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   <TITLE>American Lorain Corp: Form S-1- Prepared by TNT Filings Inc.</TITLE>

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As filed with the Securities and Exchange Commission on November 27, 2009<B><br>
Registration No. 333-____</B></P>
<P align="center">
<B><font size="5">UNITED STATES<br>
SECURITIES AND EXCHANGE COMMISSION</font><br>
WASHINGTON, D.C. 20549</B> </P>
<P align="center">
____________________________ </P>
<P align="center">
<B><font size="5">FORM S-1<br>
<br>
</font>REGISTRATION STATEMENT</B><BR>
<B>UNDER</B><BR>
<B>THE SECURITIES ACT OF 1933</B><BR>
</P>
<P align="center">
<B><U><font size="5">AMERICAN LORAIN CORPORATION<br>
</font></U></B>(Exact name of registrant as specified in its charter)<BR>
</P>
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<B><U>Nevada</U></B>
	</TD>
	<TD width=467 align=center>
<B><U>2068</U></B>
	</TD>
	<TD width=467 align=center>
<B>87-0430320</B>
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(State or other jurisdiction of
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(Primary Standard Industrial
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(I.R.S. Employer
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incorporation or organization)
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Classification Code Number)
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	<TD width=467 align=center>
Identification No.)
	</TD>
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<P align="center">
<B>Beihuan Road <br>
Junan County S<br>
handong, China 276600 <U><br>
(+86) 539-7317959</U></B><B> <br>
</B>(Address, including zip code, and telephone number, including area code, of registrant&#146;s principal executive offices)</P>
<P align="center">
United Corporate Services, Inc.<BR>
202 South Minnesota Street <BR>
Carson City, NV 89703 <BR>
</P>
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<U>(877) 734-8300</U> <br>
(Name, address, including zip code, and telephone number, including area code, of agent for service)</P>
<P align="center">
Copies to:<BR>
</P>
<P align="center">
<B>Peter G. Smith, Esq.</B><BR>
<B>Bill Huo, Esq. </B><BR>
<B>Ari Edelman, Esq. </B><BR>
<B>Kramer Levin Naftalis &amp; Frankel LLP</B><BR>
<B>1177 Avenue of Americas</B><BR>
<B>New York, New York 10036</B><BR>
<B>(212) 715-9100 </B><BR>
</P>
<P align="center">
Approximate date of commencement of proposed sale to the public:<B> From time to time after the effective date of this Registration Statement.</B>
<BR>
</P>

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<P align=justify>If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ x ] </P>
<P align=justify>If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.</P>
<P align=justify>If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.</P>
<P align=justify>If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.</P>
<P align=justify>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 &#147;large accelerated filer,&#148;
&#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in Rule 12b-2 of the
Exchange Act. (Check one): </P>
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    <p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <font face="Times New Roman">Large accelerated filer&nbsp; </font>
    <font face="Wingdings 2" size="3">&#163;</font></td>
    <td dir="ltr" style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" width="25%">
    <p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <font face="Times New Roman">Accelerated filer </font>
    <font face="Wingdings 2" size="3">&#163;</font></td>
    <td dir="ltr" style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" width="25%">
    <p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <font face="Times New Roman">Non-accelerated filer </font>
    <font face="Wingdings 2" size="3">&#163;</font></td>
    <td dir="ltr" style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" width="25%">
    <p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <font face="Times New Roman">Smaller reporting company </font>
    <font face="Wingdings 2" size="3">Q</font></td>
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    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center height="15" colspan="5" width="1401">&nbsp;
    <p><B><font size="2">CALCULATION OF REGISTRTION FEE</font></B><font size="2">
    <br>
    </font>&nbsp; </TD>
    </TR>
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    <TD align=center height="14" width="280" valign="bottom" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <font size="2">Title of each class of </TD>
    <TD align=left width="280" height="14" valign="bottom" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <font size="2">&nbsp; </TD>
    <TD align=center width="280" height="14" valign="bottom" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">Proposed maximum </TD>
    <TD align=center width="280" height="14" valign="bottom" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">Proposed maximum </TD>
    <TD align=left width="281" height="14" valign="bottom" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">&nbsp;
    </font> </font> </TD></TR>
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    <TD align=center height="14" width="280" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" valign="bottom">
    <font size="2">securities to be offered </TD>
    <TD align=center width="280" height="14" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" valign="bottom">
    <font size="2">Amount of shares to be
      registered<SUP>(1)</SUP> </TD>
    <TD align=center width="280" height="14" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" valign="bottom">offering price per share </TD>
    <TD align=center width="280" height="14" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" valign="bottom">aggregate offering price </TD>
    <TD align=center width="281" height="14" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" valign="bottom">Amount of registration fee
    </font> </font> </TD></TR>
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    <TD align=center height="46" width="280" style="border-style: solid; border-width: 1" valign="bottom" bgcolor="#E6EFFF">
    <font size="2">Common stock, par <br>
    value $0.001 per <br>
    share </TD>
    <TD align=center width="280" style="border-style: solid; border-width: 1" valign="bottom" bgcolor="#E6EFFF">
    <font size="2">5,011,169 &nbsp;</font></TD>
    <TD align=center width="280" style="border-style: solid; border-width: 1" valign="bottom" bgcolor="#E6EFFF">
    <font size="2">$3.02<SUP>(2)</SUP> </TD>
    <TD align=center width="280" style="border-style: solid; border-width: 1" valign="bottom" bgcolor="#E6EFFF">$15,133,730.38 &nbsp;</font></TD>
    <TD align=center width="281" style="border-style: solid; border-width: 1" valign="bottom" bgcolor="#E6EFFF">
    <font size="2">$844.46&nbsp;</font></TD></TR>
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    <TD align=center height="46" width="280" valign="bottom" style="border-style: solid; border-width: 1">
    <font size="2">Common stock, <br>
    par value $0.001 per <br>
    share </TD>
    <TD align=center width="280" valign="bottom" style="border-style: solid; border-width: 1">
    <font size="2">2,555,695<SUP>(3)</SUP> &nbsp;&nbsp; </font> </TD>
    <TD align=center width="280" valign="bottom" style="border-style: solid; border-width: 1">
    <font size="2">$3.70<SUP>(4)</SUP></TD>
    <TD align=center width="280" valign="bottom" style="border-style: solid; border-width: 1">$9,456,067.80 </TD>
    <TD align=center width="281" valign="bottom" style="border-style: solid; border-width: 1">$527.65&nbsp;
    </font></font> </TD></TR>
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    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center height="15" width="280" valign="bottom" bgcolor="#E6EFFF">
    <font size="2">Total </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center
      width="280" height="15" valign="bottom" bgcolor="#E6EFFF"><font size="2">7,566,863 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center width="280" height="15" valign="bottom" bgcolor="#E6EFFF">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center
      width="280" height="15" valign="bottom" bgcolor="#E6EFFF">$24,589,798.18 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center
      width="281" height="15" valign="bottom" bgcolor="#E6EFFF">$1,372.11 </font>
    </font> </TD></TR></TABLE>
<P align=justify>(1) In accordance with Rule 416(a), the Registrant is also
registering hereunder an indeterminate number of shares that may be issued and
resold resulting from stock splits, stock dividends or similar transactions.
</P>
<P align=justify>(2) Estimated pursuant to Rule 457(c) of the Securities Act of
1933 solely for the purpose of computing the amount of the registration fee
based on the average of the high and low prices reported on the NYSE AMEX on
November 20, 2009. </P>
<P align=justify>(3) Represents shares of the Registrant&#146;s common stock being
registered for resale that have been issued to the selling stockholders. </P>
<P align=justify>(4) Calculated in accordance with Rule 457(g) based upon the
price at which the warrants may be exercised. </P>
<P align=justify><B>The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall hereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine. </B></P>
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<P align=justify><B><I>PROSPECTUS</I></B><BR></P>
<P align=center><B><I>Subject to completion, dated November 27,
2009</I></B><BR></P>
<P align=center>
<IMG src="aln112109fs1x3x1.jpg" border=0 width="188" height="77"> </P>
<P align=center><B>AMERICAN LORAIN CORPORATION<BR></B><BR><B>7,566,863 Shares of
Common Stock </B><BR></P>
<P align=justify style="text-indent: 30pt">This prospectus relates to an aggregate of 7,566,863 shares of
common stock, par value $0.001 per share, of American Lorain Corporation, a
Nevada corporation, that may be sold from time to time by the selling
stockholders named in this prospectus, which includes: </P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 10">5,011,169 shares of our common stock held by the selling stockholders
  named in this prospectus;
  <LI>
  <p style="margin-top: 0; margin-bottom: 10">2,054,580 shares of our common stock issuable upon the exercise of Series
  A warrants held by the selling stockholders named in this prospectus; and
  <LI>
  <p style="margin-top: 0; margin-bottom: 10">501,115 shares of our common stock issuable upon the exercise of Series B
  warrants held by the selling stockholders named in this prospectus. </LI></UL>
<P align=justify style="text-indent: 30pt">We will not receive any proceeds from the sales of any shares
of common stock by the selling stockholders. We may, however, receive proceeds
of up to $3.70 per share from the exercise of warrants held by the selling
stockholders if and when such warrants are exercised, which would result in
proceeds to us of approximately $9.5 million in the event that all such warrants
are exercised in exchange for cash. </P>
<P align=justify style="text-indent: 30pt">Our common stock is quoted on NYSE AMEX under the symbol &#147;ALN&#148;.
The closing price for our common stock on November 23, 2009 was $2.80 per share,
as reported on NYSE AMEX. </P>
<P align=justify style="text-indent: 30pt"><B>Investing in our common stock involves a high degree of
risk. See the section entitled &#147;Risk Factors&#148; beginning on page 5 to read about
factors you should consider before buying shares of our common stock.</B> </P>
<P align=justify style="text-indent: 30pt"><B>Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.</B> </P>
<P align=justify><B>The information in this prospectus is not complete and may
be changed. No person may sell the securities described in this document until
the registration statement filed with the Securities and Exchange Commission is
declared effective. This prospectus is not an offer to sell these securities and
no person named in this prospectus is soliciting offers to buy these securities
in any state where the offer or sale is not permitted.</B></P>
<P align=center>The date of this prospectus is&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , 2009</P>
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    <TD align=center colSpan=2><B>TABLE OF CONTENTS</B> </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="15%">&nbsp; </TD></TR>
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    <TD style="BORDER-BOTTOM: #000000 1px solid">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="15%">&nbsp; </TD></TR>
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    <p style="margin-left: 10pt">Prospectus Summary </TD>
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    <p style="margin-right: 10pt">1 </TD></TR>
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    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt">Risk Factors </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%">
    <p style="margin-right: 10pt">5
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    <p style="margin-left: 10pt">Cautionary Note Regarding Forward-Looking Statements </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%"
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    <p style="margin-right: 10pt">14 </TD></TR>
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    <p style="margin-left: 10pt">Use of Proceeds
</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%">
    <p style="margin-right: 10pt">14
  </TD></TR>
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    <p style="margin-left: 10pt">Dividend Policy </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%"
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    <p style="margin-right: 10pt">14 </TD></TR>
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    <p style="margin-left: 10pt">Market for Our
      Common Stock </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%">
    <p style="margin-right: 10pt">15
  </TD></TR>
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    <p style="margin-left: 10pt">Dilution </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%"
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    <p style="margin-right: 10pt">15 </TD></TR>
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    <p style="margin-left: 10pt">Management&#146;s
      Discussion and Analysis of Financial Condition and Results of Operations
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%">
    <p style="margin-right: 10pt">16
  </TD></TR>
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    <p style="margin-left: 10pt">Our Business </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%"
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    <p style="margin-right: 10pt">33 </TD></TR>
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    <p style="margin-left: 10pt">Management </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%">
    <p style="margin-right: 10pt">46
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    <p style="margin-left: 10pt">Executive Compensation </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%"
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    <p style="margin-right: 10pt">50 </TD></TR>
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    <p style="margin-left: 10pt">Certain
      Relationships and Related Transactions </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%">
    <p style="margin-right: 10pt">51
  </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10pt">Change in Accountants </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%"
    bgColor=#e6efff>
    <p style="margin-right: 10pt">52 </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt">Selling
      Stockholders </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%">
    <p style="margin-right: 10pt">53
  </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10pt">Security Ownership of Certain Beneficial Owners and
      Management </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%"
    bgColor=#e6efff>
    <p style="margin-right: 10pt">57 </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt">Description of
      Capital Stock </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%">
    <p style="margin-right: 10pt">58
  </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10pt">Shares Eligible for Future Sale </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%"
    bgColor=#e6efff>
    <p style="margin-right: 10pt">59 </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt">Plan of
      Distribution </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%">
    <p style="margin-right: 10pt">60
  </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10pt">Legal Matters </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%"
    bgColor=#e6efff>
    <p style="margin-right: 10pt">61 </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt">Experts </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%">
    <p style="margin-right: 10pt">61
  </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10pt">Where You Can Find More Information </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%"
    bgColor=#e6efff>
    <p style="margin-right: 10pt">62 </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt">Index to Financial
      Statements </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="15%">
    <p style="margin-right: 10pt">F-1
    </TD></TR></TABLE>
<P align=justify>
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<P></P>


<A name="page_5"></A>

<P align="center">
<B>PROSPECTUS SUMMARY</B><BR>
</P>
<P align="justify">
<I>The following summary highlights some of the information contained in this prospectus, and it may not contain all of the information that is important to you in making an investment decision. You should read the following summary together with
the more detailed information regarding our company and the common stock being sold by the selling stockholders in this offering, including the &#147;Risk Factors&#148; and our consolidated financial statements and related notes, included elsewhere
in this prospectus.</I> </P>
<P align="center">
<B>Conventions</B><BR>
</P>
<P align="justify">
In this prospectus, unless indicated otherwise,<BR>
</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">&#147;We,&#148; &#147;us&#148; and &#147;our&#148; refer to the combined business of ALC, ILH and their direct and indirect Chinese operating subsidiaries.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">&#147;ALC&#148; refers to American Lorain Corporation, a Nevada corporation.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">&#147;ILH&#148; refers to International Lorain Holding, Inc., a Cayman Islands company that is wholly-owned by ALC.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">&#147;Junan Hongrun&#148; refers to Junan Hongrun Foodstuff Co., Ltd., a subsidiary of ILH.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">&#147;Luotian Lorain&#148; refers to Luotian Green Foodstuff Co., Ltd., a subsidiary of ILH.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">&#147;Beijing Lorain&#148; refers to Beijing Green Foodstuff Co., Ltd., a subsidiary of ILH.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">&#147;Shandong Lorain&#148; refers to Shandong Green Foodstuff Co., Ltd., a subsidiary of ILH.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">&#147;RMB&#148; refers to Renminbi, the legal currency of China.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">&#147;U.S. dollar,&#148; &#147;&#36;&#148; and &#147;US&#36;&#148; refer to the legal currency of the United States.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">&#147;China&#148; and &#147;PRC&#148; refer to the People&#146;s Republic of China.</LI>
</UL>
<P align="center">
<B>The Company</B><BR>
</P>
<P align="justify">
<B><I>Overview of Our Business</I></B><BR>
</P>
<P align="justify">
We are an integrated food manufacturing company with headquarters in Shandong Province, China. We develop, manufacture and sell the following types of food products: </P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">chestnut products;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">convenience foods (including ready-to-cook, or RTC, meals, ready-to-eat, or RTE, meals and meals ready- to-eat, or MRE); and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">frozen, canned, and bulk food.</LI>
</UL>
<P align="justify">
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 2009, our primary
strategy has been to focus on increasing sales of our chestnut products in the domestic Chinese market and increasing the number of domestic sales to third party distributors. Our primary strategy for 2010 is to further expand our brand equity in
the Chinese market for our chestnut products and to increase sales of our
convenience food products in the Chinese market. 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. </P>

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<A name="page_6"></A>

<P align="justify">
<B><I>Organizational Structure</I></B><BR>
</P>
<P align="justify">
ALC is a Nevada corporation that was incorporated in Delaware on February 4, 1986 and was formerly known as Millennium Quest, Inc. On May 3, 2007, ALC completed a recapitalization, or reverse merger, with ILH. Prior to such date, ALC did not engage
in active business operations other than to search for a potential acquisition target. Effective November 16, 2009, ALC reincorporated in Nevada from Delaware. </P>
<P align="justify">
ALC wholly owns ILH. ILH wholly owns two Chinese operating subsidiaries, Luotian Lorain and Junan Hongrun, directly.  In addition, together with its subsidiary Junan Hongrun, ILH wholly owns Beijing Lorain and owns approximately 80% of Shandong
Lorain (Shandong Economic Development Investment Co. Ltd. owns the remaining 20% interest). We sometimes refer to our four Chinese operating subsidiaries throughout this prospectus as the Lorain Group Companies. Below is an organizational chart of
ALC, ILH and the Lorain Group Companies: </P>
<p align="center">
<img border="0" src="aln1123.gif" width="635" height="456"></p>
<p align="left">
<b>Risk Factors</b>
<BR>
</p>
<P align="justify">
Our ability to successfully operate our business and achieve our goals and strategies is subject to numerous risks as discussed more fully below in the section entitled &#147;Risk Factors,&#148; including, but not limited to, the following: </P>
<P align="center">
2</P>

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<A name=page_7></A>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">Potential inability to secure necessary raw materials in sufficient
  quantities, and fluctuations in raw material prices;
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">Potential inability to maintain sufficient levels of working capital;
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">The current global economic and financial crisis;
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">Credit risk with respect to our accounts receivable;
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">Potential for product liability and product recall claims, and potential
  litigation arising from these claims;
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">Increased costs associated with increasing levels of governmental
  regulations;
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">Inability to effectively manage rapid growth;
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">Increased competition;
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">Increases in energy costs;
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">Potential loss of key members of our senior management; and
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">Potential failure to have complied with PRC regulations regarding our
  restructuring. </LI></UL>
<P align=justify>Any of the above risks could materially and adversely affect
our business, financial position and results of operations. An investment in our
common stock involves risks. You should read and consider the information set
forth below in the section entitled &#147;Risk Factors&#148; and all other information set
forth in this prospectus before investing in our common stock. </P>
<P align=justify><B><I>Corporate Information</I></B><BR></P>
<P align=justify>The address of our principal executive office in China is
Beihuan Road, Junan County, Shandong, China 276600, and our telephone number is
(+86) 539-7317959. Our address for correspondence in the United States is c/o
Yinglee Tseng, 4401 Prudence St., Baltimore, MD 21226 and our telephone number
in the United States is 443-552-4796. We maintain a website at
http://www.loraingroup.com and http://americanlorain.com, which contain
information about the Lorain Group Companies. However, no information contained
on our websites shall be deemed to be a part of this prospectus. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>
    <p style="margin-left: 10pt"><B>Summary of the Offering</B> </TD>
    <TD align=left width="50%">&nbsp; </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="50%">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
      <P align=justify style="margin-left: 10pt; margin-right: 10pt">Common stock offered by selling stockholders </P></TD>
    <TD align=left width="50%" bgColor=#e6efff>
      <P align=justify style="margin-left: 10pt; margin-right: 10pt">An aggregate of 7,566,863 shares of our common stock, par
      value $0.001 per share, consisting of 5,011,169 shares of our common stock
      owned by the selling stockholders and an aggregate of 2,555,695 shares of
      our common stock issuable upon the exercise of certain warrants held by
      the selling stockholders. This number represents in the aggregate
      approximately 20.4% of the outstanding shares of our common stock as of
      the date of this prospectus <SUP>(1)</SUP> </P></TD></TR>
  <TR>
    <TD>
      <P align=justify style="margin-left: 10pt; margin-right: 10pt">Common stock to be outstanding immediately after this
      offering </P></TD>
    <TD width="50%">
      <P align=justify style="margin-left: 10pt; margin-right: 10pt">30,239,985 shares<SUP>(2)</SUP> </P></TD></TR>
  <TR>
    <TD bgColor=#e6efff>
      <P align=justify style="margin-left: 10pt; margin-right: 10pt">Proceeds to us </P></TD>
    <TD width="50%" bgColor=#e6efff>
      <P align=justify style="margin-left: 10pt; margin-right: 10pt">We will not receive any of the proceeds from the sale of
      shares of our common stock by the selling stockholders. However, we may
      receive up to $3.70 per share from the exercise of warrants held by the
      selling stockholders if and when such warrants are exercised, which would
      result in proceeds to us of approximately $9.5 million if all warrants are
      exercised in exchange for cash. We will use any of such proceeds for
      general working capital purposes. </P></TD></TR></TABLE>
<P align=center>3</P>
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noShade SIZE=5>
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<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">(1) </TD>
    <TD>
      <P align=justify>Based on 30,239,985 shares of common stock outstanding as
      of November 20, 2009.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%">(2) </TD>
    <TD>
      <P align=justify>Does not include 4,082,892 shares of our common stock
      issuable upon the exercise of outstanding warrants and 1,344,586 shares of
      our common stock issuable upon the exercise of outstanding stock
      options.</P></TD></TR></TABLE>
<P align=center>4</P>
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<A name="page_9"></A>

<P align="center">
<B>RISK FACTORS</B><BR>
</P>
<P align="justify">
<I>The shares of our common stock being offered for resale by the selling stockholders are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose their entire investment in our
common stock. Before purchasing any of the shares of our common stock, you should carefully consider the following factors relating to our business and prospects. If any of the following risks actually occur, our business, financial condition or
operating results may suffer, the trading price of our common stock could decline, and you may lose all or part of your investment. You should also refer to the other information about us contained in this prospectus, including our consolidated
financial statements and related notes.</I> </P>
<P align="justify">
<B>Business Risks</B><BR>
</P>
<P align="justify">
<B><I>We may not be able to obtain an adequate supply of high quality raw materials. </I></B> </P>
<P align="justify">
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 2009, the cost of our raw materials increased, as
compared to 2008, from &#36;36.9 million to &#36;65.0 million, representing an increase of approximately 76%. However, during the nine months ended September 30, 2009, the cost of our raw materials increased from &#36;27.1 million to &#36;27.2
million, representing an increase of approximately 0.4%, as compared to the nine months ended September 30, 2008. 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.</P>
<P align="justify">
<B><I>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. </I></B> </P>
<P align="justify">
The average price that we paid for chestnuts in 2007 and 2008 was approximately &#36;787 per metric ton and &#36;727 per metric ton, respectively, excluding value added taxes. The average price that we paid for chestnuts in the nine months ended
September 30, 2009 was approximately &#36;774 per metric ton, 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.</P>
<P align="justify">
<B><I>Our sales and reputation may be affected by product liability claims, litigation or, product recalls in relation to our products. </I></B> </P>
<P align="justify">
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. </P>
<P align="justify">
We have never had a product recall in the past, but we have had product liability claims brought against us 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. </P>
<P align="center">
5</P>

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<P align="justify">
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.</P>
<P align="justify">
<B><I>We may be unable to manage future rapid growth.</I></B><BR>
</P>
<P align="justify">
We have grown rapidly over the last few years. Our sales increased by 377% from &#36;27,735,833 in 2004 to &#36;132,360,317 in 2008.  The number of product types we sold increased from approximately 100 in 2004 to approximately 234 in 2008. During
the nine months ended September 30, 2009, our sales were &#36;83,841,112. The number of product types we sold during the nine months ended September 30, 2009 was 236. 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. </P>
<P align="justify">
<B><I>Our expansion strategy may not prove successful and could adversely affect our existing business. </I></B> </P>
<P align="justify">
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, that we incur in developing such markets.</P>
<P align="justify">
<B><I>The acquisition of other businesses could pose risks to our profitability. </I></B> </P>
<P align="justify">
We may try to grow through the acquisition of other businesses in the future. Any such acquisition could result in accounting charges, potentially dilutive issuances of equity securities, or 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 entail many risks, including risks relating to the failed integration of the acquired operations, diversion of management&#146;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. </P>
<P align="justify">
<B><I>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.</I></B> </P>
<P align="justify">
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:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">chestnut products may not be widely recognized internationally, especially in Western countries;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">local economic and political conditions, including disruptions in trading markets;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">restrictive foreign governmental actions, including restrictions on transfers of funds and trade;</LI>
</UL>
<P align="center">
6</P>

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<A name="page_11"></A>

<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">protective measures, including export duties and quotas and customs tariffs; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">currency exchange rate fluctuations.</LI>
</UL>
<P align="justify">
Any of the foregoing risks could have a material and adverse effect on our operating results. </P>
<P align="justify">
<B><I>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. </I></B></P>
<P align="justify">
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 43%, 31% and 25% of our total
revenues in 2006, 2007 and 2008, respectively. Sales to our five largest customers accounted for approximately 16.6% of our total revenues in the nine months ended September 30, 2009. 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.<B><I> </I></B></P>
<P align="justify">
<B><I>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 or our reputation.</I></B> </P>
<P align="justify">
In 2008, we sold our products through over 30 distribution service providers. These services may be suspended in the future or may 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 or 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 for such damages. </P>
<P align="justify">
<B><I>Failure of the market to accept our new products, may cause us to lose our competitive position in the food industry. </I></B></P>
<P align="justify">
We introduced 20 new products in 2007, 52 new products in 2008 and 18 new products during the nine months ended September 30, 2009. We plan to introduce approximately 25 new products in 2010. 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 have introduced, and intend to continue 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. </P>
<P align="justify">
<B><I>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. </I></B> </P>
<P align="justify">
The Lorain Group Companies were founded in 1995 by Si Chen, our Chairman and Chief Executive Officer. Mr. Chen, together with other members of our 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 members of our 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.</P>
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<P align="justify">
<B><I>We face increasing competition from domestic and foreign companies. </I></B> </P>
<P align="justify">
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&#146; 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 our competitors may 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.</P>
<P align="justify">
<B><I>An increase in the cost of energy could affect our profitability.</I></B> </P>
<P align="justify">
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. </P>
<P align="justify">
<B><I>Our products are subject to counterfeiting or imitation, which could impact our reputation. </I></B> </P>
<P align="justify">
To date, we have experienced limited counterfeiting or imitation of our products by others. However, counterfeiting or imitation of our products may occur in the future and we may not be able to detect it or deal with it effectively. Any occurrence
of counterfeiting or imitation by others could impact negatively upon our reputation, particularly if the counterfeit or imitation products cause sickness or injury to consumers. In addition, we may need to incur costs with respect to the detection
or prosecution of such activities. </P>
<P align="justify">
<B><I>We rely on an outside contractor to provide a majority of our labor. </I></B> </P>
<P align="justify">
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. </P>
<P align="justify">
<B>Regulatory Risks</B><BR>
</P>
<P align="justify">
<B><I>We are subject to extensive regulations by the Chinese government.</I></B></P>
<P align="justify">
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. </P>
<P align="justify">
<B><I>Our failure to comply with PRC environmental laws may require us to incur significant costs.</I></B> </P>
<P align="justify">
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.</P>
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<P align="justify">
<B><I>Our failure to comply with PRC hygiene laws may require us to incur significant costs.</I></B> </P>
<P align="justify">
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.</P>
<P align="justify">
<B>Financial Risks</B><BR>
</P>
<P align="justify">
<B><I>Our operations are cash intensive, and our business could be adversely affected if we fail to maintain sufficient levels of working capital.</I></B> </P>
<P align="justify">
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. In 2008, we paid for approximately 10% of our raw materials on credit. In 2008, we funded approximately 60% 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.</P>
<P align="justify">
We also funded approximately 40% of our working capital requirements from the proceeds of short-term loans from Chinese banks. We have continued this trend in 2009 and 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 2008 was approximately &#36;24 million. Our average loan balance from short-term bank loans during the nine months ended
September 30, 2009 was approximately &#36;31 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 and 2008, we funded approximately &#36;3.8 million, in the aggregate, of our working capital requirements from the proceeds of a private placement transaction conducted in May 2007. On November 3, 2009, we raised an
additional &#36;12 million in a private placement transaction with the selling stockholders. In the event that we need to raise additional equity in the future, 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.</P>
<P align="justify">
Management anticipates that our existing capital resources and cash flows from operations and from our recent private placement transaction and current and expected short-term bank loans will be adequate to satisfy our liquidity requirements for the
next twelve months.  However, if available liquidity is not sufficient to meet our operating and loan obligations as they come due, our plans include considering pursuing alternative financing arrangements or further reducing expenditures as
necessary to meet our cash requirements. However, there is no assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity.  Currently, the capital markets for small
capitalization companies are extremely difficult and banking institutions have become stringent in their lending requirements. Accordingly, we cannot be sure of the availability or terms of any third party financing. If we are unable to raise
additional financing, 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.<B> </B></P>
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<P align="justify">
<B><I>The current economic and financial crisis may have a material adverse effect on our results. </I></B></P>
<P align="justify">
The crisis of the financial and credit markets since the second half of 2008 has led to a severe economic recession worldwide, and the outlook for 2010 is uncertain. A continuation or worsening of unfavorable economic conditions, including the
ongoing credit and capital markets disruptions, could have an adverse impact on our business, operating results or financial condition in a number of ways. For example, we may experience declines in revenues, profitability and cash flows as a result
of reduced orders, delays in receiving orders, delays or defaults in payment or other factors caused by the economic problems of our customers and prospective customers. We may experience supply chain delays, disruptions or other problems associated
with financial constraints faced by our suppliers and subcontractors. In addition, changes and volatility in the equity, credit and foreign exchange markets and in the competitive landscape make it increasingly difficult for us to predict our
revenues and earnings into the future. </P>
<P align="justify">
<B><I>We are subject to credit risk in respect of account receivables.</I></B> </P>
<P align="justify">
In 2008 and during the nine months ended September 30, 2009, some of our customers, including some of our large supermarket customers, delayed their payments for up to 60 to 90 days beyond their term. Our cash flow suffered while waiting for such
payments. Consequently, at times we had to delay payments to our suppliers and to postpone business expansion as a result of these delayed payments. In 2008 and during the nine months ended September 30, 2009, we shortened credit terms for many of
our international and domestic distributors from between 30 and 180 days to between 30 and 60 days. 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. </P>
<P align="justify">
<B><I>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.</I></B> </P>
<P align="justify">
Our subsidiaries are entitled to certain special or preferential tax treatments regarding foreign enterprise income tax in accordance with the &#147;Income Tax Law of the PRC for Enterprises with Foreign Investment and Foreign Enterprises&#148; and
related rules.</P>
<P align="justify">
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 January 1, 2008, the new corporate income tax law of the PRC&#146;s National
People&#146;s Congress became effective. 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. </P>
<P align="justify">
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. </P>
<P align="justify">
<B><I>We have recently entered into a financing agreement, and may enter into additional financing agreements, which may have a dilutive effect to our earnings per share and the rights of certain stockholders.</I></B> </P>
<P align="justify">
On November 3, 2009, we consummated a private placement transaction pursuant to which we issued an aggregate of 7,566,863 shares of our common stock, including an aggregate of 2,555,695 shares of common stock issuable upon the exercise of warrants.
In connection therewith, we agreed to register such shares with the Securities and Exchange Commission, or the SEC. In addition, we may issue shares and provide investors with registration rights in the future. Future financings could result in
significant dilution to our earnings per share or the issuance of
securities with rights superior to our current outstanding securities, including registration rights granted to investors who may purchase our equity or debt securities in the future.</P>
<P align="center">
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<P align="justify">
<B><I>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.</I></B> </P>
<P align="justify">
The SEC, under Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring reporting companies to provide in their annual reports on Form 10-K a report by management with respect to the company&#146;s disclosure controls and procedures
and internal control over financial reporting. We are required to comply with this requirement. In addition, such rules require that a reporting company&#146;s independent registered public accounting firm attest to the effectiveness of such
internal controls. However, we are not yet subject to the attestation report requirement. We can provide no assurance that we will comply with all of the requirements imposed thereby at such time that we may be required to comply with such rules in
the future. Further, we may not 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. </P>
<P align="justify">
<B>Risks Related To Doing Business In China</B><BR>
</P>
<P align="justify">
<B><I>The structure of the Chinese economy may inhibit our ability to expand our business. </I></B></P>
<P align="justify">
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, traditionally, state-owned enterprises have constituted 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, 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. </P>
<P align="justify">
<B><I>Our business is largely subject to the uncertain legal environment in China.</I></B> </P>
<P align="justify">
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 necessarily relied upon by decision-making bodies. 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.</P>
<P align="justify">
<B><I>It may be difficult for our stockholders to affect service of process against our subsidiaries or our officers and directors. </I></B></P>
<P align="justify">
Our operating subsidiaries were organized under the laws of China and substantially all of their assets are located outside the U.S. In addition, many of 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 operating subsidiaries, officers and directors. </P>
<P align="justify">
<B><I>Inflation in China may inhibit our ability to conduct business profitably in China.</I></B> </P>
<P align="justify">
In recent years, the Chinese economy has experienced periods of rapid expansion. During the past ten years, the rate of inflation in China has been as high as 5.8% and as low as -1.4% . These factors have led to the adoption by the Chinese
government, from time to time, of various corrective measures designed to limit inflation. High inflation in the future may cause the Chinese government to impose controls on credit or prices, or to take other actions which could inhibit economic
activity in China, and thereby harm the market for our products.</P>
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<P align="justify">
Likewise, negative inflation could have an unfavorable effect on our business profitability in China. Negative inflation may bring about a period in which consumers are reluctant to spend money, as consumers anticipate lower prices for products in
the future. In the event of negative inflation, the Chinese government may impose controls on credit or prices, or take other actions which could inhibit economic activity, harming the market for our products. </P>
<P align="justify">
<B><I>Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.</I></B> </P>
<P align="justify">
The majority of our revenues are settled in RMB and U.S. dollars, and any future restrictions on currency exchanges may limit our ability to use revenue generated in RMB 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 RMB 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 RMB 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 RMB in the future.</P>
<P align="justify">
<B><I>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. </I></B> </P>
<P align="justify">
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. </P>
<P align="justify">
ILH acquired certain interests in the Lorain Group Companies, which are 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.</P>
<P align="justify">
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.</P>
<P align="justify">
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.</P>
<P align="justify">
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&#146; 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.</P>
<P align="justify">
<B><I>Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese Renminbi into foreign currencies and, if Chinese Renminbi were to decline in value, reducing our
revenue in U.S. dollar terms.</I></B><I> </I></P>

<P align="justify">
Our reporting currency is the U.S. dollar and our operations in China use their local currency as their functional currencies. Substantially all of our revenue and expenses are in Chinese Renminbi. We are subject to the effects of exchange rate
fluctuations with respect to any of these currencies. For example, the value of the Renminbi depends to a large extent on Chinese government policies and China&#146;s domestic and international economic and political developments, as well as supply
and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to the U.S. dollar had generally been stable and the Renminbi had appreciated slightly against the U.S. dollar. However, on July 21, 2005, the
Chinese government changed its policy of pegging the value of Chinese Renminbi to the U.S. dollar. Under the new policy, Chinese Renminbi may fluctuate within a narrow and managed band against a basket of certain foreign currencies. As a result of
this policy change, Chinese Renminbi appreciated approximately 2.5% against the U.S. dollar in 2005 and 3.3% in 2006. It is possible that the Chinese government could adopt a more flexible currency policy, which could result in more significant
fluctuation of Chinese Renminbi against the U.S. dollar. We can offer no assurance that Chinese Renminbi will be stable against the U.S. dollar or any other foreign currency. </P>
<P align="center">
<BR>
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<P align="justify">
The income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies
denominated transactions results in reduced revenue, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency
denominated transactions results in increased revenue, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries
into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries&#146; financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a
component of other comprehensive income. In addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity&#146;s functional currency. Changes in the functional currency value of these assets and
liabilities create fluctuations that will lead to a transaction gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The availability and effectiveness of
any hedging transaction may be limited and we may not be able to successfully hedge our exchange rate risks. </P>
<P align="justify">
Although Chinese governmental policies were introduced in 1996 to allow the convertibility of Chinese Renminbi into foreign currency for current account items, conversion of Chinese Renminbi into foreign exchange for capital items, such as foreign
direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange, or SAFE, which is under the authority of the People&#146;s Bank of China. These approvals, however, do not guarantee the availability of
foreign currency conversion. We cannot be sure that we will be able to obtain all required conversion approvals for our operations or that Chinese regulatory authorities will not impose greater restrictions on the convertibility of Chinese Renminbi
in the future. Because a significant amount of our future revenue may be in the form of Chinese Renminbi, our inability to obtain the requisite approvals or any future restrictions on currency exchanges could limit our ability to utilize revenue
generated in Chinese Renminbi to fund our business activities outside of China, or to repay foreign currency obligations, including our debt obligations, which would have a material adverse effect on our financial condition and results of operations
</P>
<P align="justify">
<B>Risks Related To the Market For Our Common Stock and this Offering</B> </P>
<P align="justify">
<B><I>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.</I></B> </P>
<P align="justify">
Mr. Chen is the record owner of approximately 53.6% 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. </P>
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<P align="justify">
<B><I>Certain provisions of our Certificate of Incorporation may make it more difficult for a third party to effect a change- in-control.</I></B> </P>
<P align="justify">
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 could thereby 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. </P>
<P align="justify">
<B><I>When the registration statement of which this prospectus forms a part becomes effective, there will be a significant number of shares of our common stock eligible for sale, which could depress the market price of our stock.</I></B> </P>
<P align="justify">
Following the effectiveness of the registration statement of which this prospectus forms a part, a large number of shares of our common stock which are currently restricted will be eligible for resale to the public market without restriction, which
could harm the market price of our stock. Furthermore, the selling stockholders may be eligible to sell their shares of our common stock even if the registration statement of which this prospectus forms a part is not then effective, pursuant to Rule
144, and such sales may harm the market price of our stock. </P>
<P align="justify">
<B><I>The exercise of outstanding warrants issuable for shares of our common stock may cause dilution to existing shareholders.</I></B> </P>
<P align="justify">
There are currently warrants outstanding to purchase up to an aggregate of
4,082,892 shares of our common stock. The term of 1,527,197 of these warrants expires in May 2010, the term of
2,054,580 of these warrants expires in
April 2012 and the term of 501,115 of these warrants expires in October 2014. The exercise prices of these warrants range from &#36;3.70 to &#36;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. </P>
<P align="justify">
<B><I>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.</I></B> </P>
<P align="justify">
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. </P>
<P align="center">
<B>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</B></P>
<P align="justify">
This prospectus contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled &#147;Summary,&#148; &#147;Risk Factors,&#148; &#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and &#147;Business.&#148; These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any
future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned &#147;Risk Factors&#148; above.</P>
<P align="justify">
In some cases, you can identify forward-looking statements by terms such as &#147;anticipates,&#148; &#147;believes,&#148; &#147;could,&#148; &#147;estimates,&#148; &#147;expects,&#148; &#147;intends,&#148; &#147;may,&#148; &#147;plans,&#148;
&#147;potential,&#148; &#147;predicts,&#148; &#147;projects,&#148; &#147;should,&#148; &#147;would&#148; and similar
expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you
should not place undue reliance on these forward-looking statements.</P>
<P align="center">
14</P>

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<A name="page_19"></A>

<P align="justify">
Also, forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we reference in this prospectus, or that we filed as exhibits to the registration
statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. </P>
<P align="justify">
Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information
becomes available in the future. </P>
<P align="center">
<B>USE OF PROCEEDS</B><BR>
</P>
<P align="justify">
We will not receive any proceeds from the sales of any shares of common stock by the selling stockholders. However, we may receive up to &#36;3.70 per common share from the exercise of warrants held by the selling stockholders if and when those
warrants are exercised, which may result in proceeds to us of approximately &#36;9.5 million if all warrants are exercised in exchange for cash. Any such proceeds would be used for general working capital. </P>
<P align="center">
<B>DIVIDEND POLICY</B><BR>
</P>
<P align="justify">
Pursuant to a Preferred Stock Purchase Agreement with Halter Financial Investments, L.P., dated April 5, 2007, we paid a special cash dividend in the aggregate amount of &#36;415,000, or &#36;0.18 per share, to holders of common stock outstanding on
April 16, 2007. </P>
<P align="justify">
Other than noted above, we have never declared or paid cash dividends. 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. </P>
<P align="center">
15</P>

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<P align=center><B>MARKET FOR OUR COMMON STOCK</B> </P>
<P align=justify>Our common stock is quoted on NYSE AMEX under the symbol &#147;ALN&#148;.
As of November 23, 2009, the closing price for our common stock was $2.80 per
share. </P>
<P align=justify>The following table sets forth, for the periods indicated, the
high and low bid prices of our common stock. In the third quarter of 2007, we
effected a one-for-32.84 reverse split of our common stock, reflected in the
table below beginning with such quarter. Shares of our common stock were
sparsely traded until May 2008.<B> </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=center width="30%" colSpan=2><B>Bid Prices</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=center width="15%"><B>High</B> </TD>
    <TD align=center width="15%"><B>Low</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>Fiscal Year Ending December 31, 2009</B>
    </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left>First Quarter </TD>
    <TD align=center width="15%">$1.06 </TD>
    <TD align=center width="15%">$0.51 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Second Quarter </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp;2.52 </TD>
    <TD align=center width="15%" bgColor=#e6efff>0.52 </TD></TR>
  <TR vAlign=top>
    <TD align=left>Third Quarter </TD>
    <TD align=center width="15%">&nbsp;2.95 </TD>
    <TD align=center width="15%">2.25 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Fourth Quarter (through November 23, 2009)
    </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp;3.34 </TD>
    <TD align=center width="15%" bgColor=#e6efff>2.39 </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD align=center width="15%">&nbsp; </TD>
    <TD align=center width="15%">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>Fiscal Year Ended December 31, 2008</B>
    </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left>First Quarter </TD>
    <TD align=center width="15%">$23.00 </TD>
    <TD align=center width="15%">$7.90 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Second Quarter </TD>
    <TD align=center width="15%" bgColor=#e6efff>19.50 </TD>
    <TD align=center width="15%" bgColor=#e6efff>2.00 </TD></TR>
  <TR vAlign=top>
    <TD align=left>Third Quarter </TD>
    <TD align=center width="15%">&nbsp;3.25 </TD>
    <TD align=center width="15%">2.10 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Fourth Quarter </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp;2.15 </TD>
    <TD align=center width="15%" bgColor=#e6efff>0.80 </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD align=center width="15%">&nbsp; </TD>
    <TD align=center width="15%">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>Fiscal Year Ended December 31, 2007</B>
    </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left>First Quarter </TD>
    <TD align=center width="15%">N/A </TD>
    <TD align=center width="15%">N/A </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Second Quarter </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp;0.95 </TD>
    <TD align=center width="15%" bgColor=#e6efff>0.25 </TD></TR>
  <TR vAlign=top>
    <TD align=left>Third Quarter </TD>
    <TD align=center width="15%">&nbsp;9.00 </TD>
    <TD align=center width="15%">0.20 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Fourth Quarter </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp;8.00 </TD>
    <TD align=center width="15%" bgColor=#e6efff>3.00 </TD></TR></TABLE>
<P align=justify><B><I><U>Approximate Number of Holders of Our Common
Stock</U></I></B><BR></P>
<P align=justify>On November 20, 2009, there were 332 stockholders of record of
our common stock.</P>
<P align=center><B>DILUTION</B><BR></P>
<P align=justify>Our net tangible book value as of September 30, 2009 was $3.08
per share of common stock. Net tangible book value is determined by dividing our
tangible book value (total assets less intangible assets including know-how,
trademarks and patents and less total liabilities) by the number of outstanding
shares of our common stock. Since this offering is being made solely by the
selling stockholders and none of the proceeds will be paid to us, our net
tangible book value will be unaffected by this offering. However, there are
currently 1,527,197 warrants outstanding which can be exercised at $4.25 per
common share and an aggregate of 2,555,695 warrants outstanding which can be
exercised at $3.70 per common share. The warrants may have a dilutive effect
depending on our tangible book value at the time of their exercise. In addition,
if the warrants are exercised, there may be a dilutive effect on our
stockholders. The actual dilutive effect will be determined from time to time as
based on the number of shares of our common stock held by such person and the
number of warrants exercised. </P>
<P align=center>16</P>
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<P align="center">
<B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B> </P>
<P align="justify">
<B>Overview</B><BR>
</P>
<P align="justify">
We are an integrated food manufacturing company with headquarters in Shandong Province, China. We develop, manufacture and sell the following types of food products:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">chestnut products;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">convenience foods products (including ready-to-cook, or RTC, meals, ready-to-eat, or RTE, meals and meals ready-to-eat, or MRE); and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">frozen, canned, and bulk food products.</LI>
</UL>
<P align="justify">
We conduct our production activities in China. Our products are sold in 26 provinces and administrative regions in China and 42 foreign countries. We believe that we are the largest chestnut processing manufacturer in China. We have developed brand
equity for our chestnut products in China, Japan and South Korea over the past 10 to 15 years. We produced 53 high value-added processed chestnut products in 2008 and 49 high value-added processed chestnut products during the nine months ended
September 30, 2009. We currently derive most of our revenues from sales of our chestnut products in China, Japan and South Korea.  In 2009, our primary strategy has been to focus on increasing sales of our chestnut products in the domestic Chinese
market and increasing the number of domestic sales to third party distributors. Our primary strategy for 2010 is to further expand our brand equity in the Chinese market for our chestnut products and to increase sales of our convenience food
products in the Chinese market. 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. </P>
<P align="justify">
<B><I>Production Factors that Affect our Financial and Operational Condition </I></B></P>
<P align="justify">
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 2008, the cost of our raw materials increased from
&#36;36,920,585 to &#36;64,980,230, for an increase of approximately 76%. However, during the nine months ended September 30, 2009, the cost of our raw materials increased from &#36;27.1 to &#36;27.2, for an increase of approximately 0.4%, as
compared to the nine months ended September 30, 2008. 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.</P>
<P align="justify">
The average price that we paid for chestnuts in 2007 and 2008 was approximately &#36;787 per metric ton and &#36;727 per metric ton, respectively, excluding value added taxes. The average price that we paid for chestnuts in the nine months ended
September 30, 2009 was &#36;774 per metric ton, 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.</P>
<P align="justify">
<B><I>Uncertainties that Affect our Financial Condition</I></B><BR>
</P>
<P align="justify">
We spend a significant amount of cash on our operations, principally to procure raw materials for our products. Many of our suppliers, including chestnut, vegetable and fruit farmers, and suppliers of packaging materials, require
us to pay for their supplies in cash on the same day that such supplies are delivered to us. However, some of the suppliers with whom we have a long-standing business relationship allow us to pay on credit. In 2008, we paid for approximately 10% of
our raw materials on credit. We fund 60% 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.</P>
<P align="center">
17</P>

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<P align="justify">
We also fund approximately 40% 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 2008 was approximately &#36;24 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 and 2008, we funded approximately &#36;3.8 million, in the aggregate, of our working capital requirements from the proceeds of a private placement
transaction conducted in May 2007. On November 3, 2009, we raised an additional &#36;12 million in a private placement transaction with the selling stockholders. In the event that we need to raise additional equity in the future, 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.</P>
<P align="justify">
We anticipate that our existing capital resources and cash flows from operations and current and expected short-term bank loans will be adequate to satisfy our liquidity requirements for the next twelve months. However, if available liquidity is not
sufficient to meet our operating and loan obligations as they come due, our plans include considering pursuing alternative financing arrangements or further reducing expenditures as necessary to meet our cash requirements. However, there is no
assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity.  Currently, the capital markets for small capitalization companies are extremely difficult and banking
institutions have become stringent in their lending requirements. Accordingly, we cannot be sure of the availability or terms of any third party financing. </P>
<P align="justify">
The crisis of the financial and credit markets since the second half of 2008 has led to a severe economic recession worldwide, and the outlook for 2010 is uncertain. A continuation or worsening of unfavorable economic conditions, including the
ongoing credit and capital markets disruptions, could have an adverse impact on our business, operating results or financial condition in a number of ways. For example, we may experience declines in revenues, profitability and cash flows as a result
of reduced orders, delays in receiving orders, delays or defaults in payment or other factors caused by the economic problems of our customers and prospective customers. We may experience supply chain delays, disruptions or other problems associated
with financial constraints faced by our suppliers and subcontractors. In addition, changes and volatility in the equity, credit and foreign exchange markets and in the competitive landscape make it increasingly difficult for us to predict our
revenues and earnings into the future. </P>
<P align="justify">
In 2008 and during the nine months ended September 30, 2009, some of our customers, including some of our large supermarket customers, delayed their payments for up to 60 to 90 days beyond their term. Our cash flow suffered while waiting for such
payments. Consequently, at times we had to delay payments to our suppliers and to postpone business expansion as a result of these delayed payments. In 2008 and during the nine months ended September 30, 2009, we shortened credit terms for many of
our international and domestic distributors from between 30 and 180 days to between 30 and 60 days. 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. </P>
<P align="justify">
<B>Year Ended December 31, 2008 Compared to Year Ended December 31, 2007 </B></P>
<P align="justify">
<B><I>Results of Operations</I></B><BR>
</P>
<P align="justify">
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: </P>
<P align="center">
18</P>

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<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=center><FONT size=2><B>(in thousands of U.S.</B> </FONT></TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Increase/Decrease</B>
    </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Increase/Decrease</B>
    </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center><FONT size=2><B>dollars)</B> </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>2008</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>2007</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>(%)</B> </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2><B>Revenue</B> </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>132,360
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>82,094 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>50,266 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>61% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>Cost of Revenue</B> </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(101,213</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(61,932</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(39,281</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>63% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>Gross profit</B> </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>31,147 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>20,162 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>10,985 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>54% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>Operating Expenses:</B> </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Selling and Marketing
    </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(6,166</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(2,623</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(3,543</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>135% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>General and administrative </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(4,048</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(2,865</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(1,183</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>41% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>20,933 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>14,674 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>6,259 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>43% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2><B>Income from continuing</B> <B>operations</B> </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2><B>Non-operating Income</B>
      </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>(Expenses):</B> </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Investment Income </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>5 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(5</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>-100% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Government grant </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>329 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>1,373 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(1,044</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>-76% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Interest income </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>99 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>209 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(110</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>-53% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Other income </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>251 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>155 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>96 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>62% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Other expense </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(162</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(1,446</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>1,284 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>-89% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Interest Expense </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(2,770</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(2,376</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(394</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>17% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>Income before taxes</B> </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>18,681 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>12,595 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>6,086 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>48% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Income Taxes </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(3,003</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(2,135</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(868</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>41% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Income before Minority </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>15,678 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>10,460 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>5,218 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>50% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Interest </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Minority Interest </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(974</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(715</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(259</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>36% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>Net Income</B> </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>14,703 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>9,745 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>4,958 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>51% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P align=justify><U>Revenue</U> </P>
<P align=justify><EM>Net Revenues</EM>. Net revenues increased by $50.3 million,
or approximately 61.2%, to $132.4 million in 2008 from $82.1 million in 2007.
This increase was attributable to the increased revenues generated from sales of
each of our product segments, as reflected in the following table: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=center><FONT size=2><B>(in thousands of U.S.</B> </FONT><FONT
      size=2><B>dollars)</B> </FONT></TD>
    <TD align=center width="13%"><FONT size=2><B>2008 Revenues</B>
      </FONT><FONT size=2></FONT></TD>
    <TD align=center width="13%"><FONT size=2><B>2007 Revenues</B>
      </FONT><FONT size=2></FONT></TD>
    <TD align=center width="13%"><FONT size=2><B>Increase</B> </FONT><FONT
      size=2></FONT></TD>
    <TD align=center width="13%"><FONT size=2><B>Increase</B> </FONT><FONT
      size=2></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="13%"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=center width="13%"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=center width="13%"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=center width="13%"><FONT size=2><B>(%)</B> </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff><FONT size=2>Chestnut Products </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2>83,028
</FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2>45,799
</FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2>37,228
</FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2>81.3%
  </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=center><FONT size=2>Convenience Products </FONT></TD>
    <TD align=center width="13%"><FONT size=2>25,737 </FONT></TD>
    <TD align=center width="13%"><FONT size=2>15,289 </FONT></TD>
    <TD align=center width="13%"><FONT size=2>10,448 </FONT></TD>
    <TD align=center width="13%"><FONT size=2>68.3% </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff><FONT size=2>Frozen, Canned and Bulk
      </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2>23,596
</FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2>21,007
</FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2>2,589 </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2>12.3%
  </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=center><FONT size=2>Products </FONT></TD>
    <TD align=left width="13%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="13%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="13%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="13%"><FONT size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff><FONT size=2><B>Total</B> </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2><B>132,360</B>
      </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2><B>82,095</B>
      </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2><B>50,265</B>
      </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff><FONT size=2><B>61.2%</B>
      </FONT></TD></TR></TABLE>
<P align=center>19</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
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<P align=justify>We believe that the increases reflected in the table above are
attributable to the following factors, by percentage:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD vAlign=bottom align=center><B>Category</B> </TD>
    <TD vAlign=bottom align=center width="25%"><B>Chestnut Products</B> </TD>
    <TD vAlign=bottom align=center width="25%"><B>Convenience Products</B> </TD>
    <TD vAlign=bottom align=center width="25%"><B>Frozen, Canned and</B>
      <B>Bulk Products</B> </TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=center bgColor=#e6efff>Increase in volume sold </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#e6efff>62.8% </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#e6efff>84.1% </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#e6efff>-75.6% </TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=center>Increase in average sales price </TD>
    <TD vAlign=bottom align=center width="25%">18.0% </TD>
    <TD vAlign=bottom align=center width="25%">-5.3% </TD>
    <TD vAlign=bottom align=center width="25%">154.0% </TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=center bgcolor="#E6EFFF">Increase in value of the </TD>
    <TD vAlign=bottom align=center width="25%" bgcolor="#E6EFFF">19.2% </TD>
    <TD vAlign=bottom align=center width="25%" bgcolor="#E6EFFF">21.2% </TD>
    <TD vAlign=bottom align=center width="25%" bgcolor="#E6EFFF">21.6% </TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=center bgColor=#FFFFFF>U.S. dollar </TD>
    <TD vAlign=bottom align=left width="25%" bgColor=#FFFFFF>&nbsp; </TD>
    <TD vAlign=bottom align=left width="25%" bgColor=#FFFFFF>&nbsp; </TD>
    <TD vAlign=bottom align=left width="25%" bgColor=#FFFFFF>&nbsp;
  </TD></TR></TABLE>
<P align=justify>The greatest increase in volume sold in 2008, as compared to
2007, was in the domestic PRC market. Revenues from sales in this market
increased by approximately $42.9 million, or approximately 88%, in 2008. As a
percentage of total revenues, revenues from sales in the domestic PRC market
increased to approximately 69% from approximately 59% in 2007. </P>
<P align=justify>In addition, in 2008, revenues from sales to Japan, South
Korea, France and the UK increased, in the aggregate, approximately $10.1, or
42%, compared to 2007, partially offset by a decrease of an aggregate of $0.57
million, or 54%, of sales to the United States compared to 2007. See Note 16 to
the financial statements contained elsewhere in this prospectus for more
information on the breakdown of our sales per geographic region. </P>
<P align=justify><I>Cost of Revenues. </I>Our cost of revenues increased $39.3
million, or approximately 63%, to $101.2 million in 2008 from $61.9 million in
2007. This increase was attributable to the following factors, by percentage:
</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left></TD>
    <TD align=center width="50%"><B>Allocation of</B> <B>Increase in <BR>Cost
      of</B> <B>Revenues</B> </TD></TR>
  <TR vAlign=top>
    <TD align=center><B>Category</B> </TD>
    <TD align=center width="50%"><B>(%)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff>Raw Materials </TD>
    <TD align=center width="50%" bgColor=#e6efff>76 </TD></TR>
  <TR vAlign=top>
    <TD align=center>Currency (RMB) Appreciation </TD>
    <TD align=center width="50%">11 </TD></TR>
  <TR vAlign=top>
    <TD align=center bgcolor="#E6EFFF" valign="bottom">Other Allocated Overhead (utilities,
    <br>
    freight, equipment consumables) </TD>
    <TD align=left width="50%" bgcolor="#E6EFFF" valign="bottom">
    <p align="center">6 </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#FFFFFF>Wages </TD>
    <TD align=center width="50%" bgColor=#FFFFFF>6 </TD></TR>
  <TR vAlign=top>
    <TD align=center bgcolor="#E6EFFF">Depreciation </TD>
    <TD align=center width="50%" bgcolor="#E6EFFF">1 </TD></TR></TABLE>
<P align=justify>Raw material costs increased to $64,980,230, or approximately
76%, in 2008 from $36,920,585 in 2007. This increase was attributable to the
increase by approximately 40% and 472%, respectively, in the volume of raw
chestnuts and meats purchased in 2008, when compared to 2007. This increase was
offset by a decrease of approximately 50% in the volume of raw vegetables and
fruits purchased in 2008, when compared to 2007. We purchased a significantly
higher volume of raw meat for use in our convenience products because our sales
of such products increased significantly in 2008. We purchased a significantly
lower volume of raw fruits and vegetables for use in our frozen, canned and bulk
products because the price of fruits and vegetables increased significantly in
2008, resulting in less demand for such products.<B> </B></P>
<P align=justify>The following table reflects the changes in our cost of
revenues in 2008 as compared to 2007 among our different segments: </P>
<P align=center>20</P>
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noShade SIZE=5>
<A name=page_25></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=center><B>(thousands of U.S.</B> <B>dollars)</B> </TD>
    <TD align=center width="25%"><B>2008 Cost of Revenues</B> </TD>
    <TD align=center width="25%"><B>2007 Cost of Revenues</B> </TD>
    <TD align=center width="25%"><B>Increase/ (Decrease)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=center width="25%"><B>($)</B> </TD>
    <TD align=center width="25%"><B>($)</B> </TD>
    <TD align=center width="25%"><B>(%)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff>Chestnut Products </TD>
    <TD align=center width="25%" bgColor=#e6efff>62,092 </TD>
    <TD align=center width="25%" bgColor=#e6efff>33,455 </TD>
    <TD align=center width="25%" bgColor=#e6efff>85.6% </TD></TR>
  <TR vAlign=top>
    <TD align=center>Convenience Products </TD>
    <TD align=center width="25%">20,258 </TD>
    <TD align=center width="25%">11,837 </TD>
    <TD align=center width="25%">71.1% </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff>Frozen, Canned and Bulk </TD>
    <TD align=center width="25%" bgColor=#e6efff>18,863 </TD>
    <TD align=center width="25%" bgColor=#e6efff>16,640 </TD>
    <TD align=center width="25%" bgColor=#e6efff>13.4% </TD></TR>
  <TR vAlign=top>
    <TD align=center>Products </TD>
    <TD align=left width="25%">&nbsp; </TD>
    <TD align=left width="25%">&nbsp; </TD>
    <TD align=left width="25%">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff><B>Total</B> </TD>
    <TD align=center width="25%" bgColor=#e6efff><B>101,213</B> </TD>
    <TD align=center width="25%" bgColor=#e6efff><B>61,932</B> </TD>
    <TD align=center width="25%" bgColor=#e6efff><B>63.4%</B>
</TD></TR></TABLE>
<P align=justify><I>Gross Profit</I>. Our gross profit increased $10.9 million,
or 54.5%, to $31.1 million in 2008 from $20.2 million in 2007 as a result of
higher net revenues, partially offset by higher cost of revenues, for the
reasons indicated above. </P>
<P align=justify><U>Operating Expenses</U><BR></P>
<P align=justify><I>Selling and Marketing Expenses</I>. Our selling and
marketing expenses increased approximately $3.6 million, or 135%, to $6.2
million in 2008 from $2.6 million in fiscal year 2007. The following table
reflects the main factors that contributed to this increase as well as the
dollar amount that each factor contributed to this increase: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>
    <p style="margin-left: 10pt; margin-right: 10pt"><B>(in thousands of U.S. dollars)</B> </TD>
    <TD align=center width="15%"><B>Increase in costs in 2008 over 2007</B>
  </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">Shipping and inspection fees </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">1,437 </TD></TR>
  <TR vAlign=top>
    <TD align=left>
    <p style="margin-left: 10pt; margin-right: 10pt">Port surcharges </TD>
    <TD align=right width="15%">
    <p style="margin-left: 10pt; margin-right: 10pt">1,373 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">Tariffs </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">288 </TD></TR>
  <TR vAlign=top>
    <TD align=left>
    <p style="margin-left: 10pt; margin-right: 10pt">Supermarket fees </TD>
    <TD align=right width="15%">
    <p style="margin-left: 10pt; margin-right: 10pt">161 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">Wages (sales personnel) </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">59 </TD></TR></TABLE>
<P align=justify>The increases listed in the table above were partially offset
by an aggregate of $114,834 of decreases of other factors, including customer
lodging, phone, postage and courier charges, toll road expense, warehousing
costs and expenses for professional movers. </P>
<P align=justify><I>General and Administrative Expenses. </I>Our general and
administrative expenses increased approximately $1.1 million, or 41.3%, to $4.0
million in 2008 from $2.9 million in 2007. The following table reflects the main
factors that contributed to this increase as well as the dollar amount that each
factor contributed to this increase: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>
    <p style="margin-left: 10pt; margin-right: 10pt"><B>(in thousands of U.S. dollars)</B> </TD>
    <TD align=center width="15%"><B>Increase in costs in 2008 over 2007</B>
  </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">Personnel Benefits (non-wage benefits) </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">1,437 </TD></TR>
  <TR vAlign=top>
    <TD align=left>
    <p style="margin-left: 10pt; margin-right: 10pt">Consultation fees </TD>
    <TD align=right width="15%">
    <p style="margin-left: 10pt; margin-right: 10pt">1,373 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">Entertainment </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">288 </TD></TR>
  <TR vAlign=top>
    <TD align=left>
    <p style="margin-left: 10pt; margin-right: 10pt">Insurance fees </TD>
    <TD align=right width="15%">
    <p style="margin-left: 10pt; margin-right: 10pt">161 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">Research and development fees </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">59 </TD></TR></TABLE>
<P align=justify><I><U>Government Subsidy Income</U></I><BR></P>
<P align=justify>Government subsidy income decreased from approximately $1.4
million in 2007 to approximately $329,000 in 2008, representing grants received
from the local Beijing County, Junan County and Miyun County governments to
assist us in our reconstruction of our Beijing facility following the outbreak
of a fire in that facility in May 2007. </P>
<P align=justify><I><U>Income Before Taxation and Minority
Interest</U></I><BR></P>
<P align=justify>Income before taxation and minority interest increased $6.1
million, or 48.3%, to $18.7 million in 2008 from $12.6 million in 2007 as a
result of higher revenues, partially offset by higher costs of revenues and
operating expenses, for the reasons indicated above.</P>
<P align=center>21</P>
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<P align=justify><I><U>Income Taxes</U></I><BR></P>
<P align=justify>Income taxes increased $0.87 million, or 40.7%, to $3.0 million
in 2008, as compared to $2.1 million in 2007. This increase was attributable to
the higher income earned in 2008 as compared to 2007. </P>
<P align=justify>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.</P>
<P align=justify>The income tax rates applicable to our Chinese operating
subsidiaries in 2007, 2008, and 2009 are depicted in the following table: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><B>Income Tax</B> </TD>
    <TD align=center width="13%"><B>2007</B> </TD>
    <TD align=center width="13%"><B>2008</B> </TD>
    <TD align=center width="13%"><B>2009</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Junan Hongrun </TD>
    <TD align=center width="13%" bgColor=#e6efff>15% </TD>
    <TD align=center width="13%" bgColor=#e6efff>15% </TD>
    <TD align=center width="13%" bgColor=#e6efff>25% </TD></TR>
  <TR vAlign=top>
    <TD align=left>Luotian Lorain </TD>
    <TD align=center width="13%">0% </TD>
    <TD align=center width="13%">15% </TD>
    <TD align=center width="13%">15% </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Beijing Lorain </TD>
    <TD align=center width="13%" bgColor=#e6efff>0% </TD>
    <TD align=center width="13%" bgColor=#e6efff>0% </TD>
    <TD align=center width="13%" bgColor=#e6efff>15% </TD></TR>
  <TR vAlign=top>
    <TD align=left>Shandong Lorain </TD>
    <TD align=center width="13%">30% </TD>
    <TD align=center width="13%">25% </TD>
    <TD align=center width="13%">25% </TD></TR></TABLE>
<P align=justify><I><U>Minority Interest. </U></I>The Company holds 80.2% of the
equity of its subsidiary Shandong Lorain, which is reflected in the minority
interest of $0.97 million in 2008 and $0.72 million in 2007. </P>
<P align=justify><I><U>Net Income</U></I><I>.</I><BR></P>
<P align=justify>Net income increased $4.9 million, or 50.9%, to $14.7 million
in 2008 from $9.7 million in fiscal year 2007, as a result of the factors
described above. </P>
<P align=justify><B>Three Months Ended September 30, 2009 Compared to Three
Months Ended September 30, 2008</B></P>
<P align=justify>The following table summarizes the results of our operations
during the three-month periods ended September 30, 2009 and September 30, 2008,
respectively, and provides information regarding the dollar and percentage
increase or (decrease) from the three-month period ended September 30, 2008
compared to the three-month period ended September 30, 2009.</P>
<P align=center>22</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_27></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=center colSpan=12><B>(All amounts, other than percentages,
      stated in thousands of U.S. dollars)</B>&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center>&nbsp; </TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><B>Three months ended</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>Percentage</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center>&nbsp; </TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><B>September 30,</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>Dollar($)</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>(%)</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center>&nbsp; </TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>Increase</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>Increase</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="10%"><B>2009</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="10%"><B>2008</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="10%"><B>(Decrease)&nbsp;</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%"
    ><STRONG>(Decrease)</STRONG>&nbsp;</TD>
    <TD align=center width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net revenues </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;38,675 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;36,727 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;1,948 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>5.3% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Cost of revenues </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">29,567 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">29,001 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">566 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">2.0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Gross profit </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>9,108 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>7,727 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,381 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>17.9% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Operating expenses </TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="10%">&nbsp; </TD>
    <TD align=right width="2%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="10%">&nbsp; </TD>
    <TD align=right width="2%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="10%">&nbsp; </TD>
    <TD align=right width="2%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="10%">&nbsp; </TD>
    <TD align=right width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Selling and marketing expenses </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,165 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>831 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>334 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>40.2% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>General and administrative expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">907 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">848 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">59 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">7.0% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>Operating Income </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>7,036 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>6,048 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>988 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>16.3% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Government subsidy income </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">44 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">0 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">44 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="10%">&nbsp; </TD>
    <TD align=right width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Interest and other income </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>24 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>181 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(157</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(86.7%</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>Other expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">53 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">(57</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">110 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">193% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Interest expense </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>857 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>627 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>230 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>36.7% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>Earnings before tax </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">6,194 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">5,658 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">536 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">9.5% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>Income tax </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,397 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>905 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>492 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>54.4% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>Income before minority interests </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">4,798 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">4,753 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">45 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">0.9% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>Minority interests </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>300 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>295 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>5 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1.7% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Net income </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">&nbsp;4,497 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">&nbsp;4,459 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">&nbsp;38 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">0.9% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P align=justify><I><U>Revenue</U></I><BR></P>
<P align=justify><I>Net Revenues</I>. Our net revenue for the three months ended
September, 2009 amounted to $38.7 million, which represents an increase of
approximately $1.9 million, or 5.3%, from the three-month period ended on
September 30, 2008, in which our net revenue was $36.7 million. The increased
revenues were attributable to increased revenues from sales of our chestnut and
convenience food products as a result of 16.3% and 12.0% increase in sales
respectively of such products thanks to our effective marketing efforts and well
established domestic and international distribution network.</P>
<P align=justify><I>Cost of Revenues. </I>During the three months ended
September 30, 2009, we experienced an increase in cost of revenue of $.566
million, in comparison to the three months ended September 30, 2008, from $29.0
million to $29.6 million, reflecting an increase of approximately 2%.
Approximately 21%, or $0.12 million, of this increase was attributable to an
increase in raw material costs, which increased from $27.1 million during the
three months ended September 30, 2008 to $27.2 million, or approximately 0.4%,
during the three months ended September 30, 2009. </P>
<P align=justify>The factors that contributed to the remaining 79% increase in
cost of revenues were: an increase in wage expense for factory workers, an
increase in depreciation expenses for capital equipment and an increase in the
cost of consumables used in conjunction with capital equipment.</P>
<P align=justify><I>Gross Profit</I>. Our gross profit increased $1.4 million,
or 17.9%, to $9.1 million for the three months ended September 30, 2009 from
$7.7 million for the same period in 2008 as a result of higher net revenues,
offset by higher costs of revenues, for the reasons indicated immediately
above.</P>
<P align=center>23</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_28></A>
<P align=justify><I><U>Operating Expenses</U></I><BR></P>
<P align=justify><I>Selling and Marketing Expenses</I>. Our selling and
marketing expenses increased approximately $0.33 million, or 40.2%, to $1.16
million in the third quarter of 2009 from $.831 million in the third quarter of
2008. The following table reflects the main factors that contributed to this
increase as well as the dollar amount that each factor contributed to this
increase:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD vAlign=bottom align=left><B>(in U.S. dollars)</B> </TD>
    <TD vAlign=bottom align=center width="50%"><B>Increase in Costs in the
      Three</B> <B>Months Ended September 30,</B> <B>2009 <BR>over the Three
      Months</B> <B>Ended September 30, 2008</B> </TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=left bgColor=#e6efff>Shipping and inspection fees
    </TD>
    <TD vAlign=bottom align=center width="50%" bgColor=#e6efff>$25,682 </TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=left>Transportation </TD>
    <TD vAlign=bottom align=center width="50%">$354,584 </TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=left bgColor=#e6efff>Commissions </TD>
    <TD vAlign=bottom align=center width="50%" bgColor=#e6efff>$52,971 </TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=left>Supermarket fees </TD>
    <TD vAlign=bottom align=center width="50%">$45,502 </TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=left bgColor=#e6efff>Wages (sales personnel) </TD>
    <TD vAlign=bottom align=center width="50%" bgColor=#e6efff>$65,112
  </TD></TR></TABLE>
<P align=justify>The increases listed in the table above were partially offset
by decreases in dollar amount of other factors, including customer lodging,
phone, postage and courier charges, toll road expense, warehousing costs and
expenses for professional movers.</P>
<P align=justify>Selling and marketing expenses increased because we expanded
the distribution of our products in China. In addition, we introduced several
new convenience food products and initiated a marketing and promotional campaign
for our chestnut and convenience food products.</P>
<P align=justify><I>General and Administrative Expenses. </I>We experienced an
increase in general and administrative expense of approximately $0.06 million
from approximately $0.847 million to approximately $0.907 million for the three
months ended September 30, 2009, compared to the same period in 2008. The
following table reflects the main factors that contributed to this increase,
which was partially offset by other factors that contributed to decrease of the
expenses:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=left>
    <p style="margin-left: 15pt">Factor </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center
      width="15%">Dollar Increase </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 15pt">Office expenses </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="15%"
    bgColor=#e6efff>$85,024 </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 15pt">Consultation fees
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="15%">$21,592 </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 15pt">Stamp Duty </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="15%"
    bgColor=#e6efff>$4,865 </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 15pt">Waste Processing
      fees </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="15%">$10,717 </TD></TR></TABLE>
<P align=justify><I><U>Income Before Taxation and Minority
Interest</U></I><BR></P>
<P align=justify>Income before taxation and minority interest increased $0.536
million, or 9.5%, to $6.19 million for the three months ended September 30, 2009
from $5.66 million for the same period of 2008. The increase was mainly
attributable to the increase of our sales revenue as described above in the
three months ended September 30, 2009 as compared to the three months ended
September 30, 2008.</P>
<P align=justify><I><U>Income Taxes</U></I><BR></P>
<P align=justify>Income taxes increased $0.492 million, or 54.4%, to $1.396
million in the third quarter of 2009, as compared to $0.904 million in the third
quarter of 2008. This increase was attributable to the higher income tax rate in
2009 as compared to 2008. </P>
<P align=justify>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.</P>
<P align=center>24</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_29></A>
<P align=justify>The income tax rates applicable to our Chinese operating
subsidiaries in 2008 and 2009 are depicted in the following table: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=left>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center width="33%"><B>
    2008 </B>
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center width="33%"><B>
    2009</B></TD></TR>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=left>
    <p style="margin-left: 10pt">Junan Hongrun </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center width="33%">15%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center width="33%">25%
  </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10pt">Luotian Lorain </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="33%"
    bgColor=#e6efff>15% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="33%"
    bgColor=#e6efff>15% </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt">Beijing Lorain </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="33%">-
</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="33%">15%
  </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10pt">Shandong Lorain </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="33%"
    bgColor=#e6efff>25% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="33%"
    bgColor=#e6efff>25% </TD></TR></TABLE>
<P align=center>25</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_30></A>
<P align=justify><I><U>Net Income</U></I><BR></P>
<P align=justify>Net income increased $.039 million, or 0.9%, to $4.497 million
for the three months ended September 30, 2009 from $4.458 million for the same
period of 2008. The increase was attributable to increased sales revenue and
lower cost of goods sold and partially offset by increased selling and marketing
expenses and higher income tax in the three months ended September 30, 2009 as
compared to the three months ended September 30, 2008.</P>
<P align=justify><B>Nine Months Ended September 30, 2009 Compared to Nine Months
Ended September 30, 2008</B></P>
<P align=justify>The following table summarizes the results of our operations
during the nine-month periods ended September 30, 2009 and September 30, 2008,
respectively, and provides information regarding the dollar and percentage
increase or (decrease) from the nine-month period ended September 30, 2008
compared to the nine-month period ended September 30, 2009.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=center colSpan=13><b>(All amounts, other than percentages, stated
      in thousands of U.S. dollars) </b> </TD></TR>
  <TR vAlign=top>
    <TD align=center><b>&nbsp; </b> </TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><b>Nine months ended </b> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><b>&nbsp; </b> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><b>Percentage </b> </TD>
    <TD align=center width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center><b>&nbsp; </b> </TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><b>September 30, </b> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><b>Dollar($) </b> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><b>(%) </b> </TD>
    <TD align=center width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center><b>&nbsp; </b> </TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><b>&nbsp; </b> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><b>&nbsp; </b> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><b>Increase </b> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><b>Increase </b> </TD>
    <TD align=center width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center><b>&nbsp; </b> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%"><b>2009
    </b>
    </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%"><b>2008
    </b>
    </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="10%"><b>(Decrease) </b> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="10%"><b>(Decrease)&nbsp;&nbsp;</b></TD>
    <TD align=center width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net revenues </TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;83,841 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;75,680 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;8,161 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>10.8% </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Cost of revenues </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">64,280 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">58,819 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">5,461 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">9.3% </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Gross profit </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>19,561 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>16,861 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>2,700 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>16.0% </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Operating expenses </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Selling and marketing expenses </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>3,556 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>2,066 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,490 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>72.1% </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>General and Administrative expenses </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">2,798 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">2,480 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">318 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">12.8% </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>Operating Income </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>13,207 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>12,314 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>892 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>7.2% </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Government subsidy income </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">240 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">38 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">202 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">538.0% </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Interest and other income </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>233 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>288 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(56</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(19.3%</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>Other expenses </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">234 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">48 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">186 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">385.3% </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Interest expense </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>2,206 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,901 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>305 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>16.0% </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>Earnings before tax </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">11,240 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">10,691 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">548 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">5.1% </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>Income tax </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>2,580 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,788 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>792 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>44.3% </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>Income before minority interests </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">8,660 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">8,903 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(243</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(2.7%</TD>
    <TD align=left width="2%">) </TD></TR>
  <TR>
    <TD bgColor=#e6efff>Minority interests </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>551 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>595 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(45</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(7.5%</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR>
    <TD>Net income </TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;8,109 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;8,308 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;(199</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(2.4%</TD>
    <TD align=left width="2%">) </TD></TR></TABLE>
<P align=justify><I><U>Revenue</U></I><BR></P>
<P align=justify><I>Net Revenues</I>. Our net revenue for the nine months ended
September 30, 2009 amounted to $83.8 million, which is approximately $8.1
million or 10.8% more than that of the same period ended on September 30, 2008
where we had revenue of $75.7 million. The increased revenues were attributable
to the success of the Company's marketing strategies, operational enhancements
and expansion of sales markets, primarily in China. In addition, through third
party agents that we contracted with, our products were sold to a total of over
3,000 supermarkets in China as of September 30, 2009.</P>
<P align=justify>During the nine months ended September 30, 2009, revenues from
sales of chestnut products increased by $5.2 million, or 13.2%, and revenues
from sales of convenience food products increased by $1.7 million, or 10.6%, and
sales of frozen, canned and bulk food products increased $1.2 million, or 5.8%,
compared to the same period in 2008.</P>
<P align=center>26</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>



<A name="page_31"></A>

<P align="justify">
<I>Cost of Revenues.</I> Our cost of goods sold, which consists of raw materials, direct labor and manufacturing overhead expenses, was &#36;64.3 million for the nine month period ended September 30, 2009, an increase of &#36;5.5 million or 9.3%, as
compared to &#36;58.8 million for the nine month period ended September 30, 2008. The cost of goods sold increased because the sales in the first nine months of 2009 increased as compared to the same period ended September 30, 2008. </P>
<P align="justify">
<I>Gross Profit</I>. Our gross profit increased &#36;2.7 million, or 16% to &#36;19.6 million for the nine months ended September 30, 2009 from &#36;16.9 million for the same period in 2008. This increase was attributable to increased sales revenue.
</P>
<P align="justify">
<I><U>Operating Expenses</U></I><BR>
</P>
<P align="justify">
<I>Selling and Marketing Expenses</I>. Selling and marketing expenses increased &#36;1.5 million, or 72.1% to &#36;3.6 million for the nine months ended September 30, 2009 from &#36;2.1 million for the same period in 2008. This increase mainly
resulted from increased efforts to market our products in our domestic market. </P>
<P align="justify">
<I>General and Administrative Expenses.</I> General and administrative expenses increased &#36;0.32 million, or 12.8% to &#36;2.8 million for the nine months ended September 30, 2009 from &#36;2.5 million for the same period of 2008. The increase of
general and administrative expenses was primarily attributable to increased office expenses relative to our expanded business, the increased compensation for managerial personnel and<B> </B>expansion of our distribution channels. </P>
<P align="justify">
<I><U>Income Before Taxation and Minority Interest</U></I><BR>
</P>
<P align="justify">
Income before taxation and minority interest increased &#36;0.55 million or 5.1% to &#36;11.2 million for the nine months ended September 30, 2009 from &#36;10.7 million for the same period of 2008.<B> </B>The increase was primarily a result of the
higher revenue during the nine month period ended on September 30, 2009 as compared to 2008. </P>
<P align="justify">
<I><U>Income Taxes</U></I><BR>
</P>
<P align="justify">
Income taxes increased &#36;0.79 million or 44.3% to &#36;2.6 million for the nine months ended September 30, 2009 from &#36;1.8 million for the same period of 2008. The increase of tax paid was primarily a result of the increase of income in the
first nine months ended September 30, 2009 as well as increased income tax rate, as compared to the same period in 2008. </P>
<P align="justify">
<I><U>Net Income</U></I><BR>
</P>
<P align="justify">
Net income decreased &#36;0.2 million, or 2.4% to &#36;8.1 million for the nine months ended September 30, 2009 from &#36;8.3 million for the same period of 2008. The decrease was primarily a result of higher selling and marketing expenses and
increased income tax. </P>
<P align="justify">
<B>Liquidity and Capital Resources</B><BR>
</P>
<P align="justify">
<B>General</B><BR>
</P>
<P align="justify">
Our primary capital needs have been to fund the working capital requirements necessitated by our sales growth, adding new products and expansion of our facilities. Our primary sources of financing have been cash generated from operations, short-term
loans from banks in China and financing from private placement transactions. In 2007, we obtained approximately &#36;19 million from a private placement transaction.  Proceeds from such transaction, together with cash generated from operations and
short-term bank loans, have been used to fund our working capital needs. We used most of the proceeds of the private placement to build infrastructure at several of our facilities. At December 31, 2008, total unused proceeds from the private
placement were &#36;0, as compared to approximately &#36;6.5 million at December 31, 2007. On November 3, 2009, we raised an additional &#36;12 million in a private placement transaction with the selling stockholders. In the event that we
need to raise additional equity in the future, 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. At December 31, 2008, cash and cash equivalents (including
restricted cash) were $6.6 million, as compared to $8.8 million at December 31,
2007. At September 30, 2009, cash and cash equivalents (including restricted
cash) were $5.2 million.</P>
<P align="center">
27</P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">

<A name=page_32></A>
<P align=justify>We expect to continue to finance our operations and working
capital needs in 2009 from cash generated from operations and short-term bank
loans. In addition, we currently plan to finance or refinance approximately $23
million in the form of short-term bank loans in 2009. Currently, we have
negotiated loans with certain banks in China for an aggregate of $25 million. 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.</P>
<P align=justify>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 required
liquidity. Currently, the capital markets for small capitalization companies are
extremely difficult. Accordingly, we cannot be sure of the availability or terms
of any alternative financing arrangements. </P>
<P align=justify><B>Year Ended December 31, 2008 Compared to Year Ended December
30, 2007</B></P>
<P align=justify>The following table provides detailed information about our net
cash flow for all financial statements periods presented in this prospectus.
</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><B>Cash Flows Data:</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>(in thousands of U.S. dollars) </TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="27%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1"><B>For year ended December 31</B>,
    </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=center
      width="12%"><B>2008</B> </TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=center width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=center
      width="12%"><B>2007</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net cash flows provided by (used in)
      operating activities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>19,508 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(3,585</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>Net cash flows provided by (used in) investing activities
    </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(20,316</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(12,440</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net cash flows provided by (used in)
      financing activities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(8,134</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>19,664 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P align=justify><U>Operating Activities</U><BR></P>
<P align=justify>Net cash provided by operating activities for 2008 was $19.5
million and net cash used in operating activities for 2007 was $3.6 million. The
increase of approximately $23.1 million in net cash flows provided by operating
activities resulted primarily from an increase in net income of approximately
$5.0 million, a decrease in accounts receivable of approximately $38.4 million
and a decrease in inventories of approximately $1.6 million, partially offset by
a decrease in accounts payable of approximately $21.2 million. In 2008, we
increased our direct sales to third-party distributors, who do not pay on
credit, thereby decreasing our accounts receivables. In addition, we were
required to pay our suppliers on shorter terms, thereby decreasing our accounts
payable. </P>
<P align=justify><U>Investing Activities</U><BR></P>
<P align=justify>Our uses of cash for investment activities are primarily
payments for the acquisition and construction of property, plants and equipment.
</P>
<P align=justify>Net cash used in investing activities for 2008 was $20.3
million and $12.4 million, respectively, for 2008 and 2007. The increase of
approximately $7.9 million resulted primarily from an increase of $7.5 million
in the construction of refrigerated storage, vegetable tents and of
comprehensive workshops for the processing of chestnut and other food products
in 2008. </P>
<P align=center>28</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_33></A>
<P align=justify><U>Financing Activities</U><BR></P>
<P align=justify>Net cash used in financing activities for 2008 was $8.1 million
and net cash provided by financing activities for 2007 was $19.7 million. The
increase of approximately $27.8 million in net cash used by financing activities
resulted primarily from a decrease of $17.3 million in paid-in capital provided
in connection with a private placement in 2007 and an increase of approximately
$22.6 million in bank repayments, partially offset by an increase of
approximately $9.7 in bank borrowings and $2.5 million in proceeds from
notes.</P>
<P align=justify><U>Loan Facilities</U><BR></P>
<P align=justify>As of December 31, 2008, the amounts and maturity dates for our
bank loans were as follows:</P>
<P align=justify>All amounts, other than percentages, in thousands of U.S.
dollars.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">&nbsp; &nbsp;
      &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<B>Banks</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt"><B>Amounts</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt"><B>Beginning</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt"><B>Ending</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt"><B>Interest Rate</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt"><B>Duration</B> </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Beijing Miyun County Shilipu Rural Financial Institution
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">2,772.02 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">9/30/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">9/30/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">8.54% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">12 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Bank of Beijing
</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">291.79 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">7/28/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">7/28/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">7.72%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">12
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County Industrial and Commercial Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">145.90 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">1/11/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">1/10/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">6.12% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">12 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County
      Industrial and Commercial Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">240.04 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">11/21/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">2/19/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">3.17%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">3
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County Industrial and Commercial Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">393.92 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">9/12/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">3/4/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">8.54% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">4 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County
      Industrial and Commercial Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">120.76 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">11/28/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">2/26/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">10.18% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">3
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County Industrial and Commercial Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">173.67 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">12/5/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">3/5/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">10.18% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">3 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County
      Industrial and Commercial Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">118.16 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">11/21/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">2/19/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">3.17%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">3
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County Construction Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">25.17 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">9/25/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">12/24/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">7.45% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">3 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County
      Construction Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">102.13 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">9/25/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">2/24/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">7.45%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">5
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County Construction Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">1,575.68 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">10/22/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">1/22/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">10.45% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">3 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County
      Construction Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">116.72 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">11/5/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">2/3/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">7.24%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">3
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County Agriculture Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">583.58 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">8/7/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">8/6/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">12.70% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">12 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County
      Agriculture Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">656.53 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">8/22/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">8/18/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">12.70% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">12
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County Agriculture Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">364.74 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">9/3/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">8/18/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">12.70% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">12 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Junan County
      Agriculture Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">1,458.96 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">9/27/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">3/27/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">10.56% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">6
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Union Bank (China) Co., Ltd. </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">1,156.96 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">1/28/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">1/14/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">5.49% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">12 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Linyi Commercial
      Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">685.71 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">2/1/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">1/5/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">13.07% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">11
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Linyi Commercial Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">656.53 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">2/2/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">1/12/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">13.07% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">11 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Linyi Commercial
      Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">1,458.96 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">9/28/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">1/12/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">8.58%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">4
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Linyi Commercial Bank </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">116.72 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">9/28/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">1/12/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">8.58% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">4 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">China Agricultural
      Bank, Luotian Square Branch </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">817.02 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">9/8/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">9/7/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">7.47%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">12
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">China Agricultural Bank, Luotian Square Branch </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">291.79 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">9/8/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">9/7/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">7.47% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">12 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Bank of China,
      Junan Branch </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">4.01
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">9/19/2006 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">5/19/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">7.50%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">36
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Credit union,Junan </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">43.77 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">8/6/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">1/7/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">8.58% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">4 months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Credit union,Junan
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">43.77
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">9/11/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">1/12/2009 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">8.58%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">3
      months </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Agricultural Development Lutian Government </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">25.53 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">1/11/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">12/11/2011 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">2.10% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">4 years </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Union Commercial
      Bank (China) </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">551.44 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">1/29/2008 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">1/14/2011 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">5.49%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%">
    <p style="margin-left: 5pt; margin-right: 5pt">3
      years </font> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt"><font size="2">Total </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">14,991.98 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="10%"
    bgColor=#e6efff>
    <p style="margin-left: 5pt; margin-right: 5pt">&nbsp; </font> </TD></TR></TABLE>
<P align=justify>Loans listed in the table above whose maturity dates are prior
to the date hereof have either been repaid or have been extended by the lending
banks for either 6 months or 1 year.<B> </B></P>
<P align=justify><B>Nine Months Ended September 30, 2009 Compared to Nine Months
Ended September 30, 2008 </B></P>
<P align=justify>As of September 30, 2009, we had cash and cash equivalents
(including restricted cash) of $5.2 million. The following table provides
detailed information about our net cash flow for all financial statements
periods presented in this report. </P>
<P align=center>29</P>
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<P align=justify>&nbsp;</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR>
    <TD align=left>&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=center width="27%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1"><STRONG>Cash Flow (in
      thousands)<BR>Nine Months Ended </STRONG><BR><B>September 30,</B></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD align=left>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=center
      width="12%"><STRONG>2009</STRONG></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=center
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=center
      width="12%"><STRONG>2008</STRONG></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net cash provided by (used in) operating
      activities </TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;(15,739</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;4,631 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Net cash provided by (used in) investing activities </TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="12%">&nbsp;1,233 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="12%">&nbsp;(13,708</TD>
    <TD align=left width="2%">) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net cash provided by (used in) financing
      activities </TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;14,792 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;6,482 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Net cash flow (outflow) </TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="12%">&nbsp;286 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="12%">&nbsp;(2,594</TD>
    <TD align=left width="2%">) </TD></TR></TABLE>
<P align=justify><U>Operating Activities</U> </P>
<P align=justify>Net cash used in operating activities was $15.7 million for the
nine months period ended September 30, 2009, which is a decrease of $20.3
million from the $4.6 million provided by operating activities for the same
period of 2008. The decrease of net cash provided by operating activities in the
first nine months of fiscal 2009 was primarily a result of additional decrease
in accounts and other payables of approximately $7.1 million and less decrease
in accounts and other receivables of approximately $16.4 million as compared to
the same period in 2008. </P>
<P align=justify><U>Investing Activities</U><BR></P>
<P align=justify>Our main uses of cash for investment activities are payments
for the acquisition of property, plants and equipment. </P>
<P align=justify>Net cash provided by investing activities for the nine months
period ended September 30, 2009 was $1.2 million, which is an increase of $14.9
million from net cash used in investing activities of $13.7 million for the same
period of 2008. The increase was primarily due to reduced investment in fixed
assets and decrease in restricted cash in 2009. </P>
<P align=justify><U>Financing Activities</U><BR></P>
<P align=justify>Net cash provided by financing activities for the nine months
period ended September 30, 2009 was $14.8 million, which is an increase of $8.3
million from $6.5 million net cash provided by financing activities during the
same period in 2008. The increase of the net cash provided by financing
activities was primarily a result of increased short term bank borrowing in
2009. </P>
<P align=justify><U>Loan Facilities</U><BR></P>
<P align=justify>As of September 30, 2009, the amounts and maturity dates for
our short-term bank loans are as set forth in the Notes to the Financial
Statements. The total amounts outstanding were $34.6 million as of September 30,
2009, compared with $14.4 million as of December 31, 2008. We believe that our
currently available working capital, after receiving the aggregate proceeds of
the credit facilities referred to above, should be adequate to sustain our
operations at our current levels through at least the next twelve months. </P>
<P align=justify><U>Obligations under Material Contracts</U><BR></P>
<P align=justify>We do not have any material contractual obligations as of
September 30, 2009.</P>
<P align=justify><B>Critical Accounting Policies</B><BR></P>
<P align=justify>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: </P>
<P align=center>30</P>
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noShade SIZE=5>
<A name=page_35></A>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 5"><I>Method of Accounting -- </I>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.
  <LI>
  <p style="margin-top: 0; margin-bottom: 5"><I>Use of estimates -- </I>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.
  <LI>
  <p style="margin-top: 0; margin-bottom: 5"><I>Principles of consolidation -- </I>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. </LI></UL>
<P align=justify>As of December 31, 2008, the particulars of the commonly
controlled entities are as follows:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD vAlign=bottom align=left><FONT size=2><B><I>Name of Company
      </I></B></FONT></TD>
    <TD vAlign=bottom align=center width="13%"><FONT size=2><B><I>Place of
      </I></B><B><I>Incorporation </I></B></FONT></TD>
    <TD vAlign=bottom align=center width="13%"><FONT size=2><B><I>Attributable
      </I></B><B><I>Equity Interest <BR></I></B><B><I>% </I></B></FONT></TD>
    <TD vAlign=bottom align=center width="13%"><FONT size=2><B><I>Registered
      <BR></I></B><B><I>Capital </I></B></FONT></TD>
    <TD vAlign=bottom align=center width="13%"></TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=left bgColor=#e6efff><FONT size=2>Shandong Lorain
      Co., Ltd </FONT></TD>
    <TD vAlign=bottom align=center width="13%" bgColor=#e6efff><FONT
      size=2>PRC </FONT></TD>
    <TD vAlign=bottom align=center width="13%" bgColor=#e6efff><FONT
      size=2>80.2 </FONT></TD>
    <TD vAlign=bottom align=right width="13%" bgColor=#e6efff><FONT
      size=2>$12,901,823 </FONT></TD>
    <TD vAlign=bottom align=right width="13%" bgColor=#e6efff><FONT
      size=2>(RMB 100,860,000) </FONT></TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=left><FONT size=2>Luotian Lorain Co., Ltd
    </FONT></TD>
    <TD vAlign=bottom align=center width="13%"><FONT size=2>PRC </FONT></TD>
    <TD vAlign=bottom align=center width="13%"><FONT size=2>100 </FONT></TD>
    <TD vAlign=bottom align=right width="13%"><FONT size=2>$1,279,181
    </FONT></TD>
    <TD vAlign=bottom align=right width="13%"><FONT size=2>(RMB 10,000,000)
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=left bgColor=#e6efff><FONT size=2>Junan Hongrun
      Foodstuff Co., Ltd </FONT></TD>
    <TD vAlign=bottom align=center width="13%" bgColor=#e6efff><FONT
      size=2>PRC </FONT></TD>
    <TD vAlign=bottom align=center width="13%" bgColor=#e6efff><FONT
      size=2>100 </FONT></TD>
    <TD vAlign=bottom align=right width="13%" bgColor=#e6efff><FONT
      size=2>$2,430,445 </FONT></TD>
    <TD vAlign=bottom align=right width="13%" bgColor=#e6efff><FONT
      size=2>(RMB 19,000,000) </FONT></TD></TR>
  <TR vAlign=top>
    <TD vAlign=bottom align=left><FONT size=2>Beijing Lorain Co., Ltd
    </FONT></TD>
    <TD vAlign=bottom align=center width="13%"><FONT size=2>PRC </FONT></TD>
    <TD vAlign=bottom align=center width="13%"><FONT size=2>100 </FONT></TD>
    <TD vAlign=bottom align=right width="13%"><FONT size=2>$1,279,181
    </FONT></TD>
    <TD vAlign=bottom align=right width="13%"><FONT size=2>(RMB 10,000,000)
      </FONT></TD></TR></TABLE>
<UL style="TEXT-ALIGN: justify">
  <LI><I>Accounting for the Impairment of Long-Lived Assets </I>-- 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. </LI></UL>
<P align=justify>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.
</P>
<P align=justify>During the reporting years, there was no impairment
loss.<BR></P>
<UL style="TEXT-ALIGN: justify">
  <LI><I>Revenue recognition -- </I>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. </LI></UL>
<P align=justify>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. </P>
<P align=center>31</P>
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<A name="page_36"></A>

<P align="justify">
<B>Recent Accounting Pronouncements</B><BR>
</P>
<P align="justify">
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 applies to all derivative instruments and related hedged items accounted
for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 161 requires entities to provide greater transparency about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, results of operations and cash flows. SFAS 161
is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. </P>
<P align="justify">
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). Statement 162 will become effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." </P>
<P align="justify">
In May 2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1 requires the
issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the
issuer's non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis.</P>
<P align="justify">
In September 2008, FASB issued FSP No. 133-1 and FIN 45-4, &#147;Disclosures about Credit Derivatives and Certain Guarantees&#148;, an amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161. This FSP is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows
of the sellers of credit derivatives. The provisions of the FSP that amend Statement 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008. </P>
<P align="justify">
This FSP amends FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. This FSP also amends FASB
Interpretation (FIN) No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, to require an additional disclosure about the current status of the payment/performance risk of
a guarantee. The provisions of the FSP that amend Statement 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008. </P>
<P align="justify">
Finally, this FSP clarifies the effective date in FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The disclosures required by Statement 161 should be provided for any reporting period (annual or quarterly
interim) beginning after November 15, 2008. For example, an entity with a March 31 fiscal year-end should provide the disclosures for its fourth quarter interim period ending March 31, 2009, in its 2009 annual financial statements. This
clarification of the effective date of Statement 161 is effective upon issuance of the FSP. </P>
<P align="justify">
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS 165"). SFAS 165 is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are
issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or
were available to be issued. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009.</P>
<P align="justify">
In June 2009, FASB issued FASB Statement No. 166, Accounting for Transfers for Financial Assets and FASB Statement No. 167, a revision to FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities.</P>
<P align="center">
32</P>

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<A name="page_37"></A>

<P align="justify">
Statement 166 is a revision to FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, 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.</P>
<P align="justify">
Statement 167 is a revision to FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities, 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&#146;s purpose and design and the reporting
entity&#146;s ability to direct the activities of the other entity that most significantly impact the other entity&#146;s economic performance.</P>
<P align="justify">
On July 1, 2009, FASB issued FASB Statement No. 168, The "FASB Accounting Standards Codification" and the Hierarchy of Generally Accepted Accounting Principles. The ASC has become the source of authoritative US GAAP recognized by the FASB to be
applied by nongovernmental entities and provides that all such guidance carries an equal level of authority. The ASC is not intended to change or alter existing GAAP. The ASC is effective for interim and annual periods ending after September 15,
2009.</P>
<P align="justify">
We are currently evaluating the potential impact, if any, of the adoption of the above recent accounting pronouncements on our consolidated results of operations and financial condition. </P>
<P align="justify">
<B>Off-Balance Sheet Arrangements </B></P>
<P align="justify">
We do not have any off-balance arrangements. <br>
&nbsp;</P>
<P align="center">
33</P>

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<A name="page_38"></A>

<P align="justify">
<B>OUR BUSINESS</B> </P>
<P align="justify">
<B><I>Overview of Our Business</I></B> </P>
<P align="justify">
We are an integrated food manufacturing company with headquarters in Shandong Province, China. We develop, manufacture and sell the following types of food products:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">chestnut products;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">convenience foods products (including ready-to-cook, or RTC, meals, ready-to-eat, or RTE, meals and meals ready-to-eat, or MRE); and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">frozen, canned, and bulk food products.</LI>
</UL>
<P align="justify">
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 2009, our primary
strategy has been to focus on increasing sales of our chestnut products in the domestic Chinese market and increasing the number of domestic sales to third party distributors. Our primary strategy for 2010 is to further expand our brand equity in
the Chinese market for our chestnut products and to increase sales of our convenience food products in the Chinese market. 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. </P>
<P align="justify">
<B><I>Organizational Structure</I></B><BR>
</P>
<P align="justify">
ALC is a Nevada corporation that was incorporated in Delaware on February 4, 1986 and was formerly known as Millennium Quest, Inc. On May 3, 2007, ALC completed a recapitalization, or reverse merger, with ILH. Prior to that date, ALC did not engage
in active business operations other than to search for a potential acquisition target. Effective November 9, 2009, ALC reincorporated in Nevada from Delaware. </P>
<P align="justify">
ALC wholly owns ILH. ILH wholly owns two Chinese operating subsidiaries, Luotian Lorain and Junan Hongrun, directly. In addition, together with Junan Hongrun, ILH wholly owns Beijing Lorain and owns approximately 80% of Shandong Lorain (Shandong
Economic Development Investment Co. Ltd. owns approximately 20%). We sometimes refer to our four Chinese operating subsidiaries throughout this prospectus as the Lorain Group Companies. On page 2 above is an organizational chart of ALC, ILH and the
Lorain Group Companies: </P>
<P align="justify">
<B><I>Products</I></B><BR>
</P>
<P align="justify">
Our products are categorized into the following three segments:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">chestnut products;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">convenience foods; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">frozen, canned and bulk food.</LI>
</UL>
<P align="justify">
We produced 234 products in 2008, including 52 new products in our convenience foods segment. We discontinued 10 products in 2008, primarily in our frozen, canned and bulk food segment. During the nine months ended September 30, 2009, we produced
239 products, including 18 new products in our convenience food segment. We discontinued 16 products during such period across all three product segments which had lower margins or did not receive good feedback from our customers.</P>
<P align="justify">
Our chestnut products and convenience foods were our main profit centers in 2008 and during the nine months ended September 30, 2009. Our convenience foods segment has been the fastest growing portion of our business and was one of the main
catalysts of our growth during 2008 and during the nine months ended September 30, 2009. Frozen, canned and bulk food products accounted for a substantial portion of our revenues in 2008 and during the
nine months ended September 30, 2009 but generated lower profit margins than our chestnut and convenience products. </P>
<P align="center">
34</P>

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<A name="page_39"></A>

<P align="justify">
<U>Chestnut Products</U><BR>
</P>
<P align="justify">
We believe that we are the largest chestnut processing manufacturer in China. We have developed brand equity for our chestnut products in China, Japan and South Korea over the past 10 to 15 years. We produced 53 high value-added processed chestnut
products in 2008. In 2008, this segment contributed 63% of our total revenues. During the nine months ended September 30, 2009, we produced 49 high value-added processed chestnut products. This segment contributed 54% of our total revenues during
such period. </P>
<P align="justify">
Our best selling products in 2008 and thus far in 2009 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 chopped chestnut kernels. The majority of our chestnut products are natural and do not contain chemical additives. </P>
<P align="justify">
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. </P>
<P align="justify">
China is the largest grower of chestnuts, 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. </P>
<P align="justify">
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. </P>
<P align="justify">
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. </P>
<P align="justify">
<U>Convenience Foods</U><BR>
</P>
<P align="justify">
Our convenience food products are characterized as follows:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">Ready-to-cook, or RTC, food products;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">Ready-to-eat, or RTE, food products; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">Meals ready-to-eat, or MRE, food products.</LI>
</UL>
<P align="justify">
These products are intended to meet the current demands of our customers for safe, wholesome and tasty foods that are easily prepared. </P>
<P align="justify">
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 2008, and during the first nine
months of 2009, were cattle bone soup, beef and lamb. </P>
<P align="justify">
RTEs can be served without any cooking. Our best selling RTEs in 2008, and during the first nine months of 2009, were smoked fish and stewed beef with sauce. Other RTEs include spiced belt fish, cherry tomato, spicy pork fillet, pork and egg roll,
pears and pineapples. </P>
<P align="center">
35</P>

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<A name=page_40></A>
<P align=justify>MREs are meal kits with self-heating devices. Our MREs are used
in both military and civilian uses, such as camping, traveling and other
situations in which a person does not have access to traditional cooking
supplies and equipment, such as a stove or microwave.</P>
<P align=justify>We produce various MREs based on Chinese cuisine, the best
sellers of which were our stir fried rice and stir fried noodles in 2008, and
the first nine months of 2009. 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. </P>
<P align=justify>We produced 113 convenience food products in 2008, including 52
new products such as red bean paste products and ready-to-eat meal combo
products. In 2008, this segment contributed 19% of our total revenues. We
produced 121 convenience food products during the first nine months of 2009,
including 18 new products such as fruit-punch bean products, which are beans
with various fruit flavors. During the nine months ended September 30, 2009,
this segment contributed 22% of our total revenues. </P>
<P align=justify>Our convenience foods segment has been the fastest growing
portion of our business and was one of the main catalysts of our growth during
2008 and the first nine months of 2009. We expect our convenience foods segment
to continue to be an important area of growth for our business in the future.
</P>
<P align=justify><U>Frozen, Canned and Bulk Food</U><BR></P>
<P align=justify>We produce a variety of frozen, canned and bulk foods,
including frozen vegetables, frozen fruits, frozen fish, and frozen meats. We
produced 68 frozen, canned and bulk food products in 2008 and 66 during the
first nine months of 2009. Our best selling frozen, canned and bulk foods in
2008 and the first nine months of 2009 were frozen peas, frozen corn and frozen
mixed vegetables. Many of our bulk food products are natural and do not contain
chemical additives. </P>
<P align=justify>Our frozen, canned and bulk 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, canned
and bulk food division has been a significant portion of our business. In 2008,
this segment contributed 18% of our total revenues. During the nine months ended
September 30, 2009, this segment contributed 25% of our total revenues. Gross
margins in this segment are lower than the margins for chestnut products and
convenience foods, however. Because of this, we expect that the proportionate
contribution of this business segment to our total revenues will gradually
decline.</P>
<P align=justify><B><I>Our Manufacturing Facilities &#150; Do we need to update this
section?</I></B> </P>
<P align=justify><U>General</U><BR></P>
<P align=justify>We currently manufacture our products in five facilities in
China, two of which are located in Junan County, Shandong Province, one in
Luotian County, Hubei Province, one in Miyun County, Beijing Province 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. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=center width="15%"><B>Year Operations</B> </TD>
    <TD align=center width="15%"><B>Construction Size</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left><B>Facility</B> </TD>
    <TD align=center width="15%"><B>Commenced</B> </TD>
    <TD align=center width="15%"><B>(square meters)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Junan Hongrun </TD>
    <TD align=center width="15%" bgColor=#e6efff>2002 </TD>
    <TD align=center width="15%" bgColor=#e6efff>25,665 </TD></TR>
  <TR vAlign=top>
    <TD align=left>Shandong Lorain </TD>
    <TD align=center width="15%">1995 </TD>
    <TD align=center width="15%">15,392 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Luotian Lorain </TD>
    <TD align=center width="15%" bgColor=#e6efff>2003 </TD>
    <TD align=center width="15%" bgColor=#e6efff>9,558 </TD></TR>
  <TR vAlign=top>
    <TD align=left>Beijing Lorain </TD>
    <TD align=center width="15%">2003 </TD>
    <TD align=center width="15%">21,000 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Dongguan </TD>
    <TD align=center width="15%" bgColor=#e6efff>2008 </TD>
    <TD align=center width="15%" bgColor=#e6efff>5,500 </TD></TR></TABLE>
<P align=justify><U>Production Lines</U><BR></P>
<P align=justify>We currently manufacture our products using 21 production
lines. Each production line is used to produce between 10 and 50 products. We
currently run three types of product lines: </P>
<P align=center>36</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_41></A>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">deep-freezing lines, which are used to freeze raw materials for year-round
  production and to produce frozen food;
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">canning lines, which are used to produce canned products, including
  chestnut products; and
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">convenience food lines, which are used for producing RTCs, RTEs and MREs,
  all of which have nitrogen preservation capacity. </LI></UL>
<P align=justify>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. </P>
<P align=justify>The production process of our convenience products generally
involves various steps, including soaking, boiling, coating, drying, deep
freezing, packing, sealing and sterilizing. </P>
<P align=justify>The following table shows the number and types of production
lines, the types of products produced and the production capacity at each
facility: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=left>
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT
      size=2>Facility </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=left width="33%">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT
      size=2>Production Lines </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=left width="33%">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT
      size=2>Products </FONT></TD></TR>
  <TR vAlign=top>
    <TD vAlign=top align=left bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>Shandong Lorain
      </FONT></TD>
    <TD vAlign=top align=left width="33%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>1
      Deep-freezing line <BR>1 Convenience food line </FONT></TD>
    <TD vAlign=top align=left width="33%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT
      size=2>Chestnut Products <BR>Convenience Foods <BR>Frozen, Canned and Bulk
      Foods </FONT></TD></TR>
  <TR vAlign=top>
    <TD vAlign=top align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>Junan Hongrun </FONT></TD>
    <TD vAlign=top align=left width="33%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>1 Deep-freezing line
      <BR>4 Canning lines </FONT></TD>
    <TD vAlign=top align=left width="33%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>Chestnut Products
      <BR>Frozen, Canned and Bulk Foods </FONT></TD></TR>
  <TR>
    <TD vAlign=top bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>Beijing Lorain </FONT></TD>
    <TD vAlign=top width="33%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>6 Convenience food
      lines <BR>1 Deep-freezing line </FONT></TD>
    <TD vAlign=top width="33%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>Chestnut Products
      <BR>Convenience Foods Frozen, <BR>Canned and Bulk Foods </FONT></TD></TR>
  <TR vAlign=top>
    <TD vAlign=top align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>Luotian Lorain </FONT></TD>
    <TD vAlign=top align=left width="33%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>3 Convenience food
      lines <BR>2 Deep-freezing lines </FONT></TD>
    <TD vAlign=top align=left width="33%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>Chestnut Products
      <BR>Convenience Foods Frozen,<BR>
      Canned and Bulk Foods </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" vAlign=top align=left
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>Dongguan factory </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" vAlign=top align=left
    width="33%" bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>2 Convenience food lines
    </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" vAlign=top align=left
    width="33%" bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt"><FONT size=2>Convenience Foods
  </FONT></TD></TR></TABLE>
<P align=justify>We allocate our production lines based upon the location of our
facilities to take advantage of efficiencies in the transportation of required
raw materials. For example, Junan Hongrun and Shandong Lorain, which manufacture
primarily chestnut and frozen, canned and bulk products, are located in Shandong
Province, which is China&#146;s largest supplier of fresh produce by volume. Shandong
Providence 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.</P>
<P align=justify>Our production lines and facilities have all been designed to
meet the standards and requirements of our largest customers in Japan, which is
currently 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. </P>
<P align=center>37</P>
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noShade SIZE=5>
<A name=page_42></A>
<P align=justify>With limited exceptions, 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, canned and bulk
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 full
capacity throughout the year. </P>
<P align=justify>Currently, most of our processed and convenience foods are
produced at our Beijing Lorain plant. In 2008, we expanded this facility with
the addition of four convenience foods production lines, which increased
production capacity by approximately 6,000 metric tons per year. </P>
<P align=justify>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 should our facilities
be inadequate to meet increasing demand. In 2008, we leased two new convenience
foods production lines in Dongguan, Guangdong Province, which increased
production capacity by approximately 1,250 metric tons per year to meet our
short-term needs. If needed, we may lease additional facilities in the near
future. 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. </P>
<P align=justify><U>Storage Capacity</U><BR></P>
<P align=justify>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 (-18&#186;C to -20&#186;C) or constant temperature
storages (-5&#186;C to 5&#186;C). Storage is particularly critical for our chestnut
products because chestnuts are a seasonal fruit.</P>
<P align=justify>The following table illustrates on a facility by facility basis
the type and capacity of our storage resources: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1">
    <p style="margin-left: 5pt"><B>Facility</B> </TD>
    <TD align=center width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1"><B>Storage Type</B> </TD>
    <TD align=center width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1"><B>Number of</B> </TD>
    <TD align=center width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1"><B>Capacity</B> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="25%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="25%"><B>Storage Units</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="25%"><B>(metric tons)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">Junan Hongrun </TD>
    <TD align=left width="25%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">Frozen Storage <BR>Constant
      Temperature </TD>
    <TD align=center width="25%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">7 <BR>8 </TD>
    <TD align=center width="25%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">3,000 <BR>4,800 </TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">Shandong Lorain </TD>
    <TD align=left width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">Frozen Storage <BR>Constant Temperature </TD>
    <TD align=center width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">5 <BR>3 </TD>
    <TD align=center width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">2,000 <BR>1,500 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">Luotian Lorain </TD>
    <TD align=left width="25%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">Frozen Storage <BR>Constant
      Temperature </TD>
    <TD align=center width="25%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">8 <BR>4 </TD>
    <TD align=center width="25%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">4,500 <BR>2,000 </TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">Beijing Lorain </TD>
    <TD align=left width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">Frozen Storage <BR>Constant Temperature </TD>
    <TD align=center width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">6 <BR>3 </TD>
    <TD align=center width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">2,850 <BR>1,800 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">Dongguan </TD>
    <TD align=left width="25%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">Frozen Storage <BR>Constant
      Temperature </TD>
    <TD align=center width="25%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">2 <BR>1 </TD>
    <TD align=center width="25%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">800 <BR>450 </TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">TOTAL </TD>
    <TD align=left width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 5pt; margin-right: 5pt">&nbsp; </TD>
    <TD align=center width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">47 </TD>
    <TD align=center width="25%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">23,700 </TD></TR></TABLE>
<P align=justify>As we have expanded our production capacity, we have also
expanded our storage capacity. All of our storage facilities, other than the
facility in Dongguan, are owned by us. In 2008, we increased our storage
capacity by leasing a warehouse in Dongguan with a storage capacity of 1,250
metric tons.</P>
<P align=justify><U>Agricultural Operations</U><BR></P>
<P align=justify>We grow and self-supply a portion of our chestnut, fruit and
vegetable products. We self-supplied approximately 1% of our raw materials
needed in 2008 and approximately 1% of our raw materials needed during the nine
months ended September 30, 2009. (See &#147;Raw Materials&#148; below.) 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.</P>
<P align=center>38</P>
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noShade SIZE=5>
<A name=page_43></A>
<P align=justify>Lands in which we grow our agricultural products for such
products are shown in the following table: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD vAlign=bottom align=center><B>Harvest</B> </TD>
    <TD vAlign=bottom align=center width="15%"><B>Area</B> <BR><B>(acres)</B>
    </TD>
    <TD vAlign=bottom align=center width="15%"><B>Location</B>
      <BR><B>(PRC)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Chestnut (South Korean, Japanese,
      Australian cultivar) </TD>
    <TD align=center width="15%" bgColor=#e6efff>329 </TD>
    <TD align=left width="15%" bgColor=#e6efff>Shandong </TD></TR>
  <TR vAlign=top>
    <TD align=left>Chestnut (Japanese cultivar) </TD>
    <TD align=center width="15%">165 </TD>
    <TD align=left width="15%">Beijing </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Sticky Corn </TD>
    <TD align=center width="15%" bgColor=#e6efff>329 </TD>
    <TD align=left width="15%" bgColor=#e6efff>Beijing </TD></TR>
  <TR vAlign=top>
    <TD align=left>Green Pea &amp; Sweet Corn </TD>
    <TD align=center width="15%">350 </TD>
    <TD align=left width="15%">Beijing </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Pumpkin </TD>
    <TD align=center width="15%" bgColor=#e6efff>82 </TD>
    <TD align=left width="15%" bgColor=#e6efff>Heilongjiang </TD></TR>
  <TR vAlign=top>
    <TD align=left>Organic Chestnut </TD>
    <TD align=center width="15%">190 </TD>
    <TD align=left width="15%">Beijing </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Mixed Vegetables </TD>
    <TD align=center width="15%" bgColor=#e6efff>564 </TD>
    <TD align=left width="15%" bgColor=#e6efff>Hebei </TD></TR>
  <TR vAlign=top>
    <TD align=left>Japanese Pumpkin </TD>
    <TD align=center width="15%">329 </TD>
    <TD align=left width="15%">Inner Mongolia </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Strawberry </TD>
    <TD align=center width="15%" bgColor=#e6efff>261 </TD>
    <TD align=left width="15%" bgColor=#e6efff>Shandong </TD></TR></TABLE>
<P align=justify>We began growing chestnuts 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 chestnuts
to our production since 2007. By 2010, our current chestnut agricultural
operations are projected to harvest approximately 700 metric tons of high-end
chestnuts based on the number of trees currently planted and our planned
expansion. </P>
<P align=justify>We began growing strawberries in 2008 in Shandong. We use these
strawberries 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. </P>
<P align=justify><B><I>Raw Materials</I></B><BR></P>
<P align=justify>In 2008 and during the nine months ended September 30, 2009,
approximately 94% of our raw materials consisted of agricultural products,
including primarily chestnuts and vegetables, approximately 4% consisted of
packaging materials and approximately 2% consisted of condiments such as sugar,
salt and flour. </P>
<P align=justify><U>Our Supply Sources</U><BR></P>
<P align=justify>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.</P>
<P align=justify>We obtain our agricultural raw materials from three sources:
domestic procurement (excluding self-supply), overseas markets, and self-supply.
Domestic procurement accounted for 93.8% of our total raw material costs in 2008
and during the nine months ended September 30, 2009, overseas procurement
accounted for 5.2% and self-supply accounted for the remaining 1%.</P>
<P align=justify>In 2008, we procured approximately 55,643 metric tons of
chestnuts and approximately 28,773 metric tons of vegetables and other raw
materials from a number of third party suppliers, domestic and overseas, and
produced approximately 693 metric tons of chestnuts from our own agricultural
operations. During the nine months ended September 30, 2009, we procured
approximately 40,784 metric tons of chestnuts and approximately 39,041 metric
tons of vegetables and other raw materials from a number of third party
suppliers, domestic and overseas, and produced approximately 34 metric tons of
chestnuts from our own agricultural operations. </P>
<P align=center>39</P>
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<A name="page_44"></A>

<P align="justify">
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 21.3% of the total procurement
in 2008, and approximately 25.3% of the total procurement during the nine months ended September 30, 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. </P>
<P align="justify">
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. </P>
<P align="justify">
<U>Procurement Cost and Quality Control</U><BR>
</P>
<P align="justify">
To control procurement costs, our facilities are located near domestic sources of agricultural raw materials. For example, Junan Hongrun and Shandong Lorain are located in Shandong Province, which is China&#146;s largest supplier of fresh produce 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.</P>
<P align="justify">
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.</P>
<P align="justify">
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. </P>
<P align="justify">
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 produce we are purchasing complies with our standards. </P>
<P align="justify">
<B><I>Our Customers</I></B><BR>
</P>
<P align="justify">
We sell our products in 26 provinces and administrative regions in China and 42 foreign countries globally. In 2008, approximately 67% of our sales were made domestically and approximately 33% were to international customers, primarily Japan and
South Korea. During the nine months ended September 30, 2009, approximately 82% of our sales were made domestically and approximately 18% were to international customers, primarily Japan and South Korea. </P>
<P align="justify">
Our top ten customers contributed 29.3% of our total revenues in 2008 and 20.7% of our total revenues during the nine months ended September 30, 2009. Approximately 12% and 6.1% of total revenues in 2008, and 8.7% and 1.7% of total revenues during
the nine months ended September 30, 2009, were attributable to revenues from Shandong Lvan Import &amp; Export Co., Ltd., a food trading company in China that distributes a significant portion of our exported products, and Shinsei Foods, a Japanese
company and our top customer, respectively. </P>
<P align="justify">
<U>Domestic</U><BR>
</P>
<P align="justify">
In China, we sell our products through our own sales team and through third-party distributors. We have 36 sales offices in 26 provinces in China. In 2008, we sold approximately 87% of our products directly to our Chinese customers and approximately
13% through third-party distributors. During the nine months ended September 30,
2009, we sold approximately 75.8% of our products directly to our Chinese customers and approximately 24.2% throughout third-party distributors. </P>
<P align="center">
40</P>

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<A name="page_45"></A>

<P align="justify">
We sell our products in 30 first-tier cities, including Beijing, Shanghai 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, other 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. </P>
<P align="justify">
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.</P>
<P align="justify">
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 produce
that fails 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 a distributor performance-based incentives, such as a cash bonus equal to 1% of total revenues generated by such distributor which exceed previously established sales targets. </P>
<P align="justify">
We plan to gradually increase the portion of sales to our direct sales customers in order to capture the profit margin that would otherwise go to intermediate wholesalers and to enhance our brand recognition. Such plans are subject to our
customers&#146; ability to make timely payments, which has been a concern for us. (See &#147;Risk Factors&#148; below.) </P>
<P align="justify">
<U>International</U><BR>
</P>
<P align="justify">
Our export sales destinations include:<BR>
</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">Asia, primarily Japan, South Korea and Malaysia, but also Singapore and Taiwan.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">Europe, primarily Belgium and the United Kingdom, but also France, Germany, the Netherlands, Spain, and Sweden;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">the Middle East, primarily Saudi Arabia, Kuwait and the United Arab Emirates; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">North America, including the United States and Canada.</LI>
</UL>
<P align="justify">
In 2008, approximately 93.5% of our international sales were in Asia and approximately 6% were in Europe. During the nine months ended September 30, 2009, approximately 12.3% of our international sales were to Asia and approximately 3.3% in Europe.
</P>
<P align="justify">
We sell our products to international markets through Shandong Lvan, a food trading company in China, other export companies in China, and 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 currently 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. </P>
<P align="justify">
Prior to our reorganization into a U.S. entity, we had sales to several countries that are the subject of trade sanctions imposed by the United States government. Following our reorganization, we ceased all sales activities to these countries.  We
actively review the destination countries for our products, including products resold by our customers, to assure that we are not in violation of applicable U.S. trade sanctions.</P>
<P align="center">
41</P>

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<A name="page_46"></A>

<P align="justify">
<B><I>Our Sales and Marketing Efforts <br>
</I></B><BR>
We seek to expand our customer base by:<BR>
</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">direct sales communications with our larger customers;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">sales through distributors to new customer bases;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">referrals from existing customers; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">participation in domestic and international food exhibitions and trade conferences.</LI>
</UL>
<P align="justify">
Historically, we have not spent a significant amount of capital on advertising in the past. However, on November 3, 2009, we raised &#36;12 million in a private placement transaction with the selling stockholders and we intend to use a portion of
the proceeds of this transaction to support a planned, nationwide commercial campaign to promote our convenience food products in the Chinese market and to increase brand awareness of our Ready-to-Cook foods, Ready-to-Eat foods, and Meals
Ready-to-Eat, as well as our chestnut products. In addition, we intend to use the remaining proceeds of the private placement to implement packaging improvements and product enhancements and to fund our marketing efforts in Asia, North America,
Europe and the Middle East.</P>
<P align="justify">
<B><I>Competition and Market Position</I></B><BR>
</P>
<P align="justify">
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.</P>
<P align="justify">
<U>Chestnut Products</U><BR>
</P>
<P align="justify">
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.</P>
<P align="justify">
The world market for chestnut products is highly fragmented. Our principal competitors in the chestnut product market are currently Hebei Liyun, a Chinese company, and Foodwell Corporation, a South Korean company. </P>
<P align="justify">
<U>Convenience Food Products</U><BR>
</P>
<P align="justify">
Convenience food products market competition is based primarily 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.</P>
<P align="justify">
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. </P>
<P align="justify">
<U>Frozen, Canned and Bulk Food Products</U><BR>
</P>
<P align="justify">
In the frozen, canned and bulk food product market, competition is based primarily upon quality, ability to provide a reliable product supply and customer relationships.</P>
<P align="justify">
Our strongest competitors in the frozen, canned and bulk food products market are currently Weitang Langdong, Yuyao Hongji Food Co. Ltd. and Yantai Pengshun Food Co. Ltd., all of which are located in China.</P>
<P align="justify">
<U>Competitive Advantages</U><BR>
</P>
<P align="justify">
We believe that we enjoy a number of competitive advantages, both domestically and internationally.</P>
<P align="center">
42</P>

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<A name=page_47></A>
<P align=justify>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. </P>
<P align=justify>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 234 products in 2008 and 236 products during the nine
months ended September 30, 2009. We believe that we are the sole provider of
certain bottom-open chestnut and sweetheart chestnut products in China.</P>
<P align=justify>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.</P>
<P align=justify>We are focused on managing our costs in other ways as well. We
seek to place 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. </P>
<P align=justify>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.
</P>
<P align=justify>In 2008, our patent application for our technology used to
produce sweetheart chestnuts was approved by the State Intellectual Property
Office of the PRC. In addition, we are currently in the process of applying for
patent protection in the PRC for two of our technologies which support the
production of our chestnut and convenience food products. (See &#147;Intellectual
Property&#148; below.) We believe that this 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.</P>
<P align=justify>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. </P>
<P align=justify><B><I>Intellectual Property</I></B><BR><U><BR>Trademarks</U>
</P>
<P align=justify>We use the trademarks <SUP>
<img border="0" src="aln1121.jpg" width="74" height="36">TM </SUP>and <SUP>
<img border="0" src="aln1122.jpg" width="74" height="39">TM </SUP>on all of
our chestnut products sold in China, Japan and South Korea. </P>
<P align=justify><U>Patents</U> </P>
<P align=justify>We have developed the following three proprietary technologies
to support our chestnut and convenience food production: </P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">The sweetheart chestnut is a premium product that is more expensive, and
  which 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&#146;
  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 60% over the
  past several years and which increased at an annual rate of 84% in 2008. </LI></UL>
<P align=center>43</P>
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<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">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, particularly in Japan. We are currently in
  the process of applying for patent protection in the PRC for this technology.
  <LI>
  <p style="margin-top: 0; margin-bottom: 5">We have developed technology that allows us to produce an extract from the
  chestnut&#146;s inner skin. In the past, the chestnut&#146;s inner skin had been
  discarded as a waste product. Our technology allows us to produce an extract
  that can then be sold to other food processors, all of whom are currently
  based in Japan, where the chestnut is popular as a nutritional supplement.
  These processors package and sell the extract for use as a food and drink
  additive. We are currently in the process of applying for patent protection in
  the PRC for this technology. </LI></UL>
<P align=justify>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. </P>
<P align=justify><B><I>Our Employees</I></B><BR></P>
<P align=justify>As of September 30, 2009, we had a total of 1,491 full-time
employees and 747 part-time employees. 479 of our full-time employees are
directly employed by our Shandong Lorain subsidiary and the remainder 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. </P>
<P align=justify>The following table sets forth the allocation of employees,
both direct and leased, by job function: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 height="226">

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left height="16">
    <p style="margin-left: 5pt"><B>Department</B>
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="15%" height="16"><B>Number of Employees</B> </TD></TR>
  <TR>
    <TD height="15">
    <p style="margin-left: 5pt">&nbsp; </TD>
    <TD width="15%" height="15">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff height="15">
    <p style="margin-left: 5pt">Production </TD>
    <TD align=center width="15%" bgColor=#e6efff height="15">1,284 </TD></TR>
  <TR vAlign=top>
    <TD align=left height="15">
    <p style="margin-left: 5pt">Quality Control </TD>
    <TD align=center width="15%" height="15">36 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff height="15">
    <p style="margin-left: 5pt">Domestic Sales </TD>
    <TD align=center width="15%" bgColor=#e6efff height="15">32 </TD></TR>
  <TR vAlign=top>
    <TD align=left height="15">
    <p style="margin-left: 5pt">Human Resources </TD>
    <TD align=center width="15%" height="15">6 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff height="15">
    <p style="margin-left: 5pt">Research and Development </TD>
    <TD align=center width="15%" bgColor=#e6efff height="15">31 </TD></TR>
  <TR vAlign=top>
    <TD align=left height="15">
    <p style="margin-left: 5pt">International Sales </TD>
    <TD align=center width="15%" height="15">19 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff height="15">
    <p style="margin-left: 5pt">Finance </TD>
    <TD align=center width="15%" bgColor=#e6efff height="15">19 </TD></TR>
  <TR vAlign=top>
    <TD align=left height="15">
    <p style="margin-left: 5pt">Sourcing </TD>
    <TD align=center width="15%" height="15">16 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff height="15">
    <p style="margin-left: 5pt">Administration </TD>
    <TD align=center width="15%" bgColor=#e6efff height="15">28 </TD></TR>
  <TR vAlign=top>
    <TD align=left height="15">
    <p style="margin-left: 5pt">Strategic planning </TD>
    <TD align=center width="15%" height="15">3 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff height="15">
    <p style="margin-left: 5pt">Storage and Distribution </TD>
    <TD align=center width="15%" bgColor=#e6efff height="15">15 </TD></TR>
  <TR vAlign=top>
    <TD align=left height="15">
    <p style="margin-left: 5pt">Employee Relations </TD>
    <TD align=center width="15%" height="15">2 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff height="15">
    <p style="margin-left: 5pt"><B>Total</B> </TD>
    <TD align=center width="15%" bgColor=#e6efff height="15">1,491 </TD></TR></TABLE>
<P align=justify>We believe that the relationship between management and our
employees is good. We have not experienced any significant problems or
disruption to our operations due to labor disputes, nor have we experienced any
difficulties in recruitment and retention of experienced staff. </P>
<P align=center>44</P>
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<P align="justify">
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.</P>
<P align="justify">
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. </P>
<P align="justify">
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, 2008 and 2007 and at a rate of 24% of the average monthly salary for the nine months ended September 30, 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, 2008 and 2007 and at a rate of 4% of the average monthly salary for
each employee for the nine months ended September 30, 2009. As indicated above, Linyi Zhifu is responsible for contributions on behalf of the leased employees. </P>
<P align="justify">
<B><I>Our Research and Development Activities</I></B><BR>
</P>
<P align="justify">
Our research and development efforts are focused on three objectives:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">Superior product safety and quality;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">Reduction of operating costs; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">Sustaining growth through the development of new products.</LI>
</UL>
<P align="justify">
We have research and development staff at each of our facilities. In total, 31 employees are dedicated to research and development. </P>
<P align="justify">
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 2008, we added 52 new products, all in our convenience foods segment. During the nine months ended September 30, 2009, we added 18 new products, all in our convenience food segment. Over the past
several years, on average, we discontinued approximately three to five products each year. In 2008, we discontinued 10 products, primarily in our frozen, canned and bulk foods segment. During the nine months ended September 30, 2009, we discontinued
16 products across all three segments which had lower margins or did not receive good feedback from our customers. </P>
<P align="justify">
The amount we spent on research and development activities during the years ended December 31, 2008 and 2007 and during the nine months ended September 30, 2009, was not a material portion of our total expenses for those years. </P>
<P align="justify">
<B><I>Government Regulation</I></B><BR>
</P>
<P align="justify">
As a manufacturer and distributor of food products, we are subject to regulations of China&#146;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 good 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, prescribes 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. </P>
<P align="justify">
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.</P>
<P align="center">
45</P>

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<P align="justify">
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 obtaining new approvals or filing new registrations in the future, if needed. </P>
<P align="justify">
Under the relevant Provisions of the PRC on Sanitation of Food for Export (for Trial Implementation), unless an exporter&#146;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. </P>
<P align="justify">
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. </P>
<P align="center">
46</P>

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<P align=center><B>MANAGEMENT</B><BR></P>
<P align=justify><B><I>Directors and Executive Officers</I></B><BR></P>
<P align=justify>The following table sets forth the name, age and position of
each of our current executive officers and directors.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>Name </TD>
    <TD align=center width="33%">Age </TD>
    <TD align=left width="33%">Position </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Si Chen </TD>
    <TD align=center width="33%" bgColor=#e6efff>46 </TD>
    <TD align=left width="33%" bgColor=#e6efff>Chairman, Chief Executive
      Officer, President and Director </TD></TR>
  <TR vAlign=top>
    <TD align=left>Yilun Jin </TD>
    <TD align=center width="33%">34 </TD>
    <TD align=left width="33%">Chief Financial Officer and Treasurer </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Yundong Lu </TD>
    <TD align=center width="33%" bgColor=#e6efff>34 </TD>
    <TD align=left width="33%" bgColor=#e6efff>Chief Operating Officer and
      Director </TD></TR>
  <TR vAlign=top>
    <TD align=left>Maoquan Wei </TD>
    <TD align=center width="33%">62 </TD>
    <TD align=left width="33%">Director </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>DeKai Yin </TD>
    <TD align=center width="33%" bgColor=#e6efff>56 </TD>
    <TD align=left width="33%" bgColor=#e6efff>Director </TD></TR>
  <TR vAlign=top>
    <TD align=left>Yongjun Li </TD>
    <TD align=center width="33%">47 </TD>
    <TD align=left width="33%">Director </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Tad M. Ballantyne </TD>
    <TD align=center width="33%" bgColor=#e6efff>54 </TD>
    <TD align=left width="33%" bgColor=#e6efff>Director </TD></TR></TABLE>
<P align=justify><B>MR. SI CHEN. </B>Mr. Chen became our chief executive officer
and director in May 2007 upon the completion of our recapitalization. Mr. Chen
founded Shandong Lorain, our first subsidiary, in 1994, and served as the
chairman of our subsidiaries since that time. Mr. Chen earned an associate
degree from Linyi Normal University. </P>
<P align=justify><B>MR. YILUN JIN. </B>Mr. Jin became our chief financial
officer and treasurer on September 22, 2008. Prior to his appointment, Mr. Jin
served in various capacities at Citigroup since 2002, most recently as Vice
President of Markets and Banking. Mr. Jin graduated from Thunderbird School of
Global Management in 2002, earning a Master of Business Administration degree in
International Management, with a specialization in Finance, and was honored with
a Citigroup Fellowship. Mr. Jin served as manager of the Corporate Finance
Division at the Shanghai Branch of the Bank of Tokyo-Mitsubishi Ltd. from August
1997 until July 2000. Mr. Jin earned a Bachelor of Arts degree in economics from
Fudan University in Shanghai, China in 1997. Mr. Jin is also a CFA charterholder
and is fluent in English and Mandarin.</P>
<P align=justify><B>MR. YUNDONG LU. </B>Mr. Lu was appointed as our Chief
Operating Officer and was elected as a member of our board of directors
effective August 1, 2008. Mr. Lu joined the Company in 1994 and has held various
positions since then. From April 2003 to May 2005, Mr. Lu was the General
Manager of Beijing Lorain and the Deputy General Manager of our subsidiaries.
From May 2005 to February 2007, Mr. Lu was the General Manager of Lorain
International Trading and the Deputy General Manager of our subsidiaries. From
February to August 2008, Mr. Lu was the General Manager of our subsidiaries. Mr.
Lu was recognized as an Outstanding Entrepreneur in Shandong Province in 2007.
Mr. Lu earned a MBA from Shandong University and a Bachelor of Arts degree from
Shandong University. </P>
<P align=justify><B>MR. MAOQUAN WEI. </B>Mr. Wei is a retired government
official who held various positions in the government of Junan County, Shandong
Province, China from 1990 to 2003, during which time Mr. Wei was responsible for
overseeing the agricultural development of Junan County in the Shandong province
of China. Most recently, from 1998 to 2003, Mr. Wei was the Chairman of the
Political Conservative Conference of Junan County. Mr. Wei also served as the
Deputy Secretary of County Committee and Deputy Chairman of Junan County. Mr.
Wei has helped lead Junan County win numerous honors, including Top 100 National
Fruit Products County and National Chestnut Base County. Although retired, Mr.
Wei&#146;s expertise and experience with the agricultural economy and resources in
the countryside is invaluable to our business. </P>
<P align=justify><B>MR. DEKAI YIN</B>. Mr. Yin was appointed one of our
directors in September 2009. He has been working as the President of Zibo branch
of the Agricultural Bank of China since 2004. Before that position, Mr. Yin
served as the Vice President and the President at Linyi branch of the
Agricultural Bank of China from 1995-2004. Mr. Yin has a degree in economic
management and is regarded as a senior economist due to his distinguished
expertise in the banking and accounting industries and economic development. Our
company will greatly benefit from Mr. Yin&#146;s invaluable expertise in banking and
accounting systems and operations. </P>
<P align=justify><B>MR. YONGJUN LI</B>. Mr. Li was appointed one of our
directors in September 2009. He has been working as the County Governor
Assistant of Miyun County, the General Manager of Beijing Economic Development
Zone
Headquarters, and the Director of Beijing Economic Development Zone Managing Committee since 1997. Mr. Li is an economist with advanced expertise in economic and industrial development.  Mr. Li also has advanced experience and expertise in supply
chain and strategic marketing as an adviser and consultant to companies in the economic development zone. The company will significantly benefit from Mr. Li&#146;s outstanding economics and industry knowledge of the operations in China. </P>
<P align=center>47</P>
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<P align="justify">
<B>MR. TAD M. BALLANTYNE</B>. Mr.Ballantyne was appointed one of our directors in September 2009. He is also an officer and director of several private and public companies, including BR Industries, Inc, Hoopeston Foods, Inc, Thomsen Group. LLC, and
Pacific Rim Foods Ltd. lie also serves as an independent director and financial expert on the audit committee of Life Partners Holdings Inc. and Creat Resources Holdings Ltd., as an independent director of Mach One Corporation and Empire Energy
Corporation International, and is an adviser of international affairs and/or director of a number of China-based private enterprises, including TCIB Investment Co. Ltd, Jilin Jimei Foods Ltd and Creat Group.  During 2003, Texas Steel Partners Inc, a
Texas based steel foundry, filed for reorganization and was liquidated pursuant to a bankruptcy Chapter 7 conversion. Mr. Ballantyne was an officer and director and a 50% shareholder of Texas Steel Partners Inc. During the last 20 years, Mr.
Ballantyne has been active in acquiring and operating troubled companies or assets being divested by public and private companies and has focused over the last 5 years on food processing plants in both the United States and Asia. He holds a Bachelor
of Science degree in business management from the University of Wisconsin-Parkside. </P>
<P align="justify">
There are no agreements or understandings between any of our executive officers or directors and any other person pursuant to which such executive officer or director was selected to serve as a director or executive officer of our company.
Directors are elected until their successors are duly elected and qualified.  There are no family relationships among our directors or officers. </P>
<P align="center">
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<P align="center">
<B>CORPORATE GOVERNANCE</B><BR>
</P>
<P align="justify">
<B><I>Board Composition</I></B><BR>
</P>
<P align="justify">
On August 1, 2008, our board of directors increased the number of members of our board from one to five and elected Mr. Yundong Lu, Mr. Hao Chen, Mr. David Yaudoon Chiang and Mr. Maoquan Wei to serve as members of our board. Our board of directors
did not hold any meetings in 2008. </P>
<P align="justify">
On September 17, 2009, our board increased the number of members of our board from five to six, accepted the resignations of directors Messrs. David Yaudoon Chiang and Hao Chen, and appointed Messrs. Dekai Yin, Yongjun Li and Tad M. Ballantyne to
fill the three vacancies that existed on the board and to serve as members of the Audit, Compensation, and Nominating and Corporate Governance Committees. </P>
<P align="justify">
<B><I>Director Independence</I></B><BR>
</P>
<P align="justify">
Our board has determined that Messrs. Yin, Li, Ballantyne and Wei satisfy the criteria for independence under NYSE Amex and SEC rules for independence of directors and of committee members. </P>
<P align="justify">
<B><I>Audit Committee</I></B><BR>
</P>
<P align="justify">
On August 1, 2008, our board established an Audit Committee. The Audit Committee has adopted a written charter, a copy of which is available on our website on the Corporate Governance page under the Investor link at www.arnericanlorain.com, and a
printed copy of which is available to any shareholder requesting a copy by writing to: American Lorain Corporation. Attn: Corporate Governance, Beihuan Zhong Road Junan County Shandong, People&#146;s Republic of China. 276600. The Audit Committee
did not hold any meetings during 2008. Messrs. Dekai Yin, Yongjun Li, Tad M. Ballantyne, and Maoquan Wei are currently serving as members of the Audit Committee. </P>
<P align="justify">
The Audit Committee assists our board in monitoring:<BR>
</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">our accounting, auditing, and financial reporting processes;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">the integrity of our financial statements;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">internal controls and procedures designed to promote our compliance with accounting standards and applicable laws and regulations; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">the appointment and evaluation of the qualifications and independence of our independent auditors.</LI>
</UL>
<P align="justify">
<B><I>Compensation Committee</I></B><BR>
</P>
<P align="justify">
On August 1, 2008, our board established a Compensation Committee. The Compensation Committee has adopted a written charter, a copy of which is available on our website on the Corporate Governance page under the Investor link at
www.americanlorain.com, and a printed copy of which is available to any shareholder requesting a copy by writing to: American Lorain Corporation, Attn: Corporate Governance, Beihuan Zhong Road Junan County Shandong, People&#146;s Republic of China,
276600. The Compensation Committee did not hold any meetings during 2008. The current members of the Compensation Committee are Messrs. Yin, Li, Ballantyne and Wei. </P>
<P align="justify">
The functions of the Compensation Committee are as follows: </P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">to assist our board in discharging its responsibilities with respect to compensation of our executive officers and directors;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">to evaluate the performance of our executive officers;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">to assist our board in developing succession plans for executive officers; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">to administer our stock and incentive compensation plans and recommend changes in such plans to our board as needed.</LI>
</UL>
<P align="center">
49</P>

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<P align="justify">
<B><I>Nominating and Corporate Governance Committee</I></B><BR>
</P>
<P align="justify">
On August 1, 2008, our board established a Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee has adopted a written charter, a copy of which is available on our websitc on the Corporate Governance page
under the Investor link at www.americanlorain.com, and a printed copy of which is available to any shareholder requesting a copy by writing to: American Lorain Corporation, Attn: Corporate Governance, Beihuan Zhong Road Junan County Shandong,
People&#146;s Republic of China, 276600. The Nominating and Corporate Governance Committee did not hold any meetings during 2008. Messrs. Yin, Li, Ballantyne and Wei are the current members of the Nominating and Corporate Governance Committee. </P>
<P align="justify">
The functions of the Nominating and Corporate Governance Committee are to assist our board: </P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">in identifying qualified individuals to become board members;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">in determining the composition of our board and its committees;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">in monitoring a process to assess board effectiveness; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">in developing and implementing our corporate procedures and policies.</LI>
</UL>
<P align="justify">
The Nominating and Corporate Governance Committee will consider any qualified candidate, timely submitted, for an open board position by any of our security holders entitled to vote in an election of directors. The Nominating and Corporate
Governance Committee will evaluate the candidate consistent with any criteria or procedures that the board or the Nominating and Corporate Governance Committee shall approve. </P>
<P align="justify">
<B><I>Code of Ethics</I></B><BR>
</P>
<P align="justify">
Our Board adopted a Code of Ethics that applies to all of our directors, executive officers, including our principal executive officer, principal financial officer and principal accounting officer, and employees. The Code of Ethics addresses, among,
other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of
violations of the code. The Code of Ethics is available on the Corporate Governance page of our website under the Investor link at www.americanlorain.com, and a copy of the Code of Ethics is available to any shareholder requesting a copy by writing
to: American Lorain Corporation, Attn: Corporate Governance, I3eihuan Zhong Road, Junan County, Shandong, China 276600. We intend to disclose on our website, in accordance with all applicable laws and regulations, amendments to, or waivers from, our
Code of Ethics. </P>
<P align="center">
50</P>

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<A name=page_55></A>
<P align=center><B>EXECUTIVE COMPENSATION</B><BR></P>
<P align=justify><B><I>Summary Compensation Table</I></B><BR></P>
<P align=justify>The following table sets forth information concerning all
compensation earned by our Chief Executive Officer in 2008 for services provided
to us and our subsidiaries. None of our executive officers earned compensation
that exceeded $100,000 in 2008. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" vAlign=bottom
      align=center><FONT size=2><B>Name and</B> <B>Principal Position</B>
    </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" vAlign=bottom align=center
    width="13%"><FONT size=2><B>Year</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" vAlign=bottom align=center
    width="13%"><FONT size=2><B>Salary</B> <BR><B>($)</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" vAlign=bottom align=center
    width="13%"><FONT size=2><B>All Other</B> <B>Compensation</B> <BR><B>($)
      (1)</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" vAlign=bottom align=center
    width="13%"><FONT size=2><B>Total</B> <BR><B>($)</B> </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt"><FONT size=2>Si Chen </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="13%"
    bgColor=#e6efff><FONT size=2>2007 </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="13%"
    bgColor=#e6efff><FONT size=2>59,000 </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="13%"
    bgColor=#e6efff><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="13%"
    bgColor=#e6efff><FONT size=2>59,000 </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt"><FONT size=2>Chief
      Executive Officer </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="13%"><FONT size=2>2008 </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="13%"><FONT size=2>63,065
</FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="13%"><FONT size=2>2,000 </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="13%"><FONT size=2>65,065
  </FONT></TD></TR>
  </TABLE>
<P align=justify>(1) Represents payments made for the benefit of Mr. Chen for
life insurance coverage. </P>
<P align=justify>Pursuant to Mr. Chen&#146;s employment agreement, we paid Mr. Chen a
base salary of $59,000 and $63,065 in 2007 and 2008, respectively, in cash. The
employment agreement does not provide any change in control or severance
benefits to Mr. Chen, and we do not have any separate change-in-control
agreements with Mr. Chen or any of our other executive officers.</P>
<P align=justify><B><I>Outstanding Equity Awards</I></B><BR></P>
<P align=justify>As of December 31, 2008, other than Yilun Jin, none of our
executive officers had any equity awards outstanding. Our Compensation Committee
has not yet adopted a policy or program for equity awards for our executive
officers.</P>
<P align=justify><B><I>Director Compensation</I></B><BR></P>
<P align=justify>Historically, we did not pay our directors any compensation for
their service as members of our Board.</P>
<P align=justify>However, on August 1, 2008, Mr. Hao Chen, Mr. David Yaudoon
Chiang and Mr. Maoquan Wei were elected as non-employee members of our Board and
appointed as members of our Board committees. Messrs. Chen and Wei are paid RMB
100,000 (approximately US $14,640) per year and Mr. Chiang is paid US $25,000
per year plus $5,000 for each board meeting attended by Mr. Chiang, solely as
compensation to such directors for their board or board committee service. In
addition, we may reimburse our non-employee directors for reasonable travel
expenses related to attendance at board or board committee meetings. In 2008, we
did not make any such reimbursements. </P>
<P align=justify>Our policy is not to pay compensation to directors who are also
employees of the Company or its subsidiaries. </P>
<P align=justify>The following table reflects the compensation earned by our
directors in 2008:<B> </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1">
    <p style="margin-left: 5pt"><B>Name</B> </TD>
    <TD align=center width="15%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1"><B>Fees Earned or Paid in</B> </TD>
    <TD align=center width="15%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1"><B>Total</B> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="15%"><B>Cash</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="15%">&nbsp;
    </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="15%"><B>($)</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="15%"><B>($)</B> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt">Hao Chen </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="15%"
    bgColor=#e6efff>6,100 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="15%"
    bgColor=#e6efff>6,100 </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 5pt">David Yaudoon
      Chiang </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="15%">10,417 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="15%">10,417 </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 5pt">Maoquan Wei </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="15%"
    bgColor=#e6efff>6,100 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="15%"
    bgColor=#e6efff>6,10</TD></TR></TABLE>
<P align=center>51</P>
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<A name="page_56"></A>

<P align="center">
<B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B></P>
<P align="justify">
On May 3, 2007, ALC entered into a share exchange agreement with the shareholders of ILH. Pursuant to this agreement, ALC acquired 100% of the outstanding capital stock of ILH in exchange for 697,663 shares of our Series B Voting Convertible
Preferred Stock, which were subsequently converted into 16,307,872 shares of our common stock on July 17, 2007. As a result of this transaction, Mr. Akazawa, a Japanese citizen, became the beneficial owner of approximately 65.43% of our outstanding
capital stock. </P>
<P align="justify">
In addition, on May 3, 2007, we entered into a cancellation and escrow agreement with Halter Financial Investments, L.P., or HFI, Halter Financial Group, L.P., or HFG, and Securities Transfer Corporation, whereby HFI and HFG agreed to deposit into
escrow 229,227 shares of our common stock. In addition, HFI and HFG agreed to transfer to us for cancellation such shares if we report net income of &#36;12.5 million for fiscal 2008, on a consolidated basis, in our Annual Report on Form 10-K. Our
former director, Timothy P. Halter, is the Chairman of both HFI and HFG. </P>
<P align="justify">
On April 5, 2007, we entered into a Stock Purchase Agreement with HFI, whereby HFI agreed to purchase 100,000 shares of our Series A Preferred Stock, or approximately 90% of the capital stock of our company as of such date, for a cash purchase price
of &#36;455,000. On April 10, 2007, we completed this transaction. </P>
<P align="justify">
On February 14, 2007, our subsidiary, Shandong Lorain, entered into a financial advisory agreement with HFG International, Limited, or HFG International, whereby HFG International agreed to provide certain financial advisory and consulting services
to us. In consideration for these services, we paid HFG International a fee of &#36;450,000 upon the closing of our share exchange agreement. Our former director, Timothy P. Halter, is the principal stockholder and the chief executive officer of HFG
International. </P>
<P align="center">
52</P>

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<A name="page_57"></A>

<P align="center">
<B>CHANGE IN ACCOUNTANTS</B><BR>
</P>
<P align="justify">
On May 3, 2007, concurrent with the share exchange agreement described under &#147;Certain Relationships and Related Transactions&#148; above, our Board of Directors elected to continue the existing relationship between ILH and Samuel H. Wong &amp;
Co., LLP, Certified Public Accountants, or Samuel Wong, and appointed Samuel Wong as our independent auditor.  We signed an engagement letter and formally engaged Samuel Wong as our independent auditor on May 23, 2007. Additionally, concurrent with
the decision to maintain our relationship with Samuel Wong, our board of directors approved the dismissal of Michael J. Larson, LLC as our independent auditor, effective upon the filing of our Quarterly Report on Form 10-QSB on May 21, 2007. </P>
<P align="justify">
No report issued by Michael J. Larson, LLC on our financial statements for either of the past two years contained an adverse opinion or a disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles,
except for a going concern opinion expressing substantial doubt about the ability of us to continue as a going concern. </P>
<P align="justify">
During 2005, 2006 and 2007, until the date of dismissal, there were no disagreements with Michael J. Larson, LLC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. There were no
reportable events, as described in Item 304(a)(1)(v) of Regulation S-K, during 2005, 2006 and 2007, until the date of dismissal. </P>
<P align="justify">
We furnished a statement substantially similar to the proceeding three paragraphs to Michael J. Larson, LLC and requested Michael J. Larson, LLC to furnish us with a letter addressed to the Securities and Exchange Commission stating whether it
agrees with the statements made by us herein in response to Item 304(a) of Regulation S-K and, if not, stating the respect in which it does not agree. A copy of the letter was filed by us as Exhibit 16.1 to our Current Report on Form 8-K on May 25,
2007. </P>
<P align="center">
53</P>

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<A name="page_58"></A>

<P align="center">
<B>SELLING STOCKHOLDERS</B><BR>
</P>
<P align="justify">
The following table sets forth certain information regarding the selling stockholders and the shares offered by them in this prospectus. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares
beneficially owned by a selling stockholder and the percentage of ownership of such stockholder, shares of common stock underlying shares of warrants held by such stockholder that are exercisable within 60 days of November 20, 2009 are included.
Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other selling stockholder. Each selling stockholder&#146;s percentage of ownership in the following table is based upon 30,239,985 shares
of common stock outstanding as of November 20, 2009 (the 30,239,985 shares of common stock does not include the
4,082,892 shares of common stock issuable upon the exercise of outstanding warrants, or the 1,344,586 shares issuable upon the
exercise of outstanding stock options), but does include shares of common stock issuable upon the exercise of warrants held by such selling stockholders).</P>
<P align="justify">
The selling stockholders acquired the securities being registered for resale in this prospectus in a securities purchase agreement, dated October 28, 2009, by and between us the selling stockholders, pursuant to which we agreed to issue to the
selling stockholders (i) 5,011,169 shares of common stock, (ii) Series A Warrants to purchase 1,753,909 shares of common stock and (iii) Series B Warrants to purchase 501,115 shares of common stock. The aggregate purchase price was approximately
&#36;12 million. Pursuant to the securities purchase agreement, the selling stockholders have a right to participate in up to 25%, in the aggregate, of certain future financing transactions conducted by us.</P>
<P align="justify">
The initial exercise price of each of the Series A Warrants and Series B Warrants is &#36;3.70 per share, subject to certain adjustments set forth therein, including adjustments in the event of certain future financing transactions conducted by us
or in the event of a stock dividend or stock split. The Series A Warrants become exercisable six months from the date of issuance and have a term of five years thereafter. The Series B Warrants become exercisable six months from the date of issuance
and have a term of 30 months thereafter.</P>
<P align="justify">
In connection with the transaction, we entered into a registration rights agreement, pursuant to which we agreed to prepare and file a registration statement covering the resale of the common stock and the warrants with the Securities and Exchange
Commission within thirty days of the transaction. </P>
<P align="justify">
In addition, we granted such investors and Rodman &amp; Renshaw, LLC, or Rodman, and FT Global Capital, Inc., or FT Global, the placement agents, five-year warrants to purchase an aggregate of 2,555,695 shares of our common stock upon the same terms
as the Series A Warrants issued to the other selling stockholders. </P>
<P align="justify">
None of the selling stockholders are employees or suppliers of ours or our affiliates. Within the past three years, none of the selling stockholders has held a position as an officer or director of ours, nor has any selling stockholder had any
material relationship of any kind with us or any of our affiliates, except that certain selling stockholders acquired shares of our common stock and warrants pursuant to a private placement in May 2007. All information with respect to share
ownership has been furnished by the selling stockholders. The shares being offered are being registered to permit public secondary trading of such shares and each selling stockholder may offer all or part of the shares it owns for resale from time
to time pursuant to this prospectus. In addition, none of the selling stockholders has any family relationships with our officers, directors or controlling stockholders. Furthermore, based on representations made to us by the selling stockholders,
no selling stockholder is a registered broker-dealer or an affiliate of a registered broker-dealer, except for Rodman, FT Global, Noam Rubinstein and Barney Monte. </P>
<P align="justify">
The term &#147;selling stockholders&#148; also includes any transferees, pledgees, donees, or other successors in interest to the selling stockholders named in the table below. Unless otherwise indicated, to our knowledge, each person named in the
table below has sole voting and investment power (subject to applicable community property laws) with respect to the shares of common stock set forth opposite such person&#146;s name. We will file a supplement to this prospectus (or a post-effective
amendment hereto, if necessary) to name successors to any named selling stockholders who are able to use this prospectus to resell the securities registered hereby. </P>
<P align="center">
54</P>

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<A name=page_59></A>
<P align=justify>Any selling stockholders who are affiliates of broker-dealers
and any participating broker-dealers are deemed to be &#147;underwriters&#148; within the
meaning of the Securities Act, and any commissions or discounts given to any
such selling stockholder or broker-dealer may be regarded as underwriting
commissions or discounts under the Securities Act. The selling stockholders have
informed us that they do not have any agreement or understanding, directly or
indirectly, with any person to distribute their common stock.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD vAlign=bottom align=center><FONT size=2><B>Name of Beneficial
      Owner</B> </FONT></TD>
    <TD vAlign=bottom align=center width="13%"><FONT size=2><B>Shares</B>
      <B>Beneficially</B> <B>Owned Before</B> <B>the Offering</B> </FONT></TD>
    <TD vAlign=bottom align=center width="13%"><FONT size=2><B>Maximum</B>
      <B>Number of</B> <BR><B>Shares to be</B> <B>Sold</B> </FONT></TD>
    <TD vAlign=bottom align=center width="13%"><FONT size=2><B>Beneficial</B>
      <B>Shares <BR>After</B> <B>the Offering </B><B><SUP>(1)</SUP></B>
    </FONT></TD>
    <TD vAlign=bottom align=center width="13%"><FONT size=2><B>Percentage
      of</B> <B>Common Stock</B> <B>Owned After</B> <B>Offering
      </B><B><SUP>(1)</SUP></B> </FONT></TD></TR>
  <TR>
    <TD><FONT size=2>&nbsp; </FONT></TD>
    <TD width="13%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="13%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="13%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="13%"><FONT size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Daybreak Special Situations
      Master Fund, Ltd. <SUP>(2)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>120,834
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>120,834
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;James J. Fuld <SUP>(3)</SUP> </FONT></TD>
    <TD align=right width="13%"><FONT size=2>241,665 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>241,665 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>GCA Strategic Investment Fund
      Limited <SUP>(4)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>362,500
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>362,500
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Hua-Mei 21<SUP>st </SUP>Century Partners, LP
      <SUP>(5)</SUP> </FONT></TD>
    <TD align=right width="13%"><FONT size=2>1,811,337 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>1,208,334 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>603,003 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>&nbsp;Guerrilla Partners, LP
      <SUP>(6)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>1,074,738
    </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>604,168
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>470,570
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Jayhawk Private Equity Fund, L.P.
      <SUP>(7)</SUP> </FONT></TD>
    <TD align=right width="13%"><FONT size=2>2,019,379 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>1,762,433 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>256,946 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Jayhawk Private Equity Co-
      Invest Fund, L.P. <SUP>(8)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>127,711
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>110,967
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>16,744 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Hartz Capital Investments, LLC <SUP>(9)</SUP>
      </FONT></TD>
    <TD align=right width="13%"><FONT size=2>181,250 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>181,250 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>&nbsp;Ryan M. Lane
      <SUP>(10)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>60,417 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>60417 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Whitebox Combined Partners, L.P.
      <SUP>(11)</SUP> </FONT></TD>
    <TD align=right width="13%"><FONT size=2>507,500 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>507,500 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Whitebox Intermarket Partners,
      L.P. <SUP>(12)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>96,667 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>96,667 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Excalibur Special Opportunities LP
      <SUP>(13)</SUP> </FONT></TD>
    <TD align=right width="13%"><FONT size=2>344,485 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>302,083 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>42,402 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Capital Ventures International
      (14) </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>453,125
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>453,125
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Ancora Greater China Fund, LP <SUP>(15)</SUP>
      </FONT></TD>
    <TD align=right width="13%"><FONT size=2>201,250 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>181,250 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>20,000 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>&nbsp;The USX China Fund
      <SUP>(16)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>58,000 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>58,000 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;Cranshire Capital, L.P. <SUP>(17)</SUP>
      </FONT></TD>
    <TD align=right width="13%"><FONT size=2>211,460 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>211,460 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>&nbsp;Heller Capital
      Investments <SUP>(18)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>60,416 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>60,416 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;Octagon Capital Partners <SUP>(19)</SUP>
      </FONT></TD>
    <TD align=right width="13%"><FONT size=2>60,416 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>60,416 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>&nbsp;Hudson Bay Fund LP
      <SUP>(20)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>26,100 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>26,100 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Hudson Bay Overseas Fund, Ltd. <SUP>(21)</SUP>
      </FONT></TD>
    <TD align=right width="13%"><FONT size=2>46,400 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>46,400 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>&nbsp;Silver Rock II Ltd.
      <SUP>(22)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>165,000
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>145,000
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>20,000 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;WU MIJIA <SUP>(23)</SUP> </FONT></TD>
    <TD align=right width="13%"><FONT size=2>72,500 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>72,500 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Rockmore Investment Master
      Fund Ltd <SUP>(24)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>90,625 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>90,625 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;Kensington Partners LP <SUP>(25)</SUP>
      </FONT></TD>
    <TD align=right width="13%"><FONT size=2>363,978 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>302,083 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>61,895 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>&nbsp;Rodman &amp; Renshaw,
      LLC <SUP>(26)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>217,235
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>217,235
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;FT Global Capital, Inc. <SUP>(27)</SUP>
      </FONT></TD>
    <TD align=right width="13%"><FONT size=2>45,100 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>45,100 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>&nbsp;Noam Rubinstein
      <SUP>(28)</SUP> </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>19,168 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>19,168 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>* </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;Barney Monte <SUP>(29)</SUP> </FONT></TD>
    <TD align=right width="13%"><FONT size=2>19,168 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>19,168 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>* </FONT></TD></TR></TABLE>
<P align=center>55</P>
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<P align="justify">
* Less than 1%<BR>
</P>
<p>(1) Assumes that all securities offered are sold.</p>
<p align="justify">(2) Includes an aggregate of 37,500 shares underlying warrants to purchase shares of our common stock. Lawrence
Butz and John Prinz are the Managing Directors of Daybreak Capital Management
LLC, which is the Investment Manager for Daybreak Special Situations Master Fund
Ltd and have voting power and investment power over the securities held by Daybreak Special Situations Master Fund Ltd.
</p>
<p>(3) Includes an aggregate of 74,999 shares underlying warrants to purchase shares of our common stock.</p>
<p align="justify">(4) Includes an aggregate of 112,500 shares underlying warrants to purchase shares of our common stock. Lewis N.
Lester Sr. has sole voting and investment control over the securities held by GCA Strategic Investment Fund Limited.
</p>
<P align="justify">
(5) Includes an aggregate of 396,200 shares underlying warrants to purchase shares of our common stock. Peter Siris and Leigh Curry are the Managing Directors of Guerrilla Capital Management, LLC, which is the General Partner of Hua - Mei
21<SUP>st</SUP> Century Partners, LP and have voting power and investment power over securities held by Hua -Mei 21<SUP>st</SUP> Century Partners, LP. </P>
<P align="justify">
(6) Includes an aggregate of 204,501 shares underlying warrants to purchase shares of our common stock. Peter Siris and Leigh Curry are the Managing Directors of Guerrilla Capital Management, LLC, which is the General Partner of Guerrilla Partners,
LP and have voting power and investment power over securities held by Guerrilla Partners, LP. </P>
<P align="justify">
(7) Includes an aggregate of 803,908 shares underlying warrants to purchase shares of our common stock. Kent C. McCarthy is the Managing Member of Jayhawk Capital Management LLC, which is the General Partner of Jayhawk Private Equity Fund, L.P. and
has voting power and investment power over securities held by Jayhawk Private Equity Fund, L.P. </P>
<P align="justify">
(8) Includes an aggregate of 51,182 shares underlying warrants to purchase shares of our common stock. Kent C. McCarthy is the Managing Member of Jayhawk Capital Management LLC, which is the General Partner of Jayhawk Private Equity Co-Invest Fund,
L.P. and has voting power and investment power over securities held by Jayhawk Private Equity Co-Invest Fund, L.P. </P>
<P align="justify">
(9) Includes an aggregate of 56,250 shares underlying warrants to purchase shares of our common stock. Empery Asset Management LP, the authorized agent of Hartz Capital Investments, LLC ("HCI"), has discretionary authority to vote and dispose of the
shares held by HCI and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting power over
the shares held by HCI.  Mr. Hoe and Mr. Lane disclaim any beneficial ownership of these shares. </P>
<p>(10) Includes an aggregate of 18,750 shares underlying warrants to purchase shares of our common stock.</p>
<p>(11) Includes an aggregate of 157,500 shares underlying warrants to purchase shares of our common stock. Andrew
Redleaf is the managing member of Whitebox Advisors, LLC, which is the General Partner of Whitebox Combined Partners, L.P. and has voting power and investment power.
</p>
<P align="justify">
(12) Includes an aggregate of 30,000 shares underlying warrants to purchase shares of our common stock. Andrew Redleaf is the managing member of Whitebox Advisors, LLC, which is the General Partner of Whitebox Intermarket Partners, L.P. and has
voting power and investment power. </P>
<P align="justify">
(13) Includes an aggregate of 136,152 shares underlying warrants to purchase shares of our common stock. William Hecther has sole voting and investment control over the securities held by Excalibur Special Opportunities LP.
<BR>
</P>
<P align="center">
56</P>

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<font SIZE="2">
<p ALIGN="JUSTIFY">(14) Includes an aggregate of 140,625 shares underlying
warrants to purchase shares of our common stock. Heights Capital Management,
Inc., the authorized agent of Capital Ventures International (&quot;CVI&quot;), has
discretionary authority to vote and dispose of the shares held by CVI and may be
deemed to be the beneficial owner of these shares. Martin Kobinger, in his
capacity as Investment Manager of Heights Capital Management, Inc., may also be
deemed to have investment discretion and voting power over the shares held by
CVI. Mr. Kobinger disclaims any such beneficial ownership of the shares. </p>
</font>
<P align="justify">
(15) Includes an aggregate of 56,250 shares underlying warrants to purchase shares of our common stock. John P. Micklitsch has sole voting and investment control over the securities held by Ancora Greater China Fund, LP. </P>
<P align="justify">
(16) Includes an aggregate of 18,000 shares underlying warrants to purchase shares of our common stock. Steven L. Parr has sole voting and investment control over the securities held by The USX China Fund. </P>
<font FACE="Times New Roman" SIZE="2">
<p ALIGN="JUSTIFY">(17) Includes an aggregate of 65,626 shares underlying
warrants to purchase shares of our common stock. Downsview Capital, Inc. (&quot;Downsview&quot;)
is the general partner of Cranshire Capital, L.P. (&quot;Cranshire&quot;) and consequently
has voting control and investment discretion over securities held by Cranshire.
Mitchell P. Kopin (&quot;Mr. Kopin&quot;), President of Downsview, has voting control over
Downsview. As a result of the foregoing, each of Mr. Kopin and Downsview may be
deemed to have beneficial ownership (as determined under Section 13(d) of the
Securities Exchange Act of 1934, as amended) of the shares of common stock
beneficially owned by Cranshire. </p>
</font>
<P align="justify">
(18) Includes an aggregate of 18,749 shares underlying warrants to purchase shares of our common stock. Ronald I. Heller has sole voting and investment control over the securities held by Heller Capital Investments. </P>
<P align="justify">
(19) Includes an aggregate of 18,749 shares underlying warrants to purchase shares of our common stock. Steven Hart has sole voting and investment control over the securities held by Octagon Capital Partners. </P>
<P align="justify">
(20) Includes an aggregate of 8,100 shares underlying warrants to purchase shares of our common stock. Sander Gerber is the managing member of Hudson Bay Capital Management, LP, which is the General Partner of Hudson Bay Fund LP and has voting power
and investment power. </P>
<P align="justify">
(21) Includes an aggregate of 14,400 shares underlying warrants to purchase shares of our common stock. Sander Gerber is the managing member of Hudson Bay Capital Management, LP, which is the General Partner of Hudson Bay Overseas Fund, Ltd. and has
voting power and investment power.</P>
<P align="justify">
(22) Includes an aggregate of 45,000 shares underlying warrants to purchase shares of our common stock held by Silver Rock II, Ltd. and 20,000 shares underlying a warrant to purchase shares of our common stock held by Silver Rock I, Ltd., an
affiliate of Silver Rock II, Ltd.  Rima Salam has sole voting and investment control over the securities held by both Silver Rock I, Ltd. and Silver Rock II, Ltd.</P>
<p>(23) Includes an aggregate of 22,500 shares underlying warrants to purchase shares of our common stock.</p>
<font FACE="Times New Roman" SIZE="2">
<p ALIGN="JUSTIFY">(24) Includes an aggregate of 28,125 shares underlying
warrants to purchase shares of our common stock. Rockmore Capital, LLC (&quot;Rockmore
Capital&quot;) and Rockmore Partners, LLC (&quot;Rockmore Partners&quot;), each a limited
liability company formed under the laws of the State of Delaware, serve as the
investment manager and general partner, respectively, to Rockmore Investments
(US) LP, a Delaware limited partnership, which invests all of its assets through
Rockmore Investment Master Fund Ltd., an exempted company formed under the laws
of Bermuda (&quot;Rockmore Master Fund&quot;). By reason of such relationships, Rockmore
Capital and Rockmore Partners may be deemed to share dispositive power over the
shares of our common stock owned by Rockmore Master Fund. Rockmore Capital and
Rockmore Partners disclaim beneficial ownership of such shares of our common
stock. Rockmore Partners has delegated authority to Rockmore Capital regarding
the portfolio management decisions with respect to the shares of common stock
owned by Rockmore Master Fund and, as of October 28, 2009, Mr. Bruce T.
Bernstein and Mr. Brian Daly, as officers of Rockmore Capital, are responsible
for the portfolio management decisions of the shares of common stock owned by
Rockmore Master Fund. By reason of such authority, Messrs. Bernstein and Daly
may be deemed to share dispositive power over the shares of our common stock
owned by Rockmore Master Fund. Messrs. Bernstein and Daly disclaim beneficial
ownership of such shares of our common stock and neither of such persons has any
legal right to maintain such authority. No other person has sole or shared
voting or dispositive power with respect to the shares of our common stock as
those terms are used for purposes under Regulation 13D-G of the Securities
Exchange Act of 1934, as amended. No person or &quot;group&quot; (as that term is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended, or the SEC&#146;s
Regulation 13D-G) controls Rockmore Master Fund </p>
</font>
<P align="justify">
(25) Includes an aggregate of 155,645 shares underlying warrants to purchase shares of our common stock. Richard R. Keim has sole voting and investment control over the securities held by Kensington Partners LP. </P>
<p>(26) Includes 217,235 shares underlying a warrant to purchase shares of our common stock.</p>
<p>(27) Includes 45,100 shares underlying a warrant to purchase shares of our common stock.</p>
<p>(28) Includes 19,168 shares underlying a warrant to purchase shares of our common stock.</p>
<p>(29) Includes 19,168 shares underlying a warrant to purchase shares of our common stock.</p>
<P align="center">
57</P>

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<P align=center><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT</B></P>
<P align=justify>The following table sets forth information regarding beneficial
ownership of our common stock as of November 20, 2009 (i) by each person who is
known by us to beneficially own more than 5% of our common stock; (ii) by each
of our named executive officers and directors; and (iii) by all of our executive
officers and directors as a group. Beneficial ownership is determined in
accordance with the rules of the SEC that deem shares to be beneficially owned
by any person who has voting or investment power with respect to such shares.
Except as otherwise indicated, the persons listed below have advised us that
they have direct sole voting and investment power with respect to the shares
listed as owned by them.</P>
<P align=justify>Unless otherwise specified, the address of each of the persons
set forth below is c/o American Lorain Corporation, Beihuan Zhong Road, Junan
County, Shandong, China 276600.</P>
<P align=justify>In the table below, percentage ownership is based on 30,239,985
shares of our common stock outstanding as of November 20, 2009.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD vAlign=bottom align=center style="border-bottom-style: solid; border-bottom-width: 1">Name &amp; Address of <BR>Beneficial Owner
    </TD>
    <TD vAlign=bottom align=center width="25%" style="border-bottom-style: solid; border-bottom-width: 1">Office, If Any </TD>
    <TD vAlign=bottom align=center width="25%" style="border-bottom-style: solid; border-bottom-width: 1">Amount &amp; Nature of
      <BR>Beneficial Ownership </TD>
    <TD vAlign=bottom align=center width="25%" style="border-bottom-style: solid; border-bottom-width: 1">Percent of Class </TD></TR>
  <TR>
    <TD vAlign=top align=center bgColor=#e6efff>Mr. Si Chen </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#e6efff>Director and
      <BR>Chief Executive Officer </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#e6efff>16,204,423 </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#e6efff>53.6% </TD></TR>
  <TR vAlign=top>
    <TD vAlign=top align=center bgColor=#FFFFFF>Guerrilla Capital Management,
      LLC <SUP>(1)</SUP> </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#FFFFFF></TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#FFFFFF>2,299,774 </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#FFFFFF>9.1% </TD></TR>
  <TR vAlign=top>
    <TD vAlign=top align=center bgColor=#e6efff>Hua-Mei 21<SUP>st
      </SUP>Century Partners, LP <SUP>(1)</SUP> </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#e6efff></TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#e6efff>1,436,337 </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#e6efff>5.7% </TD></TR>
  <TR vAlign=top>
    <TD vAlign=top align=center bgColor=#FFFFFF>All officers and directors as
      a group <BR>(7 persons) </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#FFFFFF></TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#FFFFFF>16,210,784 </TD>
    <TD vAlign=bottom align=center width="25%" bgColor=#FFFFFF>53.6% </TD></TR>
  <TR>
    <TD bgColor=#ffffff>&nbsp; </TD>
    <TD width="25%" bgColor=#ffffff>&nbsp; </TD>
    <TD width="25%" bgColor=#ffffff>&nbsp; </TD>
    <TD width="25%" bgColor=#ffffff>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff>* Less than 1% </TD>
    <TD align=left width="25%" bgColor=#ffffff>&nbsp; </TD>
    <TD align=left width="25%" bgColor=#ffffff>&nbsp; </TD>
    <TD align=left width="25%" bgColor=#ffffff>&nbsp; </TD></TR></TABLE>
<P align=justify>(1) This information is derived from a Schedule 13G filed
jointly by Guerilla Capital Management, LLC., a Delaware limited liability
company ("Guerrilla Capital"), Hua-Mei 21st Century Partner, LP, a Delaware
limited partnership (the "Partnership"), Peter Siris and Leigh Curry on November
12, 2009. Guerrilla Capital may be deemed to be the beneficial owner of
2,299,774 shares and the Partnership may be deemed to be the beneficial owner of
1,436,337 shares. Peter Siris and Leigh Curry have control over management and
investment decisions for Guerilla Capital and the Partnership. The mailing
address for each of Guerilla Capital, the Partnership, Mr. Siris and Mr. Curry
is 237 Park Avenue, 9<SUP>th</SUP> Floor, New York, New York 10017. </P>
<P align=center>58</P>
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<P align="center">
<B>DESCRIPTION OF CAPITAL STOCK</B><BR>
</P>
<P align="justify">
<B><I>Common Stock</I></B><BR>
</P>
<P align="justify">
We are authorized to issue up to 200,000,000 shares of common stock, par value &#36;0.001 per share.</P>
<P align="justify">
Each outstanding share of common stock entitles the holder thereof to one vote per share on all matters. Corporate action to be taken by a stockholder vote may be authorized by the affirmative vote of a majority of the votes cast at a meeting of
stockholders, or by written consent in lieu of a meeting, unless otherwise required by law. In general, stockholders do not have preemptive rights to purchase shares in any future issuance of our common stock. However, the selling stockholders have
the right to participate in up to an aggregate of 25% of certain financing transactions conducted by us prior to April 28, 2011. Upon our liquidation, dissolution or winding up, and after payment of creditors and preferred stockholders, if any, our
assets will be divided pro-rata on a share-for-share basis among the holders of the shares of common stock. </P>
<P align="justify">
The holders of shares of our common stock are entitled to dividends out of funds legally available when and as declared by our board of directors. Other than a special dividend paid on April 5, 2008 in connection with our reverse merger, our board
of directors has never declared a dividend and does not anticipate declaring a dividend in the foreseeable future. Should we decide in the future to pay dividends, as a holding company, our ability to do so and meet other obligations depends upon
the receipt of dividends or other payments from our operating subsidiaries and other holdings and investments. In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their ability to make distributions to us,
including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions. In the event of our liquidation, dissolution or winding
up, holders of our common stock are entitled to receive, ratably, the net assets available to stockholders after payment of all creditors. </P>
<P align="justify">
All of the issued and outstanding shares of our common stock are duly authorized, validly issued, fully paid and non-assessable. To the extent that additional shares of our common stock are issued, the relative interests of existing stockholders
will be diluted. </P>
<P align="justify">
Effective November 16, 2009, we reincorporated in Nevada from Delaware. </P>
<P align="justify">
<B><I>Preferred Stock</I></B><BR>
</P>
<P align="justify">
We are authorized to issue 5,000,000 shares of preferred stock. We may issue shares of preferred stock in one or more classes or series within a class as may be determined by our board of directors, who may establish the number of shares to be
included in each class or series, may fix the designation, powers, preferences and rights of the shares of each such class or series and any qualifications, limitations or restrictions thereof. Any preferred stock so issued by the board of directors
may rank senior to the common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up of our company, or both. Moreover, under certain circumstances, the issuance of preferred stock or the existence of
the unissued preferred stock might tend to discourage or render more difficult a merger or other change in control transaction. There are currently no outstanding shares of our preferred stock. </P>
<P align="justify">
<B><I>Warrants</I></B><BR>
</P>
<P align="justify">
In connection with a private placement in May 2007, we granted three-year warrants which are exercisable for shares of our common stock at &#36;4.25 per share to a group of accredited investors and to the placement agent and its designee. Warrants
to purchase 1,527,197 shares of our common stock are currently outstanding. The exercise price of these warrants was determined based on the offering price of our common stock sold in the private placement transaction completed on May 3, 2007. </P>
<P align="justify">
In connection with a private placement in October 2009, we granted to the selling stockholders (i) five-year Series A warrants which are exercisable for an aggregate of 1,753,909 shares of our common stock at &#36;3.70 per share, all of
which are currently outstanding and (ii) thirty-month Series B warrants which are exercisable for an aggregate of 501,115 shares of our common stock at &#36;3.70 per share, all of which are currently outstanding. </P>
<P align="center">
59</P>

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<P align="justify">
<B><I>Indemnification of Directors and Officers</I></B><BR>
</P>
<P align="justify">
Our officers and directors are indemnified as provided by the Nevada Revised Statutes (&#147;NRS&#148;) and our bylaws and articles of incorporation. </P>
<P align="justify">
Under the NRS, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company&#146;s articles of incorporation that is not the case with our articles of
incorporation. Excepted from that immunity are: </P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top align="center">
(1) 	</TD>
	<TD>
<P align="justify" style="margin-left: 5pt">a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest;</P>
	</TD>
</TR>
<TR><TD align="center">&nbsp;</TD><TD>
  <p style="margin-left: 5pt">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top align="center">
(2) 	</TD>
	<TD>
<P align="justify" style="margin-left: 5pt">a violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful);</P>
	</TD>
</TR>
<TR><TD align="center">&nbsp;</TD><TD>
  <p style="margin-left: 5pt">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top align="center">
(3) 	</TD>
	<TD>
<P align="justify" style="margin-left: 5pt">a transaction from which the director derived an improper personal profit; and</P>
	</TD>
</TR>
<TR><TD align="center">&nbsp;</TD><TD>
  <p style="margin-left: 5pt">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top align="center">
(4) 	</TD>
	<TD>
<P align="justify" style="margin-left: 5pt">willful misconduct.</P>
	</TD>
</TR>
</TABLE>
<P align="justify">
Our bylaws and articles of incorporation provide that we will indemnify our directors, officers, employees, and agents, to the fullest extent to the extent required by the Nevada Revised Statutes and shall indemnify such individuals to the extent
permitted by the Nevada Revised Statutes. We may purchase and maintain liability insurance, or make other arrangements for such obligations or otherwise, to the extent permitted by the Nevada Revised Statutes. </P>
<P align="justify">
<B><I>Transfer Agent and Registrar</I></B><BR>
</P>
<P align="justify">
Our independent stock transfer agent is Interwest Transfer Company, Inc. Their mailing address is 1981 East Holladay Blvd., P.O. Box 17136, Salt Lake City, UT 84117. Their phone number is (801) 272-9294. </P>
<P align="center">
<B>SHARES ELIGIBLE FOR FUTURE SALE</B><BR>
</P>
<P align="justify">
As of November 20, 2009, we had 30,239,985 shares of common stock issued and outstanding.</P>
<P align="justify">
<B><I>Shares Covered by this Prospectus</I></B><BR>
</P>
<P align="justify">
All of the 7,566,863 shares of common stock being registered in this offering may be sold without restriction under the Securities Act, so long as the registration statement of which this prospectus is a part is, and remains, effective. </P>
<P align="justify">
<B><I>Rule 144</I></B><BR>
</P>
<P align="justify">
In general, pursuant to Rule 144 under the Securities Act, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale of shares of our common stock, and
who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the
availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the current
public information requirement. </P>
<P align="justify">
A person (or persons whose shares are aggregated) who is deemed to be an affiliate of ours and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell within
any three-month period a number of shares of our common stock that does not exceed the greater of (i) one percent of the then outstanding shares of our common stock or (ii) the average weekly trading volume of our common stock during the four
calendar weeks preceding such sale. Such sales are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us. </P>
<P align="center">
60</P>

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<P align="justify">
The selling stockholders will not be governed by the foregoing restrictions when selling their shares pursuant to this prospectus.  The selling stockholders may sell their pursuant to Rule 144, if available, rather than under this prospectus. </P>
<P align="center">
61</P>

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<A name="page_66"></A>

<P align="center">
<B>PLAN OF DISTRIBUTION</B><BR>
</P>
<P align="justify">
Each selling stockholder and any pledgees, assignees and successors-in-interest of any selling stockholder may, from time to time, sell any or all of their shares of common stock covered hereby on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may use any one or more of the following methods when selling shares: </P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 5">ordinary brokerage transactions and transactions in which the broker dealer solicits purchasers;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">block trades in which the broker dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">purchases by a broker dealer as principal and resale by the broker dealer for its account;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">an exchange distribution in accordance with the rules of the applicable exchange;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">privately negotiated transactions;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">in transactions through broker dealers that agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">a combination of any such methods of sale; or</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 5">any other method permitted pursuant to applicable law.</LI>
</UL>
<P align="justify">
The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. </P>
<P align="justify">
Broker dealers engaged by the selling stockholders may arrange for other brokers dealers to participate in sales. Broker dealers may receive commissions or discounts from the selling stockholders (or, if any broker dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction, not in excess of a customary brokerage commission in compliance with FINRA Rule
2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.</P>
<P align="justify">
In connection with the sale of the common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in
the course of hedging the positions they assume. The selling stockholders may also sell shares of the common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in
turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). </P>
<P align="justify">
The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be &#147;underwriters&#148; within the meaning of the Securities Act in connection with such sales.  In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed us that it does not have
any written or oral agreement or understanding, directly or indirectly, with any person to distribute the common stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent
(8%). </P>
<P align="justify">
We are required to pay certain fees and expenses incurred by us incident to the registration of the shares of common stock. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.</P>
<P align="center">
62</P>

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<A name=page_67></A>
<P align=justify>The selling stockholders will be subject to the prospectus
delivery requirements of the Securities Act or any exemption therefrom,
including Rule 172 thereunder. The selling stockholders have advised us that
there is no underwriter or coordinating broker acting in connection with the
proposed sale of the resale shares by the selling stockholders. </P>
<P align=justify>We agreed to keep this prospectus effective until the earlier
of (i) the date on which the shares may be resold by the selling stockholders
without registration and without regard to any volume or manner-of-sale
limitations by reason of Rule 144, without the requirement for us to be in
compliance with the current public information under Rule 144 under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to this prospectus or Rule 144 under the Securities Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares of common
stock covered hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with. </P>
<P align=justify>Under applicable rules and regulations under the Exchange Act,
any person engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to the common
stock for the applicable restricted period, as defined in Regulation M, prior to
the commencement of the distribution. In addition, the selling stockholders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of the common stock by the selling stockholders or
any other person. We will make copies of this prospectus available to the
selling stockholders and have informed them of the need to deliver a copy of
this prospectus to each purchaser at or prior to the time of the sale (including
by compliance with Rule 172 under the Securities Act). </P>
<P align=center><B>LEGAL MATTERS</B><BR></P>
<P align=justify>The validity of the common stock offered by this prospectus has
been passed upon for us by Holland &amp; Hart LLP, Nevada.</P>
<P align=center><B>EXPERTS</B><BR></P>
<P align=justify>The consolidated financial statements included in this
prospectus and in the registration statement have been audited by Samuel H. Wong
&amp; Co., LLP, Certified Public Accountants, an independent registered public
accounting firm, to the extent and for the periods set forth in their report
appearing elsewhere herein and in the registration statement, and are included
in reliance on such report, given the authority of said firm as an expert in
auditing and accounting. </P>
<P align=center>63</P>
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<A name="page_68"></A>

<P align="center">
<B>WHERE YOU CAN FIND MORE INFORMATION</B><BR>
</P>
<P align="justify">
We have filed with the SEC, a registration statement on Form S-1 under the Securities Act with respect to the common stock offered in this offering. This prospectus does not contain all of the information set forth in the registration statement. For
further information with respect to us and the common stock offered in this offering, we refer you to the registration statement and to the attached exhibits. With respect to each such document filed as an exhibit to the registration statement, we
refer you to the exhibit for a more complete description of the matters involved. </P>
<P align="justify">
You may inspect our registration statement and the attached exhibits and schedules without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of our
registration statement from the SEC upon payment of prescribed fees. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. </P>
<P align="justify">
Our SEC filings, including the registration statement and the exhibits filed with the registration statement, are also available from the SEC&#146;s website at www.sec.gov, which contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC. </P>
<P align="center">
64</P>

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<A name=page_69></A><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=center colSpan=2><B>INDEX TO FINANCIAL STATEMENTS</B> </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="15%">&nbsp; </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="15%">&nbsp; </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="15%">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left><B><U>CONTENTS</U></B> </TD>
    <TD align=right width="15%"><B><U>PAGES</U></B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>REPORT OF INDEPENDENT REGISTERED PUBLIC
      ACCOUNTING FIRM </TD>
    <TD align=right width="15%" bgColor=#e6efff>F-1 </TD></TR>
  <TR vAlign=top>
    <TD align=left>CONSOLIDATED BALANCE SHEETS </TD>
    <TD align=right width="15%">F-2 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>CONSOLIDATED STATEMENTS OF INCOME </TD>
    <TD align=right width="15%" bgColor=#e6efff>F-4 </TD></TR>
  <TR vAlign=top>
    <TD align=left>CONSOLIDATED STATEMENTS OF STOCKHOLDER&#146;S EQUITY </TD>
    <TD align=right width="15%">F-5 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>CONSOLIDATED STATEMENTS OF CASH FLOWS </TD>
    <TD align=right width="15%" bgColor=#e6efff>F-6 </TD></TR>
  <TR vAlign=top>
    <TD align=left>NOTES TO FINANCIAL STATEMENTS </TD>
    <TD align=right width="15%">F-7 </TD></TR></TABLE>
<P align=justify>&nbsp;</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_70></A>
<P align=center><B>REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING
FIRM</B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>To: </TD>
    <TD align=left width="95%">The Board of Directors and Stockholders of
      American Lorain Corporation </TD></TR></TABLE>
<P align=justify>We have audited the accompanying consolidated balance sheets of
American Lorain Corporation as of December 31, 2008 and 2007 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. </P>
<P align=justify>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. </P>
<P align=justify>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, 2008 and 2007 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. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>South San Francisco, California </TD>
    <TD align=left width="50%">Samuel H. Wong &amp; Co., LLP </TD></TR>
  <TR vAlign=top>
    <TD align=left>February 18, 2009 </TD>
    <TD align=left width="50%">Certified Public Accountants
</TD></TR></TABLE>
<P align=center>F-2</P>
<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">
<P align=justify><B>AMERICAN LORAIN CORPORATION</B> <BR><B>CONSOLIDATED BALANCE
SHEETS</B> <BR><B>AS OF DECEMBER 31, 2008 AND 2007</B> <BR><B>(Stated in US
Dollars)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><U>Note</U> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>ASSETS</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Current assets </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Cash and Cash
      equivalents </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;2,841,339 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp;6,769,973 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Restricted Cash </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">3 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">3,715,998 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">2,021,839 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;Short-term Investment
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>113,069 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">7,246 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Trade accounts receivable </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">4 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">25,293,326 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">32,859,688 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Other
      receivables </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>5 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>5,107,719 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">7,552,976 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Inventory </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">6 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">24,827,922 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">17,903,344 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Advance to
      Suppliers </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>415,009 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">5,357,951 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Prepaid Expenses and Taxes </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1">1,228,648 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%">916,774 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp; &nbsp; &nbsp;Total current assets </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">&nbsp;63,543,030 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">&nbsp;73,389,790 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp;Property, plant and equipment,
      <I>net</I> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">7 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">40,201,686 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">24,022,181 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;Land use rights,
      <I>net</I> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>8 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">3,950,927 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right width="10%"
    bgColor=#e6efff>3,047,021 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD width="10%" style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>TOTAL ASSETS</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: double; border-bottom-width: 3">$</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: double; border-bottom-width: 3">&nbsp;107,695,643 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; " align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-right-style:none; border-right-width:medium" align=right width="10%"
    bgColor=#e6efff>&nbsp;100,458,992 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD width="10%" style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Current liabilities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Short-term bank loans </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">9 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">&nbsp;14,414,996 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">&nbsp;24,077,504 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Notes payable
</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>10 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>5,208,485 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">2,734,444 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Accounts payable </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">6,072,883 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">6,251,833 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Income tax
      payable </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>2,682,658 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">1,121,528 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Current maturities of long term
      debts </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">12 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">- </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Accrued
      liabilities and other payables </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>11 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>10,291,237 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">16,784,108 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Customers deposits </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1">748,732 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%">957,642 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp; &nbsp; &nbsp;Total current liabilities </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">&nbsp;39,418,991 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">&nbsp;51,927,058 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; Long-term bank loans </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">12 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1">576,975 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%">102,542 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><B>TOTAL LIABILITIES</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >$</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;39,995,966 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%">&nbsp;52,029,600 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
<P align=center><B>See Accompanying Notes to the Financial Statements and
Accountant&#146;s Report </B></P>
<P align=center>F-2 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_52></A>
<P align=justify><B>AMERICAN LORAIN CORPORATION</B> <BR><B>CONSOLIDATED BALANCE
SHEETS (Continued)</B> <BR><B>AS OF DECEMBER 31, 2008 AND 2007</B>
<BR><B>(Stated in US Dollars)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><U>Note</U> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgcolor="#E6EFFF">Minority interests </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">13 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >$</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">&nbsp;5,122,021 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >$</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">&nbsp;3,887,021 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><B>STOCKHOLDERS&#146; EQUITY</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgcolor="#E6EFFF">&nbsp; &nbsp;Common Stock, $0.001 par value, 200,000,000
</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgcolor="#E6EFFF">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;shares authorized;
      25,172,640 and 24,923,178 </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgcolor="#E6EFFF">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;shares issued and
      outstanding as of December 31, </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgcolor="#E6EFFF">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;2008 and 2007,
      respectively </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">14 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">25,172 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">24,923 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgcolor="#E6EFFF">&nbsp; &nbsp;Additional paid-in-capital </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">24,187,019 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">24,187,268 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Statutory reserves </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">5,438,723 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">4,497,647 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgcolor="#E6EFFF">&nbsp; &nbsp;Retained earnings </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">27,748,126 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">13,985,824 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Accumulated other comprehensive Income </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1">5,178,616 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1">1,846,708 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="1%" bgcolor="#E6EFFF" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD width="10%" bgcolor="#E6EFFF" style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="1%" bgcolor="#E6EFFF" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD width="10%" bgcolor="#E6EFFF" style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="10%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-bottom-style: solid; border-bottom-width: 1" >$</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;62,577,656 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-bottom-style: solid; border-bottom-width: 1" >$</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;44,542,370 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD width="10%" style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD width="10%" style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><B>TOTAL LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: double; border-bottom-width: 3" >$</TD>
    <TD align=right width="10%" style="border-bottom-style: double; border-bottom-width: 3">&nbsp;107,695,643 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: double; border-bottom-width: 3" >$</TD>
    <TD align=right width="10%" style="border-bottom-style: double; border-bottom-width: 3">&nbsp;100,458,992 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P align=center><B>See Accompanying Notes to the Financial Statements and
Accountant&#146;s Report </B></P>
<P align=center>F-3<B> </B></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_53></A>
<P align=justify><B>AMERICAN LORAIN CORPORATION</B> <BR><B>CONSOLIDATED
STATEMENTS OF INCOME</B> <BR><B>FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007</B> <BR><B>(Stated in US Dollars)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><U>Note</U> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net revenues </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">132,360,317 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;82,094,963 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Cost of revenues </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%">(101,213,340</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >) </TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1">(61,932,474</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Gross profit </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">&nbsp;</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">31,146,977 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >$</TD>
    <TD align=right width="10%">&nbsp;20,162,490 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Operating expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Selling and marketing expenses </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">(6,166,248</TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">) </TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(2,623,138</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>General and administrative expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%">(4,047,988</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >) </TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1">(2,864,813</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Operating Income </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">&nbsp;</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">20,932,741 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >$</TD>
    <TD align=right width="10%">&nbsp;14,674,539 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Investment income </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">- </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%">4,769 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Government subsidy income </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">328,687 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,373,280 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Interest income </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">99,411 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%">209,010 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Other income </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">251,317 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>155,467 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Other expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">(161,726</TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >) </TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%">(1,445,780</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Interest Expense </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right width="10%"
    bgColor=#e6efff>(2,769,597</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
     bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">(2,376,088</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD width="1%" style="border-left-style: none; border-left-width: medium; border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD width="10%" style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Earnings before tax </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">18,680,833 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;12,595,196 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Income tax </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">15 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%">(3,003,265</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >) </TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1">(2,134,916</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Income before minority interests </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">&nbsp;</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">15,677,568 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >$</TD>
    <TD align=right width="10%">&nbsp;10,460,279 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Minority interests </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right width="10%"
    bgColor=#e6efff>(974,190</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
     bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">(715,359</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>Net income </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; " align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%">14,703,378 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3">9,744,920 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Earnings per share </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>basic </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">&nbsp;</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium">0.58 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >$</TD>
    <TD align=right width="10%">&nbsp;0.43 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>diluted </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; " align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-right-style:none; border-right-width:medium" align=right width="10%"
    bgColor=#e6efff>0.58 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-bottom-style: double; border-bottom-width: 3">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: double; border-bottom-width: 3">0.42 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Weighted average shares outstanding </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium; border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=left width="10%" style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>basic </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">25,172,640 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>22,554,210 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>diluted </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: double; border-bottom-width: 3" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium; border-bottom-style: double; border-bottom-width: 3">25,172,640 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium; border-bottom-style: double; border-bottom-width: 3" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: double; border-bottom-width: 3">23,177,268 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P align=center><B>See Accompanying Notes to the Financial Statements and
Accountant&#146;s Report </B></P>
<P align=center>F-4<B> </B></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_54></A>
<P align=justify><B>AMERICAN LORAIN CORPORATION</B> <BR><B>STATEMENT OF
STOCKHOLDERS&#146; EQUITY</B> <BR><B>FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007</B> <BR><B>(Stated in US Dollars)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="11" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="84" style="border-style:none; border-width:medium; "><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="12" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="84" style="border-style:none; border-width:medium; "><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="12" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="84" style="border-style:none; border-width:medium; "><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="12" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="84" style="border-style:none; border-width:medium; "><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="12" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="84" style="border-style:none; border-width:medium; "><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="12" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=right width="84" style="border-style:none; border-width:medium; "><FONT size=2><B>Accumulated</B> </FONT></TD>
    <TD align=left width="24" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="12" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=left width="84" style="border-style:none; border-width:medium; "><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="23" style="border-style:none; border-width:medium; " >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="11" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=right width="84" style="border-style: none; border-width: medium"><FONT size=2><B>Number</B> </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="84" style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="84" style="border-style: none; border-width: medium"><FONT size=2><B>Additional</B> </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="84" style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="84" style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="84" style="border-style: none; border-width: medium"><FONT size=2><B>Other</B> </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="84" style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="23" style="border-style:none; border-width:medium; " >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="11" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=right width="84" style="border-style: none; border-width: medium"><FONT size=2><B>of</B> </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="84" style="border-style: none; border-width: medium"><FONT size=2><B>Common</B> </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="84" style="border-style: none; border-width: medium"><FONT size=2><B>Paid-in</B> </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="84" style="border-style: none; border-width: medium"><FONT size=2><B>Statutory</B> </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="84" style="border-style: none; border-width: medium"><FONT size=2><B>Retained</B> </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="84" style="border-style: none; border-width: medium"><FONT size=2><B>Comprehensive</B> </FONT></TD>
    <TD align=left width="24" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="84" style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="23" style="border-style:none; border-width:medium; " >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="11"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2><B>Shares</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2><B>Stock</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2><B>Capital</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2><B>Reserves</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2><B>Earnings</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2><B>Income</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2><B>Total</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-right-style:none; border-right-width:medium; border-left-style:none; border-left-width:medium; border-top-style:none; border-top-width:medium" align=left width="23"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>Balance, January 1, 2007
      </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="11"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>17,932,777 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
     bgColor=#e6efff><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>&nbsp;17,933 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
     bgColor=#e6efff><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>&nbsp;6,846,620 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
     bgColor=#e6efff><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>&nbsp;4,439,604 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
     bgColor=#e6efff><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>&nbsp;4,298,947 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
     bgColor=#e6efff><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>&nbsp;1,006,195 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
     bgColor=#e6efff><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>&nbsp;16,609,299 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-right-style:none; border-right-width:medium; border-left-style:none; border-left-width:medium; border-top-style:none; border-top-width:medium" align=left width="23"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>Issuance of Common Stock for Cash </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="11"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>6,990,401 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>6,990 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>17,340,648 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>17,347,638 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-right-style:none; border-right-width:medium; border-left-style:none; border-left-width:medium; border-top-style:none; border-top-width:medium" align=left width="23"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>Net Income </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="11"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>9,744,920 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"
    bgColor=#e6efff><FONT size=2>9,744,920 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-right-style:none; border-right-width:medium; border-left-style:none; border-left-width:medium; border-top-style:none; border-top-width:medium" align=left width="23"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>Appropriations to Statutory Reserves
</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="11"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>58,043 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>(58,043</FONT>) </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-right-style:none; border-right-width:medium; border-left-style:none; border-left-width:medium; border-top-style:none; border-top-width:medium" align=left width="23"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>Foreign Currency Translation Adjustment
      </FONT></TD>
    <TD align=left width="11"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>- </FONT></TD>
    <TD align=right width="24"  bgColor=#e6efff style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12"  bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>- </FONT></TD>
    <TD align=right width="24"  bgColor=#e6efff style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12"  bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>- </FONT></TD>
    <TD align=right width="24"  bgColor=#e6efff style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12"  bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>- </FONT></TD>
    <TD align=right width="24"  bgColor=#e6efff style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12"  bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>- </FONT></TD>
    <TD align=right width="24"  bgColor=#e6efff style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12"  bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>840,513 </FONT></TD>
    <TD align=right width="24"  bgColor=#e6efff style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12"  bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" bgColor=#e6efff style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>840,513 </FONT></TD>
    <TD align=left width="23"  bgColor=#e6efff style="border-style:none; border-width:medium; "></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>Balance, December 31, 2007 </FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-left-style:none; border-left-width:medium; border-top-style:solid; border-top-width:1; border-right-style:none; border-right-width:medium" align=left width="11"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT
      size=2>24,923,178 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT
      size=2>&nbsp;24,923 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT
      size=2>24,187,268 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT
      size=2>&nbsp;4,497,647 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT
      size=2>13,985,824 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT
      size=2>&nbsp;1,846,708 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT
      size=2>&nbsp;44,542,370 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium" align=left width="23"
    >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="11"  bgColor=#e6efff style="border-style:none; border-width:medium; ">&nbsp;</TD>
    <TD width="84" bgColor=#e6efff style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="84" bgColor=#e6efff style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="84" bgColor=#e6efff style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="84" bgColor=#e6efff style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="84" bgColor=#e6efff style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="84" bgColor=#e6efff style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="84" bgColor=#e6efff style="border-style: none; border-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="23"  bgColor=#e6efff style="border-style:none; border-width:medium; ">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" bgcolor="#E6EFFF" width="372"><FONT size=2>Balance, January 1, 2008 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="11" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>24,923,178 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>&nbsp;24,923 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>24,187,268 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>&nbsp;4,497,647 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>13,985,824 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>&nbsp;1,846,708 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>&nbsp;44,542,370 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-right-style:none; border-right-width:medium; border-left-style:none; border-left-width:medium; border-top-style:none; border-top-width:medium" align=left width="23" bgcolor="#E6EFFF"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>Issuance of Common Stock
      </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="11">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT size=2>249,455 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT size=2>249 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT size=2>&nbsp;(249</FONT>) </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84"><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-right-style:none; border-right-width:medium; border-left-style:none; border-left-width:medium; border-top-style:none; border-top-width:medium" align=left width="23">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" bgcolor="#E6EFFF" width="372"><FONT size=2>Share Adjustment to Match Transfer Agent
      </FONT></TD>
    <TD align=left width="11" style="border-style:none; border-width:medium; " bgcolor="#E6EFFF" ></TD>
    <TD align=right width="84" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; "><FONT size=2>7 </FONT></TD>
    <TD align=right width="24" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="12" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="84" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; "><FONT size=2>- </FONT></TD>
    <TD align=right width="24" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="12" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="84" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; "><FONT size=2>- </FONT></TD>
    <TD align=right width="24" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="12" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="84" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; "><FONT size=2>- </FONT></TD>
    <TD align=right width="24" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="12" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="84" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; "><FONT size=2>- </FONT></TD>
    <TD align=right width="24" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="12" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="84" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; "><FONT size=2>- </FONT></TD>
    <TD align=right width="24" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="12" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; " ></TD>
    <TD align=right width="84" bgcolor="#E6EFFF" style="border-style:none; border-width:medium; "><FONT size=2>- </FONT></TD>
    <TD align=left width="23" style="border-style:none; border-width:medium; " bgcolor="#E6EFFF" ></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>Net Income </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-top-style:none; border-top-width:medium; border-right-style:none; border-right-width:medium" align=left width="11">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT size=2>14,703,378 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84"><FONT size=2>14,703,378 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium" align=left width="23">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" bgcolor="#E6EFFF" width="372"><FONT size=2>Appropriations to Statutory Reserves
</FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="11" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>941,076 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>(941,076</FONT>) </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="12" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-right-style:none; border-right-width:medium; border-left-style:none; border-left-width:medium; border-top-style:none; border-top-width:medium" align=left width="23" bgcolor="#E6EFFF"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" width="372"><FONT size=2>Foreign Currency Translation Adjustment
      </FONT></TD>
    <TD align=left width="11" style="border-left-style: none; border-left-width: medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>- </FONT></TD>
    <TD align=right width="24" style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>- </FONT></TD>
    <TD align=right width="24" style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>- </FONT></TD>
    <TD align=right width="24" style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>- </FONT></TD>
    <TD align=right width="24" style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>- </FONT></TD>
    <TD align=right width="24" style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>3,331,908 </FONT></TD>
    <TD align=right width="24" style="border-style:none; border-width:medium; "></TD>
    <TD align=right width="12" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"></TD>
    <TD align=right width="84" style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT
      size=2>3,331,908 </FONT></TD>
    <TD align=left width="23" style="border-style:none; border-width:medium; "></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium" width="372" bgcolor="#E6EFFF"><FONT size=2>Balance, December 31, 2008 </FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-left-style:none; border-left-width:medium; border-top-style:solid; border-top-width:1; border-right-style:none; border-right-width:medium" align=left width="11" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>25,172,640 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>&nbsp;25,172 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>24,187,019 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>&nbsp;5,438,723 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>27,748,126 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>&nbsp;5,178,616 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="24" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left width="12" bgcolor="#E6EFFF"
    ><FONT size=2>$</FONT></TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-top-style:solid; border-top-width:1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="84" bgcolor="#E6EFFF"><FONT
      size=2>&nbsp;62,577,656 </FONT></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium; border-left-style:none; border-left-width:medium" align=left width="23" bgcolor="#E6EFFF"
    >&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><B>Comprehensive</B> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><B>Comprehensive</B> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=left width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><B>Income</B> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><B>Income</B> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=left width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><B>2008</B> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><B>2007</B> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><B>Total</B> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net Income </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp;14,703,378 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">$</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp;9,744,920 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">$</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp;30,376,788 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Foreign Currency Translation Adjustment </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%">3,331,908 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%">840,513 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%">4,680,852 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; " align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-right-style:none; border-right-width:medium" align=right width="10%"
    bgColor=#e6efff>&nbsp;18,035,286 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-left-style:none; border-left-width:medium" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-right-style:none; border-right-width:medium" align=right width="10%"
    bgColor=#e6efff>&nbsp;10,585,433 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-left-style:none; border-left-width:medium" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-right-style:none; border-right-width:medium" align=right width="10%"
    bgColor=#e6efff>&nbsp;34,057,640 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P align=center><B>See Accompanying Notes to the Financial Statements and
Accountant&#146;s Report </B></P>
<P align=center>F-5<B> </B></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_55></A>
<P align=justify><B>AMERICAN LORAIN CORPORATION</B><I> <BR></I><B>CONSOLIDATED
STATEMENTS OF CASH FLOWS</B><I> <BR></I><B>FOR THE YEARS ENDED DECEMBER 31, 2008
AND 2007 <BR>(Stated in US Dollars)</B><I> </I></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Cash flows from operating activities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Net income </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;14,703,377 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;9,744,920 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Minority interest </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>974,191 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>964,666 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Fire Loss </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,392,379 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Depreciation </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,273,935 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>802,927 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Amortization </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">158,428 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">17,798 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;(Increase)/decrease in
      accounts &amp; other receivables </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>14,642,687 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(23,809,252</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;(Increase)/decrease in inventories </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(6,924,578</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(8,560,781</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Increase/(decrease) in
      accounts and other payables </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">(5,319,600</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">15,862,094 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%" style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%" style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net cash (used in)/provided by operating
      activities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">19,508,440 </TD>
    <TD align=left width="2%"  bgColor=#e6efff></TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">(3,585,249</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Cash flows from investing activities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Purchase of plant and equipment </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(13,928,921</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(7,657,346</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Purchase of biological assets
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(2,784,136</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Increase of construction in progress </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(3,524,520</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(2,258,097</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;(Increase)/decrease in
      restricted cash </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(1,694,159</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>527,482 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Payment of land use rights </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(1,062,334</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(287,344</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Investments in securities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">(105,823</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">19,374 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp;Net cash used in investing activities
    </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;(20,315,757</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;(12,440,067</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Cash flows from financing activities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Issue of common stock </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">17,347,638 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Dividend paid </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Proceeds from notes </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2,474,041 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Bank borrowings </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>35,327,917 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>25,645,795 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Bank repayment </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">(45,936,138</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">(23,329,333</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Net cash provided by/(used in)
      financing </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Activities </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;(8,134,180</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;19,664,100 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net in cash and cash equivalents
      (used)/sourced </TD>
    <TD align=left width="1%"  bgColor=#e6efff></TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">(8,941,497</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff></TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">3,638,784 </TD>
    <TD align=left width="2%"  bgColor=#e6efff></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Effect of foreign currency translation on
      cash and cash equivalents </TD>
    <TD align=left width="1%"  bgColor=#e6efff></TD>
    <TD align=right width="12%" bgColor=#e6efff>5,012,863 </TD>
    <TD align=left width="2%"  bgColor=#e6efff></TD>
    <TD align=left width="1%"  bgColor=#e6efff></TD>
    <TD align=right width="12%" bgColor=#e6efff>840,513 </TD>
    <TD align=left width="2%"  bgColor=#e6efff></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Cash and cash equivalents&#150;beginning of year
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">6,769,973 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">2,290,676 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Cash and cash equivalents&#150;end of year </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3">&nbsp;2,841,339 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3">&nbsp;6,769,973 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Supplementary cash flow information: </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Interest received </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;99,411 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;209,010 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Interest paid </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2,769,597 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2,293,442 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Taxes Paid </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: double; border-bottom-width: 3">3,003,265 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: double; border-bottom-width: 3">740,943 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P align=center><B>See Accompanying Notes to the Financial Statements and
Accountant&#146;s Report </B></P>
<P align=center>F-6<B> </B></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
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<p><A name=page_56></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>1.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>ORGANIZATION, BASIS OF PRESENTATION, AND PRINCIPAL
      ACTIVITIES</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(a)</I> </TD>
    <TD>
      <P align=justify><I>Organization history of American Lorain Corporation
      (formerly known as Millennium Quest, Inc.)</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>American Lorain Corporation (the &#147;Company&#148; or &#147;ALC&#148;) is a
      Delaware corporation incorporated on February 4, 1986. From inception
      through May 3, 2007, the Company did not engage in any active business
      operations other than in search and evaluation of potential business
      opportunity to become an acquiree of a reverse-merger deal.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(b)</I> </TD>
    <TD>
      <P align=justify><I>Organization History of International Lorain Holding
      Inc. and its subsidiaries</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>International Lorain Holding Inc. (&#147;ILH&#148;) is a Cayman
      Islands company incorporated on August 4, 2006 and was until May 3, 2007
      wholly-owned by Mr. Hisashi Akazawa. Through restructuring and acquisition
      in 2006, the Company presently has two direct wholly-owned subsidiaries,
      Junan Hongrun and Luotian Lorain, and one indirectly wholly-owned
      subsidiary through Junan Hongrun, which is Beijing Lorain.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(c)</I> </TD>
    <TD>
      <P align=justify><I>Reverse-Merger</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On May 3, 2007, the Company entered into a share exchange
      agreement with International Lorain Holding Inc. (&#147;ILH&#148;) 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 &#147;beneficial owner&#148;) 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&#146;s
      reverse-merger with Lorain.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The share exchange transaction is referred to hereafter
      as the &#147;reverse-merger transaction.&#148; The share exchange transaction has
      been accounted for as a recapitalization of ALC where the Company (the
      legal acquirer) is considered the accounting acquiree and ILH (the
      acquiree) is considered the accounting acquirer. As a result of this
      transaction, the Company is deemed to be a continuation of the business of
      ILH.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Accordingly, the accompanying consolidated financial
      statements are those of the accounting acquirer, ILH. The historical
      stockholders&#146; 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.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(d)</I> </TD>
    <TD>
      <P align=justify><I>Business Activities</I></P></TD></TR></TABLE>
<P style="MARGIN-LEFT: 10%" align=justify>The Company develops, manufactures,
and sells convenience foods (such as  ready-to-cook (or RTC) meals; ready-to-eat (or RTE)
meals and meals ready-to-eat (or MRE); chestnut products; and frozen, canned,
and bulk foods, in hundreds of varieties. The Company operates through indirect
Chinese subsidiaries. The products are sold in 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, canned, and bulk food (&#147;FCB food&#148;).</P>
<P align=center>F-7<BR></P>
<P align=justify>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<p></p>
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<p><A name=page_57></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>2.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(a)</I> </TD>
    <TD>
      <P align=justify><I>Method of Accounting</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(b)</I> </TD>
    <TD>
      <P align=justify><I>Principles of consolidation</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>As of December 31, 2008, the detailed identities of the
      consolidating subsidiaries are as follows:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff  >&nbsp;</TD>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left><FONT size=2>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<B><I>Name of Company</I></B>
      </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>&nbsp; <STRONG><EM>Place
      of</EM></STRONG> </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT
      size=2><STRONG><EM>Attributable</EM></STRONG></FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>&nbsp;
      <STRONG><EM>Registered</EM></STRONG></FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2><B><I>incorporation</I></B>
      </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>&nbsp; <STRONG><EM>equity
      interest</EM></STRONG> </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2><B><I>capital</I></B> </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2><B><I>%</I></B> </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><FONT size=2>Shandong Lorain Co., Ltd
      </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>PRC </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>80.2 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>12,901,823
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(RMB
      100,860,000</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left><FONT size=2>Luotian Lorain Co., Ltd </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>PRC </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>100 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" ><FONT size=2>$</FONT></TD>
    <TD align=right width="10%"><FONT size=2>3,240,013 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(RMB 25,328,800</FONT></TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><FONT size=2>Junan Hongrun Foodstuff Co.,
      Ltd </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>PRC </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>100 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>16,245,603
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>(RMB
      127,000,000</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left><FONT size=2>Beijing Lorain Co., Ltd </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>PRC </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>100 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" ><FONT size=2>$</FONT></TD>
    <TD align=right width="10%"><FONT size=2>1,279,181 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(RMB 10,000,000</FONT></TD>
    <TD align=left width="2%" >) </TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(c)</I> </TD>
    <TD>
      <P align=justify><I>Use of estimates</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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
      period. 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</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(d)</I> </TD>
    <TD>
      <P align=justify><I>Economic and political risks</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company&#146;s operations are conducted in the PRC.
      Accordingly, the Company&#146;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.</P></TD></TR></TABLE>
<P style="MARGIN-LEFT: 10%" align=justify>The Company&#146;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&#146;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.</P>
<P align=center>F-8<BR></P>
<P align=justify>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<p></p>
<!--$$/page=-->
<p><A name=page_58></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(e)</I> </TD>
    <TD>
      <P align=justify><I>Lease prepayments</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Lease prepayments represent the cost of land use rights
      in the PRC. Land use rights are carried at cost and amortized on a
      straight-line basis over the period of rights of 50 years.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(f)</I> </TD>
    <TD>
      <P align=justify><I>Property, plant and
equipment</I></P></TD></TR></TABLE>
<P style="MARGIN-LEFT: 10%" align=justify>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: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Buildings </TD>
    <TD align=right width="15%" bgColor=#e6efff>40 years </TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left>Machinery and equipment </TD>
    <TD align=right width="15%">10 years </TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Motor vehicles </TD>
    <TD align=right width="15%" bgColor=#e6efff>10 years </TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left>Office equipment </TD>
    <TD align=right width="15%">5 years </TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(g)</I> </TD>
    <TD>
      <P align=justify><I>Accounting for the Impairment of Long-Lived
      Assets</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The long-lived assets held and used by the Company are
      reviewed for impairment whenever events or changes in circumstances
      indicate that the carrying amount of assets may not be recoverable. It is
      reasonably possible that these assets could become impaired as a result of
      technology or other industry changes. Determination of recoverability of
      assets to be held and used is by comparing the carrying amount of an asset
      to future net undiscounted cash flows to be generated by the
  assets.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(h)</I> </TD>
    <TD>
      <P align=justify><I>Construction in progress</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Construction in progress represents direct costs of
      construction or acquisition and design fees incurred. Capitalization of
      these costs ceases and the construction in progress is transferred to
      plant and equipment when substantially all the activities necessary to
      prepare the assets for their intended use are completed. No depreciation
      is provided until it is completed and ready for intended use.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(i)</I> </TD>
    <TD>
      <P align=justify><I>Investment securities</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company classifies its equity securities into trading
      or available-for-sale. Trading securities are bought and held principally
      for the purpose of selling them in the near term. All securities not
      included in trading securities are classified as
  available-for-sale.</P></TD></TR></TABLE>
<P align=center>F-9<BR></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=-->
<p><A name=page_59></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(j)</I> </TD>
    <TD>
      <P align=justify><I>Inventories</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(k)</I> </TD>
    <TD>
      <P align=justify><I>Trade receivables</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(l)</I> </TD>
    <TD>
      <P align=justify><I>Customer deposits</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Customer deposits were received from customers in
      connection with orders of products to be delivered in future
    periods.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(m)</I> </TD>
    <TD>
      <P align=justify><I>Cash and cash equivalents</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company considers all highly liquid investments
      purchased with original maturities of three months or less to be cash
      equivalents.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(n)</I> </TD>
    <TD>
      <P align=justify><I>Advertising</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>All advertising costs are expensed as incurred.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(o)</I> </TD>
    <TD>
      <P align=justify><I>Shipping and handling</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>All shipping and handling are expensed as
  incurred.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(p)</I> </TD>
    <TD>
      <P align=justify><I>Research and development</I></P></TD></TR></TABLE>
<P style="MARGIN-LEFT: 10%" align=justify>All research and development costs are
expensed as incurred.</P>
<P align=center>F-10<BR></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=-->
<p><A name=page_60></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(q)</I> </TD>
    <TD>
      <P align=justify><I>Retirement benefits</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(r)</I> </TD>
    <TD>
      <P align=justify><I>Income taxes</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company uses the accrual method of accounting to
      determine and report its taxable reduction of income taxes for the year in
      which they are available. The Company has implemented Statement of
      Financial Accounting Standards (SFAS) No. 109, Accounting for Income
      Taxes. Income tax liabilities computed according to the United States and
      People&#146;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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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:
-</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff  >&nbsp;</TD>
    <TD align=center colspan="4"><FONT size=2>&nbsp; <B>Taxable Income</B> </FONT></TD>
    </TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left><FONT size=2><I><U>Rate</U></I> </FONT></TD>
    <TD align=right width="13%"><FONT size=2><I><U>Over</U></I> </FONT></TD>
    <TD align=right width="13%"><FONT size=2><I><U>But Not Over</U></I>
    </FONT></TD>
    <TD align=right width="13%"><FONT size=2><I><U>Of Amount Over</U></I>
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><FONT size=2>15% </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>50,000 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>0 </FONT></TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left><FONT size=2>25% </FONT></TD>
    <TD align=right width="13%"><FONT size=2>50,000 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>75,000 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>50,000 </FONT></TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><FONT size=2>34% </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>75,000 </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>100,000
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>75,000
  </FONT></TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left><FONT size=2>39% </FONT></TD>
    <TD align=right width="13%"><FONT size=2>100,000 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>335,000 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>100,000 </FONT></TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><FONT size=2>34% </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>335,000
</FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>10,000,000
    </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>335,000
  </FONT></TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left><FONT size=2>35% </FONT></TD>
    <TD align=right width="13%"><FONT size=2>10,000,000 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>15,000,000 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>10,000,000 </FONT></TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><FONT size=2>38% </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>15,000,000
    </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>18,333,333
    </FONT></TD>
    <TD align=right width="13%" bgColor=#e6efff><FONT size=2>15,000,000
    </FONT></TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left><FONT size=2>35% </FONT></TD>
    <TD align=right width="13%"><FONT size=2>18,333,333 </FONT></TD>
    <TD align=right width="13%"><FONT size=2>- </FONT></TD>
    <TD align=right width="13%"><FONT size=2>- </FONT></TD></TR></TABLE>
<P style="MARGIN-LEFT: 10%" align=justify>Based on the consolidated net income
for the year ended December 31, 2008, the Company shall not be subject to income
tax.</P>
<P style="MARGIN-LEFT: 10%" align=justify>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.</P>
<P align=center>F-11<BR></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=-->
<p><A name=page_61></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>&nbsp;</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(s)</I> </TD>
    <TD>
      <P align=justify><I>Statutory reserves</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(t)</I> </TD>
    <TD>
      <P align=justify><I>Foreign currency translation</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=center width="15%"><I><U>2008</U></I> </TD>
    <TD align=center width="15%"><I><U>2007</U></I> </TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Year end RMB : US$ exchange rate </TD>
    <TD align=center width="15%" bgColor=#e6efff>6.8542 </TD>
    <TD align=center width="15%" bgColor=#e6efff>7.3141 </TD></TR>
  <TR vAlign=top>
    <TD width="10%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left>Average yearly RMB : US$ exchange rate </TD>
    <TD align=center width="15%">6.9622 </TD>
    <TD align=center width="15%">7.6172 </TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The RMB is not freely convertible into foreign currency
      and all foreign exchange transactions must take place through authorized
      institutions. No representation is made that the RMB amounts could have
      been, or could be, converted into US$ at the rates used in
    translation.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(u)</I> </TD>
    <TD>
      <P align=justify><I>Revenue recognition</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company's revenue consists of invoiced value of
      goods, net of a value-added tax (VAT). No product return or sales discount
      allowance is made as products delivered and accepted by customers are
      normally not returnable and sales discount is normally not granted after
      products are delivered.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(v)</I> </TD>
    <TD>
      <P align=justify><I>Earnings per share</I></P></TD></TR></TABLE>
<P style="MARGIN-LEFT: 10%" align=justify>Basic earnings per share is computed
by dividing net income by the weighted average number of ordinary shares
outstanding during the period. Diluted earnings per share is computed by
dividing net income by the sum of the weighted average number of ordinary shares
outstanding and dilutive potential ordinary shares during the years. During the
years ended 2008 and 2007, no dilutive potential ordinary shares were issued.
</P>
<P align=center>F-12<BR></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=-->
<p><A name=page_62></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company computes earnings per
share (&#147;EPS&#148;) in accordance with Statement of Financial Accounting Standards No. 128, &#147;Earnings per share&#148; (&#147;SFAS
      No. 128&#148;), and SEC Staff Accounting Bulletin No. 98 (&#147;SAB 98&#148;). 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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(w)</I> </TD>
    <TD>
      <P align=justify><I>Commitments and contingencies</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(x)</I> </TD>
    <TD>
      <P align=justify><I>Comprehensive income</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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&#146;s current component of other comprehensive income is the
      foreign currency translation adjustment.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(y)</I> </TD>
    <TD>
      <P align=justify><I>Recent accounting pronouncements</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>In March 2008, the FASB issued SFAS No. 161, "Disclosures
      about Derivative Instruments and Hedging Activities, an amendment of FASB
      Statement No. 133" ("SFAS 161"). SFAS 161 applies to all derivative
      instruments and related hedged items accounted for under SFAS No. 133,
      "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
      133"). SFAS 161 requires entities to provide greater transparency about
      (a) how and why an entity uses derivative instruments, (b) how derivative
      instruments and related hedged items are accounted for under SFAS 133 and
      its related interpretations, and (c) how derivative instruments and
      related hedged items affect an entity's financial position, results of
      operations and cash flows. SFAS 161 is effective for financial statements
      issued for fiscal years and interim periods beginning after November 15,
      2008.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>In May 2008, the FASB issued SFAS No. 162, "The Hierarchy
      of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162
      identifies the sources of accounting principles and the framework for
      selecting the principles used in the preparation of financial statements
      of nongovernmental entities that are presented in conformity with
      generally accepted accounting principles (the GAAP hierarchy). Statement
      162 will become effective 60 days following the SEC's approval of the
      Public Company Accounting Oversight Board amendments to AU Section 411,
      "The Meaning of Present Fairly in Conformity With Generally Accepted
      Accounting Principles."</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>In May 2008, the FASB issued FSP Accounting Principles
      Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May
      Be Settled in Cash upon Conversion (Including Partial Cash Settlement)"
      ("FSP APB 14-1"). FSP APB 14-1 requires the issuer of certain convertible
      debt instruments that may be settled in cash (or other assets) on
      conversion to separately account for the liability (debt) and equity
      (conversion option) components of the instrument in a manner that reflects
the issuer's non-convertible debt borrowing rate. FSP APB 14-1 is effective for
fiscal years beginning after December 15, 2008 on a retroactive basis. </P></TD></TR></TABLE>
<P align=center>F-13<BR></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_63></A>
<P style="MARGIN-LEFT: 10%" align=justify>In September 2008, FASB issued FSP No.
133-1 and FIN 45-4, &#147;Disclosures about Credit Derivatives and Certain
Guarantees&#148;, an amendment of FASB Statement No. 133 and FASB Interpretation No.
45; and Clarification of the Effective Date of FASB Statement No. 161. This FSP
is intended to improve disclosures about credit derivatives by requiring more
information about the potential adverse effects of changes in credit risk on the
financial position, financial performance, and cash flows of the sellers of
credit derivatives. The provisions of the FSP that amend Statement 133 and FIN
45 are effective for reporting periods (annual or interim) ending after November
15, 2008. </P>
<P style="MARGIN-LEFT: 10%" align=justify>This FSP amends FASB Statement No.
133, <I>Accounting for Derivative Instruments and Hedging Activities</I>, to
require disclosures by sellers of credit derivatives, including credit
derivatives embedded in hybrid instruments. This FSP also amends FASB
Interpretation (FIN) No. 45, <I>Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to
Others</I>, to require an additional disclosure about the current status of the
payment/performance risk of a guarantee. The provisions of the FSP that amend
Statement 133 and FIN 45 are effective for reporting periods (annual or interim)
ending after November 15, 2008. </P>
<P style="MARGIN-LEFT: 10%" align=justify>Finally, this FSP clarifies the
effective date in FASB Statement No. 161, <I>Disclosures about Derivative
Instruments and Hedging Activities.</I> The disclosures required by Statement
161 should be provided for any reporting period (annual or quarterly interim)
beginning after November 15, 2008. For example, an entity with a March 31 fiscal
year-end should provide the disclosures for its fourth quarter interim period
ending March 31, 2009, in its 2009 annual financial statements. This
clarification of the effective date of Statement 161 is effective upon issuance
of the FSP. </P>
<P style="MARGIN-LEFT: 10%" align=justify>The Company is currently evaluating
the potential impact, if any, of the adoption of the above recent accounting
pronouncements on its consolidated results of operations and financial
condition. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>3.</B> </TD>
    <TD>
      <P align=justify><B>RESTRICTED CASH</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>4.</B> </TD>
    <TD>
      <P align=justify><B>TRADE ACCOUNTS
RECEIVABLE</B></P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Trade accounts receivable </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;25,421,293 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;33,031,997 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left><I><U>Less</U>: </I>Allowance for doubtful accounts
    </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">(127,967</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">(172,309</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;25,293,326 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;32,859,688 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  </TABLE>
<P align=center>F-14 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=-->
<p><A name=page_64></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff  >&nbsp;</TD>
    <TD align=left>Allowance for Bad Debt: </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Beginning Balance </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;172,309 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;226,881 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left>Additions to Allowance </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;<I><U>Less</U>: </I>Bad
      debt written-off </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">(44,342</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium">(54,572</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;127,967 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1">&nbsp;172,309 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>The Company offers credit terms of
between 30 to 60 days to most of their international distributors as well as
domestic supermarkets and wholesalers, and between 0 to 15 days for most of
their agents. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>5.</B> </TD>
    <TD>
      <P align=justify><B>OTHER RECEIVABLES</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Other receivables consisted of the following as of
      December 31:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Advances to suppliers </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;663,302 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;2,858,351 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right width="5%" bgColor=#ffffff ></TD>
    <TD align=left>Advances to Employees for job/travel disbursements </TD>
    <TD align=right width="1%" ></TD>
    <TD align=right width="12%">3,160,886 </TD>
    <TD align=right width="2%" ></TD>
    <TD align=right width="1%" ></TD>
    <TD align=right width="12%">3,027,007 </TD>
    <TD align=right width="2%" ></TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Amount due by a non-related enterprise </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,278,501 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,063,932 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left>Other non-related receivables </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">5,030 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">451,183 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Business taxes prepayment </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>21,876 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left>Sundry deposits </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">130,627 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;5,107,719 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;7,552,976 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>6.</B> </TD>
    <TD>
      <P align=justify><B>INVENTORIES</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Inventories consisted of the following as of December
      31:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Raw materials </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;9,636,050 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;5,278,484 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left>Work in Process </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,143,766 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">4,828,790 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Finished goods </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>14,048,106 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>7,796,070 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;24,827,922 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;17,903,344 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>7.</B> </TD>
    <TD>
      <P align=justify><B>PROPERTY, PLANT, AND EQUIPMENT</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Property, plant, and equipment consisted of the following
      as of December 31:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>At cost: </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Buildings </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;27,798,849 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;15,547,205 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Landscaping,
      plant, and tree </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2,752,101 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2,784,136 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Machinery and equipment </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">7,229,512 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">5,732,776 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Office equipment
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>859,818 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>28,520 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Motor vehicles </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">39,824 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">658,547 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#ffffff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;38,680,104 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;24,751,184 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P align=center>F-15 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=-->
<p><A name=page_65></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium"><I><U>Less</U>: </I>accumulated depreciation </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=left width="12%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium">&nbsp; &nbsp; &nbsp; &nbsp;Buildings </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">(1,192,855</TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >) </TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="12%">(698,732</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium">&nbsp; &nbsp; &nbsp; &nbsp;Machinery and equipment </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">(2,628,710</TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >) </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">(1,954,257</TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >) </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium">&nbsp; &nbsp; &nbsp; &nbsp;Office equipment </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">(414,478</TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >) </TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="12%">(15,643</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium">&nbsp; &nbsp; &nbsp; &nbsp;Motor vehicles </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="1%" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right
      width="12%" bgcolor="#E6EFFF">(24,992</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%" bgcolor="#E6EFFF"
    >) </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-bottom-style: solid; border-bottom-width: 1">(318,468</TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >) </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">(4,261,035</TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >) </TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-top-style: solid; border-top-width: 1">(2,987,100</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD width="1%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD width="12%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium">Construction in Progress </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="1%" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right
      width="12%" bgcolor="#E6EFFF">5,782,617 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-bottom-style: solid; border-bottom-width: 1">2,258,097 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium"></TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="1%"
    >&nbsp;$</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right
      width="12%">40,201,686 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >$</TD>
    <TD align=right width="12%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;24,022,181 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>Construction in progress mainly
comprises capital expenditures for construction of the Company&#146;s new corporate
campus, including offices, factories and staff dormitories. Capital commitments
for the construction are immaterial for the three years above. </P>
<P style="MARGIN-LEFT: 5%" align=justify>Landscaping, plant and tree is chestnut
trees investment in the development of agricultural operations, which have not
been the significant source of the raw materials needed for the Company&#146;s
operations to date.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>8.</B> </TD>
    <TD>
      <P align=justify><B>LAND USE RIGHTS, NET</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Land use rights consisted of the following as of December
      31<SUP>:</SUP></P></TD></TR></TABLE>
<p>&nbsp;</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#e6efff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Land use rights, <I>at cost</I> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;4,236,266 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;3,173,931 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp;<I><U>Less</U>: </I>Accumulated
      amortization </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">(285,339</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">(126,910</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#e6efff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;3,950,927 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;3,047,021 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>
      &nbsp;</TD></TR>

  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Land use rights represent the prepaid land use right. The
      PRC government owns the land on which the Company&#146;s corporate campus is
      being constructed.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>9.</B> </TD>
    <TD>
      <P align=justify><B>SHORT-TERM DEBTS</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Short-term debts consisted of the following as of
      December 31:</P></TD></TR></TABLE>
<p><BR>
</p>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><u><font size="2"><i>2008</i></font></u></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2"><i><u>2007</u></i></font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2"><i>Loans from Junan County Construction Bank,</i></font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2">&nbsp; <font face="Times New Roman">&nbsp;&#149; </font>
    Interest rate at 6.264% per annum due 8/31/2007 </font></td>
    <td WIDTH="9%" align="right"><font size="2">$</font></td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
    <td WIDTH="10%" align="right"><font size="2">$</font></td>
    <td WIDTH="10%" align="right"><font size="2">410.167</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2">&nbsp; <font face="Times New Roman">&nbsp;&#149; </font>
    Interest rate at 6.264% per annum due 9/7/2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">343,173</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2">&nbsp; <font face="Times New Roman">&nbsp;&#149; </font>
    Interest rate at 7.776% per annum due 12/18/2007</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">261,139</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2">&nbsp; <font face="Times New Roman">&nbsp;&#149; </font>
    Interest rate at 7.776% per annum due 12/18/2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">355,478</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2">&nbsp; <font face="Times New Roman">&nbsp;&#149; </font>
    Interest rate at 8.541% per annum due 3/5/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">355,478</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2">&nbsp; <font face="Times New Roman">&nbsp;&#149; </font>
    Interest rate at 8.892% per annum due 7/23/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">328,133</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2">&nbsp; <font face="Times New Roman">&nbsp;&#149; </font>
    Interest rate at 6.314% per annum due 9/17/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">256,696</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2">&nbsp; <font face="Times New Roman">&nbsp;&#149; </font>
    Interest rate at 6.264% per annum due between 1/10/2007 and 9/7/2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="38%"><font size="2">&nbsp; <font face="Times New Roman">&nbsp;&#149; </font>
    Interest rate at 7.452% per annum due 2/24/2009 </font></td>
    <td WIDTH="9%">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">102,127</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="38%" bgcolor="#E6EFFF"><font size="2">&nbsp; <font face="Times New Roman">&nbsp;&#149; </font>
    Interest rate at 10.452% per annum due 1/22/2009 </font></td>
    <td WIDTH="9%" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" bgcolor="#E6EFFF" align="right"><font size="2">1,575,676</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="38%"><font size="2">&nbsp; <font face="Times New Roman">&nbsp;&#149; </font>
    Interest rate at 7.236% per annum due 2/3/2009 </font></td>
    <td WIDTH="9%">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">116,717</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
  </tr>
</table>
<P align=center>F-16 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_66></A>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0">
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2"><i>Loan from Junan
    County Agriculture Bank,</i></font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 10.251% per annum due 1/11/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">231,061</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 10.557% per annum due 1/11/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">345,907</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 11.016% per annum due 2/21/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">191,411</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><u><font FACE="Times New Roman" size="2"><i>
    2008</i></font></u></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2"><i><u>
    2007</u></i></font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 11.169% per annum due 6/7/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">123,050</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 11.169% per annum due 6/7/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">41,017</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 11.169% per annum due 6/29/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">347,274</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 11.169% per annum due 6/29/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">109,378</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 11.169% per annum due 7/3/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">505,872</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 7.884% per annum due 7/18/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">273,444</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 11.628% per annum due 7/25/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">191,411</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 11.628% per annum due 8/1/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">82,033</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 12.393% per annum due 10/30/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">410,167</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 12.393% per annum due 11/11/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">239,264</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 12.393% per annum due 11/14/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">205,083</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 12.393% per annum due 11/14/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">199,614</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 12.393% per annum due 11/22/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">410,167</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 12.393% per annum due 11/29/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">287,117</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 12.393% per annum due 12/4/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">410,167</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 12.393% per annum due 12/13/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">410,167</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 7.65% to 10.404% per annum due between 1/10/2007 and
    12/5/2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="33%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at
    12.699% per annum due 8/6/2009 </font></td>
    <td WIDTH="9%">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2" FACE="Times New Roman">583,584</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 12.699% per annum due 8/18/2009 </font></td>
    <td WIDTH="9%" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" bgcolor="#E6EFFF" align="right"><font size="2" FACE="Times New Roman">
    656,532</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="33%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at
    12.699% per annum due 8/18/2009 </font></td>
    <td WIDTH="9%">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">364,740</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="33%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 10.577% per annum due 3/27/2009 </font></td>
    <td WIDTH="9%" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" bgcolor="#E6EFFF" align="right"><font size="2" FACE="Times New Roman">
    1,458,959</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%"><font FACE="Times New Roman" size="2"><i>Loan from Junan
    County Industrial and Commercial Bank,</i></font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 6.120% per annum due 1/11/2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">546,889</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 8.424% per annum due 3/7/2007</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">806,661</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 6.120% per annum due 11/10/2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">136,722</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 8.073% per annum due 12/7/2007</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">
    1,278,353</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 7.956% per annum due 1/18/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">478,528</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 7.956% per annum due 1/18/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">546,889</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 6.9545% per annum due 2/8/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">604,299</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 6.570% per annum due 2/8/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">546,889</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 7.956% per annum due 3/5//2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">
    1,367,222</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 8.892% per annum due 3/7/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">410,167</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 6.12% per annum due 6/30/2008</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">706,766</font></td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 7.290% per annum due 6/30/2008</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font FACE="Times New Roman" size="2">232,428</font></td>
  </tr>
</table>
<P align=center>F-17</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_67></A>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0">
  <tr>
    <td WIDTH="39%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 3.5% to 6.12% per annum due between 1/11/2007 and 12/10/2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">-</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 6.120% per annum due 1/10/2009 </font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">145,896</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 8.541% per annum due 3/4/2009 </font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">393,919</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 3.1725% per annum due 2/19/2009 </font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">240,035</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 3.1725% per annum due 2/19/2009 </font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">118,161</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 10.1825% per annum due 2/26/2009</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">&nbsp;120,762</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2"><i>2008</i></font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2"><i>2007</i></font></td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 10.1825% per annum due 3/5/2009 </font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">173,670</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2"><i>Loan from Junan County Merchants Bank,</i></font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 6.210% per annum due 3/13/2008 -</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">1,367,222</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2"><i>Loan from Junan County Agricultural
    Financial Institution,</i></font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 9.750% per annum due 5/20/2008 </font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">-</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">25,977</font></td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 12.420% per annum due 6/20/2008 </font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">-</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">68,361</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 10.935% per annum due 10/1/2008 </font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">-</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">2,597,722</font></td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 9.765% per annum due between 1/13/2007 and 5/22/2007</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">-</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 9.765% per annum  due between 1/13/2007 and 5/22/2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">-</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2"><i>Loan from Linyi Commercial Bank,</i></font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 10.71% per annum due 2/6/2008 </font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">-</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">615,250</font></td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 10.71% per annum due 2/9/2008 </font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">-</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">497,221</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 13.73% per annum due </font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">-</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">136,722</font></td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 9.765% to 10.4715% per annum  due between 1/9/2007 and 11/29/2007</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">-</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 13.073% per annum due 1/5/2009 </font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">685,711</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 13.073% per annum due 1/5/2009 </font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">656,532</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 8.539% per annum due 3/27/2009 </font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">1,458,959</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 8.539% per annum due 3/27/2009 </font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">141,885</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2"><i>Loan from Junan Agricultural Development
    Bank,</i></font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 7.290% per annum due 9/26/2008 </font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">-</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">1,367,222</font></td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rates
    at 5.3625% to 6.435% per annum due between 7/19/2007 and 9/4/2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">-</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2"><i>Loan from Beijing Miyun County Shilipu
    Rural Financial Institution,</i></font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="39%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rates
    at 7.56% to 9.18% per annum  due between 3/30/2007 and 5/27/2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">-</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rates
    at 8.539% per annum due 9/30/2009 </font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">2,772,023</font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2"><i>Loan from China Agricultural Bank, Miyun</i></font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="39%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rate
    at 7.02% per annum due 7/18/2007 </font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">-</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
</table>
<P align=center>F-18</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black noShade SIZE=5>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111" height="590">
  <tr>
    <td WIDTH="61%" height="19">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2"><i>Loan
    from China Agricultural Bank, Luotian Branch</i></font></td>
    <td WIDTH="9%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="45%" height="19"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 7.722% per annum due 8/30/2008</font></td>
    <td WIDTH="9%" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">
    <font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">
    <font FACE="Times New Roman" size="2">1,039,089</font></td>
  </tr>
  <tr>
    <td WIDTH="45%" height="19" bgcolor="#E6EFFF">
    <font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rates at 7.605% to 7.95% per due 6/30/2007 and 9/5/2007</font></td>
    <td WIDTH="9%" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">
    <font FACE="Times New Roman" size="2"><i><u>2008</u></i></font></td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">
    <font FACE="Times New Roman" size="2"><i><u>2007</u></i></font></td>
  </tr>
  <tr>
    <td WIDTH="36%" height="19"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 7.47% per annum due 9/7/2009 </font></td>
    <td WIDTH="9%" height="19">&nbsp;</td>
    <td WIDTH="10%" height="19" align="right"><font FACE="Times New Roman" size="2">
    817,017</font></td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">
    <font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="36%" height="19" bgcolor="#E6EFFF">
    <font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 7.47% per annum
    due 9/7/2009 </font></td>
    <td WIDTH="9%" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" height="19" bgcolor="#E6EFFF" align="right">
    <font size="2" FACE="Times New Roman">291,792</font></td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19"><font FACE="Times New Roman" size="2"><i>Bank of
    Beijing</i></font></td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="36%" height="20" bgcolor="#E6EFFF">
    <font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 7.722% per annum
    due 7/28/2009 </font></td>
    <td WIDTH="9%" height="20" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" height="20" bgcolor="#E6EFFF" align="right">
    <font size="2" FACE="Times New Roman">291,792</font></td>
    <td WIDTH="10%" align="right" height="20" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="20" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19"><font FACE="Times New Roman" size="2"><i>Bank of
    China, Junan Branch,</i></font></td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="36%" height="19" bgcolor="#E6EFFF">
    <font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 7.500% per annum
    due 5/19/2009 </font></td>
    <td WIDTH="9%" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" height="19" bgcolor="#E6EFFF" align="right">
    <font size="2" FACE="Times New Roman">4,014</font></td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">9,815</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19"><font FACE="Times New Roman" size="2"><i>United
    Commercial Bank, China Branch</i></font></td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="36%" height="19" bgcolor="#E6EFFF">
    <font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 5.494% per annum
    due 1/14/2009 </font></td>
    <td WIDTH="9%" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" height="19" bgcolor="#E6EFFF" align="right">
    <font size="2" FACE="Times New Roman">1,156,955</font></td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19"><font FACE="Times New Roman" size="2"><i>
    International Trust Co., Ltd.,</i></font></td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="45%" height="19" bgcolor="#E6EFFF">
    <font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 7.839% per annum due 5/19/2009</font></td>
    <td WIDTH="9%" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">1,367,222</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19"><font FACE="Times New Roman" size="2"><i>Credit
    Union, Junan</i></font></td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="36%" height="19" bgcolor="#E6EFFF">
    <font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rate at 8.5837% per annum
    due 1/7/2009 </font></td>
    <td WIDTH="9%" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" height="19" bgcolor="#E6EFFF" align="right">
    <font size="2" FACE="Times New Roman">43,769</font></td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="36%" height="19"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 8.5837% per annum due 1/12/2009 </font></td>
    <td WIDTH="9%" height="19">&nbsp;</td>
    <td WIDTH="10%" height="19" align="right"><font FACE="Times New Roman" size="2">
    43,769</font></td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">
    <font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2"><i>
    International Trust and Investment Co., Ltd.</i></font></td>
    <td WIDTH="9%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="45%" height="19"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rate at 0.67% per annum due 6/13/2008</font></td>
    <td WIDTH="9%" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" style="border-bottom-style: solid; border-bottom-width: 1">
    <font FACE="Times New Roman" size="2">-</font></td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" style="border-bottom-style: solid; border-bottom-width: 1">
    <font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">$</font></td>
    <td WIDTH="10%" align="right" height="19" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">14,414,996</font></td>
    <td WIDTH="10%" align="right" height="19" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">$</font></td>
    <td WIDTH="10%" align="right" height="19" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">24,077,504</font></td>
  </tr>
  <tr>
    <td WIDTH="61%" height="19">&nbsp;</td>
    <td WIDTH="9%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" style="border-top-style: solid; border-top-width: 1">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19">&nbsp;</td>
    <td WIDTH="10%" align="right" height="19" style="border-top-style: solid; border-top-width: 1">&nbsp;</td>
  </tr>
</table>
<!--$$/page=-->
<P align=justify>The short-term loans, which are denominated in the functional
currency Renminbi (RMB), were primarily obtained for general working capital.
</P>
<P align=justify>All overdue loans were extended by its financial institution.
</P>
<P align=justify><B>10.</B> <B>NOTES PAYABLE</B><BR></P>
<P align=justify>Notes payable consisted of the following as of December 31:</P>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2"><i><u>2008</u></i></font></td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2"><i><u>2007</u></i></font></td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%" bgcolor="#E6EFFF"><font size="2"><i>Notes to Industrial and Commercial Bank,</i></font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="41%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Bank
    commission charge at 3.99% due December 20, 2007</font></td>
    <td WIDTH="9%" align="right"><font size="2">$</font></td>
    <td WIDTH="10%" align="right">-</td>
    <td WIDTH="10%" align="right"><font size="2">$</font></td>
    <td WIDTH="10%" align="right"><font size="2">546,889</font></td>
  </tr>
  <tr>
    <td WIDTH="41%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Bank
    commission charge at 3.99% due December 12, 2007</font></td>
    <td WIDTH="9%" bgcolor="#E6EFFF" align="right">&nbsp;</td>
    <td WIDTH="10%" bgcolor="#E6EFFF" align="right">-</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">1,093,778</font></td>
  </tr>
  <tr>
    <td WIDTH="41%"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Bank
    commission charge at 3.99% due December 18, 2007</font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">-</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right"><font size="2">1,093,778</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
</table>
<P align=center>F-19</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_69></A>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="47%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="47%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Bank
    commission charge at 3.744% due June 1, 2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">-</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2"><i>Notes to Linyi Commercial Bank,</i></font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="47%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Bank
    commission charge at 2.85%, due May 20, 2007</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">-</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2"><i>Notes to Junan County Construction Bank,</i></font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="47%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Bank
    commission charge at 4%, due 1/12/2009</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">554,405</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="61%"><font size="2"><i>Notes to Junan County Agriculture Bank,</i></font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="47%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Bank
    commission charge at 4%, due 1/16/2009</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">277,202</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF"><font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="55%"><font size="2"><i>Loan to Jinan Branch, Shenzhen Development
    Bank,</i></font></td>
    <td WIDTH="9%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
    <td WIDTH="10%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="47%" bgcolor="#E6EFFF"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Bank charge
    commission charge at 3.96%, due 2/6/2009</font></td>
    <td WIDTH="9%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E6EFFF">
    <font size="2">4,376,878</font></td>
    <td WIDTH="10%" align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="10%" align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E6EFFF">
    <font size="2">-</font></td>
  </tr>
  <tr>
    <td WIDTH="61%">&nbsp;</td>
    <td WIDTH="9%" align="right"><font size="2">
    <p align="right">$</font></td>
    <td WIDTH="10%" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">5,208,485</font></td>
    <td WIDTH="10%" align="right"><font size="2">$</font></td>
    <td WIDTH="10%" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">2,734,444</font></td>
  </tr>
</table>
<P style="MARGIN-LEFT: 5%" align=justify>All overdue notes were extended by its
financial institution. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>11.</B> </TD>
    <TD>
      <P align=justify><B>ACCRUED EXPENSES AND OTHER PAYABLE</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Accrued expenses and other payables consisted of the
      following as of December 31:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#e6efff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Accrued salaries and wages </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;605,471 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;302,356 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Accrued utility expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">481,678 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">515,092 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#e6efff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Accrued interest expenses </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Accrued transportation expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,103,112 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">371,839 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#e6efff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Other accruals </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2,848,985 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Business and other taxes </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,979,650 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#e6efff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Purchases disbursements payables </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>6,018,057 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>12,359,109 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Interest Payable </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: none; border-bottom-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: none; border-bottom-width: medium">180,696 </TD>
    <TD align=left width="2%" style="border-bottom-style: none; border-bottom-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#e6efff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Accrued staff welfare </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>103,269 </TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=right width="12%"
    bgColor=#e6efff>206,031 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" style="border-top-style: none; border-top-width: medium" >&nbsp;</TD>
    <TD width="12%" style="border-top-style: none; border-top-width: medium">&nbsp; </TD>
    <TD width="2%" style="border-top-style: none; border-top-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgColor=#e6efff >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: double; border-bottom-width: 3">&nbsp;10,291,237 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-bottom-style: double; border-bottom-width: 3">16,784,108 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  </TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>12.</B> </TD>
    <TD>
      <P align=justify><B>LONG-TERM DEBTS</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Long-term debts consisted of the following as of December
      31:</P></TD></TR></TABLE>
<p><BR>
</p>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111" height="53">
  <tr>
    <td height="19" width="60%">&nbsp;</td>
    <td align="right" height="19">&nbsp;</td>
    <td align="right" height="19"><font size="2"><i>2008</i></font></td>
    <td align="right" height="19">&nbsp;</td>
    <td align="right" height="19"><font size="2"><i>2007</i></font></td>
  </tr>
  <tr>
    <td height="19" width="60%" bgcolor="#E6EFFF"><font size="2"><i>Loan from Bank of China, Junan
    Branch,</i></font></td>
    <td align="right" height="19" width="10%" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" height="19" width="10%" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" height="19" width="10%" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" height="19" width="10%" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td height="15"><font size="2">&nbsp; </font>
    <font FACE="Times New Roman" size="2">&nbsp;&#149; </font><font size="2">Interest rates
    at 0.67% per annum due </font><font FACE="Times New Roman" size="2">
    5/19/2009</font></td>
    <td height="15" align="right"><font size="2">$</font></td>
    <td align="right" height="15"><font size="2">-</font></td>
    <td align="right" height="15"><font size="2">$</font></td>
    <td align="right" height="15"><font size="2">-</font></td>
  </tr>
</table>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td width="60%" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td width="60%" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2"><i>Loan from
    Agricultural Development Luotian Government,</i></font></td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td width="60%"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rates at 0.67% per annum due - 12/11/2010</font></td>
    <td width="10%">&nbsp;</td>
    <td width="10%">&nbsp;</td>
    <td align="right" width="10%">&nbsp;</td>
    <td align="right" width="10%"><font FACE="Times New Roman" size="2">102,542</font></td>
  </tr>
  <tr>
    <td width="60%" bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp;
    &#149; Interest rates at 2.10% per annum due 12/11/2011</font></td>
    <td bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">25,532</font></td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td width="60%">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr>
    <td width="60%"><font FACE="Times New Roman" size="2"><i>Loan from United
    Commercial Bank, China Branch</i></font></td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#E6EFFF"><font size="2" FACE="Times New Roman">&nbsp;&nbsp; &#149; Interest rates at 5.494% per annum due 1/14/2011</font></td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">551,443</font></td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr>
    <td><font FACE="Times New Roman" size="2"><i><b><u>Less</u></b></i>: Current
    maturities of long-term debts</font></td>
    <td align="right">&nbsp;</td>
    <td align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font FACE="Times New Roman" size="2">-</font></td>
    <td align="right">&nbsp;</td>
    <td align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font FACE="Times New Roman" size="2">-</font></td>
  </tr>
  <tr>
    <td bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" style="border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#E6EFFF">&nbsp;</td>
    <td align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">$</font></td>
    <td align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">576,975</font></td>
    <td align="right" bgcolor="#E6EFFF"><font FACE="Times New Roman" size="2">$</font></td>
    <td align="right" style="border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" size="2">&nbsp;102,542</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right" style="border-top-style: solid; border-top-width: 1">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right" style="border-top-style: solid; border-top-width: 1">&nbsp;</td>
  </tr>
</table>
<P align=center>F-20 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=-->
<p><A name=page_70></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>13.</B> </TD>
    <TD>
      <P align=justify><B>MINORITY INTERESTS</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>This represents the 19.8% equity of Shangdong Lorain held
      by a state-owned interest, Shandong Economic Development Investment
      Corporation.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>14.</B> </TD>
    <TD>
      <P align=justify><B>CAPITALIZATION</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Dating back to May 3, 2007, the Company underwent a
      reverse-merger and a concurrent financing transaction that resulted in
      24,923,178 shares of outstanding common stock that remained unchanged
      until through December 31, 2007. During the course of 2008, several
      holders of warrants issued in connection with the financing transaction
      exercised their rights to purchase shares at the prescribed exercise
      price. The holders of the warrants exercised the right to purchase a total
      of 360,207; however, because the holders did not pay in cash for the
      warrants, 110,752 of those shares were cancelled as consideration in lieu
      of the warrant holders paying in cash. Ultimately, 249,455 of new shares
      were issued to those who exercised their warrant. The Company also made an
      adjustment to it outstanding share count for rounding errors as result of
      the split and reverse splits made at the time of the reverse merger. The
      number of shares in the adjustment was an addition of seven shares. The
      Company believes the adjustment of seven shares is immaterial to both
      prior and current earnings per share calculation. As detailed in the table
      below, the total number of outstanding shares at December 31, 2008 was
      25,172,640.</P></TD></TR></TABLE>
<p><BR>
</p>
<P align=center>F-21 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_71></A>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="10%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=left width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><B>Additional</B> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium"><B>Number of</B> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><B>Common Stock</B> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><B>Paid-in</B> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=left><B>Type of
      Shares</B> </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right
      width="10%"><B>Shares</B> </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%"><B>Capital</B> </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="10%"><B>Capital</B> </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=right width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium"></TD>
    <TD align=right width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=left width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=left width="10%" style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF" width="687" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">Free Trading Shares </TD>
    <TD align=left width="12" bgcolor="#E6EFFF" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="123" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">8,406,244 </TD>
    <TD align=left width="24" bgcolor="#E6EFFF" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium">$</TD>
    <TD align=right width="123" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium">&nbsp;8,406 </TD>
    <TD align=left width="24" bgcolor="#E6EFFF" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium">$</TD>
    <TD align=right width="123" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium">&nbsp;17,340,648 </TD>
    <TD align=left width="24" bgcolor="#E6EFFF" style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="687" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">Restricted Shares </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right
      width="123">16,766,396 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium" align=left
    width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="123">16,766 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium" align=left
    width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="123">6,846,371 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF" width="687" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="12" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right
      width="123" bgcolor="#E6EFFF">25,172,640 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="24" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-left-style:none; border-left-width:medium" align=left width="12" bgcolor="#E6EFFF">$</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="123" bgcolor="#E6EFFF">&nbsp;25,172 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="24" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-left-style:none; border-left-width:medium" align=left width="12" bgcolor="#E6EFFF">$</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-right-style:none; border-right-width:medium" align=right
      width="123" bgcolor="#E6EFFF">&nbsp;24,187,019 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="24" bgcolor="#E6EFFF">&nbsp;</TD></TR></TABLE>
<p>
<BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>15.</B> </TD>
    <TD>
      <P align=justify><B>INCOME TAXES</B></P></TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>All of the Group&#146;s income before income
taxes and related tax expenses are from PRC sources. In accordance with the
relevant tax laws and regulations of PRC, the corporation income tax rate is
33%. However, also in accordance with the relevant taxation laws in the PRC,
some of the subsidiaries of the Group are eligible for tax exemption. In
particular, from the time that a company has its first profitable tax year, the
company is exempt from corporate income tax for its first two year and is then
entitled to a 50% tax reduction for the succeeding three year. Actual income tax
expenses reported in the consolidated statements of income and comprehensive
income differ from the amounts computed by applying the PRC statutory income tax
rate of 33% to income before income tax for the period from August 4, 2006 (date
of incorporation) to December 31, 2008 for the following reasons: - </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" ><I><U>2008</U></I> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" ><I><U>2007</U></I> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium" bgcolor="#E6EFFF">Income before tax </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">$</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" bgcolor="#E6EFFF" >&nbsp;18,680,832 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">$</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" bgcolor="#E6EFFF" >&nbsp;12,595,196 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD width="2%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" >&nbsp; </TD>
    <TD width="2%" style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium">Tax at the income tax rate </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" >4,670,208 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" >3,778,559 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium" bgcolor="#E6EFFF">Effect of tax exemption granted </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="1%" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="12%" bgcolor="#E6EFFF"
    >(1,666,943</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%" bgcolor="#E6EFFF">) </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-bottom-style: solid; border-bottom-width: 1" bgcolor="#E6EFFF" >(1,643,643</TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">) </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium">Income tax </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="1%">$</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="12%"
    >&nbsp;3,003,265 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="2%">&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium">$</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;2,134,916 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD width="2%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1" >&nbsp; </TD>
    <TD width="2%" style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium">&nbsp;<I><U>Per Share Effect of Tax Exemption</U></I> </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" >&nbsp; </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" ><I><U>2008</U></I> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" ><I><U>2007</U></I> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium" bgcolor="#E6EFFF">&nbsp;Effect of tax exemption granted </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">$</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" bgcolor="#E6EFFF" >1,666,943 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">&nbsp;$</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" bgcolor="#E6EFFF" >1,643,643 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD style="border-right-style: none; border-right-width: medium">&nbsp; </TD>
    <TD width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD width="2%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium" >&nbsp; </TD>
    <TD width="2%" style="border-style: none; border-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium">&nbsp;Weighted-Average Shares Outstanding </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="12%"
    >25,172,640 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="12%"
    >24,923,178 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left style="border-right-style: none; border-right-width: medium" bgcolor="#E6EFFF">&nbsp;Per share effect </TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">$</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-bottom-style: double; border-bottom-width: 3" bgcolor="#E6EFFF" >0.0662 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="1%" bgcolor="#E6EFFF">&nbsp;$</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="12%" bgcolor="#E6EFFF"
    >0.0659 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
    width="2%" bgcolor="#E6EFFF">&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>Effective January 1, 2008, PRC
government implements a new 25% tax rate across the board for all enterprises
regardless of whether domestic or foreign enterprise without any tax holiday
which is defined as &#147;two-year exemption followed by three-year half exemption&#148;
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.</P>
<P style="MARGIN-LEFT: 5%" align=justify>Based on the background of each
constituent of our group, the income tax rates applicable to the four
constituents for 2007, 2008 and 2009 are depicted in the following table.</P>
<P align=center>F-22 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_72></A>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD></TR>

  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Income Tax Rate </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%"><I><U>2007</U></I> </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%"><I><U>2009</U></I> </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">Junan Hongran </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">15% </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">15% </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF">&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">25% </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF">&nbsp;</TD></TR>
  </TABLE>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>Luotian Lorain </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">0% </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">15% </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">15% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">Beijing Lorain </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">0% </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">0% </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF">15% </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Shangdong Lorain </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">30% </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">25% </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">25% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>16.</B> </TD>
    <TD>
      <P align=justify><B>SALES BY PRODUCT TYPE</B></P></TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>Sales by categories of product
consisted of the following as of December 31:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<I><U>Category</U></I> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">Chestnut </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >$</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">&nbsp;83,027,719 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >$</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">&nbsp;45,799,404 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Convenience food </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">25,736,534 </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">15,288,515 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">FCB food </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-bottom-style: solid; border-bottom-width: 1">23,596,064 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="1%" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right
      width="12%" bgcolor="#E6EFFF">21,007,044 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%" bgcolor="#E6EFFF"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left><B>Total</B> </TD>
    <TD align=left width="1%" ><B>$</B></TD>
    <TD align=right width="12%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><B>&nbsp;132,360,317</B> </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="1%"
    ><B>$</B></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right
      width="12%"><B>&nbsp;82,094,963</B> </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>Revenue by geography consisted of the
following as of December 31:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left><I><U>Country</U></I> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>2008</U></I> </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium"><I><U>2007</U></I> </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">Australia </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >$</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">&nbsp;- </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >$</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">&nbsp;18,710 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Belgium </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,893,467 </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">2,040,636 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">Canada </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">- </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">14,112 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>China </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">91,442,654 </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">48,566,474 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">France </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">1,579,449 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">284,101 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Germany </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">722,436 </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">44,527 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">Holland </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">346,140 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">586,379 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Hong Kong </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">189,790 </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">71,860 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">Japan </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">21,764,764 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">17,077,937 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Kuwait </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">364,893 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">Malaysia </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">1,395,654 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">1,569,794 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Mexico </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">- </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">Saudi Arabia </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">32,961 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">684,321 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Singapore </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,054,239 </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">2,442,038 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">South Korea </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">8,338,475 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">5,174,079 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Taiwan </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">331,723 </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">57,819 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">United Arab Emirates </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">- </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">239,565 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>United Kingdom </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2,775,230 </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">1,793,707 </TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF">United States of America </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">493,335 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium">1,064,011 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Other </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%" style="border-bottom-style: solid; border-bottom-width: 1">- </TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right width="12%">- </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left bgcolor="#E6EFFF"><B>Total</B> </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" ><B>$</B></TD>
    <TD align=right width="12%" bgcolor="#E6EFFF" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3"><B>&nbsp;132,360,317</B> </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="1%" bgcolor="#E6EFFF"
    >$</TD>
    <TD style="BORDER-BOTTOM: 3px double #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" align=right
      width="12%" bgcolor="#E6EFFF">&nbsp;<B>82,094,963</B> </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="2%" bgcolor="#E6EFFF"
    >&nbsp;</TD></TR></TABLE>
<P align=center>F-23<BR></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>




<A name="page_92"></A>

<P align="center">
<B><U>American Lorain Corporation</U></B><BR>
</P>
<TABLE style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0"><TR valign="top">
	<TD align=left>
<B><U>CONTENTS</U></B>
	</TD>
	<TD width=15% align=left>
 <p align="center"><B><U>PAGES</U></B>
	</TD>
</TR>
<TR valign="top">
	<TD align=left>
&nbsp;</TD>
	<TD width=15% align=left>
&nbsp;</TD>
</TR>
<TR valign="top">
	<TD align=left bgcolor="#E6EFFF">
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
	</TD>
	<TD width=15% align=center bgcolor="#E6EFFF">
F-25
	</TD>
</TR>
<TR valign="top">
	<TD align=left>
CONSOLIDATED BALANCE SHEETS
	</TD>
	<TD width=15% align=center>
F-26&#150;F-27
	</TD>
</TR>
<TR valign="top">
	<TD align=left bgcolor="#E6EFFF">
CONSOLIDATED STATEMENTS OF INCOME
	</TD>
	<TD width=15% align=center bgcolor="#E6EFFF">
F-28
	</TD>
</TR>
<TR valign="top">
	<TD align=left>
CONSOLIDATED STATEMENTS OF CASH FLOWS
	</TD>
	<TD width=15% align=center>
F-29
	</TD>
</TR>
<TR valign="top">
	<TD align=left bgcolor="#E6EFFF">
CONSOLIDATED STATEMENTS OF STOCKHOLDER&#146;S EQUITY
	</TD>
	<TD width=15% align=center bgcolor="#E6EFFF">
F-30
	</TD>
</TR>
<TR valign="top">
	<TD align=left>
NOTES TO FINANCIAL STATEMENTS
	</TD>
	<TD width=15% align=center>
F-31-F-48
	</TD>
</TR>
</TABLE>
<P align="center">
F-24<BR>
</P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">




<A name="page_93"></A>

<P align="justify">
<B>REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM</B></P>
<TABLE style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0"><TR valign="top">
	<TD align=left width="5%">
To:
	</TD>
	<TD align=left>
The Board of Directors and Stockholders of American Lorain Corporation
	</TD>
</TR>
</TABLE>
<P align="justify">
We have reviewed the accompanying interim consolidated balance sheets of
American Lorain Corporation (the &#147;Company&#148;) as of September 30, 2009 and
December 31, 2008, and the related statements of income, stockholders&#146; equity,
and cash flows for the three-month and nine-month periods ended September 30,
2009 and 2008. These interim consolidated financial statements are the
responsibility of the Company's management. </P>
<P align="justify">
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion. </P>
<P align="justify">
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim consolidated financial statements for them
to be in conformity with U.S. generally accepted accounting principles. </P>
<TABLE style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0"><TR valign="top">
	<TD align=left width="700">
South San Francisco, California
	</TD>
	<TD width=701 align=left>
Samuel H. Wong &amp; Co., LLP
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="700">
November 2, 2009
	</TD>
	<TD width=701 align=left>
Certified Public Accountants
	</TD>
</TR>
</TABLE>
<P align="center">
F-25</P>
<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>CONSOLIDATED BALANCE SHEETS
<BR>AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(Stated in US
Dollars) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><I><U>(Audited)</U></I> </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%"><U>Note</U> </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><I><U>12/31/2008</U></I> </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>ASSETS</B> </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Current Assets </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Cash and cash
      equivalents </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;4,161,802 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;2,841,339 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Restricted cash </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">3 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">1,008,007 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">3,715,998 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;&nbsp; Short-term
      investment </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>51,919 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>113,069 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Trade accounts receivable </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">4 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">17,745,011 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">25,293,326 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Other
      receivables </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>5 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>4,402,879 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>5,107,719 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Inventory </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">6 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">35,606,922 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">24,827,922 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Advance to
      suppliers </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>7 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>12,528,032 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>415,009 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Prepaid expenses and taxes </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">1,077,904 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">1,228,648 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left
      bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      current assets </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;76,582,476 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;63,543,030 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD><BR>Property, plant and equipment, <I>net</I> </TD>
    <TD width="1%"><BR></TD>
    <TD align=center width="10%"><BR>8 </TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR>40,667,653 </TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR>40,201,686 </TD>
    <TD width="2%"><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left
      bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Land use rights,
      <I>net</I> </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>9 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>3,918,315 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>3,950,927 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets
      &amp; goodwill </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">2,047
    </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">- </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff><BR><B>TOTAL ASSETS</B> </TD>
    <TD width="1%" bgColor=#e6efff><BR></TD>
    <TD align=center width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
      bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR>121,170,491 </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
      bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR>107,695,643 </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD></TR>
  <TR>
    <TD><BR><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B> </TD>
    <TD width="1%"><BR></TD>
    <TD align=center width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp;Current liabilities </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Short-term bank loans </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">10 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;34,588,160 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;14,414,996 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Long-term bank
      loans current portion </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>83,000 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Notes payable </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">11 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">5,208,485 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Accounts payable
    </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>2,417,468 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>6,072,883 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Taxes payable </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">1,413,194 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">2,682,658 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Accrued
      liabilities and other payables </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>12 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>4,788,869 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>10,291,237 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Customers deposits </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">78,836 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">748,732 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD
      bgColor=#e6efff><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      Current Liabilities </TD>
    <TD width="1%" bgColor=#e6efff><BR></TD>
    <TD align=center width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
      bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff><BR>43,369,527 </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
      bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff><BR>39,418,991 </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD></TR>
  <TR>
    <TD><BR>&nbsp;&nbsp;&nbsp;Long Term Liabilities </TD>
    <TD width="1%"><BR></TD>
    <TD align=center width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left
      bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long term bank
      loans </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>13 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>321,544 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>576,975 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD><BR><B>TOTAL LIABILITIES</B> </TD>
    <TD width="1%"><BR></TD>
    <TD align=center width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>43,691,071 </TD>
    <TD width="2%"><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>39,995,966 </TD>
    <TD width="2%"><BR></TD></TR></TABLE>
<P align=center><B>See Accompanying Notes to the Financial Statements and
Accountant&#146;s Report </B></P>
<P align="center">
F-26</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_6></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>CONSOLIDATED BALANCE SHEETS
<BR>AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(Stated in US
Dollars) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%"><I><U>(Audited)</U></I> </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%"><U>Note</U> </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%"><I><U>9/30/2009</U></I> </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%"><I><U>12/31/2008</U></I> </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>STOCKHOLDERS&#146; EQUITY</B> </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp; Common stock, $0.001 par value,
      200,000,000
      shares&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;authorized;
      25,177,640 and 25,172,640 shares issued
      and&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outstanding as of
      September 30, 2009 and December
      31,&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2008, respectively
    </TD>
    <TD align=left width="1%"><BR><BR><BR></TD>
    <TD align=center width="10%"><BR><BR><BR>15 </TD>
    <TD align=left width="2%"><BR><BR><BR></TD>
    <TD align=left width="1%"><BR><BR><BR></TD>
    <TD align=right width="10%"><BR><BR><BR>25,177 </TD>
    <TD align=left width="2%"><BR><BR><BR></TD>
    <TD align=left width="1%"><BR><BR><BR></TD>
    <TD align=right width="10%"><BR><BR><BR>25,172 </TD>
    <TD align=left width="2%"><BR><BR><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp; Additional paid-in
      capital </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>24,273,650 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>24,187,019 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp; Statutory reserves </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">5,680,512 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">5,438,723 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp; Retained earnings </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>35,615,406 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>27,748,126 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp; Accumulated other comprehensive income
    </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">6,212,145 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">5,178,616 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp; Non-controlling
      interests </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>14 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>5,672,530 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>5,122,021 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=center width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>77,479,420 </TD>
    <TD width="2%"><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>67,699,677 </TD>
    <TD width="2%"><BR></TD></TR>
  <TR>
    <TD bgColor=#e6efff><BR><B>TOTAL LIABILITIES AND</B> <BR><B>STOCKHOLDERS&#146;
      EQUITY</B> </TD>
    <TD width="1%" bgColor=#e6efff><BR><BR></TD>
    <TD align=center width="10%" bgColor=#e6efff><BR><BR></TD>
    <TD width="2%" bgColor=#e6efff><BR><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
      bgColor=#e6efff><BR><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR><BR>121,170,491 </TD>
    <TD width="2%" bgColor=#e6efff><BR><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
      bgColor=#e6efff><BR><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR><BR>107,695,643 </TD>
    <TD width="2%" bgColor=#e6efff><BR><BR></TD></TR></TABLE>
<P align=center><B>See Accompanying Notes to the Financial Statements and
Accountant&#146;s Report </B></P>
<P align="center">
F-27</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_7></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>CONSOLIDATED STATEMENTS OF
INCOME <BR>FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND
2008 <BR>(Stated in US Dollars) </B></P>
<DIV>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><B>Three months ended</B> </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><B>Nine months ended</B> </TD>
    <TD align=left width="2%"  >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><B>September 30,</B> </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><B>September 30,</B> </TD>
    <TD align=left width="2%"  >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B><I><U>Note</U></I></B> </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B><U>2009</U></B> </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B><U>2008</U></B> </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B><U>2009</U></B> </TD>
    <TD align=center width="2%"  >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B><U>2008</U></B> </TD>
    <TD align=left width="2%"  >&nbsp;</TD></TR>
  <TR>
    <TD >&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD width="2%"  >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%"  >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%"  >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%"  >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%"  >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Net revenues </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>17 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;38,674,651 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;36,727,394 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;83,841,112 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;75,680,120 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Cost of revenues </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">(29,566,601</TD>
    <TD align=left width="2%"  >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">(29,000,724</TD>
    <TD align=left width="2%"  >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">(64,279,971</TD>
    <TD align=left width="2%"  >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">(58,819,320</TD>
    <TD align=left width="2%"  >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >&nbsp;&nbsp;&nbsp;&nbsp;
      Gross profit </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;9,108,050 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;7,726,670 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;19,561,141 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;16,860,800 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD></TR>
  <TR>
    <TD ><BR>Operating expenses </TD>
    <TD width="1%" ><BR></TD>
    <TD align=center width="10%"><BR></TD>
    <TD width="2%"  ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%"  ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%"  ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%"  ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%"  ><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Selling and marketing
      expenses </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(1,165,107</TD>
    <TD align=left width="2%"  bgColor=#e6efff >)
</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(831,138</TD>
    <TD align=left width="2%"  bgColor=#e6efff >)
</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(3,556,271</TD>
    <TD align=left width="2%"  bgColor=#e6efff >)
</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(2,066,156</TD>
    <TD align=left width="2%"  bgColor=#e6efff >)
  </TD></TR>
  <TR vAlign=top>
    <TD align=left >General and administrative expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">(
      906,847 </TD>
    <TD align=left width="2%"  >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">(847,896</TD>
    <TD align=left width="2%"  >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">(
      2,798,044 </TD>
    <TD align=left width="2%"  >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">(2,480,240</TD>
    <TD align=left width="2%"  >) </TD></TR>
  <TR>
    <TD bgColor=#e6efff ><BR>Operating income </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD align=center width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff><BR>7,036,096 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff><BR>6,047,636 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff><BR>13,206,826 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff><BR>12,314,404 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD></TR>
  <TR>
    <TD ><BR>Investment income </TD>
    <TD width="1%" ><BR></TD>
    <TD align=center width="10%"><BR></TD>
    <TD width="2%"  ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"  ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"  ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"  ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"  ><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Government subsidy income </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>43,864 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>393 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>240,118 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>37,635 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >Interest and other income </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">24,196 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">180,641 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">232,844 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">288,439 </TD>
    <TD align=left width="2%"  >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >Other expenses </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(52,694</TD>
    <TD align=left width="2%"  bgColor=#e6efff >)
</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>56,706 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(234,298</TD>
    <TD align=left width="2%"  bgColor=#e6efff >)
</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(48,281</TD>
    <TD align=left width="2%"  bgColor=#e6efff >)
  </TD></TR>
  <TR vAlign=top>
    <TD align=left >Interest expense </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">(857,089</TD>
    <TD align=left width="2%"  >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">(627,148</TD>
    <TD align=left width="2%"  >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">(2,205,740</TD>
    <TD align=left width="2%"  >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">(1,900,846</TD>
    <TD align=left width="2%"  >) </TD></TR>
  <TR>
    <TD bgColor=#e6efff ><BR>Earnings before tax </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD align=center width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>6,194,373 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>5,658,228 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>11,239,750 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>10,691,351 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD></TR>
  <TR>
    <TD ><BR>Income tax </TD>
    <TD width="1%" ><BR></TD>
    <TD align=center width="10%"><BR><EM>2(r), 16</EM> </TD>
    <TD width="2%"  ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>(1,396,694</TD>
    <TD width="2%"  ><BR>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>(904,827</TD>
    <TD width="2%"  ><BR>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>(2,580,172</TD>
    <TD width="2%"  ><BR>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>(1,788,402</TD>
    <TD width="2%"  ><BR>) </TD></TR>
  <TR>
    <TD bgColor=#e6efff ><BR>Income before minority interests </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD align=center width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
    bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR>4,797,679 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
    bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR>4,753,401 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
    bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR>8,659,578 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
    bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR>8,902,949 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left >Net income attributable to: </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff ><BR>-Parent </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD align=center width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>4,497,364 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>4,458,659 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>8,109,069 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>8,307,737 </TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left >-Non-controlling Interest </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">300,315 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">294,742 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">550,509 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">595,212 </TD>
    <TD align=left width="2%"  >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff >&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>&nbsp;4,797,679 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>&nbsp;4,753,401 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>&nbsp;8,659,578 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>&nbsp;8,902,949 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD></TR>
  <TR>
    <TD ><BR><BR>Earnings per share </TD>
    <TD width="1%" ><BR><BR></TD>
    <TD align=center width="10%"><BR><BR><EM>2(v)</EM> </TD>
    <TD width="2%"  ><BR><BR></TD>
    <TD width="1%" ><BR><BR></TD>
    <TD align=right width="10%"><BR><BR></TD>
    <TD width="2%"  ><BR><BR></TD>
    <TD width="1%" ><BR><BR></TD>
    <TD align=right width="10%"><BR><BR></TD>
    <TD width="2%"  ><BR><BR></TD>
    <TD width="1%" ><BR><BR></TD>
    <TD align=right width="10%"><BR><BR></TD>
    <TD width="2%"  ><BR><BR></TD>
    <TD width="1%" ><BR><BR></TD>
    <TD align=right width="10%"><BR><BR></TD>
    <TD width="2%"  ><BR><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff
      >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - Basic </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;0.18 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;0.18 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;0.32 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;0.33 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      Diluted </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="10%">&nbsp;0.18 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="10%">&nbsp;0.18 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="10%">&nbsp;0.32 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right
      width="10%">&nbsp;0.33 </TD>
    <TD align=left width="2%"  >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff ><BR>Weighted average shares outstanding
    </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD align=center width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD align=right width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD align=right width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD align=right width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD align=right width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff ><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - Basic
    </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">25,177,640 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">24,923,178 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">25,177,640 </TD>
    <TD align=left width="2%"  >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">24,923,178 </TD>
    <TD align=left width="2%"  >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff
      >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - Diluted </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>25,200,136 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>24,923,178 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>25,717,588 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>25,282,206 </TD>
    <TD align=left width="2%"  bgColor=#e6efff
    >&nbsp;</TD></TR></TABLE></DIV>
<P align=center><B>See Accompanying Notes to the Financial Statements and
Accountant&#146;s Report </B></P>
<P align="center">
F-28</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_8></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>CONSOLIDATED STATEMENTS OF
CASH FLOW <BR>FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND
2008 <BR>(Stated in US Dollars) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><B>Three months ended</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><B>Nine months ended</B> </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><B>September 30,</B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><B>September 30,</B> </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="10%"><B><U>2009</U></B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><B><U>2008</U></B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><B><U>2009</U></B> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="10%"><B><U>2008</U></B> </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Cash flows from operating activities </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp; &nbsp;Net income </TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;4,497,364 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;4,458,659 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;8,109,069 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;8,307,737 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;Minority interest
    </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>300,316 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>294,741 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>550,509 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>595,212 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;Share based compensation </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">80,484 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">0 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">86,636 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">0 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;Depreciation </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>276,693 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>461,968 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>942,173 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>975,125 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;Amortization </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">22,217 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">11,332 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">158,209 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">209,102 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;(Increase)/decrease
      in accounts &amp; other receivables </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,776,531 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>10,487,405 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>7,583,260 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>23,939,692 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;(Increase)/decrease in inventories
    </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(8,751,246</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(12,644,355</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(10,778,999</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(14,099,060</TD>
    <TD align=left width="2%">) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;Increase/(decrease)
      in accounts &amp; other payables </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>(961,609</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>(1,722,767</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>(22,389,528</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>(15,296,367</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;Net cash (used in)/provided by
      operating activities </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(2,759,250</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">1,346,983 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(15,738,671</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">4,631,441 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff><BR>Cash flows from investing activities </TD>
    <TD width="1%" bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD width="1%" bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD width="1%" bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD width="1%" bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%" bgColor=#e6efff><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;Purchase of plant and equipment </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(881,610</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(82,023</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(1,408,140</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(5,739,946</TD>
    <TD align=left width="2%">) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;Payment of
      construction in progress </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>0 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(1,294,028</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>0 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>0 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;(Increase)/decrease in restricted
      cash </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(14,642</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(242,639</TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">2,707,991 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">(2,472,807</TD>
    <TD align=left width="2%">) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;Payments for land
      use rights </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(4,590</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(174,839</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(125,600</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(1,123,069</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of investment
      securities </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">58,384 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">0 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">61,151 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%">0 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;Purchase of
      investment securities </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>0 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(31,539</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>0 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(1,620,924</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;Payments for deposits </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">0 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">(2,751,740</TD>
    <TD align=left width="2%">) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="10%">(2,045</TD>
    <TD align=left width="2%">) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">(2,751,740</TD>
    <TD align=left width="2%">) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net cash used in investing activities </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(842,458</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(4,576,808</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,233,357 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(13,708,486</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR>
    <TD><BR>Cash flows from financing activities </TD>
    <TD width="1%"><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%"><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp;&nbsp;Bank borrowings </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>2,465,431 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>3,405,635 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>20,000,733 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>4,738,607 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;Notes payable </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">(1,614,364</TD>
    <TD align=left width="2%">) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">(2,070,085</TD>
    <TD align=left width="2%">) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">(5,208,485</TD>
    <TD align=left width="2%">) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">1,743,973 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net cash provided by/(used in) financing
      activities </TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;851,067 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;1,335,550 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;14,792,248 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;6,482,580 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD><BR>Net Increase/(decrease) of cash and cash equivalents </TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR>(2,750,641</TD>
    <TD width="2%"><BR>) </TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR>(1,894,275</TD>
    <TD width="2%"><BR>) </TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR>286,934 </TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR>(2,594,465</TD>
    <TD width="2%"><BR>) </TD></TR>
  <TR>
    <TD bgColor=#e6efff><BR>Effect of foreign currency translation </TD>
    <TD width="1%" bgColor=#e6efff><BR></TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>80,722 </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD width="1%" bgColor=#e6efff><BR></TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>1,960,246 </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD width="1%" bgColor=#e6efff><BR></TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>1,033,529 </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD width="1%" bgColor=#e6efff><BR></TD>
    <TD align=right width="10%" bgColor=#e6efff><BR>4,384,819 </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD></TR>
  <TR>
    <TD><BR>Cash and cash equivalents&#150;beginning of year </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>6,831,721 </TD>
    <TD width="2%"><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>8,494,356 </TD>
    <TD width="2%"><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>2,841,339 </TD>
    <TD width="2%"><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><BR>6,769,973 </TD>
    <TD width="2%"><BR></TD></TR>
  <TR>
    <TD bgColor=#e6efff><BR><B>Cash and cash equivalents&#150;end of year</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
      bgColor=#e6efff><BR><B>$</B></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR><B>4,161,802</B> </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
      bgColor=#e6efff><BR><B>$</B></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR><B>8,560,327</B> </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
      bgColor=#e6efff><BR><B>$</B></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR><B>4,161,802</B> </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
      bgColor=#e6efff><BR><B>$</B></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff><BR><B>8,560,327</B> </TD>
    <TD width="2%" bgColor=#e6efff><BR></TD></TR>
  <TR>
    <TD><BR><I><U>Supplementary cash flow information:</U></I> </TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="10%"><BR></TD>
    <TD width="2%"><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Interest
      received </TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;3,892 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;34,200 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;70,502 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;68,612 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Interest paid </TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;857,089 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;627,148 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;2,205,740 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="10%">&nbsp;1,900,846 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Taxes
      paid </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>&nbsp;1,396,694 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>&nbsp;904,827 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>&nbsp;2,580,172 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
    bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>&nbsp;1,788,402 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P align=center><B>See Accompanying Notes to the Financial Statements and
Accountant&#146;s Report </B></P>
<P align="center">
F-29</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_9></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>STATEMENT OF STOCKHOLDERS&#146; EQUITY <BR>FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US DOLLARS)</B> </P>
<DIV>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD noWrap align=left width="281">&nbsp; </TD>
    <TD noWrap align=left width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="99"><B>Accumulated</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=left width="28" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD noWrap align=left width="281">&nbsp; </TD>
    <TD noWrap align=left width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Number</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Additional</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="99"><B>Other</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Non-</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=left width="28" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD noWrap align=left width="281">&nbsp; </TD>
    <TD noWrap align=left width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>of</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Common</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Paid-in</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Statutory</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Retained</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="99"><B>Comprehensive</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>controlling</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98">&nbsp; </TD>
    <TD noWrap align=left width="28" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD noWrap align=left width="281">&nbsp; </TD>
    <TD noWrap align=left width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Shares</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Stock</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Capital</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Reserves</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Earnings</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="99"><B>Income</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Interests</B> </TD>
    <TD noWrap align=center width="28" >&nbsp;</TD>
    <TD noWrap align=center width="14" >&nbsp;</TD>
    <TD noWrap align=center width="98"><B>Total</B> </TD>
    <TD noWrap align=left width="28" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="281">Balance, January 1, 2008 </TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>24,923,178 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp;24,923 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>24,187,268 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp;4,497,647 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>13,985,824 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="99" bgColor=#e6efff>&nbsp;1,846,708 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp;3,887,021 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp;48,429,391 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="281">Issuance of Common Stock </TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">249,455 </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">249 </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">(249</TD>
    <TD align=left width="28" >) </TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="99">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="281">Share Adjustment to Match Transfer
      <BR>Agent </TD>
    <TD align=left width="14"  bgColor=#e6efff><BR></TD>
    <TD align=right width="98" bgColor=#e6efff><BR>7 </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR></TD>
    <TD align=right width="98" bgColor=#e6efff><BR>- </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR></TD>
    <TD align=right width="98" bgColor=#e6efff><BR>- </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR></TD>
    <TD align=right width="98" bgColor=#e6efff><BR>- </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR></TD>
    <TD align=right width="98" bgColor=#e6efff><BR>- </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR></TD>
    <TD align=right width="99" bgColor=#e6efff><BR>- </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR></TD>
    <TD align=right width="98" bgColor=#e6efff><BR>- </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR></TD>
    <TD align=right width="98" bgColor=#e6efff><BR>- </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left width="281">Net Income </TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">14,703,378 </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="99">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">14,703,378 </TD>
    <TD align=left width="28" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="281">Appropriations to Statutory Reserves </TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>941,076 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>(941,076</TD>
    <TD align=left width="28"  bgColor=#e6efff>) </TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="99" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="281">Non-controlling Interests </TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="99">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">1,235,000 </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">1,235,000 </TD>
    <TD align=left width="28" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="281">Foreign Currency Translation </TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="99" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="281">Adjustment </TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="99">3,331,908 </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">3,331,908 </TD>
    <TD align=left width="28" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="281">Balance, December 31, 2008 </TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>25,172,640 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp;25,172 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>24,187,019 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp;5,438,723 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>27,748,126 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="99" bgColor=#e6efff>&nbsp;5,178,616 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp;5,122,021 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>$</TD>
    <TD align=right width="98" bgColor=#e6efff>&nbsp;67,699,677 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="281"><BR>Balance, January 1, 2009 </TD>
    <TD width="14" ><BR></TD>
    <TD align=right width="98"><BR>25,172,640 </TD>
    <TD width="28" ><BR></TD>
    <TD width="14" ><BR>$</TD>
    <TD align=right width="98"><BR>25,172 </TD>
    <TD width="28" ><BR></TD>
    <TD width="14" ><BR>$</TD>
    <TD align=right width="98"><BR>24,187,019 </TD>
    <TD width="28" ><BR></TD>
    <TD width="14" ><BR>$</TD>
    <TD align=right width="98"><BR>5,438,723 </TD>
    <TD width="28" ><BR></TD>
    <TD width="14" ><BR>$</TD>
    <TD align=right width="98"><BR>27,748,126 </TD>
    <TD width="28" ><BR></TD>
    <TD width="14" ><BR>$</TD>
    <TD align=right width="99"><BR>5 ,178,616 </TD>
    <TD width="28" ><BR></TD>
    <TD width="14" ><BR>$</TD>
    <TD align=right width="98"><BR>5,122,021 </TD>
    <TD width="28" ><BR></TD>
    <TD width="14" ><BR>$</TD>
    <TD align=right width="98"><BR>67,699,677 </TD>
    <TD width="28" ><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="281">Issuance of Common Stock </TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>5,000 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>5 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>6,147 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="99" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>6,152 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="281">Issuance Stock Options </TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">&nbsp; </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">&nbsp; </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">80,484 </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">&nbsp; </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">&nbsp; </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="99">&nbsp; </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">&nbsp; </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">80,484 </TD>
    <TD align=left width="28" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="281">Net Income </TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>8,109,069 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="99" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>8,109,069 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="281">Appropriations to Statutory Reserves </TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">241,789 </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">(241,789</TD>
    <TD align=left width="28" >) </TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="99">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD>
    <TD align=left width="14" >&nbsp;</TD>
    <TD align=right width="98">- </TD>
    <TD align=left width="28" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="281">Non-controlling Interests </TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="99" bgColor=#e6efff>- </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>550,509 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="14"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="98" bgColor=#e6efff>550,509 </TD>
    <TD align=left width="28"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="281">Foreign Currency Translation <BR>Adjustment </TD>
    <TD align=left width="14" ><BR></TD>
    <TD align=right width="98"><BR>- </TD>
    <TD align=left width="28" ><BR></TD>
    <TD align=left width="14" ><BR></TD>
    <TD align=right width="98"><BR>- </TD>
    <TD align=left width="28" ><BR></TD>
    <TD align=left width="14" ><BR></TD>
    <TD align=right width="98"><BR>- </TD>
    <TD align=left width="28" ><BR></TD>
    <TD align=left width="14" ><BR></TD>
    <TD align=right width="98"><BR>- </TD>
    <TD align=left width="28" ><BR></TD>
    <TD align=left width="14" ><BR></TD>
    <TD align=right width="98"><BR>- </TD>
    <TD align=left width="28" ><BR></TD>
    <TD align=left width="14" ><BR></TD>
    <TD align=right width="99"><BR>1,033,529 </TD>
    <TD align=left width="28" ><BR></TD>
    <TD align=left width="14" ><BR></TD>
    <TD align=right width="98"><BR>- </TD>
    <TD align=left width="28" ><BR></TD>
    <TD align=left width="14" ><BR></TD>
    <TD align=right width="98"><BR>1,033,529 </TD>
    <TD align=left width="28" ><BR></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="281"><BR>Balance, September 30, 2009 </TD>
    <TD align=left width="14"  bgColor=#e6efff><BR></TD>
    <TD align=right width="98" bgColor=#e6efff><BR>25,177,640 </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="98" bgColor=#e6efff><BR>25,177 </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="98" bgColor=#e6efff><BR>24,273,650 </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="98" bgColor=#e6efff><BR>5,680,512 </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="98" bgColor=#e6efff><BR>35,615,406 </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="99" bgColor=#e6efff><BR>6,212,145 </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="98" bgColor=#e6efff><BR>5,672,530 </TD>
    <TD align=left width="28"  bgColor=#e6efff><BR></TD>
    <TD align=left width="14"  bgColor=#e6efff><BR>$</TD>
    <TD align=right width="98" bgColor=#e6efff><BR>77,479,420 </TD>
    <TD align=left width="28"
bgColor=#e6efff><BR></TD></TR></TABLE></DIV>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>Comprehensive</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>Comprehensive</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>Income</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>Income</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>9/30/2009</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>12/31/2008</B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B>Total</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net Income </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;8,109,069 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;14,703,378 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>&nbsp;22,812,447 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Foreign Currency Translation Adjustment </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">1,033,542 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">3,331,908 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">4,365,450 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>&nbsp;9,142,611 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>&nbsp;18,035,286 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="10%"
    bgColor=#e6efff>&nbsp;27,177,897 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P align=center><B>See Accompanying Notes to the Financial Statements and Accountant&#146;s
Report </B></P>
<P align="center">
F-30</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_10></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>1.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>PRINCIPAL ACTIVITIES</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The Company develops, manufactures, and sells convenience
      foods (such as cut fruit and premixed salads, which are known as lightly
      processed; ready-to-cook (or &#147;RTC&#148;) meals; ready-to-eat (or &#147;RTE&#148;) meals
      and meals ready-to-eat (or &#147;MRE&#148;); chestnut products; and frozen, canned,
      and bulk 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, canned, and bulk food (&#147;FCB food&#148;).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>2.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(a)</I> </TD>
    <TD>
      <P align=justify><I>Method of Accounting</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(b)</I> </TD>
    <TD>
      <P align=justify><I>Principles of consolidation</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>As of September 30, 2009, the detailed identities of the
      consolidating subsidiaries are as follows: -</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=left></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><STRONG><EM>Place of</EM></STRONG> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><STRONG><EM>Attributable</EM></STRONG> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><STRONG><EM>Registered</EM></STRONG></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left><STRONG><EM>Name of Company</EM></STRONG> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B><I>incorporation</I></B> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><STRONG><EM>equity interest</EM></STRONG> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B><I>capital</I></B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><B><I>%</I></B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Shandong Green Foodstuff Co., Ltd </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>PRC </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>80.2 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>12,901,823 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(RMB 100,860,000</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Luotian Green Foodstuff Co., Ltd </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">PRC </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">100 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">3,240,013 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">(RMB 25,328,800</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Junan Hongrun Foodstuff Co., Ltd </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>PRC </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>100 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="10%" bgColor=#e6efff>16,245,603 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>(RMB 127,000,000</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Beijing Green Foodstuff Co., Ltd </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">PRC </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">100 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">1,279,181 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">(RMB 10,000,000</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>International Lorain Holding, Inc </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>Cayman Islands </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>100 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(c)</I> </TD>
    <TD>
      <P align=justify><I>Use of estimates</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(d)</I> </TD>
    <TD>
      <P align=justify><I>Economic and political risks</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company&#146;s operations are conducted in the PRC.
      Accordingly, the Company&#146;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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company&#146;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&#146;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.</P></TD></TR></TABLE>
<P align="center">
<br>
F-31</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_11></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(e)</I> </TD>
    <TD>
      <P align=justify><I>Lease prepayments</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Lease prepayments represent the cost of land use rights
      in the PRC. Land use rights are carried at cost and amortized on a
      straight-line basis over the period of rights of 50 years.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(f)</I> </TD>
    <TD>
      <P align=justify><I>Property, plant and equipment</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Buildings </TD>
    <TD align=right width="15%" bgColor=#e6efff>40 years </TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Machinery and equipment </TD>
    <TD align=right width="15%">10 years </TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Motor vehicles </TD>
    <TD align=right width="15%" bgColor=#e6efff>10 years </TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Office equipment </TD>
    <TD align=right width="15%">5 years </TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(g)</I> </TD>
    <TD colSpan=2>
      <P align=justify><I>Accounting for the Impairment of Long-Lived
      Assets</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The long-lived assets held and used by the Company are
      reviewed for impairment whenever events or changes in circumstances
      indicate that the carrying amount of assets may not be recoverable. It is
      reasonably possible that these assets could become impaired as a result of
      technology or other industry changes. Determination of recoverability of
      assets to be held and used is by comparing the carrying amount of an asset
      to future net undiscounted cash flows to be generated by the
  assets.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(h)</I> </TD>
    <TD colSpan=2>
      <P align=justify><I>Construction in progress</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>Construction in progress represents direct costs of
      construction or acquisition and design fees incurred. Capitalization of
      these costs ceases and the construction in progress is transferred to
      plant and equipment when substantially all the activities necessary to
      prepare the assets for their intended use are completed. No depreciation
      is provided until it is completed and ready for intended use.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(i)</I> </TD>
    <TD colSpan=2>
      <P align=justify><I>Investment securities</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The Company classifies its equity securities into trading
      or available-for-sale. Trading securities are bought and held principally
      for the purpose of selling them in the near term. All securities not
      included in trading securities are classified as
  available-for-sale.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" ></TD>
    <TD width="5%"></TD>
    <TD vAlign=top colSpan=2>
      <P align=justify>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.</P></TD></TR></TABLE>
<P align="center">
<br>
F-32</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_12></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(j)</I> </TD>
    <TD>
      <P align=justify><I>Inventories</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(k)</I> </TD>
    <TD>
      <P align=justify><I>Trade receivables</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(l)</I> </TD>
    <TD>
      <P align=justify><I>Customer deposits</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Customer deposits were cash received from customers in
      connection with orders of products to be delivered in future
    periods.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(m)</I> </TD>
    <TD>
      <P align=justify><I>Cash and cash equivalents</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company considers all highly liquid investments
      purchased with original maturities of three months or less to be cash
      equivalents.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(n)</I> </TD>
    <TD>
      <P align=justify><I>Advertising</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>All advertising costs are expensed as incurred.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(o)</I> </TD>
    <TD>
      <P align=justify><I>Shipping and handling</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>All shipping and handling are expensed as
  incurred.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(p)</I> </TD>
    <TD>
      <P align=justify><I>Research and development</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>All research and development costs are expensed as
      incurred.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(q)</I> </TD>
    <TD>
      <P align=justify><I>Retirement benefits</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(r)</I> </TD>
    <TD>
      <P align=justify><I>Income taxes</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company uses the accrual method of accounting to
      determine and report its taxable reduction of income taxes for the year in
      which they are available. The Company has implemented Statement of
      Financial Accounting Standards (SFAS) No. 109, Accounting for Income
      Taxes. Income tax liabilities computed according to the United States and
      People&#146;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. </P></TD></TR></TABLE>
<p><BR>
</p>
<P align="center">
F-33</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_13></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<P style="MARGIN-LEFT: 10%" align=justify>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 25%
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. </P>
<P style="MARGIN-LEFT: 10%" align=justify>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: - </P>
<DIV align=center>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="60%" border=0>

  <TR vAlign=top>
    <TD align=center colSpan=4><B>Taxable Income</B> </TD></TR>
  <TR vAlign=top>
    <TD align=center><I><U>Rate</U></I> </TD>
    <TD align=center width="25%"><I><U>Over</U></I> </TD>
    <TD align=center width="25%"><I><U>But Not Over</U></I> </TD>
    <TD align=center width="25%"><I><U>Of Amount Over</U></I> </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff>15% </TD>
    <TD align=right width="25%" bgColor=#e6efff>0 </TD>
    <TD align=right width="25%" bgColor=#e6efff>50,000 </TD>
    <TD align=right width="25%" bgColor=#e6efff>0 </TD></TR>
  <TR vAlign=top>
    <TD align=center>25% </TD>
    <TD align=right width="25%">50,000 </TD>
    <TD align=right width="25%">75,000 </TD>
    <TD align=right width="25%">50,000 </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff>34% </TD>
    <TD align=right width="25%" bgColor=#e6efff>75,000 </TD>
    <TD align=right width="25%" bgColor=#e6efff>100,000 </TD>
    <TD align=right width="25%" bgColor=#e6efff>75,000 </TD></TR>
  <TR vAlign=top>
    <TD align=center>39% </TD>
    <TD align=right width="25%">100,000 </TD>
    <TD align=right width="25%">335,000 </TD>
    <TD align=right width="25%">100,000 </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff>34% </TD>
    <TD align=right width="25%" bgColor=#e6efff>335,000 </TD>
    <TD align=right width="25%" bgColor=#e6efff>10,000,000 </TD>
    <TD align=right width="25%" bgColor=#e6efff>335,000 </TD></TR>
  <TR vAlign=top>
    <TD align=center>35% </TD>
    <TD align=right width="25%">10,000,000 </TD>
    <TD align=right width="25%">15,000,000 </TD>
    <TD align=right width="25%">10,000,000 </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff>38% </TD>
    <TD align=right width="25%" bgColor=#e6efff>15,000,000 </TD>
    <TD align=right width="25%" bgColor=#e6efff>18,333,333 </TD>
    <TD align=right width="25%" bgColor=#e6efff>15,000,000 </TD></TR>
  <TR vAlign=top>
    <TD align=center>35% </TD>
    <TD align=right width="25%">18,333,333 </TD>
    <TD align=right width="25%">- </TD>
    <TD align=right width="25%">- </TD></TR></TABLE></DIV>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Based on the consolidated net income for the period ended
      September 30, 2009 and the year ended December 31, 2008, the Company shall
      not be subject to income tax.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(s)</I> </TD>
    <TD>
      <P align=justify><I>Statutory reserves</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(t)</I> </TD>
    <TD>
      <P align=justify><I>Foreign currency translation</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="10%"><I>9/30/2009</I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="10%"><I>12/31/2008</I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="10%"><I>9/30/2008</I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Period end RMB : US$ exchange rate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>6.8376 </TD>
    <TD align=center width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>6.8542 </TD>
    <TD align=center width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="10%" bgColor=#e6efff>6.8551 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=left>Average period RMB : US$ exchange rate </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%">6.8425 </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%">6.9622 </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%">6.9989 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The RMB is not freely convertible into foreign currency
      and all foreign exchange transactions must take place through authorized
      institutions. No representation is made that the RMB amounts could have
      been, or could be, converted into US$ at the rates used in
    translation.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(u)</I> </TD>
    <TD>
      <P align=justify><I>Revenue recognition</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR></TABLE>
<p><BR>
</p>
<P align="center">
F-34</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_14></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company's revenue consists of invoiced value of
      goods, net of a value-added tax (VAT). No product return or sales discount
      allowance is made as products delivered and accepted by customers are
      normally not returnable and sales discount is normally not granted after
      products are delivered.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(v)</I> </TD>
    <TD>
      <P align=justify><I>Earnings per share</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Basic earnings per share is computed by dividing net
      income by the weighted average number of ordinary shares outstanding
      during the period. Diluted earnings per share is computed by dividing net
      income by the sum of the weighted average number of ordinary shares
      outstanding and dilutive potential ordinary shares during the years.
      During the nine months ended September 30, 2009 and the year ended
      December 31, 2008, no dilutive potential ordinary shares were
    issued.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company computes earnings per share (&#147;EPS&#148;) in
      accordance with Statement of Financial Accounting Standards No. 128,
      &#147;Earnings per share&#148; (&#147;SFAS No. 128&#148;), and SEC Staff Accounting Bulletin
      No. 98 (&#147;SAB 98&#148;). 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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(w)</I> </TD>
    <TD>
      <P align=justify><I>Commitments and contingencies</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(x)</I> </TD>
    <TD>
      <P align=justify><I>Comprehensive income</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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&#146;s current component of other comprehensive income is the
      foreign currency translation adjustment.</P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(y)</I> </TD>
    <TD>
      <P align=justify><I>Recent accounting pronouncements</I></P></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <font FACE="Times New Roman">
      <p ALIGN="JUSTIFY">In May 2009, the FASB issued SFAS No. 165, &quot;Subsequent
      Events&quot; (&quot;SFAS 165&quot;). SFAS 165 is intended to establish general standards
      of accounting for and disclosure of events that occur after the balance
      sheet date but before financial statements are issued or are available to
      be issued. It requires the disclosure of the date through which an entity
      has evaluated subsequent events and the basis for that date, that is,
      whether that date represents the date the financial statements were issued
      or were available to be issued. SFAS 165 is effective for interim or
      annual financial periods ending after June 15, 2009. </font></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <font FACE="Times New Roman">
      <p ALIGN="JUSTIFY">In June 2009, FASB issued FASB Statement No. 166,
      Accounting for Transfers for Financial Assets and FASB Statement No. 167,
      a revision to FASB Interpretation No. 46 (Revised December 2003),
      Consolidation of Variable Interest Entities. </font></TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>
      <font FACE="Times New Roman">
      <p ALIGN="JUSTIFY">Statement 166 is a revision to FASB Statement No. 140,
      Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities, 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 &quot;qualifying
      special-purpose entity,&quot; changes the requirements for derecognizing
      financial assets, and requires additional disclosures. </font></TD></TR></TABLE>
<p><BR>
</p>
<P align="center">
F-35</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_15></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%" >&nbsp;</TD>
    <TD>
      <font FACE="Times New Roman">
      <p ALIGN="JUSTIFY">Statement 167 is a revision to FASB Interpretation No.
      46 (Revised December 2003), Consolidation of Variable Interest Entities,
      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&#146;s purpose and design and the reporting entity&#146;s
      ability to direct the activities of the other entity that most
      significantly impact the other entity&#146;s economic performance. </font></TD></TR>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%" >&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%" >&nbsp;</TD>
    <TD>
      <font FACE="Times New Roman">
      <p ALIGN="JUSTIFY">On July 1, 2009, FASB issued FASB Statement No. 168,
      The &quot;FASB Accounting Standards Codification&quot; and the Hierarchy of
      Generally Accepted Accounting Principles. The ASC has become the source of
      authoritative US GAAP recognized by the FASB to be applied by
      nongovernmental entities and provides that all such guidance carries an
      equal level of authority. The ASC is not intended to change or alter
      existing GAAP. The ASC is effective for interim and annual periods ending
      after September 15, 2009. </font></TD></TR>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%" >&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%" ></TD>
    <TD>
      <P align=justify>The Company is currently evaluating the
      potential impact, if any, of the adoption of the above recent accounting
      pronouncements on its consolidated results of operations and financial
      condition.</P></TD></TR>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%" >&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"  ><STRONG>3.</STRONG>
    </TD>
    <TD vAlign=top colSpan=2>
      <P align=justify><B>RESTRICTED CASH</B></P></TD></TR>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%" >&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD colSpan=2>
      <P align=justify>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 upon the duration of the
      related borrowing facility. 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 nine month time deposits that pay
      interest at the national time deposit rate.</P></TD></TR>
  <TR>
    <TD width="5%"  >&nbsp;</TD>
    <TD width="5%" >&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"  ><STRONG>4.</STRONG>
    </TD>
    <TD vAlign=top colSpan=2>
      <P align=justify><B>TRADE ACCOUNTS
RECEIVABLE</B></P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>12/31/2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Trade accounts receivable </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;17,970,577 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;25,421,293 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left><I><U>Less</U>: </I>Allowance for doubtful accounts
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(225,566</TD>
    <TD align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(127,967</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>&nbsp;17,745,011 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>&nbsp;25,293,326 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid"><BR>Allowance for bad debt:
    </TD>
    <TD width="1%" ><BR></TD>
    <TD align=center width="12%"><BR><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%" ><BR></TD>
    <TD align=center width="1%" ><BR></TD>
    <TD align=center width="12%"><BR><I><U>12/31/2008</U></I> </TD>
    <TD width="2%" ><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Beginning balance </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;(127,967</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;(172,309</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Additions to allowance </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(97,599</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Bad debt written-off </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>44,342 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">&nbsp;(225,566</TD>
    <TD align=left width="2%" >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">&nbsp;(127,967</TD>
    <TD align=left width="2%" >) </TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>The Company offers credit terms of
between 30 to 60 days to most of their international distributors as well as
domestic supermarkets and wholesalers, and between 0 to 15 days for most of
their agents. </P>
<P align="center">
<br>
F-35</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_16></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>5.</B> </TD>
    <TD>
      <P align=justify><B>OTHER RECEIVABLES</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Other receivables consisted of the following as of
      September 30, 2009 and December 31, 2008:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>12/312008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Advances to employees for job/travel
      disbursements </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;2,180,628 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;3,160,886 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Amount due by a non-related enterprise </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,991,252 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,278,501 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Tender deposit </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>36,563 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Other </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">194,436 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">668,332 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>&nbsp;4,402,879 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>&nbsp;5,107,719 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>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.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>6.</B> </TD>
    <TD>
      <P align=justify><B>INVENTORY</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Inventories consisted of the following as of September
      30, 2009 and December 31, 2008:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>12/312008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Raw materials </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;17,607,376 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;9,636,050 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Work in progress </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,143,766 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Finished goods </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>17,999,546 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>14,048,106 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">&nbsp;35,606,922 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">&nbsp;24,827,922 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>7.</B> </TD>
    <TD>
      <P align=justify><B>ADVANCE TO SUPPLIERS</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Advance to suppliers represents prepayments made to
      vendors for goods and services that the Company anticipates using within
      its one year operating cycle. As a result of the seasonality of the
      Company&#146;s business, there are significant increases in the balance of this
      account before the Company&#146;s peak season, which are the third and fourth
      quarters of the calendar year.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Advance to suppliers consisted of the following as of
      September 30, 2009:</P></TD></TR></TABLE>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="5%">&nbsp;</td>
    <td WIDTH="80%">&nbsp;</td>
    <td WIDTH="2%">&nbsp;</td>
    <td WIDTH="12%">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="5%">&nbsp;</td>
    <td WIDTH="80%">&nbsp;</td>
    <td WIDTH="2%">&nbsp;</td>
    <td WIDTH="12%"><font SIZE="2"><i>
    <p align="center">9/30/2009</i></font></td>
  </tr>
  <tr>
    <td WIDTH="5%">&nbsp;</td>
    <td WIDTH="80%" bgcolor="#E6EFFF"><font SIZE="2">Raw materials</font></td>
    <td WIDTH="2%" bgcolor="#E6EFFF"><font SIZE="2">$</font></td>
    <td WIDTH="12%" align="right" bgcolor="#E6EFFF"><font SIZE="2">3,647,645</font></td>
  </tr>
  <tr>
    <td WIDTH="5%">&nbsp;</td>
    <td WIDTH="80%"><font SIZE="2">Packaging materials</font></td>
    <td WIDTH="2%">&nbsp;</td>
    <td WIDTH="12%" align="right"><font SIZE="2">675,073</font></td>
  </tr>
  <tr>
    <td WIDTH="5%">&nbsp;</td>
    <td WIDTH="80%" bgcolor="#E6EFFF"><font SIZE="2">Shipping</font></td>
    <td WIDTH="2%" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="12%" align="right" bgcolor="#E6EFFF"><font SIZE="2">55,900</font></td>
  </tr>
  <tr>
    <td WIDTH="5%">&nbsp;</td>
    <td WIDTH="80%"><font SIZE="2">Equipment</font></td>
    <td WIDTH="2%">&nbsp;</td>
    <td WIDTH="12%" align="right"><font SIZE="2">136,525</font></td>
  </tr>
  <tr>
    <td WIDTH="5%">&nbsp;</td>
    <td WIDTH="80%" bgcolor="#E6EFFF"><font SIZE="2">Construction materials</font></td>
    <td WIDTH="2%" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="12%" align="right" bgcolor="#E6EFFF"><font SIZE="2">7,843,049</font></td>
  </tr>
  <tr>
    <td WIDTH="5%">&nbsp;</td>
    <td WIDTH="80%"><font SIZE="2">Other</font></td>
    <td WIDTH="2%" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="12%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">169,840</font></td>
  </tr>
  <tr>
    <td WIDTH="5%">&nbsp;</td>
    <td WIDTH="80%" bgcolor="#E6EFFF">&nbsp;</td>
    <td WIDTH="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bgcolor="#E6EFFF">
    <font SIZE="2">$</font></td>
    <td WIDTH="12%" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bgcolor="#E6EFFF">
    <font SIZE="2">12,528,032</font></td>
  </tr>
</table>
<P align="center">
<br>
F-36</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_17></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>8.</B> </TD>
    <TD>
      <P align=justify><B>PROPERTY, PLANT, AND EQUIPMENT</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Property, plant, and equipment consisted of the following
      as of September 30, 2009 and December 31,
2008:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><I><U>12/31/2008</U></I> </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>At Cost: </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp;Buildings </TD>
    <TD align=left width="1%">$</TD>
    <TD align=right width="12%">&nbsp;27,866,338 $ </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">27,798,849 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;Landscaping, plant, and
      tree </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2,758,782 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2,752,101 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp;Machinery and equipment </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">7,494,138 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">7,229,512 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;Office equipment </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>796,557 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>859,818 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp;Motor vehicles </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">25,926 </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">39,824 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;38,941,741 $ </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>38,680,104 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left><I><U>Less</U>: </I>Accumulated depreciation </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;Buildings </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(1,657,426</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(1,192,855</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp;Landscaping, plant, and tree </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(3,072,410</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp;Machinery and equipment </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">(2,628,710</TD>
    <TD align=left width="2%">) </TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;Office equipment </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(455,071</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(414,478</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp;Motor vehicles </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(18,302</TD>
    <TD align=left width="2%">) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(24,992</TD>
    <TD align=left width="2%">) </TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(5,203,209</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(4,261,035</TD>
    <TD align=left width="2%" bgColor=#e6efff>) </TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD><BR>Construction in Progress </TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="12%"><BR>6,929,121 </TD>
    <TD width="2%"><BR></TD>
    <TD width="1%"><BR></TD>
    <TD align=right width="12%"><BR>5,782,617 </TD>
    <TD width="2%"><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>&nbsp;40,667,653 $ </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>40,201,686 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Construction in progress is mainly comprised of capital
      expenditures for construction of the Company&#146;s new corporate campus,
      including offices, factories, and staff dormitories. Capital commitments
      for the construction are immaterial for the two years above.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Landscaping, plants, and trees are the Chestnut
      subsidiary&#146;s investment in the development of agricultural operations,
      which have not been the significant source of the raw materials needed for
      the Company&#146;s operations to date.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>9.</B> </TD>
    <TD>
      <P align=justify><B>LAND USE RIGHTS, NET</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Land use rights consisted of the following as of
      September 30, 2009 and December 31,
2008<SUP>:</SUP></P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><I><U>12/31/2008</U></I> </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Land use rights, <I>at cost</I> </TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;4,361,862 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;4,236,266 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp;<I><U>Less</U>: </I>Accumulated
      amortization </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(443,547</TD>
    <TD align=left width="2%">) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(285,339</TD>
    <TD align=left width="2%">) </TD></TR>
  <TR vAlign=top>
    <TD width="5%">&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;3,918,315 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;3,950,927 </TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>Land use rights represent the Company&#146;s
purchase of usage rights for a parcel of land for a specified duration of time.
The PRC government owns the land on which the Company&#146;s corporate campus is
being constructed.</P>
<P align="center">
<br>
F-37</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_18></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>10.</B> </TD>
    <TD>
      <P align=justify><B>SHORT-TERM BANK LOANS</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Short-term bank loans consisted of the following as of
      September 30, 2009 and December 31, 2008:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><I><U>12/31/2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><I>Loans from Junan County Construction
      Bank,</I> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 5.3460% per annum due1/07/2010 </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="11%">&nbsp;1,462,501 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="11%">&nbsp;- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 5.3460% per annum due 9/1/2010 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>1,170,001 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 5.3460% per annum due 12/15/2010 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">394,875 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 5.3460% per annum due12/19/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>1,170,001 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 7.452% per annum due 2/24/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">102,127 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 10.452% per annum due 1/22/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>1,575,676 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 7.236% per annum due 2/3/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">116,717 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD bgColor=#e6efff><BR><I>Loan from Junan County Agriculture Bank,</I>
</TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="11%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="11%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 7.9650% per annum due 8/23/2010 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">1,608,752 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 7.2900% per annum due 12/01/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>1,901,252 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 7.027% per annum due 11/21/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">643,501 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 7.9650% per annum due 3/17/2010 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>3,363,753 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 8.2620% per annum due12/17/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">1,755,002 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 8.2620% per annum due 12/17/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>2,193,752 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 7.290% per annum due 9/23/2010 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">1,447,877 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="11%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 12.699% per annum due 8/6/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>583,584 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 12.699% per annum due 8/18/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="11%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">656,532 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 12.699% per annum due 8/1/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>364,740 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 10.577% per annum due 3/27/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">1,458,959 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD bgColor=#e6efff><BR><I>Loan from Junan County Industrial and
      Commercial Banks,</I> </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="11%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="11%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 5.3460% per annum due10/9/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">438,750 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 5.3460% per annum due10/13/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>541,126 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 5.3460% per annum due11/19/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">694,688 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 5.3460% per annum due 10/25/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>614,251 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 5.3460% per annum due 11/23/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">497,251 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 5.3460% per annum due 12/22/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>463,613 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 6.120% per annum due 1/10/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">145,896 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 8.541% per annum due 3/4/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>393,919 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 3.1725% per annum due 2/19/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">240,035 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 3.1725% per annum due 2/19/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>118,161 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 10.1825% per annum due 2/26/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">120,762 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 10.1825% per annum due 3/5/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>173,670 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD><BR><I>Loan from Junan County Agricultural Financial Institution,</I>
    </TD>
    <TD width="1%" ><BR></TD>
    <TD width="11%"><BR></TD>
    <TD width="2%" ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD width="11%"><BR></TD>
    <TD width="2%" ><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 9.1155% per annum due 1/22/2010 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>1,170,001 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 9.1155% per annum due 12/23/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">438,750 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 9.1155% per annum due 12/23/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>146,250 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>
      Interest rate at 9.1155% per annum due 12/23/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">438,750 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<P align="center">
F-38</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_19></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><I><U>9/30/2009</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><I><U>12/31/2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><I>Loan from Linyi Commercial Bank,</I> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 9.293% per annum due 6/15/2010 </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="10%">&nbsp;1,462,501 $ </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 9.293% per annum due
      1/19/2010 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>658,126 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 9.293%per annum due 12/14/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">687,376 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 9.293% per annum due
      6/16/2010 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,462,501 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 13.073% per annum due 1/5/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">685,711 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 13.073% per annum due
      1/5/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>656,532 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 8.539% per annum due 3/27/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">1,458,959 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 8.539% per annum due
      3/27/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>141,885 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left><BR><I>Loan from Beijing Miyun County Shilipu Rural</I>
      <I>Financial Institution,</I> </TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%" ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%" ><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rates at 7.434% per annum due
      1/20/2010 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,462,502 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rates at 8.539% per annum due 9/30/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">2,772,023 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><BR><I>Loan from China Merchants Bank,
      Beijing</I> </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 5.310% per annum due 3/29/2010 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">731,251 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><BR><I>Loan from China Agricultural Bank,
      Luotian</I> <I>Branch</I> </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 6.372% per annum due 8/25/2010 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">1,901,252 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 7.47% per annum due
      9/7/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>817,017 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 7.47% per annum due 9/7/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">291,792 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><BR><I>Bank of Beijing</I> </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 6.903% per annum due 7/29/2010 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">292,500 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 7.722% per annum due
      7/28/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>291,792 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left><BR><I>Bank of China, Junan Branch,</I> </TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%" ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%" ><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 7.500% per annum due
      5/19/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>4,014 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left><BR><I>United Commercial Bank, China Branch</I> </TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%" ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%" ><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 5.494% per annum due
      1/14/2010 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,050,077 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 5.494% per annum due 1/14/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">1,156,955 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><BR><I>HSBC Miyun Branch</I> </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 6.804% per annum due 11/13/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">351,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><BR><I>Credit Union, Junan</I> </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="10%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 8.5837% per annum due 1/7/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">43,769 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 8.5837% per annum due
      1/12/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>43,769 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left><BR>LinYi Yizhou Limited Company </TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%" ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD width="10%"><BR></TD>
    <TD width="2%" ><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 0.9% per month due
      11/13/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,257,751 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rate at 0.9% per month due 10/08/2009 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">716,626 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>&nbsp;34,588,160 $ </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>14,414,996 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>The short-term loans are revolving
lines of credit, which are denominated in the functional currency Renminbi
(RMB), were primarily obtained for general working capital. </P>
<P style="MARGIN-LEFT: 5%" align=justify>All overdue loans were extended by the
financial institution. </P>
<P align="center">
F-39</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_20></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>11.</B> </TD>
    <TD>
      <P align=justify><B>NOTES PAYABLE</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Notes payable consisted of the following as of September
      30, 2009 and December 31, 2008:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><I><U>12/31/2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="11%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="11%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><I>Notes to Junan County Construction
      Bank,</I> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>&nbsp; Bank commission charge at 4%, due 1/12/2009 </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="11%">&nbsp;- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="11%">&nbsp;554,405 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>&nbsp; Bank commission charge at 5.8320%, due
      8/13/2009 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>&nbsp; Bank commission charge at 5.8320%, due 8/25/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD bgColor=#e6efff><BR><I>Notes to Junan County Agriculture Bank,</I> </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="11%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="11%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>&nbsp; Bank commission charge at 4%, due 1/16/2009 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="11%">277,202 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD bgColor=#e6efff><BR><I>Loan to Jinan Branch, Shenzhen Development
      Bank,</I> </TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="11%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD>
    <TD width="1%"  bgColor=#e6efff><BR></TD>
    <TD width="11%" bgColor=#e6efff><BR></TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font>&nbsp; Bank charge commission charge at 3.96%, due 2/6/2009 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="11%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="11%">4,376,878 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="11%"
    bgColor=#e6efff>&nbsp;- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="11%"
    bgColor=#e6efff>&nbsp;5,208,485 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>12.</B> </TD>
    <TD>
      <P align=justify><B>ACCRUED EXPENSES AND OTHER PAYABLE</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Accrued expenses and other payables consisted of the
      following as of September 30, 2009 and December 31,
2008:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>12/31/2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Business and other taxes </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;960,758 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;1,979,650 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Accrued staff welfare </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">556,316 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">103,269 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Accrued salaries and wages </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>109,123 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>605,471 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Accrued utility expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">289,246 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">481,678 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Accrued interest expenses </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Accrued transportation expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">314,075 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,103,112 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Other accruals </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,337,486 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Purchases disbursements payables </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">1,221,865 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">6,018,057 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;4,788,869 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;10,291,237 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>13.</B> </TD>
    <TD>
      <P align=justify><B>LONG-TERM DEBTS</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Long-term debts consisted of the following as of
      September 30, 2009 and December 31, 2008:</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="11%"><I><U>12/31/2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff><I>Loan from Agricultural Development
      Luotian Government,</I> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="11%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rates at 0.67% per annum due 12/11/2010 </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="11%">&nbsp;109,688 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="11%">&nbsp;- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rates at 2.10% per annum due
      12/11/2011 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>25,594 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="11%" bgColor=#e6efff>25,532 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD><BR><I>Loan from United Commercial Bank, China Branch</I> </TD>
    <TD width="1%" ><BR></TD>
    <TD align=right width="11%"><BR></TD>
    <TD width="2%" ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD align=right width="11%"><BR></TD>
    <TD width="2%" ><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<font face="Times New Roman">&#9679;</font> Interest rates at 5.494% per annum due
      1/14/2011 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="11%"
    bgColor=#e6efff>186,262 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="11%"
    bgColor=#e6efff>551,443 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    ><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="11%"><BR>321,544 </TD>
    <TD width="2%" ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    ><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="11%"><BR>576,975 </TD>
    <TD width="2%" ><BR></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>14.</B> </TD>
    <TD>
      <P align=justify><B>NON-CONTROLLING INTERESTS</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The non-controlling interests represents the 19.8% equity
      of Shandong Green Foodstuff Co., Ltd. held by the Shandong Economic
      Development Investment Corporation, which is a state-owned
  interest.</P></TD></TR></TABLE>
<p><BR>
</p>
<P align="center">
F-40</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_21></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>15.</B> </TD>
    <TD>
      <P align=justify><B>CAPITALIZATION</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Dating back to May 3, 2007, the Company underwent a
      reverse-merger and a concurrent financing transaction that resulted in
      24,923,178 shares of outstanding common stock that remained unchanged
      until through December 31, 2007. During the course of 2008, several
      holders of warrants issued in connection with the financing transaction
      exercised their rights to purchase shares at the prescribed exercise
      price. The holders of the warrants exercised the right to purchase a total
      of 360,207; however, because the holders did not pay in cash for the
      warrants, 110,752 of those shares were cancelled as consideration in lieu
      of the warrant holders paying in cash. Ultimately, 249,455 of new shares
      were issued to those who exercised their warrant. The total number of
      outstanding shares at September 30, 2009 was 25,177,640.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>16.</B> </TD>
    <TD>
      <P align=justify><B>INCOME TAXES</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>All of the Group&#146;s income before income taxes and related
      tax expenses are from PRC sources. In accordance with the relevant tax
      laws and regulations of PRC, the corporation income tax rate is 33%.
      However, also in accordance with the relevant taxation laws in the PRC,
      some of the subsidiaries of the Group are eligible for tax exemption. In
      particular, from the time that a company has its first profitable tax
      year, the company is exempt from corporate income tax for its first two
      year and is then entitled to a 50% tax reduction for the succeeding three
      year. Actual income tax expenses reported in the consolidated statements
      of income and comprehensive income differ from the amounts computed by
      applying the PRC statutory income tax rate of 33% to income before income
      tax for the period from August 4, 2006 (date of incorporation) to
      September 30, 2009 for the following reasons:
-</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>9/30/2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Income before tax </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;11,439,761 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;10,691,351 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD><BR>Tax at the income tax rate </TD>
    <TD width="1%" ><BR></TD>
    <TD align=right width="12%"><BR>2,859,940 </TD>
    <TD width="2%" ><BR></TD>
    <TD width="1%" ><BR></TD>
    <TD align=right width="12%"><BR>2,672,838 </TD>
    <TD width="2%" ><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Effect of tax exemption granted </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(279,768</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(884,436</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Income tax </TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;2,580,172 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >$</TD>
    <TD align=right width="12%">&nbsp;1,788,402 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify><I><U>Per Share Effect of Tax
Exemption</U> </I></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>12/31/2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Effect of tax exemption granted </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;279,768 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;884,436 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD><BR>Weighted-Average Shares Outstanding </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><BR>25,177,640 </TD>
    <TD width="2%" ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" width="1%"
    ><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><BR>24,923,178 </TD>
    <TD width="2%" ><BR></TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Per share effect </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;0.01 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff>&nbsp;0.04 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>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 &#147;two-year exemption followed by three-year half exemption&#148;
hitherto enjoyed by tax payers. As a result of the new tax law of a standard 25%
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.</P>
<P style="MARGIN-LEFT: 5%" align=justify>Based on the background of each
constituent of our group, the income tax rates applicable to the four
constituents for 2008 and 2009 are depicted in the following table.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left>Income Tax Rate </TD>
    <TD align=center width="15%"><I><U>2008</U></I> </TD>
    <TD align=center width="15%"><I><U>2009</U></I> </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Junan Hongrun </TD>
    <TD align=center width="15%" bgColor=#e6efff>15% </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp; &nbsp;25% </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Luotian Lorain </TD>
    <TD align=center width="15%">15% </TD>
    <TD align=center width="15%">&nbsp; &nbsp;15% </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Beijing Lorain </TD>
    <TD align=center width="15%" bgColor=#e6efff>0% </TD>
    <TD align=center width="15%" bgColor=#e6efff>&nbsp; &nbsp;15% </TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Shandong Lorain </TD>
    <TD align=center width="15%">25% </TD>
    <TD align=center width="15%">&nbsp; &nbsp;25% </TD></TR></TABLE>
<p><BR>
</p>
<P align="center">
F-41</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_22></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>17.</B> </TD>
    <TD>
      <P align=justify><B>SALES BY PRODUCT TYPE</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Sales by categories of product at September 30, 2009 and
      2008 was as follows: -</P></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left><I><U>Category</U></I> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>9/30/2009</U></I> </TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%"><I><U>9/30/2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Chestnut </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;44,852,695 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;39,609,810 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Convenience Food </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">18,099,093 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">16,364,820 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>FCB Food </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>20,858,242 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>19,705,490 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Others </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">31,082 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Total </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>&nbsp;83,841,112 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>&nbsp;75,680,120 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P style="MARGIN-LEFT: 5%" align=justify>Revenue by geography at September 30,
2009 and 2008 was as follows: - </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left><I><U>Country</U></I> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>9/30/2009</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><I><U>9/30/2008</U></I> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Belgium </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;1,203,354 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;1,797,772 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Italy </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">177,153 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Chile </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>426,507 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>China </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">68,980,929 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">59,321,493 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>France </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>723,383 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>868,028 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Germany </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">395,209 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">722,394 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Holland </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>142,385 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Hong Kong </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">342,428 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Japan </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>4,245,059 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>4,374,448 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>India </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">519,401 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Malaysia </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>422,013 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>144,469 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Netherlands </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">508,340 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Saudi Arabia </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>993,350 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>110,292 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Kuwait </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">76,989 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Singapore </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>725,402 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>207,396 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>South Korea </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">4,206,399 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">3,833,565 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Sweden </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>83,606 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Taiwan </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">399,103 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">523,231 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>United Arab Emirates </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>174,323 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>United Kingdom </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">289,426 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,457,012 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>United States of America </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>541,028 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>207,711 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Spain </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">154,655 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">222,979 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD bgColor=#e6efff><BR>Total </TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
    bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff><BR>83,841,112 </TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" width="1%"
    bgColor=#e6efff><BR>$</TD>
    <TD style="BORDER-BOTTOM: #000000 3px double" align=right width="12%"
    bgColor=#e6efff><BR>75,680,120 </TD>
    <TD width="2%"  bgColor=#e6efff><BR></TD></TR></TABLE>
<p><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>18.</B> </TD>
    <TD>
      <P align=justify><B>SUBSEQUENT EVENT</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On October 13, 2009, the Company filed a Definitive
      Information Statement on Schedule 14C with the US Securities and Exchange
      Commission and mailed it to shareholders disclosing that a written consent
      in lieu of an annual meeting had been signed and delivered to the Company
      by the majority shareholder authorizing the following actions: To elect
      six directors to hold office until 2010; to ratify the Company&#146;s
      independent registered public accounting firm
for fiscal year 2009; and to reincorporate the Company in the
      State of Nevada through a redomicile merger. On November 9, 2009, the
      waiting period pursuant to Exchange Act Rule 14c-2 expired, and the first
      two actions became effective. In addition, the Company anticipates closing
      the redomicile merger as promptly as practicable.</P></TD></TR></TABLE>
<p><BR>
</p>
<P align="center">
F-42</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_23></A>
<P align=center><B>AMERICAN LORAIN CORPORATION <BR>NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 <BR>(STATED IN US
DOLLARS)</B> </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On October 28, 2009, the Company filed a Form 8-K with
      the US Securities and Exchange Commission disclosing that the Company
      entered into a Securities Purchase Agreement dated on the same date by and
      between the Company and the accredited investors signatories thereto.
      Pursuant to the agreement the Company agreed to issue to the Investors (i)
      5,011,169 shares (the "Shares") of common stock, par value $0.001 per
      share (the "Common Stock"), (ii) Series A Warrants to purchase 1,753,909
      shares of Common Stock (the "Series A Warrant Shares") and (iii) Series B
      Warrants to purchase 501,115 shares of Common Stock (the "Series B Warrant
      Shares" and, collectively with the Series A Warrant Shares, the "Warrant
      Shares"). The aggregate purchase price is approximately $12 million.
      Pursuant to the Purchase Agreement, Investors have a right to participate
      in up to 25%, in the aggregate, of certain future financing transactions
      conducted by the Company within the next eighteen (18) months.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company entered into a registration rights agreement:
      the Company agreed to prepare and file a registration statement covering
      the resale of the Shares and the Warrant Shares with the SEC.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company is obligated to pay Rodman &amp; Renshaw,
      LLC, as lead placement agent, and FT Global Inc., as co-lead placement
      agent, in the aggregate, a commission equal to 6% of the aggregate
      purchase price.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>19.</B> </TD>
    <TD>
      <P align=justify><B>SHARE BASED COMPENSATION</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On July 27, 2009, the Company&#146;s Board of Directors
      adopted the American Lorain Corporation 2009 Incentive Stock Plan (the
      &#147;Plan&#148;). The Plan provides that the maximum number of shares of the
      Company&#146;s common stock that may be issued under the Plan is 2,500,000
      shares. The Company&#146;s employees, directors, and service providers are
      eligible to participate in the Plan.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>For the nine months ended September 30, 2009, the Company
      recorded a total of $86,636 of shared based compensation expense. The
      Company issued warrants that upon exercise would result in the issuance of
      1,321,385 common shares. These warrants vest over three years, where
      33.33% vest annually. The expense related to the warrants was $31,677. The
      Company also recorded expenses of $48,808 and $6,152 for the expected
      issuance of 30,891 common shares and the already issued 5,000 common
      shares to participants, respectively. The common shares to be and already
      issued to participants vest immediately. The entire stock option
      compensation expenses were recorded as general and administrative expenses
      given the nature of the work contribution of the grantees.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The range of the exercise prices of the stock options
      granted since inception of the plan are shown in the following
    table:</P></TD></TR></TABLE>
<p><BR>
</p>
<DIV>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="50%" border=0>

  <TR vAlign=top>
    <TD width="10%"  >&nbsp;</TD>
    <TD align=right><U>Price Range</U> </TD>
    <TD align=right width="47%"><U>Number of Shares</U> </TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=right bgColor=#e6efff>$0 - $4.99 </TD>
    <TD align=right width="47%" bgColor=#e6efff>1,344,586 shares </TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=right>$5.00 - $9.99 </TD>
    <TD align=right width="47%">0 shares </TD></TR>
  <TR vAlign=top>
    <TD width="10%" >&nbsp;</TD>
    <TD align=right bgColor=#e6efff>$10.00 - $14.99 </TD>
    <TD align=right width="47%" bgColor=#e6efff>0 shares
</TD></TR></TABLE></DIV>
<P style="MARGIN-LEFT: 5%" align=justify>No tax benefit has yet to be accrued or
realized. For the nine months ended September 30, 2009 the Company has yet to
repatriate its earnings, accordingly it has not recognized any deferred tax
assets or liability in regards to benefits derived from the issuance of stock
options.</P>
<P style="MARGIN-LEFT: 5%" align=justify>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:
</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD width="5%"  >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Weighted-average fair value of grants: </TD>
    <TD align=left width="1%"  bgColor=#e6efff>$</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp;0.2877 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Risk-free interest rate: </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2.51% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left bgColor=#e6efff>Expected volatility: </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>7.15% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width="5%" >&nbsp;</TD>
    <TD align=left>Expected life in months: </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">60.00 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
<P align="center">
<br>
<br>
F-43<BR>
</P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">




&nbsp;<A name="page_115"></A><P align="center">
<IMG src="aln112109fs1x115x1.jpg" border=0 width="188" height="78">
</P>
<P align="center">
<B>7,566,863 shares of common stock</B></P>
<P align="center">
<B>PROSPECTUS </B></P>
<P align="center">
[_______], 2009 </P>
<P align="center">
&nbsp;</P>
<P align="center">
&nbsp;</P>
<P align="center">
F-44<BR>
</P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">




<A name="page_116"></A>

<P align="center">
<B>PART II </B></P>
<P align="center">
<B>INFORMATION NOT REQUIRED IN THE PROSPECTUS</B></P>
<P align="justify">
<B>Item 13. Other Expenses of Issuance and Distribution</B><BR>
</P>
<P align="justify">
The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of common stock being registered. All amounts, other than the SEC registration fee, are estimates. We
will pay all these expenses. </P>
<TABLE style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0"><TR valign="top">
	<TD align=left>
&nbsp;
	</TD>
	<TD width="1%" align=right>
&nbsp;</TD>
	<TD width=15% align=right>
<p align="center">
<B>Amount to</B>&nbsp;
<B>be</B>
<B>Paid</B>
	</TD>
</TR>
<TR valign="top">
	<TD align=left bgcolor="#E6EFFF">
 SEC Registration Fee
	</TD>
	<TD width="1%" align=left bgcolor="#E6EFFF">
$</TD>
	<TD width=15% align=right bgcolor="#E6EFFF">
&nbsp;1,372.11
	</TD>
</TR>
<TR valign="top">
	<TD align=left>
 Legal Fees and Expenses
	</TD>
	<TD width="1%" align=left>
&nbsp;</TD>
	<TD width=15% align=right>
60,000
	</TD>
</TR>
<TR valign="top">
	<TD align=left bgcolor="#E6EFFF">
 Accounting Fees and Expenses
	</TD>
	<TD width="1%" align=left bgcolor="#E6EFFF">
&nbsp;</TD>
	<TD width=15% align=right bgcolor="#E6EFFF">
5,000
	</TD>
</TR>
<TR valign="top">
	<TD align=left>
 Blue Sky Fees and Expenses
	</TD>
	<TD width="1%" align=left>
&nbsp;</TD>
	<TD width=15% align=right>
2,325
	</TD>
</TR>
<TR valign="top">
	<TD align=left bgcolor="#E6EFFF">
 Total
	</TD>
	<TD width="1%" align=left bgcolor="#E6EFFF">
$</TD>
	<TD width=15% align=right bgcolor="#E6EFFF">
&nbsp;68,697.11
	</TD>
</TR>
</TABLE>
<p>
<B>Item 14. Indemnification of Directors and Officers</B> </p>
<P align="justify">
Our articles of incorporation provide for the indemnification of our present and prior directors and officers or any person who may have served at our request as a director or officer of another corporation in which we own shares of capital stock or
of which we are a creditor, against expenses actually and necessarily incurred by them in connection with the defense of any actions, suits or proceedings in which they, or any of them, are made parties, or a party, by reason of being or having been
director(s) or officer(s) of us or of such other corporation, in the absence of negligence or misconduct in the performance of their duties. This indemnification policy could result in substantial expenditure by us, which we may be unable to
recoup.</P>
<P align="justify">
Insofar as indemnification by us for liabilities arising under the Exchange Act may be permitted to our directors, officers and controlling persons pursuant to provisions of our articles of incorporation and bylaws, or otherwise, we have been
advised that in the opinion of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of
any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Exchange Act and will be governed by the final adjudication of such issue. </P>
<P align="justify">
At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding
which may result in a claim for such indemnification.</P>
<P align="justify">
<B>Item 15. Recent Sales of Unregistered Securities</B><BR>
</P>
<P align="justify">
On April 5, 2007, we issued 100,000 shares of Series A Voting Convertible Preferred Stock to Halter Financial Investments, L.P. for a consideration of &#36;415,000. Each share of Series A Voting Convertible Preferred Stock was entitled to 428.56
votes and can be converted into 428.56 shares of our common stock. The foregoing transfers were made in reliance upon exemptions provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering and
Regulation D promulgated thereunder. </P>
<P align="justify">
On May 3, 2007, we issued 697,633 shares of our Series B Voting Convertible Preferred Stock to stockholders of ILH. The total consideration for these shares of our Series B Voting Convertible Preferred Stock was 5,099,503 shares of common stock of
ILH, which constituted all the issued and outstanding capital stock of ILH. We did not receive any cash consideration in connection with the share exchange. The number of our shares issued to the stockholders of ILH was determined based on an
arms-length negotiation. The issuance of our shares to these individuals was made in reliance upon exemptions from the registration requirements of the Securities Act pursuant to Regulation S thereunder. </P>
<P align="justify">
On May 3, 2007, we also completed a private placement pursuant to which we issued and sold to certain accredited investors 604,674 shares of our Series B Voting Convertible Preferred Stock for approximately &#36;19.8 million pursuant to a
Securities
Purchase Agreement dated May 3, 2007. The issuance of our shares to these investors was made in reliance on the exemption provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering and
Regulation D promulgated thereunder. </P>
<P align="center">
F-45<BR>
</P>

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<P align="justify">
On October 28, 2009, we entered into a Securities Purchase Agreement pursuant to which we agreed to issue to the investors signatories thereto 5,011,169 shares of common stock, Series A Warrants to purchase 1,753,909 shares of Common Stock and
Series B Warrants to purchase 501,115 shares of Common Stock. In addition, Series A Warrants to purchase an aggregate of 300,671 shares of Common Stock were issued to Redman, FT Global and their employees. The aggregate purchase price was
approximately &#36;12 million. </P>
<P align="justify">
The initial exercise price of each of the Series A Warrants and Series B Warrants is &#36;3.70 per share, subject to certain adjustments set forth therein, including adjustments in the event of certain future financing transactions conducted by the
Company or in the event of a stock dividend or stock split. The Series A Warrants become exercisable six months from the date of issuance and have a term of five years thereafter. The Series B Warrants become exercisable six months from the date of
issuance and have a term of 30 months thereafter. The issuance of our shares to these investors and brokers was made in reliance on the exemption provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a
public offering and Regulation D promulgated thereunder. </P>
<P align="justify">
In instances described above where we issued securities in reliance upon Regulation D, we relied upon Rule 506 of Regulation D of the Securities Act. These stockholders who received the securities in such instances made representations that (a) the
stockholder is acquiring the securities for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the
meaning of the Securities Act, (b) the stockholder agrees not to sell or otherwise transfer the purchased shares unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions from such
registration are available, (c) the stockholder has knowledge and experience in financial and business matters such that he, she or it is capable of evaluating the merits and risks of an investment in us, (d) the stockholder had access to all of our
documents, records, and books pertaining to the investment and was provided the opportunity to ask questions and receive answers regarding the terms and conditions of the offering and to obtain any additional information which we possessed or were
able to acquire without unreasonable effort and expense, and (e) the stockholder has no need for the liquidity in its investment in us and could afford the complete loss of such investment. Management made the determination that the investors in
instances where we relied on Regulation D are accredited investors (as defined in Regulation D) based upon management&#146;s inquiry into their sophistication and net worth. In addition, there was no general solicitation or advertising for
securities issued in reliance upon Regulation D. </P>
<P align="justify">
In instances described above where we indicate that we relied upon Section 4(2) of the Securities Act in issuing securities, our reliance was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by
us which did not involve a public offering; (b) there were only a limited number of offerees; (c) there were no subsequent or contemporaneous public offerings of the securities by us; (d) the securities were not broken down into smaller
denominations; and (e) the negotiations for the sale of the stock took place directly between the offeree and us. </P>
<P align="justify">
<B>Item 16. Exhibits and Financial Statement Schedules<br>
</B><BR>
The following exhibits are included as part of this Form S-1.<BR>
</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<b>
<U>Exhibit No.</U> </b> 	</TD>
	<TD>
<B>Description</B></TD>
</TR>
<TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
&nbsp;</TD>
	<TD bgcolor="#E6EFFF">
&nbsp;</TD>
</TR>
<TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
3.1 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">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&#146;s current report on Form 8-K filed on May 9, 2007.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
3.2 	</TD>
	<TD>
<P align="justify">Bylaws of the registrant, adopted on March 31, 2000. Incorporated by reference to Exhibit 3.2 to the registrant&#146;s registration statement on Form 10SB12G filed on October 19, 2001,</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
4.1 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">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&#146;s
current report on Form 8-K filed on May 9, 2007 in commission file number 0- 31619. .</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
4.2 	</TD>
	<TD>
<P align="justify">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&#146;s current
report on Form 8-K filed on May 9, 2007.</P>
	</TD>
</TR>
</TABLE>
<P align="center">
F-46</P>

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<A name="page_118"></A>

<P align="justify">
&nbsp;<BR>
</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<b>
<U>Exhibit No.</U></b></TD>
	<TD>
<B>Description</B></TD>
</TR>
<TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
&nbsp;</TD>
	<TD bgcolor="#E6EFFF">
&nbsp;</TD>
</TR>
<TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
4.3 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Form of Series A Warrant. Incorporated by reference to Exhibit 4.1 to the registrant&#146;s current report on Form 8-K filed on October 29, 2009.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
4.4 	</TD>
	<TD>
<P align="justify">Form of Series B Warrant. Incorporated by reference to Exhibit 4.2 to the registrant&#146;s current report on Form 8-K filed on October 29, 2009.</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
4.5 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Registration Rights Agreement, dated as of October 28, 2009, by and between American Lorain Corporation and the selling stockholders. Incorporated by reference to Exhibit 4.3 to the registrant&#146;s current report on Form 8-K
filed on October 29, 2009.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
5.1 	</TD>
	<TD>
<P align="justify">Opinion of Holland &amp; Hart LLP**</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
10.1 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Employment Agreement, effective September 22, 2008, by and between American Lorain Corporation and Yilun Jin. Incorporated by reference to Exhibit 10.1 to the registrant's current report on Form 8-K filed on September 18, 2008.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
10.2 	</TD>
	<TD>
<P align="justify">Securities Purchase Agreement, dated as of October 28, 2009, by and between American Lorain Corporation and the selling stockholders. Incorporated by reference to Exhibit 10.1 to the registrant&#146;s current report on Form 8-K
filed on October 29, 2009.</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
14 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Business Ethics Policy and Code of Conduct, adopted on April 30, 2007. Incorporated by reference to Exhibit 14 to the registrant&#146;s current report on Form 8-K filed on May 9, 2007.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
21 	</TD>
	<TD>
<P align="justify">List of subsidiaries of the registrant. Incorporated by reference to Exhibit 21 to the registrant&#146;s current report on Form 8-K filed on May 9, 2007.</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
23.1 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Consent of Holland &amp; Hart LLP, included in Exhibit 5.1.**</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
23.2 	</TD>
	<TD>
<P align="justify">Consent of Samuel H. Wong &amp; Co., LLP, an independent registered accounting firm.*</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
24 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Power of Attorney (set forth on the signature page).*</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD>
<P align="justify">* Filed herewith.</P>
	</TD>
</TR>
<TR>
<TD width=5%>&nbsp;</TD>	<TD>
** To be filed by amendment</TD>
</TR>
</TABLE>
<P align="justify">
<B>Item 17. Undertakings </B></P>
<P align="justify">
The undersigned registrant hereby undertakes: </P>
<P align="justify">
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: </P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
&nbsp;</TD>
	<TD width=5% valign=top>
(a) 	</TD>
	<TD>
<P align="justify">To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
&nbsp;</TD>
	<TD width=5% valign=top>
(b) 	</TD>
	<TD>
<P align="justify">To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the &#147;Calculation of Registration
Fee&#148; table in the effective registration statement; and </P>
	</TD>
</TR>
<TR>
	<TD width=5% valign=top>
&nbsp;</TD>
	<TD width=5% valign=top>
&nbsp;</TD>
	<TD>
&nbsp;</TD>
</TR>
<TR>
	<TD width=5% valign=top>
&nbsp;</TD>
	<TD width=5% valign=top>
(c)</TD>
	<TD>
To include material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
	</TD>
</TR>
</TABLE>
<P align="justify">
(2) That, for the purpose of determining liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof. </P>
<P align="justify">
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. </P>
<P align="justify">
(4) Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it is first used after effectiveness. <I>Provided, however, </I>that no statement made in a registration statement or prospectus that is part of the registration statement or made in
a document
incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.</P>
<P align="center">
F-47<BR>
</P>

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<A name="page_119"></A>

<P align="justify">
(5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. </P>
<P align="center">
F-48<BR>
</P>

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<P align="center">
<B>SIGNATURES</B><BR>
</P>
<P align="justify" style="text-indent: 30pt">
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Shandong,
on the 27<SUP>th</SUP> day of November, 2009. </P>
<P align="justify" style="margin-left: 50%">
<B>AMERICAN LORAIN CORPORATION</B><BR>
</P>
<TABLE style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="1401" border="0"><TR valign="top">
	<TD align=left width="700" style="border-right-style: none; border-right-width: medium">
<p align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; :
	</TD>
	<TD width=701 align=left style="border-bottom: medium none #000000;; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium">
By<u><B>&nbsp; /</B>s/ Si Chen&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</u>
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="700" style="border-right-style: none; border-right-width: medium">
&nbsp;
	</TD>
	<TD width=701 align=left style="border-style: none; border-width: medium">
<p style="margin-left: 20pt">Si Chen
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="700" style="border-right-style: none; border-right-width: medium">
&nbsp;
	</TD>
	<TD width=701 align=left style="border-style: none; border-width: medium">
<p style="margin-left: 20pt">
<I>Chief Executive Officer</I>
	</TD>
</TR>
</TABLE>
<P align="justify" style="text-indent: 30pt">
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Each person whose signature appears below
constitutes and appoints Si Chen and Yilun Jin, and each of them individually, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. </P>
<TABLE style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0"><TR valign="top">
	<TD align=left style="border-bottom: 1px solid #000000;" width="467">
 <p align="center"><B>Signature</B>
	</TD>
	<TD width=467 align=left style="border-bottom: 1px solid #000000;">
 <p align="center"><B>Title</B>
	</TD>
	<TD width=467 align=right style="border-bottom: 1px solid #000000;">
<B>Date</B>
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
<U>/s/ Si Chen&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </U>&nbsp;</TD>
	<TD width=467 align=left>
Chairman, Director and Chief Executive Officer
	</TD>
	<TD width=467 align=right>
November 27, 2009
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
Mr. Si Chen
	</TD>
	<TD width=467 align=left>
(Principal Executive Officer)
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
<U>/s/ Yilun Jin&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </U>&nbsp;</TD>
	<TD width=467 align=left>
Chief Financial Officer
	</TD>
	<TD width=467 align=right>
November 27, 2009
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
Mr. Yilun Jin
	</TD>
	<TD width=467 align=left>
(Principal Financial and
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
&nbsp;
	</TD>
	<TD width=467 align=left>
Accounting Officer)
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
<U>/s/ Yundong Lu&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </U>&nbsp;</TD>
	<TD width=467 align=left>
Chief Operating Officer and Director
	</TD>
	<TD width=467 align=right>
November 27, 2009
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
Mr. Yundong Lu
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
<U>/s/ Delkai Yin&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	</TD>
	<TD width=467 align=left>
Director
	</TD>
	<TD width=467 align=right>
November 27, 2009
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
Mr. Delkai Yin
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
<U>/s/ Yongjun Li&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
	</TD>
	<TD width=467 align=left>
Director
	</TD>
	<TD width=467 align=right>
November 27, 2009
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
Mr. Yongjun Li
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
<U>/s/ Maoquan Wei&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;&nbsp;
	</TD>
	<TD width=467 align=left>
Director
	</TD>
	<TD width=467 align=right>
November 27, 2009
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
Mr. Maoquan Wei
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR>
	<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
<TD width="467">
&nbsp;
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
<U>/s/ Tad M. Ballantyne&nbsp;&nbsp;&nbsp; </U>&nbsp;</TD>
	<TD width=467 align=left>
Director
	</TD>
	<TD width=467 align=right>
November 27, 2009
	</TD>
</TR>
<TR valign="top">
	<TD align=left width="467">
Tad M. Ballantyne
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
	<TD width=467 align=left>
&nbsp;
	</TD>
</TR>
</TABLE>
<P align="center">
F-49</P>

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<A name="page_121"></A>

<P align="center">
<B>EXHIBIT INDEX</B><BR>
<BR>
</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<b>
<U>Exhibit No.</U></b></TD>
	<TD>
<B>Description</B></TD>
</TR>
<TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
&nbsp;</TD>
	<TD bgcolor="#E6EFFF">
&nbsp;</TD>
</TR>
<TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
3.1 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">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&#146;s current report on Form 8-K filed on May 9, 2007.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
3.2 	</TD>
	<TD>
<P align="justify">Bylaws of the registrant, adopted on March 31, 2000. Incorporated by reference to Exhibit 3.2 to the registrant&#146;s registration statement on Form 10SB12G filed on October 19, 2001.</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
4.1 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">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&#146;s
current report on Form 8-K filed on May 9, 2007 in commission file number 0- 31619.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
4.2 	</TD>
	<TD>
<P align="justify">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&#146;s current
report on Form 8-K filed on May 9, 2007.</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
4.3 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Form of Series A Warrant. Incorporated by reference to Exhibit 4.1 to the registrant&#146;s current report on Form 8-K filed on October 29, 2009.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
4.4 	</TD>
	<TD>
<P align="justify">Form of Series B Warrant. Incorporated by reference to Exhibit 4.2 to the registrant&#146;s current report on Form 8-K filed on October 29, 2009.</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
4.5 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Registration Rights Agreement, dated as of October 28, 2009. Incorporated by reference to Exhibit 4.3 to the registrant&#146;s current report on Form 8-K filed on October 29, 2009.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
5.1 	</TD>
	<TD>
<P align="justify">Opinion of Holland &amp; Hart LLP**</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
10.1 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Employment Agreement, effective September 22, 2008, by and between American Lorain Corporation and Yilun Jin. Incorporated by reference to Exhibit 10.1 to the registrant's current report on Form 8-K filed on September 18, 2008.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
14 	</TD>
	<TD>
<P align="justify">Business Ethics Policy and Code of Conduct, adopted on April 30, 2007. Incorporated by reference to Exhibit 14 to the registrant&#146;s current report on Form 8-K filed on May 9, 2007.</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
10.2 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Securities Purchase Agreement dated as of October 28, 2009, by and between American Loan Corporation and the Selling Stockholders. Incorporated by reference to Exhibit 10.1 to the registrant&#146;s current report on Form 8-K filed
on October 29, 2009.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
21 	</TD>
	<TD>
<P align="justify">List of subsidiaries of the registrant. Incorporated by reference to Exhibit 21 to the registrant&#146;s current report on Form 8-K filed on May 9, 2007.</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
23.1 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Consent of Holland &amp; Hart LLP, included in Exhibit 5.1.**</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
23.2 	</TD>
	<TD>
<P align="justify">Consent of Samuel H. Wong &amp; Co., LLP, an independent registered accounting firm.*</P>
	</TD>
</TR>
<TR><TD bgcolor="#E6EFFF">&nbsp;</TD><TD bgcolor="#E6EFFF">&nbsp;</TD></TR><TR>
	<TD width=5% valign=top bgcolor="#E6EFFF">
24 	</TD>
	<TD bgcolor="#E6EFFF">
<P align="justify">Power of Attorney (set forth on the signature page).</P>
	</TD>
</TR>
</TABLE>
<P align="justify">
* Filed herewith.<br>
** To be filed by amendment<BR>
</P>
<P align="center">
F-53<BR>
</P>
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</HTML>
[{"type": "S-1", "sequence": "1", "filename": "aln112109fs1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1131452}]
{"company-data": {"conformed-name": "American Lorain CORP", "cik": "0001117057", "assigned-sic": "2030", "irs-number": "870430320", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-163395", "film-number": "091210446"}, "business-address": {"street1": "BEIHUAN ROAD", "street2": "JUNAN COUNTY", "city": "LINYI, SHANDONG", "state": "F4", "zip": "276600", "phone": "(86) 539-7318818"}, "mail-address": {"street1": "BEIHUAN ROAD", "street2": "JUNAN COUNTY", "city": "LINYI, SHANDONG", "state": "F4", "zip": "276600"}, "former-company": [{"former-conformed-name": "American CORP", "date-changed": "20070806"}, {"former-conformed-name": "American Lorain CORP", "date-changed": "20070801"}, {"former-conformed-name": "MILLENNIUM QUEST INC", "date-changed": "20000622"}]}
American Lorain Corp: Form S-1- Prepared by TNT Filings Inc.
As filed with the Securities and Exchange Commission on November 27, 2009
Registration No. 333-____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERICAN LORAIN CORPORATION
(Exact name of registrant as specified in its charter)
Nevada
2068
87-0430320
(State or other jurisdiction of
(Primary Standard Industrial
(I.R.S. Employer
incorporation or organization)
Classification Code Number)
Identification No.)
Beihuan Road
Junan County S
handong, China 276600
(+86) 539-7317959
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
United Corporate Services, Inc.
202 South Minnesota Street
Carson City, NV 89703
(877) 734-8300
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Peter G. Smith, Esq.
Bill Huo, Esq.
Ari Edelman, Esq.
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of Americas
New York, New York 10036
(212) 715-9100
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ x ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of "large accelerated filer,"
"accelerated filer" and "smaller reporting company" in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
£
Accelerated filer
£
Non-accelerated filer
£
Smaller reporting company
Q
CALCULATION OF REGISTRTION FEE
Title of each class of
Proposed maximum
Proposed maximum
securities to be offered
Amount of shares to be
      registered
(1)
offering price per share
aggregate offering price
Amount of registration fee
Common stock, par
value $0.001 per
share
5,011,169
$3.02
(2)
$15,133,730.38
$844.46
Common stock,
par value $0.001 per
share
2,555,695
(3)
$3.70
(4)
$9,456,067.80
$527.65
Total
7,566,863
$24,589,798.18
$1,372.11
(1) In accordance with Rule 416(a), the Registrant is also
registering hereunder an indeterminate number of shares that may be issued and
resold resulting from stock splits, stock dividends or similar transactions.
(2) Estimated pursuant to Rule 457(c) of the Securities Act of
1933 solely for the purpose of computing the amount of the registration fee
based on the average of the high and low prices reported on the NYSE AMEX on
November 20, 2009.
(3) Represents shares of the Registrant's common stock being
registered for resale that have been issued to the selling stockholders.
(4) Calculated in accordance with Rule 457(g) based upon the
price at which the warrants may be exercised.
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall hereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
PROSPECTUS
Subject to completion, dated November 27,
2009
AMERICAN LORAIN CORPORATION
7,566,863 Shares of
Common Stock
This prospectus relates to an aggregate of 7,566,863 shares of
common stock, par value $0.001 per share, of American Lorain Corporation, a
Nevada corporation, that may be sold from time to time by the selling
stockholders named in this prospectus, which includes:
5,011,169 shares of our common stock held by the selling stockholders
  named in this prospectus;
2,054,580 shares of our common stock issuable upon the exercise of Series
  A warrants held by the selling stockholders named in this prospectus; and
501,115 shares of our common stock issuable upon the exercise of Series B
  warrants held by the selling stockholders named in this prospectus.
We will not receive any proceeds from the sales of any shares
of common stock by the selling stockholders. We may, however, receive proceeds
of up to $3.70 per share from the exercise of warrants held by the selling
stockholders if and when such warrants are exercised, which would result in
proceeds to us of approximately $9.5 million in the event that all such warrants
are exercised in exchange for cash.
Our common stock is quoted on NYSE AMEX under the symbol "ALN".
The closing price for our common stock on November 23, 2009 was $2.80 per share,
as reported on NYSE AMEX.
Investing in our common stock involves a high degree of
risk. See the section entitled "Risk Factors" beginning on page 5 to read about
factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The information in this prospectus is not complete and may
be changed. No person may sell the securities described in this document until
the registration statement filed with the Securities and Exchange Commission is
declared effective. This prospectus is not an offer to sell these securities and
no person named in this prospectus is soliciting offers to buy these securities
in any state where the offer or sale is not permitted.
The date of this prospectus is            , 2009
TABLE OF CONTENTS
Prospectus Summary
1
Risk Factors
5
Cautionary Note Regarding Forward-Looking Statements
14
Use of Proceeds
14
Dividend Policy
14
Market for Our
      Common Stock
15
Dilution
15
Management's
      Discussion and Analysis of Financial Condition and Results of Operations
16
Our Business
33
Management
46
Executive Compensation
50
Certain
      Relationships and Related Transactions
51
Change in Accountants
52
Selling
      Stockholders
53
Security Ownership of Certain Beneficial Owners and
      Management
57
Description of
      Capital Stock
58
Shares Eligible for Future Sale
59
Plan of
      Distribution
60
Legal Matters
61
Experts
61
Where You Can Find More Information
62
Index to Financial
      Statements
F-1
PROSPECTUS SUMMARY
The following summary highlights some of the information contained in this prospectus, and it may not contain all of the information that is important to you in making an investment decision. You should read the following summary together with
the more detailed information regarding our company and the common stock being sold by the selling stockholders in this offering, including the "Risk Factors" and our consolidated financial statements and related notes, included elsewhere
in this prospectus.
Conventions
In this prospectus, unless indicated otherwise,
"We," "us" and "our" refer to the combined business of ALC, ILH and their direct and indirect Chinese operating subsidiaries.
"ALC" refers to American Lorain Corporation, a Nevada corporation.
"ILH" refers to International Lorain Holding, Inc., a Cayman Islands company that is wholly-owned by ALC.
"Junan Hongrun" refers to Junan Hongrun Foodstuff Co., Ltd., a subsidiary of ILH.
"Luotian Lorain" refers to Luotian Green Foodstuff Co., Ltd., a subsidiary of ILH.
"Beijing Lorain" refers to Beijing Green Foodstuff Co., Ltd., a subsidiary of ILH.
"Shandong Lorain" refers to Shandong Green Foodstuff Co., Ltd., a subsidiary of ILH.
"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.
The Company
Overview of Our Business
We are an integrated food manufacturing company with headquarters in Shandong Province, China. We develop, manufacture and sell the following types of food products:
chestnut products;
convenience foods (including ready-to-cook, or RTC, meals, ready-to-eat, or RTE, meals and meals ready- to-eat, or MRE); and
frozen, canned, and bulk food.
We conduct our production activities in China. Our products are sold in 26 provinces and administrative regions in China and 42 foreign countries. We derive most of our revenues from sales in China, Japan and South Korea. In 2009, our primary
strategy has been to focus on increasing sales of our chestnut products in the domestic Chinese market and increasing the number of domestic sales to third party distributors. Our primary strategy for 2010 is to further expand our brand equity in
the Chinese market for our chestnut products and to increase sales of our
convenience food products in the Chinese market. 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.
Organizational Structure
ALC is a Nevada corporation that was incorporated in Delaware on February 4, 1986 and was formerly known as Millennium Quest, Inc. On May 3, 2007, ALC completed a recapitalization, or reverse merger, with ILH. Prior to such date, ALC did not engage
in active business operations other than to search for a potential acquisition target. Effective November 16, 2009, ALC reincorporated in Nevada from Delaware.
ALC wholly owns ILH. ILH wholly owns two Chinese operating subsidiaries, Luotian Lorain and Junan Hongrun, directly.  In addition, together with its subsidiary Junan Hongrun, ILH wholly owns Beijing Lorain and owns approximately 80% of Shandong
Lorain (Shandong Economic Development Investment Co. Ltd. owns the remaining 20% interest). We sometimes refer to our four Chinese operating subsidiaries throughout this prospectus as the Lorain Group Companies. Below is an organizational chart of
ALC, ILH and the Lorain Group Companies:
Risk Factors
Our ability to successfully operate our business and achieve our goals and strategies is subject to numerous risks as discussed more fully below in the section entitled "Risk Factors," including, but not limited to, the following:
2
Potential inability to secure necessary raw materials in sufficient
  quantities, and fluctuations in raw material prices;
Potential inability to maintain sufficient levels of working capital;
The current global economic and financial crisis;
Credit risk with respect to our accounts receivable;
Potential for product liability and product recall claims, and potential
  litigation arising from these claims;
Increased costs associated with increasing levels of governmental
  regulations;
Inability to effectively manage rapid growth;
Increased competition;
Increases in energy costs;
Potential loss of key members of our senior management; and
Potential failure to have complied with PRC regulations regarding our
  restructuring.
Any of the above risks could materially and adversely affect
our business, financial position and results of operations. An investment in our
common stock involves risks. You should read and consider the information set
forth below in the section entitled "Risk Factors" and all other information set
forth in this prospectus before investing in our common stock.
Corporate Information
The address of our principal executive office in China is
Beihuan Road, Junan County, Shandong, China 276600, and our telephone number is
(+86) 539-7317959. Our address for correspondence in the United States is c/o
Yinglee Tseng, 4401 Prudence St., Baltimore, MD 21226 and our telephone number
in the United States is 443-552-4796. We maintain a website at
http://www.loraingroup.com and http://americanlorain.com, which contain
information about the Lorain Group Companies. However, no information contained
on our websites shall be deemed to be a part of this prospectus.
Summary of the Offering
Common stock offered by selling stockholders
An aggregate of 7,566,863 shares of our common stock, par
      value $0.001 per share, consisting of 5,011,169 shares of our common stock
      owned by the selling stockholders and an aggregate of 2,555,695 shares of
      our common stock issuable upon the exercise of certain warrants held by
      the selling stockholders. This number represents in the aggregate
      approximately 20.4% of the outstanding shares of our common stock as of
      the date of this prospectus
(1)
Common stock to be outstanding immediately after this
      offering
30,239,985 shares
(2)
Proceeds to us
We will not receive any of the proceeds from the sale of
      shares of our common stock by the selling stockholders. However, we may
      receive up to $3.70 per share from the exercise of warrants held by the
      selling stockholders if and when such warrants are exercised, which would
      result in proceeds to us of approximately $9.5 million if all warrants are
      exercised in exchange for cash. We will use any of such proceeds for
      general working capital purposes.
3
(1)
Based on 30,239,985 shares of common stock outstanding as
      of November 20, 2009.
(2)
Does not include 4,082,892 shares of our common stock
      issuable upon the exercise of outstanding warrants and 1,344,586 shares of
      our common stock issuable upon the exercise of outstanding stock
      options.
4
RISK FACTORS
The shares of our common stock being offered for resale by the selling stockholders are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose their entire investment in our
common stock. Before purchasing any of the shares of our common stock, you should carefully consider the following factors relating to our business and prospects. If any of the following risks actually occur, our business, financial condition or
operating results may suffer, the trading price of our common stock could decline, and you may lose all or part of your investment. You should also refer to the other information about us contained in this prospectus, including our consolidated
financial statements and related notes.
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 2009, the cost of our raw materials increased, as
compared to 2008, from $36.9 million to $65.0 million, representing an increase of approximately 76%. However, during the nine months ended September 30, 2009, the cost of our raw materials increased from $27.1 million to $27.2
million, representing an increase of approximately 0.4%, as compared to the nine months ended September 30, 2008. 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 2007 and 2008 was approximately $787 per metric ton and $727 per metric ton, respectively, excluding value added taxes. The average price that we paid for chestnuts in the nine months ended
September 30, 2009 was approximately $774 per metric ton, 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.
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.
We have never had a product recall in the past, but we have had product liability claims brought against us 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.
5
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 by 377% from $27,735,833 in 2004 to $132,360,317 in 2008.  The number of product types we sold increased from approximately 100 in 2004 to approximately 234 in 2008. During
the nine months ended September 30, 2009, our sales were $83,841,112. The number of product types we sold during the nine months ended September 30, 2009 was 236. 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, that we incur in developing such markets.
The acquisition of other businesses could pose risks to our profitability.
We may try to grow through the acquisition of other businesses in the future. Any such acquisition could result in accounting charges, potentially dilutive issuances of equity securities, or 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 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.
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;
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protective measures, including export duties and quotas and customs tariffs; and
currency exchange rate fluctuations.
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 43%, 31% and 25% of our total
revenues in 2006, 2007 and 2008, respectively. Sales to our five largest customers accounted for approximately 16.6% of our total revenues in the nine months ended September 30, 2009. 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 or our reputation.
In 2008, we sold our products through over 30 distribution service providers. These services may be suspended in the future or may 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 or 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 for such damages.
Failure of the market to accept our new products, may cause us to lose our competitive position in the food industry.
We introduced 20 new products in 2007, 52 new products in 2008 and 18 new products during the nine months ended September 30, 2009. We plan to introduce approximately 25 new products in 2010. 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 have introduced, and intend to continue 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 members of our 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 members of our 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 our competitors may 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 or imitation of our products by others. However, counterfeiting or imitation of our products may occur in the future and we may not be able to detect it or deal with it effectively. Any occurrence
of counterfeiting or imitation by others could impact negatively upon our reputation, particularly if the counterfeit or imitation products cause sickness or injury to consumers. In addition, we may 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.
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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.
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. In 2008, we paid for approximately 10% of our raw materials on credit. In 2008, we funded approximately 60% 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 40% of our working capital requirements from the proceeds of short-term loans from Chinese banks. We have continued this trend in 2009 and 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 2008 was approximately $24 million. Our average loan balance from short-term bank loans during the nine months ended
September 30, 2009 was approximately $31 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 and 2008, we funded approximately $3.8 million, in the aggregate, of our working capital requirements from the proceeds of a private placement transaction conducted in May 2007. On November 3, 2009, we raised an
additional $12 million in a private placement transaction with the selling stockholders. In the event that we need to raise additional equity in the future, 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 from our recent private placement transaction and current and expected short-term bank loans will be adequate to satisfy our liquidity requirements for the
next twelve months.  However, if available liquidity is not sufficient to meet our operating and loan obligations as they come due, our plans include considering pursuing alternative financing arrangements or further reducing expenditures as
necessary to meet our cash requirements. However, there is no assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity.  Currently, the capital markets for small
capitalization companies are extremely difficult and banking institutions have become stringent in their lending requirements. Accordingly, we cannot be sure of the availability or terms of any third party financing. If we are unable to raise
additional financing, 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.
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The current economic and financial crisis may have a material adverse effect on our results.
The crisis of the financial and credit markets since the second half of 2008 has led to a severe economic recession worldwide, and the outlook for 2010 is uncertain. A continuation or worsening of unfavorable economic conditions, including the
ongoing credit and capital markets disruptions, could have an adverse impact on our business, operating results or financial condition in a number of ways. For example, we may experience declines in revenues, profitability and cash flows as a result
of reduced orders, delays in receiving orders, delays or defaults in payment or other factors caused by the economic problems of our customers and prospective customers. We may experience supply chain delays, disruptions or other problems associated
with financial constraints faced by our suppliers and subcontractors. In addition, changes and volatility in the equity, credit and foreign exchange markets and in the competitive landscape make it increasingly difficult for us to predict our
revenues and earnings into the future.
We are subject to credit risk in respect of account receivables.
In 2008 and during the nine months ended September 30, 2009, some of our customers, including some of our large supermarket customers, delayed their payments for up to 60 to 90 days beyond their term. Our cash flow suffered while waiting for such
payments. Consequently, at times we had to delay payments to our suppliers and to postpone business expansion as a result of these delayed payments. In 2008 and during the nine months ended September 30, 2009, we shortened credit terms for many of
our international and domestic distributors from between 30 and 180 days to between 30 and 60 days. 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 January 1, 2008, the new corporate income tax law of the PRC's National
People's Congress became effective. 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.
We have recently entered into a financing agreement, and may enter into additional financing agreements, which may have a dilutive effect to our earnings per share and the rights of certain stockholders.
On November 3, 2009, we consummated a private placement transaction pursuant to which we issued an aggregate of 7,566,863 shares of our common stock, including an aggregate of 2,555,695 shares of common stock issuable upon the exercise of warrants.
In connection therewith, we agreed to register such shares with the Securities and Exchange Commission, or the SEC. In addition, we may issue shares and provide investors with registration rights in the future. Future financings could result in
significant dilution to our earnings per share or the issuance of
securities with rights superior to our current outstanding securities, including registration rights granted to investors who may purchase our equity or debt securities in the future.
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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 reporting 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 required to comply with this requirement. In addition, such rules require that a reporting company's independent registered public accounting firm attest to the effectiveness of such
internal controls. However, we are not yet subject to the attestation report requirement. We can provide no assurance that we will comply with all of the requirements imposed thereby at such time that we may be required to comply with such rules in
the future. Further, we may not 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
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, traditionally, state-owned enterprises have constituted 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, 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 necessarily relied upon by decision-making bodies. 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, many of 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 operating subsidiaries, officers and directors.
Inflation in China may inhibit our ability to conduct business profitably in China.
In recent years, the Chinese economy has experienced periods of rapid expansion. During the past ten years, the rate of inflation in China has been as high as 5.8% and as low as -1.4% . These factors have led to the adoption by the Chinese
government, from time to time, of various corrective measures designed to limit inflation. High inflation in the future may cause the Chinese government to impose controls on credit or prices, or to take other actions which could inhibit economic
activity in China, and thereby harm the market for our products.
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Likewise, negative inflation could have an unfavorable effect on our business profitability in China. Negative inflation may bring about a period in which consumers are reluctant to spend money, as consumers anticipate lower prices for products in
the future. In the event of negative inflation, the Chinese government may impose controls on credit or prices, or take other actions which could inhibit economic activity, harming the market for our products.
Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.
The majority of our revenues are settled in RMB and U.S. dollars, and any future restrictions on currency exchanges may limit our ability to use revenue generated in RMB 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 RMB 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 RMB 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 RMB 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, which are 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.
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.
Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese Renminbi into foreign currencies and, if Chinese Renminbi were to decline in value, reducing our
revenue in U.S. dollar terms.
Our reporting currency is the U.S. dollar and our operations in China use their local currency as their functional currencies. Substantially all of our revenue and expenses are in Chinese Renminbi. We are subject to the effects of exchange rate
fluctuations with respect to any of these currencies. For example, the value of the Renminbi depends to a large extent on Chinese government policies and China's domestic and international economic and political developments, as well as supply
and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to the U.S. dollar had generally been stable and the Renminbi had appreciated slightly against the U.S. dollar. However, on July 21, 2005, the
Chinese government changed its policy of pegging the value of Chinese Renminbi to the U.S. dollar. Under the new policy, Chinese Renminbi may fluctuate within a narrow and managed band against a basket of certain foreign currencies. As a result of
this policy change, Chinese Renminbi appreciated approximately 2.5% against the U.S. dollar in 2005 and 3.3% in 2006. It is possible that the Chinese government could adopt a more flexible currency policy, which could result in more significant
fluctuation of Chinese Renminbi against the U.S. dollar. We can offer no assurance that Chinese Renminbi will be stable against the U.S. dollar or any other foreign currency.
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The income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies
denominated transactions results in reduced revenue, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency
denominated transactions results in increased revenue, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries
into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries' financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a
component of other comprehensive income. In addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity's functional currency. Changes in the functional currency value of these assets and
liabilities create fluctuations that will lead to a transaction gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The availability and effectiveness of
any hedging transaction may be limited and we may not be able to successfully hedge our exchange rate risks.
Although Chinese governmental policies were introduced in 1996 to allow the convertibility of Chinese Renminbi into foreign currency for current account items, conversion of Chinese Renminbi into foreign exchange for capital items, such as foreign
direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange, or SAFE, which is under the authority of the People's Bank of China. These approvals, however, do not guarantee the availability of
foreign currency conversion. We cannot be sure that we will be able to obtain all required conversion approvals for our operations or that Chinese regulatory authorities will not impose greater restrictions on the convertibility of Chinese Renminbi
in the future. Because a significant amount of our future revenue may be in the form of Chinese Renminbi, our inability to obtain the requisite approvals or any future restrictions on currency exchanges could limit our ability to utilize revenue
generated in Chinese Renminbi to fund our business activities outside of China, or to repay foreign currency obligations, including our debt obligations, which would have a material adverse effect on our financial condition and results of operations
Risks Related To the Market For Our Common Stock and this Offering
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 53.6% 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.
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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 could thereby 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.
When the registration statement of which this prospectus forms a part becomes effective, there will be a significant number of shares of our common stock eligible for sale, which could depress the market price of our stock.
Following the effectiveness of the registration statement of which this prospectus forms a part, a large number of shares of our common stock which are currently restricted will be eligible for resale to the public market without restriction, which
could harm the market price of our stock. Furthermore, the selling stockholders may be eligible to sell their shares of our common stock even if the registration statement of which this prospectus forms a part is not then effective, pursuant to Rule
144, and such sales may harm the market price of our 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
4,082,892 shares of our common stock. The term of 1,527,197 of these warrants expires in May 2010, the term of
2,054,580 of these warrants expires in
April 2012 and the term of 501,115 of these warrants expires in October 2014. The exercise prices of these warrants range from $3.70 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.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled "Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business." These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any
future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned "Risk Factors" above.
In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans,"
"potential," "predicts," "projects," "should," "would" and similar
expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you
should not place undue reliance on these forward-looking statements.
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Also, forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we reference in this prospectus, or that we filed as exhibits to the registration
statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.
Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information
becomes available in the future.
USE OF PROCEEDS
We will not receive any proceeds from the sales of any shares of common stock by the selling stockholders. However, we may receive up to $3.70 per common share from the exercise of warrants held by the selling stockholders if and when those
warrants are exercised, which may result in proceeds to us of approximately $9.5 million if all warrants are exercised in exchange for cash. Any such proceeds would be used for general working capital.
DIVIDEND POLICY
Pursuant to a Preferred Stock Purchase Agreement with Halter Financial Investments, L.P., dated April 5, 2007, we paid a special cash dividend in the aggregate amount of $415,000, or $0.18 per share, to holders of common stock outstanding on
April 16, 2007.
Other than noted above, we have never declared or paid cash dividends. 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.
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MARKET FOR OUR COMMON STOCK
Our common stock is quoted on NYSE AMEX under the symbol "ALN".
As of November 23, 2009, the closing price for our common stock was $2.80 per
share.
The following table sets forth, for the periods indicated, the
high and low bid prices of our common stock. In the third quarter of 2007, we
effected a one-for-32.84 reverse split of our common stock, reflected in the
table below beginning with such quarter. Shares of our common stock were
sparsely traded until May 2008.
Bid Prices
High
Low
Fiscal Year Ending December 31, 2009
First Quarter
$1.06
$0.51
Second Quarter
2.52
0.52
Third Quarter
2.95
2.25
Fourth Quarter (through November 23, 2009)
3.34
2.39
Fiscal Year Ended December 31, 2008
First Quarter
$23.00
$7.90
Second Quarter
19.50
2.00
Third Quarter
3.25
2.10
Fourth Quarter
2.15
0.80
Fiscal Year Ended December 31, 2007
First Quarter
N/A
N/A
Second Quarter
0.95
0.25
Third Quarter
9.00
0.20
Fourth Quarter
8.00
3.00
Approximate Number of Holders of Our Common
Stock
On November 20, 2009, there were 332 stockholders of record of
our common stock.
DILUTION
Our net tangible book value as of September 30, 2009 was $3.08
per share of common stock. Net tangible book value is determined by dividing our
tangible book value (total assets less intangible assets including know-how,
trademarks and patents and less total liabilities) by the number of outstanding
shares of our common stock. Since this offering is being made solely by the
selling stockholders and none of the proceeds will be paid to us, our net
tangible book value will be unaffected by this offering. However, there are
currently 1,527,197 warrants outstanding which can be exercised at $4.25 per
common share and an aggregate of 2,555,695 warrants outstanding which can be
exercised at $3.70 per common share. The warrants may have a dilutive effect
depending on our tangible book value at the time of their exercise. In addition,
if the warrants are exercised, there may be a dilutive effect on our
stockholders. The actual dilutive effect will be determined from time to time as
based on the number of shares of our common stock held by such person and the
number of warrants exercised.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are an integrated food manufacturing company with headquarters in Shandong Province, China. We develop, manufacture and sell the following types of food products:
chestnut products;
convenience foods products (including ready-to-cook, or RTC, meals, ready-to-eat, or RTE, meals and meals ready-to-eat, or MRE); and
frozen, canned, and bulk food 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 processing manufacturer in China. We have developed brand
equity for our chestnut products in China, Japan and South Korea over the past 10 to 15 years. We produced 53 high value-added processed chestnut products in 2008 and 49 high value-added processed chestnut products during the nine months ended
September 30, 2009. We currently derive most of our revenues from sales of our chestnut products in China, Japan and South Korea.  In 2009, our primary strategy has been to focus on increasing sales of our chestnut products in the domestic Chinese
market and increasing the number of domestic sales to third party distributors. Our primary strategy for 2010 is to further expand our brand equity in the Chinese market for our chestnut products and to increase sales of our convenience food
products in the Chinese market. 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 2008, the cost of our raw materials increased from
$36,920,585 to $64,980,230, for an increase of approximately 76%. However, during the nine months ended September 30, 2009, the cost of our raw materials increased from $27.1 to $27.2, for an increase of approximately 0.4%, as
compared to the nine months ended September 30, 2008. 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 2007 and 2008 was approximately $787 per metric ton and $727 per metric ton, respectively, excluding value added taxes. The average price that we paid for chestnuts in the nine months ended
September 30, 2009 was $774 per metric ton, 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.
Uncertainties that Affect our Financial Condition
We spend a significant amount of cash on our operations, principally to procure raw materials for our products. Many of our suppliers, including chestnut, vegetable and fruit farmers, and suppliers of packaging materials, require
us to pay for their supplies in cash on the same day that such supplies are delivered to us. However, some of the suppliers with whom we have a long-standing business relationship allow us to pay on credit. In 2008, we paid for approximately 10% of
our raw materials on credit. We fund 60% 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.
17
We also fund approximately 40% 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 2008 was approximately $24 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 and 2008, we funded approximately $3.8 million, in the aggregate, of our working capital requirements from the proceeds of a private placement
transaction conducted in May 2007. On November 3, 2009, we raised an additional $12 million in a private placement transaction with the selling stockholders. In the event that we need to raise additional equity in the future, we can provide no
assurances that we will be able to enter into any future financing or refinancing agreements on terms favorable to us, especially considering the current instability of the capital markets.
We anticipate that our existing capital resources and cash flows from operations and current and expected short-term bank loans will be adequate to satisfy our liquidity requirements for the next twelve months. However, if available liquidity is not
sufficient to meet our operating and loan obligations as they come due, our plans include considering pursuing alternative financing arrangements or further reducing expenditures as necessary to meet our cash requirements. However, there is no
assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity.  Currently, the capital markets for small capitalization companies are extremely difficult and banking
institutions have become stringent in their lending requirements. Accordingly, we cannot be sure of the availability or terms of any third party financing.
The crisis of the financial and credit markets since the second half of 2008 has led to a severe economic recession worldwide, and the outlook for 2010 is uncertain. A continuation or worsening of unfavorable economic conditions, including the
ongoing credit and capital markets disruptions, could have an adverse impact on our business, operating results or financial condition in a number of ways. For example, we may experience declines in revenues, profitability and cash flows as a result
of reduced orders, delays in receiving orders, delays or defaults in payment or other factors caused by the economic problems of our customers and prospective customers. We may experience supply chain delays, disruptions or other problems associated
with financial constraints faced by our suppliers and subcontractors. In addition, changes and volatility in the equity, credit and foreign exchange markets and in the competitive landscape make it increasingly difficult for us to predict our
revenues and earnings into the future.
In 2008 and during the nine months ended September 30, 2009, some of our customers, including some of our large supermarket customers, delayed their payments for up to 60 to 90 days beyond their term. Our cash flow suffered while waiting for such
payments. Consequently, at times we had to delay payments to our suppliers and to postpone business expansion as a result of these delayed payments. In 2008 and during the nine months ended September 30, 2009, we shortened credit terms for many of
our international and domestic distributors from between 30 and 180 days to between 30 and 60 days. 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.
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
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:
18
(in thousands of U.S.
Increase/Decrease
Increase/Decrease
dollars)
2008
2007
($)
(%)
Revenue
132,360
82,094
50,266
61%
Cost of Revenue
(101,213
)
(61,932
)
(39,281
)
63%
Gross profit
31,147
20,162
10,985
54%
Operating Expenses:
Selling and Marketing
(6,166
)
(2,623
)
(3,543
)
135%
General and administrative
(4,048
)
(2,865
)
(1,183
)
41%
20,933
14,674
6,259
43%
Income from continuing
operations
Non-operating Income
(Expenses):
Investment Income
5
(5
)
-100%
Government grant
329
1,373
(1,044
)
-76%
Interest income
99
209
(110
)
-53%
Other income
251
155
96
62%
Other expense
(162
)
(1,446
)
1,284
-89%
Interest Expense
(2,770
)
(2,376
)
(394
)
17%
Income before taxes
18,681
12,595
6,086
48%
Income Taxes
(3,003
)
(2,135
)
(868
)
41%
Income before Minority
15,678
10,460
5,218
50%
Interest
Minority Interest
(974
)
(715
)
(259
)
36%
Net Income
14,703
9,745
4,958
51%
Revenue
Net Revenues
. Net revenues increased by $50.3 million,
or approximately 61.2%, to $132.4 million in 2008 from $82.1 million in 2007.
This increase was attributable to the increased revenues generated from sales of
each of our product segments, as reflected in the following table:
(in thousands of U.S.
dollars)
2008 Revenues
2007 Revenues
Increase
Increase
($)
($)
($)
(%)
Chestnut Products
83,028
45,799
37,228
81.3%
Convenience Products
25,737
15,289
10,448
68.3%
Frozen, Canned and Bulk
23,596
21,007
2,589
12.3%
Products
Total
132,360
82,095
50,265
61.2%
19
We believe that the increases reflected in the table above are
attributable to the following factors, by percentage:
Category
Chestnut Products
Convenience Products
Frozen, Canned and
Bulk Products
Increase in volume sold
62.8%
84.1%
-75.6%
Increase in average sales price
18.0%
-5.3%
154.0%
Increase in value of the
19.2%
21.2%
21.6%
U.S. dollar
The greatest increase in volume sold in 2008, as compared to
2007, was in the domestic PRC market. Revenues from sales in this market
increased by approximately $42.9 million, or approximately 88%, in 2008. As a
percentage of total revenues, revenues from sales in the domestic PRC market
increased to approximately 69% from approximately 59% in 2007.
In addition, in 2008, revenues from sales to Japan, South
Korea, France and the UK increased, in the aggregate, approximately $10.1, or
42%, compared to 2007, partially offset by a decrease of an aggregate of $0.57
million, or 54%, of sales to the United States compared to 2007. See Note 16 to
the financial statements contained elsewhere in this prospectus for more
information on the breakdown of our sales per geographic region.
Cost of Revenues.
Our cost of revenues increased $39.3
million, or approximately 63%, to $101.2 million in 2008 from $61.9 million in
2007. This increase was attributable to the following factors, by percentage:
Allocation of
Increase in
Cost
      of
Revenues
Category
(%)
Raw Materials
76
Currency (RMB) Appreciation
11
Other Allocated Overhead (utilities,
freight, equipment consumables)
6
Wages
6
Depreciation
1
Raw material costs increased to $64,980,230, or approximately
76%, in 2008 from $36,920,585 in 2007. This increase was attributable to the
increase by approximately 40% and 472%, respectively, in the volume of raw
chestnuts and meats purchased in 2008, when compared to 2007. This increase was
offset by a decrease of approximately 50% in the volume of raw vegetables and
fruits purchased in 2008, when compared to 2007. We purchased a significantly
higher volume of raw meat for use in our convenience products because our sales
of such products increased significantly in 2008. We purchased a significantly
lower volume of raw fruits and vegetables for use in our frozen, canned and bulk
products because the price of fruits and vegetables increased significantly in
2008, resulting in less demand for such products.
The following table reflects the changes in our cost of
revenues in 2008 as compared to 2007 among our different segments:
20
(thousands of U.S.
dollars)
2008 Cost of Revenues
2007 Cost of Revenues
Increase/ (Decrease)
($)
($)
(%)
Chestnut Products
62,092
33,455
85.6%
Convenience Products
20,258
11,837
71.1%
Frozen, Canned and Bulk
18,863
16,640
13.4%
Products
Total
101,213
61,932
63.4%
Gross Profit
. Our gross profit increased $10.9 million,
or 54.5%, to $31.1 million in 2008 from $20.2 million in 2007 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 $3.6 million, or 135%, to $6.2
million in 2008 from $2.6 million in fiscal year 2007. The following table
reflects the main factors that contributed to this increase as well as the
dollar amount that each factor contributed to this increase:
(in thousands of U.S. dollars)
Increase in costs in 2008 over 2007
Shipping and inspection fees
1,437
Port surcharges
1,373
Tariffs
288
Supermarket fees
161
Wages (sales personnel)
59
The increases listed in the table above were partially offset
by an aggregate of $114,834 of decreases of other factors, including customer
lodging, phone, postage and courier charges, toll road expense, warehousing
costs and expenses for professional movers.
General and Administrative Expenses.
Our general and
administrative expenses increased approximately $1.1 million, or 41.3%, to $4.0
million in 2008 from $2.9 million in 2007. The following table reflects the main
factors that contributed to this increase as well as the dollar amount that each
factor contributed to this increase:
(in thousands of U.S. dollars)
Increase in costs in 2008 over 2007
Personnel Benefits (non-wage benefits)
1,437
Consultation fees
1,373
Entertainment
288
Insurance fees
161
Research and development fees
59
Government Subsidy Income
Government subsidy income decreased from approximately $1.4
million in 2007 to approximately $329,000 in 2008, representing grants received
from the local Beijing County, Junan County and Miyun County governments to
assist us in our reconstruction of our Beijing facility following the outbreak
of a fire in that facility in May 2007.
Income Before Taxation and Minority
Interest
Income before taxation and minority interest increased $6.1
million, or 48.3%, to $18.7 million in 2008 from $12.6 million in 2007 as a
result of higher revenues, partially offset by higher costs of revenues and
operating expenses, for the reasons indicated above.
21
Income Taxes
Income taxes increased $0.87 million, or 40.7%, to $3.0 million
in 2008, as compared to $2.1 million in 2007. This increase was attributable to
the higher income earned in 2008 as compared to 2007.
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 2007, 2008, and 2009 are depicted in the following table:
Income Tax
2007
2008
2009
Junan Hongrun
15%
15%
25%
Luotian Lorain
0%
15%
15%
Beijing Lorain
0%
0%
15%
Shandong Lorain
30%
25%
25%
Minority Interest.
The Company holds 80.2% of the
equity of its subsidiary Shandong Lorain, which is reflected in the minority
interest of $0.97 million in 2008 and $0.72 million in 2007.
Net Income
.
Net income increased $4.9 million, or 50.9%, to $14.7 million
in 2008 from $9.7 million in fiscal year 2007, as a result of the factors
described above.
Three Months Ended September 30, 2009 Compared to Three
Months Ended September 30, 2008
The following table summarizes the results of our operations
during the three-month periods ended September 30, 2009 and September 30, 2008,
respectively, and provides information regarding the dollar and percentage
increase or (decrease) from the three-month period ended September 30, 2008
compared to the three-month period ended September 30, 2009.
22
(All amounts, other than percentages,
      stated in thousands of U.S. dollars)
Three months ended
Percentage
September 30,
Dollar($)
(%)
Increase
Increase
2009
2008
(Decrease)
(Decrease)
Net revenues
$
38,675
$
36,727
$
1,948
5.3%
Cost of revenues
29,567
29,001
566
2.0%
Gross profit
9,108
7,727
1,381
17.9%
Operating expenses
Selling and marketing expenses
1,165
831
334
40.2%
General and administrative expenses
907
848
59
7.0%
Operating Income
7,036
6,048
988
16.3%
Government subsidy income
44
0
44
Interest and other income
24
181
(157
)
(86.7%
)
Other expenses
53
(57
)
110
193%
Interest expense
857
627
230
36.7%
Earnings before tax
6,194
5,658
536
9.5%
Income tax
1,397
905
492
54.4%
Income before minority interests
4,798
4,753
45
0.9%
Minority interests
300
295
5
1.7%
Net income
$
4,497
$
4,459
$
38
0.9%
Revenue
Net Revenues
. Our net revenue for the three months ended
September, 2009 amounted to $38.7 million, which represents an increase of
approximately $1.9 million, or 5.3%, from the three-month period ended on
September 30, 2008, in which our net revenue was $36.7 million. The increased
revenues were attributable to increased revenues from sales of our chestnut and
convenience food products as a result of 16.3% and 12.0% increase in sales
respectively of such products thanks to our effective marketing efforts and well
established domestic and international distribution network.
Cost of Revenues.
During the three months ended
September 30, 2009, we experienced an increase in cost of revenue of $.566
million, in comparison to the three months ended September 30, 2008, from $29.0
million to $29.6 million, reflecting an increase of approximately 2%.
Approximately 21%, or $0.12 million, of this increase was attributable to an
increase in raw material costs, which increased from $27.1 million during the
three months ended September 30, 2008 to $27.2 million, or approximately 0.4%,
during the three months ended September 30, 2009.
The factors that contributed to the remaining 79% increase in
cost of revenues were: an increase in wage expense for factory workers, an
increase in depreciation expenses for capital equipment and an increase in the
cost of consumables used in conjunction with capital equipment.
Gross Profit
. Our gross profit increased $1.4 million,
or 17.9%, to $9.1 million for the three months ended September 30, 2009 from
$7.7 million for the same period in 2008 as a result of higher net revenues,
offset by higher costs of revenues, for the reasons indicated immediately
above.
23
Operating Expenses
Selling and Marketing Expenses
. Our selling and
marketing expenses increased approximately $0.33 million, or 40.2%, to $1.16
million in the third quarter of 2009 from $.831 million in the third quarter of
2008. The following table reflects the main factors that contributed to this
increase as well as the dollar amount that each factor contributed to this
increase:
(in U.S. dollars)
Increase in Costs in the
      Three
Months Ended September 30,
2009
over the Three
      Months
Ended September 30, 2008
Shipping and inspection fees
$25,682
Transportation
$354,584
Commissions
$52,971
Supermarket fees
$45,502
Wages (sales personnel)
$65,112
The increases listed in the table above were partially offset
by decreases in dollar amount of other factors, including customer lodging,
phone, postage and courier charges, toll road expense, warehousing costs and
expenses for professional movers.
Selling and marketing expenses increased because we expanded
the distribution of our products in China. In addition, we introduced several
new convenience food products and initiated a marketing and promotional campaign
for our chestnut and convenience food products.
General and Administrative Expenses.
We experienced an
increase in general and administrative expense of approximately $0.06 million
from approximately $0.847 million to approximately $0.907 million for the three
months ended September 30, 2009, compared to the same period in 2008. The
following table reflects the main factors that contributed to this increase,
which was partially offset by other factors that contributed to decrease of the
expenses:
Factor
Dollar Increase
Office expenses
$85,024
Consultation fees
$21,592
Stamp Duty
$4,865
Waste Processing
      fees
$10,717
Income Before Taxation and Minority
Interest
Income before taxation and minority interest increased $0.536
million, or 9.5%, to $6.19 million for the three months ended September 30, 2009
from $5.66 million for the same period of 2008. The increase was mainly
attributable to the increase of our sales revenue as described above in the
three months ended September 30, 2009 as compared to the three months ended
September 30, 2008.
Income Taxes
Income taxes increased $0.492 million, or 54.4%, to $1.396
million in the third quarter of 2009, as compared to $0.904 million in the third
quarter of 2008. This increase was attributable to the higher income tax rate in
2009 as compared to 2008.
Effective January 1, 2008, the PRC government implemented a new
25% tax rate across the board for all enterprises, without any tax holiday.
However, the PRC government has established a set of transition rules to allow
enterprises that already started tax holidays before January 1, 2008 to continue
utilizing such tax holidays until they are fully utilized.
24
The income tax rates applicable to our Chinese operating
subsidiaries in 2008 and 2009 are depicted in the following table:
2008
2009
Junan Hongrun
15%
25%
Luotian Lorain
15%
15%
Beijing Lorain
-
15%
Shandong Lorain
25%
25%
25
Net Income
Net income increased $.039 million, or 0.9%, to $4.497 million
for the three months ended September 30, 2009 from $4.458 million for the same
period of 2008. The increase was attributable to increased sales revenue and
lower cost of goods sold and partially offset by increased selling and marketing
expenses and higher income tax in the three months ended September 30, 2009 as
compared to the three months ended September 30, 2008.
Nine Months Ended September 30, 2009 Compared to Nine Months
Ended September 30, 2008
The following table summarizes the results of our operations
during the nine-month periods ended September 30, 2009 and September 30, 2008,
respectively, and provides information regarding the dollar and percentage
increase or (decrease) from the nine-month period ended September 30, 2008
compared to the nine-month period ended September 30, 2009.
(All amounts, other than percentages, stated
      in thousands of U.S. dollars)
Nine months ended
Percentage
September 30,
Dollar($)
(%)
Increase
Increase
2009
2008
(Decrease)
(Decrease)
Net revenues
$
83,841
$
75,680
$
8,161
10.8%
Cost of revenues
64,280
58,819
5,461
9.3%
Gross profit
19,561
16,861
2,700
16.0%
Operating expenses
Selling and marketing expenses
3,556
2,066
1,490
72.1%
General and Administrative expenses
2,798
2,480
318
12.8%
Operating Income
13,207
12,314
892
7.2%
Government subsidy income
240
38
202
538.0%
Interest and other income
233
288
(56
)
(19.3%
)
Other expenses
234
48
186
385.3%
Interest expense
2,206
1,901
305
16.0%
Earnings before tax
11,240
10,691
548
5.1%
Income tax
2,580
1,788
792
44.3%
Income before minority interests
8,660
8,903
(243
)
(2.7%
)
Minority interests
551
595
(45
)
(7.5%
)
Net income
$
8,109
$
8,308
$
(199
)
(2.4%
)
Revenue
Net Revenues
. Our net revenue for the nine months ended
September 30, 2009 amounted to $83.8 million, which is approximately $8.1
million or 10.8% more than that of the same period ended on September 30, 2008
where we had revenue of $75.7 million. The increased revenues were attributable
to the success of the Company's marketing strategies, operational enhancements
and expansion of sales markets, primarily in China. In addition, through third
party agents that we contracted with, our products were sold to a total of over
3,000 supermarkets in China as of September 30, 2009.
During the nine months ended September 30, 2009, revenues from
sales of chestnut products increased by $5.2 million, or 13.2%, and revenues
from sales of convenience food products increased by $1.7 million, or 10.6%, and
sales of frozen, canned and bulk food products increased $1.2 million, or 5.8%,
compared to the same period in 2008.
26
Cost of Revenues.
Our cost of goods sold, which consists of raw materials, direct labor and manufacturing overhead expenses, was $64.3 million for the nine month period ended September 30, 2009, an increase of $5.5 million or 9.3%, as
compared to $58.8 million for the nine month period ended September 30, 2008. The cost of goods sold increased because the sales in the first nine months of 2009 increased as compared to the same period ended September 30, 2008.
Gross Profit
. Our gross profit increased $2.7 million, or 16% to $19.6 million for the nine months ended September 30, 2009 from $16.9 million for the same period in 2008. This increase was attributable to increased sales revenue.
Operating Expenses
Selling and Marketing Expenses
. Selling and marketing expenses increased $1.5 million, or 72.1% to $3.6 million for the nine months ended September 30, 2009 from $2.1 million for the same period in 2008. This increase mainly
resulted from increased efforts to market our products in our domestic market.
General and Administrative Expenses.
General and administrative expenses increased $0.32 million, or 12.8% to $2.8 million for the nine months ended September 30, 2009 from $2.5 million for the same period of 2008. The increase of
general and administrative expenses was primarily attributable to increased office expenses relative to our expanded business, the increased compensation for managerial personnel and
expansion of our distribution channels.
Income Before Taxation and Minority Interest
Income before taxation and minority interest increased $0.55 million or 5.1% to $11.2 million for the nine months ended September 30, 2009 from $10.7 million for the same period of 2008.
The increase was primarily a result of the
higher revenue during the nine month period ended on September 30, 2009 as compared to 2008.
Income Taxes
Income taxes increased $0.79 million or 44.3% to $2.6 million for the nine months ended September 30, 2009 from $1.8 million for the same period of 2008. The increase of tax paid was primarily a result of the increase of income in the
first nine months ended September 30, 2009 as well as increased income tax rate, as compared to the same period in 2008.
Net Income
Net income decreased $0.2 million, or 2.4% to $8.1 million for the nine months ended September 30, 2009 from $8.3 million for the same period of 2008. The decrease was primarily a result of higher selling and marketing expenses and
increased income tax.
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 expansion of our facilities. Our primary sources of financing have been cash generated from operations, short-term
loans from banks in China and financing from private placement transactions. In 2007, we obtained approximately $19 million from a private placement transaction.  Proceeds from such transaction, together with cash generated from operations and
short-term bank loans, have been used to fund our working capital needs. We used most of the proceeds of the private placement to build infrastructure at several of our facilities. At December 31, 2008, total unused proceeds from the private
placement were $0, as compared to approximately $6.5 million at December 31, 2007. On November 3, 2009, we raised an additional $12 million in a private placement transaction with the selling stockholders. In the event that we
need to raise additional equity in the future, 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. At December 31, 2008, cash and cash equivalents (including
restricted cash) were $6.6 million, as compared to $8.8 million at December 31,
2007. At September 30, 2009, cash and cash equivalents (including restricted
cash) were $5.2 million.
27
We expect to continue to finance our operations and working
capital needs in 2009 from cash generated from operations and short-term bank
loans. In addition, we currently plan to finance or refinance approximately $23
million in the form of short-term bank loans in 2009. Currently, we have
negotiated loans with certain banks in China for an aggregate of $25 million. 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.
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 required
liquidity. Currently, the capital markets for small capitalization companies are
extremely difficult. Accordingly, we cannot be sure of the availability or terms
of any alternative financing arrangements.
Year Ended December 31, 2008 Compared to Year Ended December
30, 2007
The following table provides detailed information about our net
cash flow for all financial statements periods presented in this prospectus.
Cash Flows Data:
(in thousands of U.S. dollars)
For year ended December 31
,
2008
2007
Net cash flows provided by (used in)
      operating activities
19,508
(3,585
)
Net cash flows provided by (used in) investing activities
(20,316
)
(12,440
)
Net cash flows provided by (used in)
      financing activities
(8,134
)
19,664
Operating Activities
Net cash provided by operating activities for 2008 was $19.5
million and net cash used in operating activities for 2007 was $3.6 million. The
increase of approximately $23.1 million in net cash flows provided by operating
activities resulted primarily from an increase in net income of approximately
$5.0 million, a decrease in accounts receivable of approximately $38.4 million
and a decrease in inventories of approximately $1.6 million, partially offset by
a decrease in accounts payable of approximately $21.2 million. In 2008, we
increased our direct sales to third-party distributors, who do not pay on
credit, thereby decreasing our accounts receivables. In addition, we were
required to pay our suppliers on shorter terms, thereby decreasing our accounts
payable.
Investing Activities
Our uses of cash for investment activities are primarily
payments for the acquisition and construction of property, plants and equipment.
Net cash used in investing activities for 2008 was $20.3
million and $12.4 million, respectively, for 2008 and 2007. The increase of
approximately $7.9 million resulted primarily from an increase of $7.5 million
in the construction of refrigerated storage, vegetable tents and of
comprehensive workshops for the processing of chestnut and other food products
in 2008.
28
Financing Activities
Net cash used in financing activities for 2008 was $8.1 million
and net cash provided by financing activities for 2007 was $19.7 million. The
increase of approximately $27.8 million in net cash used by financing activities
resulted primarily from a decrease of $17.3 million in paid-in capital provided
in connection with a private placement in 2007 and an increase of approximately
$22.6 million in bank repayments, partially offset by an increase of
approximately $9.7 in bank borrowings and $2.5 million in proceeds from
notes.
Loan Facilities
As of December 31, 2008, the amounts and maturity dates for our
bank loans were as follows:
All amounts, other than percentages, in thousands of U.S.
dollars.
Banks
Amounts
Beginning
Ending
Interest Rate
Duration
Beijing Miyun County Shilipu Rural Financial Institution
2,772.02
9/30/2008
9/30/2009
8.54%
12 months
Bank of Beijing
291.79
7/28/2008
7/28/2009
7.72%
12
      months
Junan County Industrial and Commercial Bank
145.90
1/11/2008
1/10/2009
6.12%
12 months
Junan County
      Industrial and Commercial Bank
240.04
11/21/2008
2/19/2009
3.17%
3
      months
Junan County Industrial and Commercial Bank
393.92
9/12/2008
3/4/2009
8.54%
4 months
Junan County
      Industrial and Commercial Bank
120.76
11/28/2008
2/26/2009
10.18%
3
      months
Junan County Industrial and Commercial Bank
173.67
12/5/2008
3/5/2009
10.18%
3 months
Junan County
      Industrial and Commercial Bank
118.16
11/21/2008
2/19/2009
3.17%
3
      months
Junan County Construction Bank
25.17
9/25/2008
12/24/2008
7.45%
3 months
Junan County
      Construction Bank
102.13
9/25/2008
2/24/2009
7.45%
5
      months
Junan County Construction Bank
1,575.68
10/22/2008
1/22/2009
10.45%
3 months
Junan County
      Construction Bank
116.72
11/5/2008
2/3/2009
7.24%
3
      months
Junan County Agriculture Bank
583.58
8/7/2008
8/6/2009
12.70%
12 months
Junan County
      Agriculture Bank
656.53
8/22/2008
8/18/2009
12.70%
12
      months
Junan County Agriculture Bank
364.74
9/3/2008
8/18/2009
12.70%
12 months
Junan County
      Agriculture Bank
1,458.96
9/27/2008
3/27/2009
10.56%
6
      months
Union Bank (China) Co., Ltd.
1,156.96
1/28/2008
1/14/2009
5.49%
12 months
Linyi Commercial
      Bank
685.71
2/1/2008
1/5/2009
13.07%
11
      months
Linyi Commercial Bank
656.53
2/2/2008
1/12/2009
13.07%
11 months
Linyi Commercial
      Bank
1,458.96
9/28/2008
1/12/2009
8.58%
4
      months
Linyi Commercial Bank
116.72
9/28/2008
1/12/2009
8.58%
4 months
China Agricultural
      Bank, Luotian Square Branch
817.02
9/8/2008
9/7/2009
7.47%
12
      months
China Agricultural Bank, Luotian Square Branch
291.79
9/8/2008
9/7/2009
7.47%
12 months
Bank of China,
      Junan Branch
4.01
9/19/2006
5/19/2009
7.50%
36
      months
Credit union,Junan
43.77
8/6/2008
1/7/2009
8.58%
4 months
Credit union,Junan
43.77
9/11/2008
1/12/2009
8.58%
3
      months
Agricultural Development Lutian Government
25.53
1/11/2008
12/11/2011
2.10%
4 years
Union Commercial
      Bank (China)
551.44
1/29/2008
1/14/2011
5.49%
3
      years
Total
14,991.98
Loans listed in the table above whose maturity dates are prior
to the date hereof have either been repaid or have been extended by the lending
banks for either 6 months or 1 year.
Nine Months Ended September 30, 2009 Compared to Nine Months
Ended September 30, 2008
As of September 30, 2009, we had cash and cash equivalents
(including restricted cash) of $5.2 million. The following table provides
detailed information about our net cash flow for all financial statements
periods presented in this report.
29
Cash Flow (in
      thousands)
Nine Months Ended
September 30,
2009
2008
Net cash provided by (used in) operating
      activities
$
(15,739
)
$
4,631
Net cash provided by (used in) investing activities
$
1,233
$
(13,708
)
Net cash provided by (used in) financing
      activities
$
14,792
$
6,482
Net cash flow (outflow)
$
286
$
(2,594
)
Operating Activities
Net cash used in operating activities was $15.7 million for the
nine months period ended September 30, 2009, which is a decrease of $20.3
million from the $4.6 million provided by operating activities for the same
period of 2008. The decrease of net cash provided by operating activities in the
first nine months of fiscal 2009 was primarily a result of additional decrease
in accounts and other payables of approximately $7.1 million and less decrease
in accounts and other receivables of approximately $16.4 million as compared to
the same period in 2008.
Investing Activities
Our main uses of cash for investment activities are payments
for the acquisition of property, plants and equipment.
Net cash provided by investing activities for the nine months
period ended September 30, 2009 was $1.2 million, which is an increase of $14.9
million from net cash used in investing activities of $13.7 million for the same
period of 2008. The increase was primarily due to reduced investment in fixed
assets and decrease in restricted cash in 2009.
Financing Activities
Net cash provided by financing activities for the nine months
period ended September 30, 2009 was $14.8 million, which is an increase of $8.3
million from $6.5 million net cash provided by financing activities during the
same period in 2008. The increase of the net cash provided by financing
activities was primarily a result of increased short term bank borrowing in
2009.
Loan Facilities
As of September 30, 2009, the amounts and maturity dates for
our short-term bank loans are as set forth in the Notes to the Financial
Statements. The total amounts outstanding were $34.6 million as of September 30,
2009, compared with $14.4 million as of December 31, 2008. We believe that our
currently available working capital, after receiving the aggregate proceeds of
the credit facilities referred to above, should be adequate to sustain our
operations at our current levels through at least the next twelve months.
Obligations under Material Contracts
We do not have any material contractual obligations as of
September 30, 2009.
Critical Accounting Policies
The preparation of financial statements in conformity with
United States generally accepted accounting principles requires our management
to make assumptions, estimates and judgments that affect the amounts reported in
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:
30
Method of Accounting --
We maintain our general ledger and journals
  with the accrual method accounting for financial reporting purposes. The
  financial statements and notes are representations of management. Accounting
  policies adopted by us conform to generally accepted accounting principles in
  the United States of America and have been consistently applied in the
  presentation of financial statements, which are compiled on the accrual basis
  of accounting.
Use of estimates --
The preparation of the financial statements in
  conformity with generally accepted accounting principles in the United States
  of America requires management to make estimates and assumptions that affect
  the reported amounts of assets and liabilities and disclosure of contingent
  assets and liabilities at the date of the financial statements and the
  reported amounts of revenues and expenses during the reporting periods.
  Management makes these estimates using the best information available at the
  time the estimates are made; however, actual results could differ materially
  from those estimates.
Principles of consolidation --
The consolidated financial
  statements are presented in US Dollars and include the accounts of the Company
  and its commonly controlled entity. All significant inter-company balances and
  transactions are eliminated in combination.
As of December 31, 2008, the particulars of the commonly
controlled entities are as follows:
Name of Company
Place of
Incorporation
Attributable
Equity Interest
%
Registered
Capital
Shandong Lorain
      Co., Ltd
PRC
80.2
$12,901,823
(RMB 100,860,000)
Luotian Lorain Co., Ltd
PRC
100
$1,279,181
(RMB 10,000,000)
Junan Hongrun
      Foodstuff Co., Ltd
PRC
100
$2,430,445
(RMB 19,000,000)
Beijing Lorain Co., Ltd
PRC
100
$1,279,181
(RMB 10,000,000)
Accounting for the Impairment of Long-Lived Assets
-- The
  long-lived assets held and used by us are reviewed for impairment whenever
  events or changes in circumstances indicate that the carrying amount of assets
  may not be recoverable. It is reasonably possible that these assets could
  become impaired as a result of technology or other industry changes.
  Determination of recoverability of assets to be held and used is by comparing
  the carrying amount of an asset to future net undiscounted cash flows to be
  generated by the assets.
If such assets are considered to be impaired, the impairment to
be recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.
During the reporting 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.
31
Recent Accounting Pronouncements
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 applies to all derivative instruments and related hedged items accounted
for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 161 requires entities to provide greater transparency about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, results of operations and cash flows. SFAS 161
is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). Statement 162 will become effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles."
In May 2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1 requires the
issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the
issuer's non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis.
In September 2008, FASB issued FSP No. 133-1 and FIN 45-4, "Disclosures about Credit Derivatives and Certain Guarantees", an amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161. This FSP is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows
of the sellers of credit derivatives. The provisions of the FSP that amend Statement 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008.
This FSP amends FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. This FSP also amends FASB
Interpretation (FIN) No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, to require an additional disclosure about the current status of the payment/performance risk of
a guarantee. The provisions of the FSP that amend Statement 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008.
Finally, this FSP clarifies the effective date in FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The disclosures required by Statement 161 should be provided for any reporting period (annual or quarterly
interim) beginning after November 15, 2008. For example, an entity with a March 31 fiscal year-end should provide the disclosures for its fourth quarter interim period ending March 31, 2009, in its 2009 annual financial statements. This
clarification of the effective date of Statement 161 is effective upon issuance of the FSP.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS 165"). SFAS 165 is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are
issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or
were available to be issued. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009.
In June 2009, FASB issued FASB Statement No. 166, Accounting for Transfers for Financial Assets and FASB Statement No. 167, a revision to FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities.
32
Statement 166 is a revision to FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, 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 167 is a revision to FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities, 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.
On July 1, 2009, FASB issued FASB Statement No. 168, The "FASB Accounting Standards Codification" and the Hierarchy of Generally Accepted Accounting Principles. The ASC has become the source of authoritative US GAAP recognized by the FASB to be
applied by nongovernmental entities and provides that all such guidance carries an equal level of authority. The ASC is not intended to change or alter existing GAAP. The ASC is effective for interim and annual periods ending after September 15,
2009.
We are currently evaluating the potential impact, if any, of the adoption of the above recent accounting pronouncements on our consolidated results of operations and financial condition.
Off-Balance Sheet Arrangements
We do not have any off-balance arrangements.
33
OUR BUSINESS
Overview of Our Business
We are an integrated food manufacturing company with headquarters in Shandong Province, China. We develop, manufacture and sell the following types of food products:
chestnut products;
convenience foods products (including ready-to-cook, or RTC, meals, ready-to-eat, or RTE, meals and meals ready-to-eat, or MRE); and
frozen, canned, and bulk food 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 2009, our primary
strategy has been to focus on increasing sales of our chestnut products in the domestic Chinese market and increasing the number of domestic sales to third party distributors. Our primary strategy for 2010 is to further expand our brand equity in
the Chinese market for our chestnut products and to increase sales of our convenience food products in the Chinese market. 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.
Organizational Structure
ALC is a Nevada corporation that was incorporated in Delaware on February 4, 1986 and was formerly known as Millennium Quest, Inc. On May 3, 2007, ALC completed a recapitalization, or reverse merger, with ILH. Prior to that date, ALC did not engage
in active business operations other than to search for a potential acquisition target. Effective November 9, 2009, ALC reincorporated in Nevada from Delaware.
ALC wholly owns ILH. ILH wholly owns two Chinese operating subsidiaries, Luotian Lorain and Junan Hongrun, directly. In addition, together with Junan Hongrun, ILH wholly owns Beijing Lorain and owns approximately 80% of Shandong Lorain (Shandong
Economic Development Investment Co. Ltd. owns approximately 20%). We sometimes refer to our four Chinese operating subsidiaries throughout this prospectus as the Lorain Group Companies. On page 2 above is an organizational chart of ALC, ILH and the
Lorain Group Companies:
Products
Our products are categorized into the following three segments:
chestnut products;
convenience foods; and
frozen, canned and bulk food.
We produced 234 products in 2008, including 52 new products in our convenience foods segment. We discontinued 10 products in 2008, primarily in our frozen, canned and bulk food segment. During the nine months ended September 30, 2009, we produced
239 products, including 18 new products in our convenience food segment. We discontinued 16 products during such period across all three product segments which had lower margins or did not receive good feedback from our customers.
Our chestnut products and convenience foods were our main profit centers in 2008 and during the nine months ended September 30, 2009. Our convenience foods segment has been the fastest growing portion of our business and was one of the main
catalysts of our growth during 2008 and during the nine months ended September 30, 2009. Frozen, canned and bulk food products accounted for a substantial portion of our revenues in 2008 and during the
nine months ended September 30, 2009 but generated lower profit margins than our chestnut and convenience products.
34
Chestnut Products
We believe that we are the largest chestnut processing manufacturer in China. We have developed brand equity for our chestnut products in China, Japan and South Korea over the past 10 to 15 years. We produced 53 high value-added processed chestnut
products in 2008. In 2008, this segment contributed 63% of our total revenues. During the nine months ended September 30, 2009, we produced 49 high value-added processed chestnut products. This segment contributed 54% of our total revenues during
such period.
Our best selling products in 2008 and thus far in 2009 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 chopped 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, 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.
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 2008, and during the first nine
months of 2009, were cattle bone soup, beef and lamb.
RTEs can be served without any cooking. Our best selling RTEs in 2008, and during the first nine months of 2009, were smoked fish and stewed beef with sauce. Other RTEs include spiced belt fish, cherry tomato, spicy pork fillet, pork and egg roll,
pears and pineapples.
35
MREs are meal kits with self-heating devices. Our MREs are used
in both military and civilian uses, such as camping, traveling and other
situations in which a person does not have access to traditional cooking
supplies and equipment, such as a stove or microwave.
We produce various MREs based on Chinese cuisine, the best
sellers of which were our stir fried rice and stir fried noodles in 2008, and
the first nine months of 2009. 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 113 convenience food products in 2008, including 52
new products such as red bean paste products and ready-to-eat meal combo
products. In 2008, this segment contributed 19% of our total revenues. We
produced 121 convenience food products during the first nine months of 2009,
including 18 new products such as fruit-punch bean products, which are beans
with various fruit flavors. During the nine months ended September 30, 2009,
this segment contributed 22% 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
2008 and the first nine months of 2009. We expect our convenience foods segment
to continue to be an important area of growth for our business in the future.
Frozen, Canned and Bulk Food
We produce a variety of frozen, canned and bulk foods,
including frozen vegetables, frozen fruits, frozen fish, and frozen meats. We
produced 68 frozen, canned and bulk food products in 2008 and 66 during the
first nine months of 2009. Our best selling frozen, canned and bulk foods in
2008 and the first nine months of 2009 were frozen peas, frozen corn and frozen
mixed vegetables. Many of our bulk food products are natural and do not contain
chemical additives.
Our frozen, canned and bulk 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, canned
and bulk food division has been a significant portion of our business. In 2008,
this segment contributed 18% of our total revenues. During the nine months ended
September 30, 2009, this segment contributed 25% of our total revenues. Gross
margins in this segment are lower than the margins for chestnut products and
convenience foods, however. Because of this, we expect that the proportionate
contribution of this business segment to our total revenues will gradually
decline.
Our Manufacturing Facilities – Do we need to update this
section?
General
We currently manufacture our products in five facilities in
China, two of which are located in Junan County, Shandong Province, one in
Luotian County, Hubei Province, one in Miyun County, Beijing Province 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.
Year Operations
Construction Size
Facility
Commenced
(square meters)
Junan Hongrun
2002
25,665
Shandong Lorain
1995
15,392
Luotian Lorain
2003
9,558
Beijing Lorain
2003
21,000
Dongguan
2008
5,500
Production Lines
We currently manufacture our products using 21 production
lines. Each production line is used to produce between 10 and 50 products. We
currently run three types of product lines:
36
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:
Facility
Production Lines
Products
Shandong Lorain
1
      Deep-freezing line
1 Convenience food line
Chestnut Products
Convenience Foods
Frozen, Canned and Bulk
      Foods
Junan Hongrun
1 Deep-freezing line
4 Canning lines
Chestnut Products
Frozen, Canned and Bulk Foods
Beijing Lorain
6 Convenience food
      lines
1 Deep-freezing line
Chestnut Products
Convenience Foods Frozen,
Canned and Bulk Foods
Luotian Lorain
3 Convenience food
      lines
2 Deep-freezing lines
Chestnut Products
Convenience Foods Frozen,
Canned and Bulk Foods
Dongguan factory
2 Convenience food lines
Convenience Foods
We allocate our production lines based upon the location of our
facilities to take advantage of efficiencies in the transportation of required
raw materials. For example, Junan Hongrun and Shandong Lorain, which manufacture
primarily chestnut and frozen, canned and bulk products, are located in Shandong
Province, which is China's largest supplier of fresh produce by volume. Shandong
Providence 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.
Our production lines and facilities have all been designed to
meet the standards and requirements of our largest customers in Japan, which is
currently 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.
37
With limited exceptions, 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, canned and bulk
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 full
capacity throughout the year.
Currently, most of our processed and convenience foods are
produced at our Beijing Lorain plant. In 2008, we expanded this facility with
the addition of four convenience foods production lines, which increased
production capacity by approximately 6,000 metric tons per year.
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 should our facilities
be inadequate to meet increasing demand. In 2008, we leased two new convenience
foods production lines in Dongguan, Guangdong Province, which increased
production capacity by approximately 1,250 metric tons per year to meet our
short-term needs. If needed, we may lease additional facilities in the near
future. 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
Constant
      Temperature
7
8
3,000
4,800
Shandong Lorain
Frozen Storage
Constant Temperature
5
3
2,000
1,500
Luotian Lorain
Frozen Storage
Constant
      Temperature
8
4
4,500
2,000
Beijing Lorain
Frozen Storage
Constant Temperature
6
3
2,850
1,800
Dongguan
Frozen Storage
Constant
      Temperature
2
1
800
450
TOTAL
47
23,700
As we have expanded our production capacity, we have also
expanded our storage capacity. All of our storage facilities, other than the
facility in Dongguan, are owned by us. In 2008, we increased our storage
capacity by leasing a warehouse in Dongguan with a storage capacity of 1,250
metric tons.
Agricultural Operations
We grow and self-supply a portion of our chestnut, fruit and
vegetable products. We self-supplied approximately 1% of our raw materials
needed in 2008 and approximately 1% of our raw materials needed during the nine
months ended September 30, 2009. (See "Raw Materials" below.) 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.
38
Lands in which we grow our agricultural products for such
products are shown in the following table:
Harvest
Area
(acres)
Location
(PRC)
Chestnut (South Korean, Japanese,
      Australian cultivar)
329
Shandong
Chestnut (Japanese cultivar)
165
Beijing
Sticky Corn
329
Beijing
Green Pea & Sweet Corn
350
Beijing
Pumpkin
82
Heilongjiang
Organic Chestnut
190
Beijing
Mixed Vegetables
564
Hebei
Japanese Pumpkin
329
Inner Mongolia
Strawberry
261
Shandong
We began growing chestnuts 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 chestnuts
to our production since 2007. By 2010, our current chestnut agricultural
operations are projected to harvest approximately 700 metric tons of high-end
chestnuts based on the number of trees currently planted and our planned
expansion.
We began growing strawberries in 2008 in Shandong. We use these
strawberries 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 2008 and during the nine months ended September 30, 2009,
approximately 94% of our raw materials consisted of agricultural products,
including primarily chestnuts and vegetables, approximately 4% consisted of
packaging materials and approximately 2% 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.
We obtain our agricultural raw materials from three sources:
domestic procurement (excluding self-supply), overseas markets, and self-supply.
Domestic procurement accounted for 93.8% of our total raw material costs in 2008
and during the nine months ended September 30, 2009, overseas procurement
accounted for 5.2% and self-supply accounted for the remaining 1%.
In 2008, we procured approximately 55,643 metric tons of
chestnuts and approximately 28,773 metric tons of vegetables and other raw
materials from a number of third party suppliers, domestic and overseas, and
produced approximately 693 metric tons of chestnuts from our own agricultural
operations. During the nine months ended September 30, 2009, we procured
approximately 40,784 metric tons of chestnuts and approximately 39,041 metric
tons of vegetables and other raw materials from a number of third party
suppliers, domestic and overseas, and produced approximately 34 metric tons of
chestnuts from our own agricultural operations.
39
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 21.3% of the total procurement
in 2008, and approximately 25.3% of the total procurement during the nine months ended September 30, 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, our facilities are located 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 produce 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 produce we are purchasing complies with our standards.
Our Customers
We sell our products in 26 provinces and administrative regions in China and 42 foreign countries globally. In 2008, approximately 67% of our sales were made domestically and approximately 33% were to international customers, primarily Japan and
South Korea. During the nine months ended September 30, 2009, approximately 82% of our sales were made domestically and approximately 18% were to international customers, primarily Japan and South Korea.
Our top ten customers contributed 29.3% of our total revenues in 2008 and 20.7% of our total revenues during the nine months ended September 30, 2009. Approximately 12% and 6.1% of total revenues in 2008, and 8.7% and 1.7% of total revenues during
the nine months ended September 30, 2009, were attributable to revenues from Shandong Lvan Import & Export Co., Ltd., a food trading company in China that distributes a significant portion of our exported products, and Shinsei Foods, a Japanese
company and our top customer, respectively.
Domestic
In China, we sell our products through our own sales team and through third-party distributors. We have 36 sales offices in 26 provinces in China. In 2008, we sold approximately 87% of our products directly to our Chinese customers and approximately
13% through third-party distributors. During the nine months ended September 30,
2009, we sold approximately 75.8% of our products directly to our Chinese customers and approximately 24.2% throughout third-party distributors.
40
We sell our products in 30 first-tier cities, including Beijing, Shanghai 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, other 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.
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 produce
that fails 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 a distributor 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 our direct sales customers in order to capture the profit margin that would otherwise go to intermediate wholesalers and to enhance our brand recognition. Such plans are subject to our
customers' ability to make timely payments, which has been a concern for us. (See "Risk Factors" below.)
International
Our export sales destinations include:
Asia, primarily Japan, South Korea and Malaysia, but also Singapore and Taiwan.
Europe, primarily Belgium and the United Kingdom, but also France, Germany, the Netherlands, Spain, and Sweden;
the Middle East, primarily Saudi Arabia, Kuwait and the United Arab Emirates; and
North America, including the United States and Canada.
In 2008, approximately 93.5% of our international sales were in Asia and approximately 6% were in Europe. During the nine months ended September 30, 2009, approximately 12.3% of our international sales were to Asia and approximately 3.3% in Europe.
We sell our products to international markets through Shandong Lvan, a food trading company in China, other export companies in China, and 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 currently 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.
Prior to our reorganization into a U.S. entity, we had sales to several countries that are the subject of trade sanctions imposed by the United States government. Following our reorganization, we ceased all sales activities to these countries.  We
actively review the destination countries for our products, including products resold by our customers, to assure that we are not in violation of applicable U.S. trade sanctions.
41
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.
Historically, we have not spent a significant amount of capital on advertising in the past. However, on November 3, 2009, we raised $12 million in a private placement transaction with the selling stockholders and we intend to use a portion of
the proceeds of this transaction to support a planned, nationwide commercial campaign to promote our convenience food products in the Chinese market and to increase brand awareness of our Ready-to-Cook foods, Ready-to-Eat foods, and Meals
Ready-to-Eat, as well as our chestnut products. In addition, we intend to use the remaining proceeds of the private placement to implement packaging improvements and product enhancements and to fund our marketing efforts in Asia, North America,
Europe and the Middle East.
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.
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 Liyun, a Chinese company, and Foodwell Corporation, a South Korean company.
Convenience Food Products
Convenience food products market competition is based primarily 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, Canned and Bulk Food Products
In the frozen, canned and bulk 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, canned and bulk food products market are currently Weitang Langdong, 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.
42
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 234 products in 2008 and 236 products during the nine
months ended September 30, 2009. 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 place 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, our patent application for our technology used to
produce sweetheart chestnuts was approved by the State Intellectual Property
Office of the PRC. In addition, we are currently in the process of applying for
patent protection in the PRC for two of our technologies which support the
production of our chestnut and convenience food products. (See "Intellectual
Property" below.) We believe that this 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.
Intellectual Property
Trademarks
We use the trademarks
TM
and
TM
on all of
our chestnut products sold in China, Japan and South Korea.
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
  which 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 60% over the
  past several years and which increased at an annual rate of 84% in 2008.
43
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, particularly in Japan. We are currently in
  the process of applying for patent protection in the PRC for this technology.
We have developed technology that allows us to produce an extract from the
  chestnut's inner skin. In the past, the chestnut's inner skin had been
  discarded as a waste product. Our technology allows us to produce an extract
  that can then be sold to other food processors, all of whom are currently
  based in Japan, where the chestnut is popular as a nutritional supplement.
  These processors package and sell the extract for use as a food and drink
  additive. We are currently in the process of applying for patent protection in
  the PRC for this technology.
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 September 30, 2009, we had a total of 1,491 full-time
employees and 747 part-time employees. 479 of our full-time employees are
directly employed by our Shandong Lorain subsidiary and the remainder 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
1,284
Quality Control
36
Domestic Sales
32
Human Resources
6
Research and Development
31
International Sales
19
Finance
19
Sourcing
16
Administration
28
Strategic planning
3
Storage and Distribution
15
Employee Relations
2
Total
1,491
We believe that the relationship between management and our
employees is good. We have not experienced any significant problems or
disruption to our operations due to labor disputes, nor have we experienced any
difficulties in recruitment and retention of experienced staff.
44
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, 2008 and 2007 and at a rate of 24% of the average monthly salary for the nine months ended September 30, 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, 2008 and 2007 and at a rate of 4% of the average monthly salary for
each employee for the nine months ended September 30, 2009. 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, 31 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 2008, we added 52 new products, all in our convenience foods segment. During the nine months ended September 30, 2009, we added 18 new products, all in our convenience food segment. Over the past
several years, on average, we discontinued approximately three to five products each year. In 2008, we discontinued 10 products, primarily in our frozen, canned and bulk foods segment. During the nine months ended September 30, 2009, we discontinued
16 products across all three segments which had lower margins or did not receive good feedback from our customers.
The amount we spent on research and development activities during the years ended December 31, 2008 and 2007 and during the nine months ended September 30, 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 good 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, prescribes 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.
45
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 obtaining new approvals or filing new registrations in the future, if needed.
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.
46
MANAGEMENT
Directors and Executive Officers
The following table sets forth the name, age and position of
each of our current executive officers and directors.
Name
Age
Position
Si Chen
46
Chairman, Chief Executive
      Officer, President and Director
Yilun Jin
34
Chief Financial Officer and Treasurer
Yundong Lu
34
Chief Operating Officer and
      Director
Maoquan Wei
62
Director
DeKai Yin
56
Director
Yongjun Li
47
Director
Tad M. Ballantyne
54
Director
MR. SI CHEN.
Mr. Chen became our chief executive officer
and director in May 2007 upon the completion of our recapitalization. Mr. Chen
founded Shandong Lorain, our first subsidiary, in 1994, and served as the
chairman of our subsidiaries since that time. Mr. Chen earned an associate
degree from Linyi Normal University.
MR. YILUN JIN.
Mr. Jin became our chief financial
officer and treasurer on September 22, 2008. Prior to his appointment, Mr. Jin
served in various capacities at Citigroup since 2002, most recently as Vice
President of Markets and Banking. Mr. Jin graduated from Thunderbird School of
Global Management in 2002, earning a Master of Business Administration degree in
International Management, with a specialization in Finance, and was honored with
a Citigroup Fellowship. Mr. Jin served as manager of the Corporate Finance
Division at the Shanghai Branch of the Bank of Tokyo-Mitsubishi Ltd. from August
1997 until July 2000. Mr. Jin earned a Bachelor of Arts degree in economics from
Fudan University in Shanghai, China in 1997. Mr. Jin is also a CFA charterholder
and is fluent in English and Mandarin.
MR. YUNDONG LU.
Mr. Lu was appointed as our Chief
Operating Officer and was elected as a member of our board of directors
effective August 1, 2008. Mr. Lu joined the Company in 1994 and has held various
positions since then. From April 2003 to May 2005, Mr. Lu was the General
Manager of Beijing Lorain and the Deputy General Manager of our subsidiaries.
From May 2005 to February 2007, Mr. Lu was the General Manager of Lorain
International Trading and the Deputy General Manager of our subsidiaries. From
February to August 2008, Mr. Lu was the General Manager of our subsidiaries. Mr.
Lu was recognized as an Outstanding Entrepreneur in Shandong Province in 2007.
Mr. Lu earned a MBA from Shandong University and a Bachelor of Arts degree from
Shandong University.
MR. MAOQUAN WEI.
Mr. Wei is a retired government
official who held various positions in the government of Junan County, Shandong
Province, China from 1990 to 2003, during which time Mr. Wei was responsible for
overseeing the agricultural development of Junan County in the Shandong province
of China. Most recently, from 1998 to 2003, Mr. Wei was the Chairman of the
Political Conservative Conference of Junan County. Mr. Wei also served as the
Deputy Secretary of County Committee and Deputy Chairman of Junan County. Mr.
Wei has helped lead Junan County win numerous honors, including Top 100 National
Fruit Products County and National Chestnut Base County. Although retired, Mr.
Wei's expertise and experience with the agricultural economy and resources in
the countryside is invaluable to our business.
MR. DEKAI YIN
. Mr. Yin was appointed one of our
directors in September 2009. He has been working as the President of Zibo branch
of the Agricultural Bank of China since 2004. Before that position, Mr. Yin
served as the Vice President and the President at Linyi branch of the
Agricultural Bank of China from 1995-2004. Mr. Yin has a degree in economic
management and is regarded as a senior economist due to his distinguished
expertise in the banking and accounting industries and economic development. Our
company will greatly benefit from Mr. Yin's invaluable expertise in banking and
accounting systems and operations.
MR. YONGJUN LI
. Mr. Li was appointed one of our
directors in September 2009. He has been working as the County Governor
Assistant of Miyun County, the General Manager of Beijing Economic Development
Zone
Headquarters, and the Director of Beijing Economic Development Zone Managing Committee since 1997. Mr. Li is an economist with advanced expertise in economic and industrial development.  Mr. Li also has advanced experience and expertise in supply
chain and strategic marketing as an adviser and consultant to companies in the economic development zone. The company will significantly benefit from Mr. Li's outstanding economics and industry knowledge of the operations in China.
47
MR. TAD M. BALLANTYNE
. Mr.Ballantyne was appointed one of our directors in September 2009. He is also an officer and director of several private and public companies, including BR Industries, Inc, Hoopeston Foods, Inc, Thomsen Group. LLC, and
Pacific Rim Foods Ltd. lie also serves as an independent director and financial expert on the audit committee of Life Partners Holdings Inc. and Creat Resources Holdings Ltd., as an independent director of Mach One Corporation and Empire Energy
Corporation International, and is an adviser of international affairs and/or director of a number of China-based private enterprises, including TCIB Investment Co. Ltd, Jilin Jimei Foods Ltd and Creat Group.  During 2003, Texas Steel Partners Inc, a
Texas based steel foundry, filed for reorganization and was liquidated pursuant to a bankruptcy Chapter 7 conversion. Mr. Ballantyne was an officer and director and a 50% shareholder of Texas Steel Partners Inc. During the last 20 years, Mr.
Ballantyne has been active in acquiring and operating troubled companies or assets being divested by public and private companies and has focused over the last 5 years on food processing plants in both the United States and Asia. He holds a Bachelor
of Science degree in business management from the University of Wisconsin-Parkside.
There are no agreements or understandings between any of our executive officers or directors and any other person pursuant to which such executive officer or director was selected to serve as a director or executive officer of our company.
Directors are elected until their successors are duly elected and qualified.  There are no family relationships among our directors or officers.
48
CORPORATE GOVERNANCE
Board Composition
On August 1, 2008, our board of directors increased the number of members of our board from one to five and elected Mr. Yundong Lu, Mr. Hao Chen, Mr. David Yaudoon Chiang and Mr. Maoquan Wei to serve as members of our board. Our board of directors
did not hold any meetings in 2008.
On September 17, 2009, our board increased the number of members of our board from five to six, accepted the resignations of directors Messrs. David Yaudoon Chiang and Hao Chen, and appointed Messrs. Dekai Yin, Yongjun Li and Tad M. Ballantyne to
fill the three vacancies that existed on the board and to serve as members of the Audit, Compensation, and Nominating and Corporate Governance Committees.
Director Independence
Our board has determined that Messrs. Yin, Li, Ballantyne and Wei satisfy the criteria for independence under NYSE Amex and SEC rules for independence of directors and of committee members.
Audit Committee
On August 1, 2008, our board established an Audit Committee. The Audit Committee has adopted a written charter, a copy of which is available on our website on the Corporate Governance page under the Investor link at www.arnericanlorain.com, and a
printed copy of which is available to any shareholder requesting a copy by writing to: American Lorain Corporation. Attn: Corporate Governance, Beihuan Zhong Road Junan County Shandong, People's Republic of China. 276600. The Audit Committee
did not hold any meetings during 2008. Messrs. Dekai Yin, Yongjun Li, Tad M. Ballantyne, and Maoquan Wei are currently serving as members of the Audit Committee.
The Audit Committee assists our board in monitoring:
our accounting, auditing, and financial reporting processes;
the integrity of our financial statements;
internal controls and procedures designed to promote our compliance with accounting standards and applicable laws and regulations; and
the appointment and evaluation of the qualifications and independence of our independent auditors.
Compensation Committee
On August 1, 2008, our board established a Compensation Committee. The Compensation Committee has adopted a written charter, a copy of which is available on our website on the Corporate Governance page under the Investor link at
www.americanlorain.com, and a printed copy of which is available to any shareholder requesting a copy by writing to: American Lorain Corporation, Attn: Corporate Governance, Beihuan Zhong Road Junan County Shandong, People's Republic of China,
276600. The Compensation Committee did not hold any meetings during 2008. The current members of the Compensation Committee are Messrs. Yin, Li, Ballantyne and Wei.
The functions of the Compensation Committee are as follows:
to assist our board in discharging its responsibilities with respect to compensation of our executive officers and directors;
to evaluate the performance of our executive officers;
to assist our board in developing succession plans for executive officers; and
to administer our stock and incentive compensation plans and recommend changes in such plans to our board as needed.
49
Nominating and Corporate Governance Committee
On August 1, 2008, our board established a Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee has adopted a written charter, a copy of which is available on our websitc on the Corporate Governance page
under the Investor link at www.americanlorain.com, and a printed copy of which is available to any shareholder requesting a copy by writing to: American Lorain Corporation, Attn: Corporate Governance, Beihuan Zhong Road Junan County Shandong,
People's Republic of China, 276600. The Nominating and Corporate Governance Committee did not hold any meetings during 2008. Messrs. Yin, Li, Ballantyne and Wei are the current members of the Nominating and Corporate Governance Committee.
The functions of the Nominating and Corporate Governance Committee are to assist our board:
in identifying qualified individuals to become board members;
in determining the composition of our board and its committees;
in monitoring a process to assess board effectiveness; and
in developing and implementing our corporate procedures and policies.
The Nominating and Corporate Governance Committee will consider any qualified candidate, timely submitted, for an open board position by any of our security holders entitled to vote in an election of directors. The Nominating and Corporate
Governance Committee will evaluate the candidate consistent with any criteria or procedures that the board or the Nominating and Corporate Governance Committee shall approve.
Code of Ethics
Our Board adopted a Code of Ethics that applies to all of our directors, executive officers, including our principal executive officer, principal financial officer and principal accounting officer, and employees. The Code of Ethics addresses, among,
other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of
violations of the code. The Code of Ethics is available on the Corporate Governance page of our website under the Investor link at www.americanlorain.com, and a copy of the Code of Ethics is available to any shareholder requesting a copy by writing
to: American Lorain Corporation, Attn: Corporate Governance, I3eihuan Zhong Road, Junan County, Shandong, China 276600. We intend to disclose on our website, in accordance with all applicable laws and regulations, amendments to, or waivers from, our
Code of Ethics.
50
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all
compensation earned by our Chief Executive Officer in 2008 for services provided
to us and our subsidiaries. None of our executive officers earned compensation
that exceeded $100,000 in 2008.
Name and
Principal Position
Year
Salary
($)
All Other
Compensation
($)
      (1)
Total
($)
Si Chen
2007
59,000
-
59,000
Chief
      Executive Officer
2008
63,065
2,000
65,065
(1) Represents payments made for the benefit of Mr. Chen for
life insurance coverage.
Pursuant to Mr. Chen's employment agreement, we paid Mr. Chen a
base salary of $59,000 and $63,065 in 2007 and 2008, respectively, in cash. The
employment agreement does not provide any change in control or severance
benefits to Mr. Chen, and we do not have any separate change-in-control
agreements with Mr. Chen or any of our other executive officers.
Outstanding Equity Awards
As of December 31, 2008, other than Yilun Jin, none of our
executive officers had any equity awards outstanding. Our Compensation Committee
has not yet adopted a policy or program for equity awards for our executive
officers.
Director Compensation
Historically, we did not pay our directors any compensation for
their service as members of our Board.
However, on August 1, 2008, Mr. Hao Chen, Mr. David Yaudoon
Chiang and Mr. Maoquan Wei were elected as non-employee members of our Board and
appointed as members of our Board committees. Messrs. Chen and Wei are paid RMB
100,000 (approximately US $14,640) per year and Mr. Chiang is paid US $25,000
per year plus $5,000 for each board meeting attended by Mr. Chiang, solely as
compensation to such directors for their board or board committee service. In
addition, we may reimburse our non-employee directors for reasonable travel
expenses related to attendance at board or board committee meetings. In 2008, we
did not make any such reimbursements.
Our policy is not to pay compensation to directors who are also
employees of the Company or its subsidiaries.
The following table reflects the compensation earned by our
directors in 2008:
Name
Fees Earned or Paid in
Total
Cash
($)
($)
Hao Chen
6,100
6,100
David Yaudoon
      Chiang
10,417
10,417
Maoquan Wei
6,100
6,10
51
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 3, 2007, ALC entered into a share exchange agreement with the shareholders of ILH. Pursuant to this agreement, ALC acquired 100% of the outstanding capital stock of ILH in exchange for 697,663 shares of our Series B Voting Convertible
Preferred Stock, which were subsequently converted into 16,307,872 shares of our common stock on July 17, 2007. As a result of this transaction, Mr. Akazawa, a Japanese citizen, became the beneficial owner of approximately 65.43% of our outstanding
capital stock.
In addition, on May 3, 2007, we entered into a cancellation and escrow agreement with Halter Financial Investments, L.P., or HFI, Halter Financial Group, L.P., or HFG, and Securities Transfer Corporation, whereby HFI and HFG agreed to deposit into
escrow 229,227 shares of our common stock. In addition, HFI and HFG agreed to transfer to us for cancellation such shares if we report net income of $12.5 million for fiscal 2008, on a consolidated basis, in our Annual Report on Form 10-K. Our
former director, Timothy P. Halter, is the Chairman of both HFI and HFG.
On April 5, 2007, we entered into a Stock Purchase Agreement with HFI, whereby HFI agreed to purchase 100,000 shares of our Series A Preferred Stock, or approximately 90% of the capital stock of our company as of such date, for a cash purchase price
of $455,000. On April 10, 2007, we completed this transaction.
On February 14, 2007, our subsidiary, Shandong Lorain, entered into a financial advisory agreement with HFG International, Limited, or HFG International, whereby HFG International agreed to provide certain financial advisory and consulting services
to us. In consideration for these services, we paid HFG International a fee of $450,000 upon the closing of our share exchange agreement. Our former director, Timothy P. Halter, is the principal stockholder and the chief executive officer of HFG
International.
52
CHANGE IN ACCOUNTANTS
On May 3, 2007, concurrent with the share exchange agreement described under "Certain Relationships and Related Transactions" above, our Board of Directors elected to continue the existing relationship between ILH and Samuel H. Wong &
Co., LLP, Certified Public Accountants, or Samuel Wong, and appointed Samuel Wong as our independent auditor.  We signed an engagement letter and formally engaged Samuel Wong as our independent auditor on May 23, 2007. Additionally, concurrent with
the decision to maintain our relationship with Samuel Wong, our board of directors approved the dismissal of Michael J. Larson, LLC as our independent auditor, effective upon the filing of our Quarterly Report on Form 10-QSB on May 21, 2007.
No report issued by Michael J. Larson, LLC on our financial statements for either of the past two years contained an adverse opinion or a disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles,
except for a going concern opinion expressing substantial doubt about the ability of us to continue as a going concern.
During 2005, 2006 and 2007, until the date of dismissal, there were no disagreements with Michael J. Larson, LLC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. There were no
reportable events, as described in Item 304(a)(1)(v) of Regulation S-K, during 2005, 2006 and 2007, until the date of dismissal.
We furnished a statement substantially similar to the proceeding three paragraphs to Michael J. Larson, LLC and requested Michael J. Larson, LLC to furnish us with a letter addressed to the Securities and Exchange Commission stating whether it
agrees with the statements made by us herein in response to Item 304(a) of Regulation S-K and, if not, stating the respect in which it does not agree. A copy of the letter was filed by us as Exhibit 16.1 to our Current Report on Form 8-K on May 25,
2007.
53
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the selling stockholders and the shares offered by them in this prospectus. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares
beneficially owned by a selling stockholder and the percentage of ownership of such stockholder, shares of common stock underlying shares of warrants held by such stockholder that are exercisable within 60 days of November 20, 2009 are included.
Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other selling stockholder. Each selling stockholder's percentage of ownership in the following table is based upon 30,239,985 shares
of common stock outstanding as of November 20, 2009 (the 30,239,985 shares of common stock does not include the
4,082,892 shares of common stock issuable upon the exercise of outstanding warrants, or the 1,344,586 shares issuable upon the
exercise of outstanding stock options), but does include shares of common stock issuable upon the exercise of warrants held by such selling stockholders).
The selling stockholders acquired the securities being registered for resale in this prospectus in a securities purchase agreement, dated October 28, 2009, by and between us the selling stockholders, pursuant to which we agreed to issue to the
selling stockholders (i) 5,011,169 shares of common stock, (ii) Series A Warrants to purchase 1,753,909 shares of common stock and (iii) Series B Warrants to purchase 501,115 shares of common stock. The aggregate purchase price was approximately
$12 million. Pursuant to the securities purchase agreement, the selling stockholders have a right to participate in up to 25%, in the aggregate, of certain future financing transactions conducted by us.
The initial exercise price of each of the Series A Warrants and Series B Warrants is $3.70 per share, subject to certain adjustments set forth therein, including adjustments in the event of certain future financing transactions conducted by us
or in the event of a stock dividend or stock split. The Series A Warrants become exercisable six months from the date of issuance and have a term of five years thereafter. The Series B Warrants become exercisable six months from the date of issuance
and have a term of 30 months thereafter.
In connection with the transaction, we entered into a registration rights agreement, pursuant to which we agreed to prepare and file a registration statement covering the resale of the common stock and the warrants with the Securities and Exchange
Commission within thirty days of the transaction.
In addition, we granted such investors and Rodman & Renshaw, LLC, or Rodman, and FT Global Capital, Inc., or FT Global, the placement agents, five-year warrants to purchase an aggregate of 2,555,695 shares of our common stock upon the same terms
as the Series A Warrants issued to the other selling stockholders.
None of the selling stockholders are employees or suppliers of ours or our affiliates. Within the past three years, none of the selling stockholders has held a position as an officer or director of ours, nor has any selling stockholder had any
material relationship of any kind with us or any of our affiliates, except that certain selling stockholders acquired shares of our common stock and warrants pursuant to a private placement in May 2007. All information with respect to share
ownership has been furnished by the selling stockholders. The shares being offered are being registered to permit public secondary trading of such shares and each selling stockholder may offer all or part of the shares it owns for resale from time
to time pursuant to this prospectus. In addition, none of the selling stockholders has any family relationships with our officers, directors or controlling stockholders. Furthermore, based on representations made to us by the selling stockholders,
no selling stockholder is a registered broker-dealer or an affiliate of a registered broker-dealer, except for Rodman, FT Global, Noam Rubinstein and Barney Monte.
The term "selling stockholders" also includes any transferees, pledgees, donees, or other successors in interest to the selling stockholders named in the table below. Unless otherwise indicated, to our knowledge, each person named in the
table below has sole voting and investment power (subject to applicable community property laws) with respect to the shares of common stock set forth opposite such person's name. We will file a supplement to this prospectus (or a post-effective
amendment hereto, if necessary) to name successors to any named selling stockholders who are able to use this prospectus to resell the securities registered hereby.
54
Any selling stockholders who are affiliates of broker-dealers
and any participating broker-dealers are deemed to be "underwriters" within the
meaning of the Securities Act, and any commissions or discounts given to any
such selling stockholder or broker-dealer may be regarded as underwriting
commissions or discounts under the Securities Act. The selling stockholders have
informed us that they do not have any agreement or understanding, directly or
indirectly, with any person to distribute their common stock.
Name of Beneficial
      Owner
Shares
Beneficially
Owned Before
the Offering
Maximum
Number of
Shares to be
Sold
Beneficial
Shares
After
the Offering
(1)
Percentage
      of
Common Stock
Owned After
Offering
(1)
Daybreak Special Situations
      Master Fund, Ltd.
(2)
120,834
120,834
0
*
James J. Fuld
(3)
241,665
241,665
0
*
GCA Strategic Investment Fund
      Limited
(4)
362,500
362,500
0
*
Hua-Mei 21
st
Century Partners, LP
(5)
1,811,337
1,208,334
603,003
*
Guerrilla Partners, LP
(6)
1,074,738
604,168
470,570
*
Jayhawk Private Equity Fund, L.P.
(7)
2,019,379
1,762,433
256,946
*
Jayhawk Private Equity Co-
      Invest Fund, L.P.
(8)
127,711
110,967
16,744
*
Hartz Capital Investments, LLC
(9)
181,250
181,250
0
*
Ryan M. Lane
(10)
60,417
60417
0
*
Whitebox Combined Partners, L.P.
(11)
507,500
507,500
0
*
Whitebox Intermarket Partners,
      L.P.
(12)
96,667
96,667
0
*
Excalibur Special Opportunities LP
(13)
344,485
302,083
42,402
*
Capital Ventures International
      (14)
453,125
453,125
0
*
Ancora Greater China Fund, LP
(15)
201,250
181,250
20,000
*
The USX China Fund
(16)
58,000
58,000
0
*
Cranshire Capital, L.P.
(17)
211,460
211,460
0
*
Heller Capital
      Investments
(18)
60,416
60,416
0
*
Octagon Capital Partners
(19)
60,416
60,416
0
*
Hudson Bay Fund LP
(20)
26,100
26,100
0
*
Hudson Bay Overseas Fund, Ltd.
(21)
46,400
46,400
0
*
Silver Rock II Ltd.
(22)
165,000
145,000
20,000
*
WU MIJIA
(23)
72,500
72,500
0
*
Rockmore Investment Master
      Fund Ltd
(24)
90,625
90,625
0
*
Kensington Partners LP
(25)
363,978
302,083
61,895
*
Rodman & Renshaw,
      LLC
(26)
217,235
217,235
0
*
FT Global Capital, Inc.
(27)
45,100
45,100
0
*
Noam Rubinstein
(28)
19,168
19,168
0
*
Barney Monte
(29)
19,168
19,168
0
*
55
* Less than 1%
(1) Assumes that all securities offered are sold.
(2) Includes an aggregate of 37,500 shares underlying warrants to purchase shares of our common stock. Lawrence
Butz and John Prinz are the Managing Directors of Daybreak Capital Management
LLC, which is the Investment Manager for Daybreak Special Situations Master Fund
Ltd and have voting power and investment power over the securities held by Daybreak Special Situations Master Fund Ltd.
(3) Includes an aggregate of 74,999 shares underlying warrants to purchase shares of our common stock.
(4) Includes an aggregate of 112,500 shares underlying warrants to purchase shares of our common stock. Lewis N.
Lester Sr. has sole voting and investment control over the securities held by GCA Strategic Investment Fund Limited.
(5) Includes an aggregate of 396,200 shares underlying warrants to purchase shares of our common stock. Peter Siris and Leigh Curry are the Managing Directors of Guerrilla Capital Management, LLC, which is the General Partner of Hua - Mei
21
st
Century Partners, LP and have voting power and investment power over securities held by Hua -Mei 21
st
Century Partners, LP.
(6) Includes an aggregate of 204,501 shares underlying warrants to purchase shares of our common stock. Peter Siris and Leigh Curry are the Managing Directors of Guerrilla Capital Management, LLC, which is the General Partner of Guerrilla Partners,
LP and have voting power and investment power over securities held by Guerrilla Partners, LP.
(7) Includes an aggregate of 803,908 shares underlying warrants to purchase shares of our common stock. Kent C. McCarthy is the Managing Member of Jayhawk Capital Management LLC, which is the General Partner of Jayhawk Private Equity Fund, L.P. and
has voting power and investment power over securities held by Jayhawk Private Equity Fund, L.P.
(8) Includes an aggregate of 51,182 shares underlying warrants to purchase shares of our common stock. Kent C. McCarthy is the Managing Member of Jayhawk Capital Management LLC, which is the General Partner of Jayhawk Private Equity Co-Invest Fund,
L.P. and has voting power and investment power over securities held by Jayhawk Private Equity Co-Invest Fund, L.P.
(9) Includes an aggregate of 56,250 shares underlying warrants to purchase shares of our common stock. Empery Asset Management LP, the authorized agent of Hartz Capital Investments, LLC ("HCI"), has discretionary authority to vote and dispose of the
shares held by HCI and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting power over
the shares held by HCI.  Mr. Hoe and Mr. Lane disclaim any beneficial ownership of these shares.
(10) Includes an aggregate of 18,750 shares underlying warrants to purchase shares of our common stock.
(11) Includes an aggregate of 157,500 shares underlying warrants to purchase shares of our common stock. Andrew
Redleaf is the managing member of Whitebox Advisors, LLC, which is the General Partner of Whitebox Combined Partners, L.P. and has voting power and investment power.
(12) Includes an aggregate of 30,000 shares underlying warrants to purchase shares of our common stock. Andrew Redleaf is the managing member of Whitebox Advisors, LLC, which is the General Partner of Whitebox Intermarket Partners, L.P. and has
voting power and investment power.
(13) Includes an aggregate of 136,152 shares underlying warrants to purchase shares of our common stock. William Hecther has sole voting and investment control over the securities held by Excalibur Special Opportunities LP.
56
(14) Includes an aggregate of 140,625 shares underlying
warrants to purchase shares of our common stock. Heights Capital Management,
Inc., the authorized agent of Capital Ventures International ("CVI"), has
discretionary authority to vote and dispose of the shares held by CVI and may be
deemed to be the beneficial owner of these shares. Martin Kobinger, in his
capacity as Investment Manager of Heights Capital Management, Inc., may also be
deemed to have investment discretion and voting power over the shares held by
CVI. Mr. Kobinger disclaims any such beneficial ownership of the shares.
(15) Includes an aggregate of 56,250 shares underlying warrants to purchase shares of our common stock. John P. Micklitsch has sole voting and investment control over the securities held by Ancora Greater China Fund, LP.
(16) Includes an aggregate of 18,000 shares underlying warrants to purchase shares of our common stock. Steven L. Parr has sole voting and investment control over the securities held by The USX China Fund.
(17) Includes an aggregate of 65,626 shares underlying
warrants to purchase shares of our common stock. Downsview Capital, Inc. ("Downsview")
is the general partner of Cranshire Capital, L.P. ("Cranshire") and consequently
has voting control and investment discretion over securities held by Cranshire.
Mitchell P. Kopin ("Mr. Kopin"), President of Downsview, has voting control over
Downsview. As a result of the foregoing, each of Mr. Kopin and Downsview may be
deemed to have beneficial ownership (as determined under Section 13(d) of the
Securities Exchange Act of 1934, as amended) of the shares of common stock
beneficially owned by Cranshire.
(18) Includes an aggregate of 18,749 shares underlying warrants to purchase shares of our common stock. Ronald I. Heller has sole voting and investment control over the securities held by Heller Capital Investments.
(19) Includes an aggregate of 18,749 shares underlying warrants to purchase shares of our common stock. Steven Hart has sole voting and investment control over the securities held by Octagon Capital Partners.
(20) Includes an aggregate of 8,100 shares underlying warrants to purchase shares of our common stock. Sander Gerber is the managing member of Hudson Bay Capital Management, LP, which is the General Partner of Hudson Bay Fund LP and has voting power
and investment power.
(21) Includes an aggregate of 14,400 shares underlying warrants to purchase shares of our common stock. Sander Gerber is the managing member of Hudson Bay Capital Management, LP, which is the General Partner of Hudson Bay Overseas Fund, Ltd. and has
voting power and investment power.
(22) Includes an aggregate of 45,000 shares underlying warrants to purchase shares of our common stock held by Silver Rock II, Ltd. and 20,000 shares underlying a warrant to purchase shares of our common stock held by Silver Rock I, Ltd., an
affiliate of Silver Rock II, Ltd.  Rima Salam has sole voting and investment control over the securities held by both Silver Rock I, Ltd. and Silver Rock II, Ltd.
(23) Includes an aggregate of 22,500 shares underlying warrants to purchase shares of our common stock.
(24) Includes an aggregate of 28,125 shares underlying
warrants to purchase shares of our common stock. Rockmore Capital, LLC ("Rockmore
Capital") and Rockmore Partners, LLC ("Rockmore Partners"), each a limited
liability company formed under the laws of the State of Delaware, serve as the
investment manager and general partner, respectively, to Rockmore Investments
(US) LP, a Delaware limited partnership, which invests all of its assets through
Rockmore Investment Master Fund Ltd., an exempted company formed under the laws
of Bermuda ("Rockmore Master Fund"). By reason of such relationships, Rockmore
Capital and Rockmore Partners may be deemed to share dispositive power over the
shares of our common stock owned by Rockmore Master Fund. Rockmore Capital and
Rockmore Partners disclaim beneficial ownership of such shares of our common
stock. Rockmore Partners has delegated authority to Rockmore Capital regarding
the portfolio management decisions with respect to the shares of common stock
owned by Rockmore Master Fund and, as of October 28, 2009, Mr. Bruce T.
Bernstein and Mr. Brian Daly, as officers of Rockmore Capital, are responsible
for the portfolio management decisions of the shares of common stock owned by
Rockmore Master Fund. By reason of such authority, Messrs. Bernstein and Daly
may be deemed to share dispositive power over the shares of our common stock
owned by Rockmore Master Fund. Messrs. Bernstein and Daly disclaim beneficial
ownership of such shares of our common stock and neither of such persons has any
legal right to maintain such authority. No other person has sole or shared
voting or dispositive power with respect to the shares of our common stock as
those terms are used for purposes under Regulation 13D-G of the Securities
Exchange Act of 1934, as amended. No person or "group" (as that term is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended, or the SEC's
Regulation 13D-G) controls Rockmore Master Fund
(25) Includes an aggregate of 155,645 shares underlying warrants to purchase shares of our common stock. Richard R. Keim has sole voting and investment control over the securities held by Kensington Partners LP.
(26) Includes 217,235 shares underlying a warrant to purchase shares of our common stock.
(27) Includes 45,100 shares underlying a warrant to purchase shares of our common stock.
(28) Includes 19,168 shares underlying a warrant to purchase shares of our common stock.
(29) Includes 19,168 shares underlying a warrant to purchase shares of our common stock.
57
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding beneficial
ownership of our common stock as of November 20, 2009 (i) by each person who is
known by us to beneficially own more than 5% of our common stock; (ii) by each
of our named executive officers and directors; and (iii) by all of our executive
officers and directors as a group. Beneficial ownership is determined in
accordance with the rules of the SEC that deem shares to be beneficially owned
by any person who has voting or investment power with respect to such shares.
Except as otherwise indicated, the persons listed below have advised us that
they have direct sole voting and investment power with respect to the shares
listed as owned by them.
Unless otherwise specified, the address of each of the persons
set forth below is c/o American Lorain Corporation, Beihuan Zhong Road, Junan
County, Shandong, China 276600.
In the table below, percentage ownership is based on 30,239,985
shares of our common stock outstanding as of November 20, 2009.
Name & Address of
Beneficial Owner
Office, If Any
Amount & Nature of
Beneficial Ownership
Percent of Class
Mr. Si Chen
Director and
Chief Executive Officer
16,204,423
53.6%
Guerrilla Capital Management,
      LLC
(1)
2,299,774
9.1%
Hua-Mei 21
st
Century Partners, LP
(1)
1,436,337
5.7%
All officers and directors as
      a group
(7 persons)
16,210,784
53.6%
* Less than 1%
(1) This information is derived from a Schedule 13G filed
jointly by Guerilla Capital Management, LLC., a Delaware limited liability
company ("Guerrilla Capital"), Hua-Mei 21st Century Partner, LP, a Delaware
limited partnership (the "Partnership"), Peter Siris and Leigh Curry on November
12, 2009. Guerrilla Capital may be deemed to be the beneficial owner of
2,299,774 shares and the Partnership may be deemed to be the beneficial owner of
1,436,337 shares. Peter Siris and Leigh Curry have control over management and
investment decisions for Guerilla Capital and the Partnership. The mailing
address for each of Guerilla Capital, the Partnership, Mr. Siris and Mr. Curry
is 237 Park Avenue, 9
th
Floor, New York, New York 10017.
58
DESCRIPTION OF CAPITAL STOCK
Common Stock
We are authorized to issue up to 200,000,000 shares of common stock, par value $0.001 per share.
Each outstanding share of common stock entitles the holder thereof to one vote per share on all matters. Corporate action to be taken by a stockholder vote may be authorized by the affirmative vote of a majority of the votes cast at a meeting of
stockholders, or by written consent in lieu of a meeting, unless otherwise required by law. In general, stockholders do not have preemptive rights to purchase shares in any future issuance of our common stock. However, the selling stockholders have
the right to participate in up to an aggregate of 25% of certain financing transactions conducted by us prior to April 28, 2011. Upon our liquidation, dissolution or winding up, and after payment of creditors and preferred stockholders, if any, our
assets will be divided pro-rata on a share-for-share basis among the holders of the shares of common stock.
The holders of shares of our common stock are entitled to dividends out of funds legally available when and as declared by our board of directors. Other than a special dividend paid on April 5, 2008 in connection with our reverse merger, our board
of directors has never declared a dividend and does not anticipate declaring a dividend in the foreseeable future. Should we decide in the future to pay dividends, as a holding company, our ability to do so and meet other obligations depends upon
the receipt of dividends or other payments from our operating subsidiaries and other holdings and investments. In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their ability to make distributions to us,
including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions. In the event of our liquidation, dissolution or winding
up, holders of our common stock are entitled to receive, ratably, the net assets available to stockholders after payment of all creditors.
All of the issued and outstanding shares of our common stock are duly authorized, validly issued, fully paid and non-assessable. To the extent that additional shares of our common stock are issued, the relative interests of existing stockholders
will be diluted.
Effective November 16, 2009, we reincorporated in Nevada from Delaware.
Preferred Stock
We are authorized to issue 5,000,000 shares of preferred stock. We may issue shares of preferred stock in one or more classes or series within a class as may be determined by our board of directors, who may establish the number of shares to be
included in each class or series, may fix the designation, powers, preferences and rights of the shares of each such class or series and any qualifications, limitations or restrictions thereof. Any preferred stock so issued by the board of directors
may rank senior to the common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up of our company, or both. Moreover, under certain circumstances, the issuance of preferred stock or the existence of
the unissued preferred stock might tend to discourage or render more difficult a merger or other change in control transaction. There are currently no outstanding shares of our preferred stock.
Warrants
In connection with a private placement in May 2007, we granted three-year warrants which are exercisable for shares of our common stock at $4.25 per share to a group of accredited investors and to the placement agent and its designee. Warrants
to purchase 1,527,197 shares of our common stock are currently outstanding. The exercise price of these warrants was determined based on the offering price of our common stock sold in the private placement transaction completed on May 3, 2007.
In connection with a private placement in October 2009, we granted to the selling stockholders (i) five-year Series A warrants which are exercisable for an aggregate of 1,753,909 shares of our common stock at $3.70 per share, all of
which are currently outstanding and (ii) thirty-month Series B warrants which are exercisable for an aggregate of 501,115 shares of our common stock at $3.70 per share, all of which are currently outstanding.
59
Indemnification of Directors and Officers
Our officers and directors are indemnified as provided by the Nevada Revised Statutes ("NRS") and our bylaws and articles of incorporation.
Under the NRS, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company's articles of incorporation that is not the case with our articles of
incorporation. Excepted from that immunity are:
(1)
a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest;
(2)
a violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful);
(3)
a transaction from which the director derived an improper personal profit; and
(4)
willful misconduct.
Our bylaws and articles of incorporation provide that we will indemnify our directors, officers, employees, and agents, to the fullest extent to the extent required by the Nevada Revised Statutes and shall indemnify such individuals to the extent
permitted by the Nevada Revised Statutes. We may purchase and maintain liability insurance, or make other arrangements for such obligations or otherwise, to the extent permitted by the Nevada Revised Statutes.
Transfer Agent and Registrar
Our independent stock transfer agent is Interwest Transfer Company, Inc. Their mailing address is 1981 East Holladay Blvd., P.O. Box 17136, Salt Lake City, UT 84117. Their phone number is (801) 272-9294.
SHARES ELIGIBLE FOR FUTURE SALE
As of November 20, 2009, we had 30,239,985 shares of common stock issued and outstanding.
Shares Covered by this Prospectus
All of the 7,566,863 shares of common stock being registered in this offering may be sold without restriction under the Securities Act, so long as the registration statement of which this prospectus is a part is, and remains, effective.
Rule 144
In general, pursuant to Rule 144 under the Securities Act, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale of shares of our common stock, and
who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the
availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the current
public information requirement.
A person (or persons whose shares are aggregated) who is deemed to be an affiliate of ours and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell within
any three-month period a number of shares of our common stock that does not exceed the greater of (i) one percent of the then outstanding shares of our common stock or (ii) the average weekly trading volume of our common stock during the four
calendar weeks preceding such sale. Such sales are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us.
60
The selling stockholders will not be governed by the foregoing restrictions when selling their shares pursuant to this prospectus.  The selling stockholders may sell their pursuant to Rule 144, if available, rather than under this prospectus.
61
PLAN OF DISTRIBUTION
Each selling stockholder and any pledgees, assignees and successors-in-interest of any selling stockholder may, from time to time, sell any or all of their shares of common stock covered hereby on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may use any one or more of the following methods when selling shares:
ordinary brokerage transactions and transactions in which the broker dealer solicits purchasers;
block trades in which the broker dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
purchases by a broker dealer as principal and resale by the broker dealer for its account;
an exchange distribution in accordance with the rules of the applicable exchange;
privately negotiated transactions;
settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
in transactions through broker dealers that agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
a combination of any such methods of sale; or
any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.
Broker dealers engaged by the selling stockholders may arrange for other brokers dealers to participate in sales. Broker dealers may receive commissions or discounts from the selling stockholders (or, if any broker dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction, not in excess of a customary brokerage commission in compliance with FINRA Rule
2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.
In connection with the sale of the common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in
the course of hedging the positions they assume. The selling stockholders may also sell shares of the common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in
turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales.  In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed us that it does not have
any written or oral agreement or understanding, directly or indirectly, with any person to distribute the common stock. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent
(8%).
We are required to pay certain fees and expenses incurred by us incident to the registration of the shares of common stock. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
62
The selling stockholders will be subject to the prospectus
delivery requirements of the Securities Act or any exemption therefrom,
including Rule 172 thereunder. The selling stockholders have advised us that
there is no underwriter or coordinating broker acting in connection with the
proposed sale of the resale shares by the selling stockholders.
We agreed to keep this prospectus effective until the earlier
of (i) the date on which the shares may be resold by the selling stockholders
without registration and without regard to any volume or manner-of-sale
limitations by reason of Rule 144, without the requirement for us to be in
compliance with the current public information under Rule 144 under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to this prospectus or Rule 144 under the Securities Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares of common
stock covered hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act,
any person engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to the common
stock for the applicable restricted period, as defined in Regulation M, prior to
the commencement of the distribution. In addition, the selling stockholders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of the common stock by the selling stockholders or
any other person. We will make copies of this prospectus available to the
selling stockholders and have informed them of the need to deliver a copy of
this prospectus to each purchaser at or prior to the time of the sale (including
by compliance with Rule 172 under the Securities Act).
LEGAL MATTERS
The validity of the common stock offered by this prospectus has
been passed upon for us by Holland & Hart LLP, Nevada.
EXPERTS
The consolidated financial statements included in this
prospectus and in the registration statement have been audited by Samuel H. Wong
& Co., LLP, Certified Public Accountants, an independent registered public
accounting firm, to the extent and for the periods set forth in their report
appearing elsewhere herein and in the registration statement, and are included
in reliance on such report, given the authority of said firm as an expert in
auditing and accounting.
63
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC, a registration statement on Form S-1 under the Securities Act with respect to the common stock offered in this offering. This prospectus does not contain all of the information set forth in the registration statement. For
further information with respect to us and the common stock offered in this offering, we refer you to the registration statement and to the attached exhibits. With respect to each such document filed as an exhibit to the registration statement, we
refer you to the exhibit for a more complete description of the matters involved.
You may inspect our registration statement and the attached exhibits and schedules without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of our
registration statement from the SEC upon payment of prescribed fees. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.
Our SEC filings, including the registration statement and the exhibits filed with the registration statement, are also available from the SEC's website at www.sec.gov, which contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC.
64
INDEX TO FINANCIAL STATEMENTS
CONTENTS
PAGES
REPORT OF INDEPENDENT REGISTERED PUBLIC
      ACCOUNTING FIRM
F-1
CONSOLIDATED BALANCE SHEETS
F-2
CONSOLIDATED STATEMENTS OF INCOME
F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
F-6
NOTES TO FINANCIAL STATEMENTS
F-7
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, 2008 and 2007 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, 2008 and 2007 and the results of
its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
South San Francisco, California
Samuel H. Wong & Co., LLP
February 18, 2009
Certified Public Accountants
F-2
AMERICAN LORAIN CORPORATION
CONSOLIDATED BALANCE
SHEETS
AS OF DECEMBER 31, 2008 AND 2007
(Stated in US
Dollars)
Note
2008
2007
ASSETS
Current assets
Cash and Cash
      equivalents
$
2,841,339
$
6,769,973
Restricted Cash
3
3,715,998
2,021,839
Short-term Investment
113,069
7,246
Trade accounts receivable
4
25,293,326
32,859,688
Other
      receivables
5
5,107,719
7,552,976
Inventory
6
24,827,922
17,903,344
Advance to
      Suppliers
415,009
5,357,951
Prepaid Expenses and Taxes
1,228,648
916,774
Total current assets
$
63,543,030
$
73,389,790
Property, plant and equipment,
net
7
40,201,686
24,022,181
Land use rights,
net
8
3,950,927
3,047,021
TOTAL ASSETS
$
107,695,643
$
100,458,992
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank loans
9
$
14,414,996
$
24,077,504
Notes payable
10
5,208,485
2,734,444
Accounts payable
6,072,883
6,251,833
Income tax
      payable
2,682,658
1,121,528
Current maturities of long term
      debts
12
-
-
Accrued
      liabilities and other payables
11
10,291,237
16,784,108
Customers deposits
748,732
957,642
Total current liabilities
$
39,418,991
$
51,927,058
Long-term bank loans
12
576,975
102,542
TOTAL LIABILITIES
$
39,995,966
$
52,029,600
See Accompanying Notes to the Financial Statements and
Accountant's Report
F-2
AMERICAN LORAIN CORPORATION
CONSOLIDATED BALANCE
SHEETS (Continued)
AS OF DECEMBER 31, 2008 AND 2007
(Stated in US Dollars)
Note
2008
2007
Minority interests
13
$
5,122,021
$
3,887,021
STOCKHOLDERS' EQUITY
Common Stock, $0.001 par value, 200,000,000
shares authorized;
      25,172,640 and 24,923,178
shares issued and
      outstanding as of December 31,
2008 and 2007,
      respectively
14
25,172
24,923
Additional paid-in-capital
24,187,019
24,187,268
Statutory reserves
5,438,723
4,497,647
Retained earnings
27,748,126
13,985,824
Accumulated other comprehensive Income
5,178,616
1,846,708
$
62,577,656
$
44,542,370
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
107,695,643
$
100,458,992
See Accompanying Notes to the Financial Statements and
Accountant's Report
F-3
AMERICAN LORAIN CORPORATION
CONSOLIDATED
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
Note
2008
2007
Net revenues
$
132,360,317
$
82,094,963
Cost of revenues
(101,213,340
)
(61,932,474
)
Gross profit
$
31,146,977
$
20,162,490
Operating expenses
Selling and marketing expenses
(6,166,248
)
(2,623,138
)
General and administrative expenses
(4,047,988
)
(2,864,813
)
Operating Income
$
20,932,741
$
14,674,539
Investment income
-
4,769
Government subsidy income
328,687
1,373,280
Interest income
99,411
209,010
Other income
251,317
155,467
Other expenses
(161,726
)
(1,445,780
)
Interest Expense
(2,769,597
)
(2,376,088
)
Earnings before tax
$
18,680,833
$
12,595,196
Income tax
15
(3,003,265
)
(2,134,916
)
Income before minority interests
$
15,677,568
$
10,460,279
Minority interests
(974,190
)
(715,359
)
Net income
14,703,378
9,744,920
Earnings per share
basic
$
0.58
$
0.43
diluted
0.58
0.42
Weighted average shares outstanding
basic
25,172,640
22,554,210
diluted
25,172,640
23,177,268
See Accompanying Notes to the Financial Statements and
Accountant's Report
F-4
AMERICAN LORAIN CORPORATION
STATEMENT OF
STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008 AND
2007
(Stated in US Dollars)
Accumulated
Number
Additional
Other
of
Common
Paid-in
Statutory
Retained
Comprehensive
Shares
Stock
Capital
Reserves
Earnings
Income
Total
Balance, January 1, 2007
17,932,777
$
17,933
$
6,846,620
$
4,439,604
$
4,298,947
$
1,006,195
$
16,609,299
Issuance of Common Stock for Cash
6,990,401
6,990
17,340,648
-
-
-
17,347,638
Net Income
-
-
-
-
9,744,920
-
9,744,920
Appropriations to Statutory Reserves
-
-
-
58,043
(58,043
)
-
-
Foreign Currency Translation Adjustment
-
-
-
-
-
840,513
840,513
Balance, December 31, 2007
24,923,178
$
24,923
$
24,187,268
$
4,497,647
$
13,985,824
$
1,846,708
$
44,542,370
Balance, January 1, 2008
24,923,178
$
24,923
$
24,187,268
$
4,497,647
$
13,985,824
$
1,846,708
$
44,542,370
Issuance of Common Stock
249,455
249
(249
)
-
-
-
-
Share Adjustment to Match Transfer Agent
7
-
-
-
-
-
-
Net Income
-
-
-
-
14,703,378
-
14,703,378
Appropriations to Statutory Reserves
-
-
-
941,076
(941,076
)
-
-
Foreign Currency Translation Adjustment
-
-
-
-
-
3,331,908
3,331,908
Balance, December 31, 2008
25,172,640
$
25,172
$
24,187,019
$
5,438,723
$
27,748,126
$
5,178,616
$
62,577,656
Comprehensive
Comprehensive
Income
Income
2008
2007
Total
Net Income
$
14,703,378
$
9,744,920
$
30,376,788
Foreign Currency Translation Adjustment
3,331,908
840,513
4,680,852
$
18,035,286
$
10,585,433
$
34,057,640
See Accompanying Notes to the Financial Statements and
Accountant's Report
F-5
AMERICAN LORAIN CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008
AND 2007
(Stated in US Dollars)
2008
2007
Cash flows from operating activities
Net income
$
14,703,377
$
9,744,920
Minority interest
974,191
964,666
Fire Loss
1,392,379
Depreciation
1,273,935
802,927
Amortization
158,428
17,798
(Increase)/decrease in
      accounts & other receivables
14,642,687
(23,809,252
)
(Increase)/decrease in inventories
(6,924,578
)
(8,560,781
)
Increase/(decrease) in
      accounts and other payables
(5,319,600
)
15,862,094
Net cash (used in)/provided by operating
      activities
$
19,508,440
$
(3,585,249
)
Cash flows from investing activities
Purchase of plant and equipment
(13,928,921
)
(7,657,346
)
Purchase of biological assets
(2,784,136
)
Increase of construction in progress
(3,524,520
)
(2,258,097
)
(Increase)/decrease in
      restricted cash
(1,694,159
)
527,482
Payment of land use rights
(1,062,334
)
(287,344
)
Investments in securities
(105,823
)
19,374
Net cash used in investing activities
$
(20,315,757
)
$
(12,440,067
)
Cash flows from financing activities
Issue of common stock
-
17,347,638
Dividend paid
-
Proceeds from notes
2,474,041
Bank borrowings
35,327,917
25,645,795
Bank repayment
(45,936,138
)
(23,329,333
)
Net cash provided by/(used in)
      financing
Activities
$
(8,134,180
)
$
19,664,100
Net in cash and cash equivalents
      (used)/sourced
(8,941,497
)
3,638,784
Effect of foreign currency translation on
      cash and cash equivalents
5,012,863
840,513
Cash and cash equivalents–beginning of year
6,769,973
2,290,676
Cash and cash equivalents–end of year
$
2,841,339
$
6,769,973
Supplementary cash flow information:
Interest received
$
99,411
$
209,010
Interest paid
2,769,597
2,293,442
Taxes Paid
3,003,265
740,943
See Accompanying Notes to the Financial Statements and
Accountant's Report
F-6
1.
ORGANIZATION, BASIS OF PRESENTATION, AND PRINCIPAL
      ACTIVITIES
(a)
Organization history of American Lorain Corporation
      (formerly known as Millennium Quest, Inc.)
American Lorain Corporation (the "Company" or "ALC") is a
      Delaware corporation incorporated on February 4, 1986. From inception
      through May 3, 2007, the Company did not engage in any active business
      operations other than in search and evaluation of potential business
      opportunity to become an acquiree of a reverse-merger deal.
(b)
Organization History of International Lorain Holding
      Inc. and its subsidiaries
International Lorain Holding Inc. ("ILH") is a Cayman
      Islands company incorporated on August 4, 2006 and was until May 3, 2007
      wholly-owned by Mr. Hisashi Akazawa. Through restructuring and acquisition
      in 2006, the Company presently has two direct wholly-owned subsidiaries,
      Junan Hongrun and Luotian Lorain, and one indirectly wholly-owned
      subsidiary through Junan Hongrun, which is Beijing Lorain.
In addition, the Company directly and indirectly has
      80.2% ownership of Shandong Lorain. The rest of the 19.8%, which is owned
      by the State under the name of Shandong Economic Development Investment
      Co. Ltd., is not included as a part of the Group.
(c)
Reverse-Merger
On May 3, 2007, the Company entered into a share exchange
      agreement with International Lorain Holding Inc. ("ILH") whereby the
      Company consummated its acquisition of ILH by issuance of 697,663 Series B
      voting convertible preferred shares to the shareholders of ILH in exchange
      of 5,099,503 ILH shares. Concurrently on May 3, 2007, the Company also
      entered into a securities purchase agreement with certain investors and
      Mr. Hisashi Akazawa and Mr. Si Chen (each a "beneficial owner") whereby
      the Company issued 319,913 (after reverse-split at 32.84 from 10,508,643)
      common shares to its shareholders as consideration of the Company's
      reverse-merger with Lorain.
The share exchange transaction is referred to hereafter
      as the "reverse-merger transaction." The share exchange transaction has
      been accounted for as a recapitalization of ALC where the Company (the
      legal acquirer) is considered the accounting acquiree and ILH (the
      acquiree) is considered the accounting acquirer. As a result of this
      transaction, the Company is deemed to be a continuation of the business of
      ILH.
Accordingly, the accompanying consolidated financial
      statements are those of the accounting acquirer, ILH. The historical
      stockholders' equity of the accounting acquirer prior to the share
      exchange has been retroactively restated as if the share exchange
      transaction occurred as of the beginning of the first period presented.
      See also Note 14 Capitalization.
(d)
Business Activities
The Company develops, manufactures,
and sells convenience foods (such as  ready-to-cook (or RTC) meals; ready-to-eat (or RTE)
meals and meals ready-to-eat (or MRE); chestnut products; and frozen, canned,
and bulk foods, in hundreds of varieties. The Company operates through indirect
Chinese subsidiaries. The products are sold in 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, canned, and bulk food ("FCB food").
F-7
2.
SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES
(a)
Method of Accounting
The Company maintains its general ledger and journals
      with the accrual method accounting for financial reporting purposes. The
      financial statements and notes are representations of management.
      Accounting policies adopted by the Company conform to generally accepted
      accounting principles in the United States of America and have been
      consistently applied in the presentation of financial statements, which
      are compiled on the accrual basis of accounting.
(b)
Principles of consolidation
The consolidated financial statements which include the
      Company and its subsidiaries are compiled in accordance with generally
      accepted accounting principles in the United States of America. All
      significant inter-company accounts and transactions have been eliminated.
      The consolidated financial statements include 100% of assets, liabilities,
      and net income or loss of those wholly-owned subsidiaries; ownership
      interests of minority investors are recorded as minority
  interests.
As of December 31, 2008, the detailed identities of the
      consolidating subsidiaries are as follows:
Name of Company
Place
      of
Attributable
Registered
incorporation
equity
      interest
capital
%
Shandong Lorain Co., Ltd
PRC
80.2
$
12,901,823
(RMB
      100,860,000
)
Luotian Lorain Co., Ltd
PRC
100
$
3,240,013
(RMB 25,328,800
)
Junan Hongrun Foodstuff Co.,
      Ltd
PRC
100
$
16,245,603
(RMB
      127,000,000
)
Beijing Lorain Co., Ltd
PRC
100
$
1,279,181
(RMB 10,000,000
)
(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
      period. Management makes these estimates using the best information
      available at the time the estimates are made; however actual results could
      differ materially from those estimates
(d)
Economic and political risks
The Company's operations are conducted in the PRC.
      Accordingly, the Company's business, financial condition and results of
      operations may be influenced by the political, economic and legal
      environment in the PRC, and by the general state of the PRC
  economy.
The Company's operations in the PRC
are subject to special considerations and significant risks not typically
associated with companies in North America and Western Europe. These include risks associated with, among others, the
      political, economic and legal environment and foreign currency exchange.
      The Company's results may be adversely affected by changes in the
      political and social conditions in the PRC, and by changes in governmental
      policies with respect to laws and regulations, anti-inflationary measures,
      currency conversion, remittances abroad, and rates and methods of
      taxation, among other things.
F-8
(e)
Lease prepayments
Lease prepayments represent the cost of land use rights
      in the PRC. Land use rights are carried at cost and amortized on a
      straight-line basis over the period of rights of 50 years.
(f)
Property, plant and
equipment
Plant and equipment are carried at
cost less accumulated depreciation. Depreciation is provided over their
estimated useful lives, using the straight-line method. Estimated useful lives
of the plant and equipment are as follows:
Buildings
40 years
Machinery and equipment
10 years
Motor vehicles
10 years
Office equipment
5 years
The cost and related accumulated depreciation of assets
      sold or otherwise retired are eliminated from the accounts and any gain or
      loss is included in the statement of income. The cost of maintenance and
      repairs is charged to income as incurred, whereas significant renewals and
      betterments are capitalized.
(g)
Accounting for the Impairment of Long-Lived
      Assets
The long-lived assets held and used by the Company are
      reviewed for impairment whenever events or changes in circumstances
      indicate that the carrying amount of assets may not be recoverable. It is
      reasonably possible that these assets could become impaired as a result of
      technology or other industry changes. Determination of recoverability of
      assets to be held and used is by comparing the carrying amount of an asset
      to future net undiscounted cash flows to be generated by the
  assets.
If such assets are considered to be impaired, the
      impairment to be recognized is measured by the amount by which the
      carrying amount of the assets exceeds the fair value of the assets. Assets
      to be disposed of are reported at the lower of the carrying amount or fair
      value less costs to sell. During the reporting years, there was no
      impairment loss.
(h)
Construction in progress
Construction in progress represents direct costs of
      construction or acquisition and design fees incurred. Capitalization of
      these costs ceases and the construction in progress is transferred to
      plant and equipment when substantially all the activities necessary to
      prepare the assets for their intended use are completed. No depreciation
      is provided until it is completed and ready for intended use.
(i)
Investment securities
The Company classifies its equity securities into trading
      or available-for-sale. Trading securities are bought and held principally
      for the purpose of selling them in the near term. All securities not
      included in trading securities are classified as
  available-for-sale.
F-9
Trading and available-for-sale securities are recorded at
      fair value. Unrealized holding gains and losses on trading securities are
      included in the net income. Unrealized holding gains and losses, net of
      the related tax effect, on available for sale securities are excluded from
      net income and are reported as a separate component of other comprehensive
      income until realized. Realized gains and losses from the sale of
      available-for-sale securities are determined on a specific-identification
      basis.
A decline in the market value of any available-for-sale
      security below cost that is deemed to be other-than-temporary results in a
      reduction in carrying amount to fair value. The impairment is charged as
      an expense to the statement of income and comprehensive income and a new
      cost basis for the security is established. To determine whether
      impairment is other-than-temporary, the Company considers whether it has
      the ability and intent to hold the investment until a market price
      recovery and considers whether evidence indicating the cost of the
      investment is recoverable outweighs evidence to the contrary. Evidence
      considered in this assessment includes the reasons for the impairment, the
      severity and duration of the impairment, changes in value subsequent to
      year end, and forecasted performance of the investee.
Premiums and discounts are amortized or accreted over the
      life of the related available-for-sale security as an adjustment to yield
      using the effective-interest method. Dividend and interest income are
      recognized when earned.
(j)
Inventories
Inventories consisting of finished goods and raw
      materials are stated at the lower of cost or market value. Finished goods
      are comprised of direct materials, direct labor and an appropriate
      proportion of overhead.
(k)
Trade receivables
Trade receivables are recognized and carried at the
      original invoice amount less allowance for any uncollectible amounts. An
      estimate for doubtful accounts is made when collection of the full amount
      is no longer probable. Bad debts are written off as incurred.
(l)
Customer deposits
Customer deposits were received from customers in
      connection with orders of products to be delivered in future
    periods.
(m)
Cash and cash equivalents
The Company considers all highly liquid investments
      purchased with original maturities of three months or less to be cash
      equivalents.
(n)
Advertising
All advertising costs are expensed as incurred.
(o)
Shipping and handling
All shipping and handling are expensed as
  incurred.
(p)
Research and development
All research and development costs are
expensed as incurred.
F-10
(q)
Retirement benefits
Retirement benefits in the form of contributions under
      defined contribution retirement plans to the relevant authorities are
      charged to the consolidated statement of income as incurred.
(r)
Income taxes
The Company uses the accrual method of accounting to
      determine and report its taxable reduction of income taxes for the year in
      which they are available. The Company has implemented Statement of
      Financial Accounting Standards (SFAS) No. 109, Accounting for Income
      Taxes. Income tax liabilities computed according to the United States and
      People's Republic of China (PRC) tax laws are provided for the tax effects
      of transactions reported in the financial statements and consists of taxes
      currently due plus deferred taxes related primarily to differences between
      the basis of fixed assets and intangible assets for financial and tax
      reporting. The deferred tax assets and liabilities represent the future
      tax return consequences of those differences, which will be either taxable
      or deductible when the assets and liabilities are recovered or settled.
      Deferred taxes also are recognized for operating losses that are available
      to offset future income taxes. A valuation allowance is created to
      evaluate deferred tax assets if it is more likely than not that these
      items will either expire before the Company is able to realize that tax
      benefit, or that future realization is uncertain.
Effective January 1, 2008, PRC government implemented a
      new 25% tax rate across the board for all enterprises regardless of
      whether domestic or foreign enterprise without any tax holiday which is
      defined as "two-year exemption followed by three-year half exemption"
      hitherto enjoyed by tax payers. As a result of the new tax law of a
      standard 15% tax rate, tax holidays terminated as of December 31, 2007.
      However, PRC government has established a set of transition rules to allow
      enterprises already started tax holidays before January 1, 2008, to
      continue enjoying the tax holidays until being fully utilized.
The Company is subject to United States Tax according to
      Internal Revenue Code Sections 951 and 957. Corporate income tax is
      imposed on progressive rates in the range of:
-
Taxable Income
Rate
Over
But Not Over
Of Amount Over
15%
0
50,000
0
25%
50,000
75,000
50,000
34%
75,000
100,000
75,000
39%
100,000
335,000
100,000
34%
335,000
10,000,000
335,000
35%
10,000,000
15,000,000
10,000,000
38%
15,000,000
18,333,333
15,000,000
35%
18,333,333
-
-
Based on the consolidated net income
for the year ended December 31, 2008, the Company shall not be subject to income
tax.
The Company accounts for income tax
using an asset and liability approach and allows for recognition of deferred tax
benefits in future years. Under the asset and liability approach, deferred taxes
are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
      reporting purposes and the amounts used for income tax purposes. A
      valuation allowance is provided for deferred tax assets if it is more
      likely than not these items will either expire before the Company is able
      to realize their benefits, or that future realization is
  uncertain.
F-11
(s)
Statutory reserves
Statutory reserves are referring to the amount
      appropriated from the net income in accordance with laws or regulations,
      which can be used to recover losses and increase capital, as approved, and
      are to be used to expand production or operations.
(t)
Foreign currency translation
The accompanying financial statements are presented in
      United States dollars. The functional currency of the Company is the
      Renminbi (RMB). The financial statements are translated into United States
      dollars from RMB at year-end exchange rates as to assets and liabilities
      and average exchange rates as to revenues and expenses. Capital accounts
      are translated at their historical exchange rates when the capital
      transactions occurred.
2008
2007
Year end RMB : US$ exchange rate
6.8542
7.3141
Average yearly RMB : US$ exchange rate
6.9622
7.6172
The RMB is not freely convertible into foreign currency
      and all foreign exchange transactions must take place through authorized
      institutions. No representation is made that the RMB amounts could have
      been, or could be, converted into US$ at the rates used in
    translation.
(u)
Revenue recognition
The Company's revenue recognition policies are in
      compliance with Staff accounting bulletin (SAB) 104. Sales revenue is
      recognized at the date of shipment to customers when a formal arrangement
      exists, the price is fixed or determinable, the delivery is completed, no
      other significant obligations of the Company exist and collectibility is
      reasonably assured. Payments received before all of the relevant criteria
      for revenue recognition are satisfied are recorded as unearned
    revenue.
The Company's revenue consists of invoiced value of
      goods, net of a value-added tax (VAT). No product return or sales discount
      allowance is made as products delivered and accepted by customers are
      normally not returnable and sales discount is normally not granted after
      products are delivered.
(v)
Earnings per share
Basic earnings per share is computed
by dividing net income by the weighted average number of ordinary shares
outstanding during the period. Diluted earnings per share is computed by
dividing net income by the sum of the weighted average number of ordinary shares
outstanding and dilutive potential ordinary shares during the years. During the
years ended 2008 and 2007, no dilutive potential ordinary shares were issued.
F-12
The Company computes earnings per
share ("EPS") in accordance with Statement of Financial Accounting Standards No. 128, "Earnings per share" ("SFAS
      No. 128"), and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). SFAS No.
      128 requires companies with complex capital structures to present basic
      and diluted EPS. Basic EPS is measured as the income or loss available to
      common shareholders divided by the weighted average common shares
      outstanding for the period. Diluted EPS is similar to basic EPS but
      presents the dilutive effect on a per share basis of potential common
      shares (e.g., convertible securities, options, and warrants) as if they
      had been converted at the beginning of the periods presented, or issuance
      date, if later. Potential common shares that have an anti-dilutive effect
      (i.e., those that increase income per share or decrease loss per share)
      are excluded from the calculation of diluted EPS.
(w)
Commitments and contingencies
Liabilities for loss contingencies arising from claims,
      assessments, litigation, fines and penalties and other sources are
      recorded when it is probable that a liability has been incurred and the
      amount of the assessment can be reasonably estimated.
(x)
Comprehensive income
Comprehensive income is defined to include all changes in
      equity except those resulting from investments by owners and distributions
      to owners. Among other disclosures, all items that are required to be
      recognized under current accounting standards as components of
      comprehensive income are required to be reported in a financial statement
      that is presented with the same prominence as other financial statements.
      The Company's current component of other comprehensive income is the
      foreign currency translation adjustment.
(y)
Recent accounting pronouncements
In March 2008, the FASB issued SFAS No. 161, "Disclosures
      about Derivative Instruments and Hedging Activities, an amendment of FASB
      Statement No. 133" ("SFAS 161"). SFAS 161 applies to all derivative
      instruments and related hedged items accounted for under SFAS No. 133,
      "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
      133"). SFAS 161 requires entities to provide greater transparency about
      (a) how and why an entity uses derivative instruments, (b) how derivative
      instruments and related hedged items are accounted for under SFAS 133 and
      its related interpretations, and (c) how derivative instruments and
      related hedged items affect an entity's financial position, results of
      operations and cash flows. SFAS 161 is effective for financial statements
      issued for fiscal years and interim periods beginning after November 15,
      2008.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy
      of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162
      identifies the sources of accounting principles and the framework for
      selecting the principles used in the preparation of financial statements
      of nongovernmental entities that are presented in conformity with
      generally accepted accounting principles (the GAAP hierarchy). Statement
      162 will become effective 60 days following the SEC's approval of the
      Public Company Accounting Oversight Board amendments to AU Section 411,
      "The Meaning of Present Fairly in Conformity With Generally Accepted
      Accounting Principles."
In May 2008, the FASB issued FSP Accounting Principles
      Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May
      Be Settled in Cash upon Conversion (Including Partial Cash Settlement)"
      ("FSP APB 14-1"). FSP APB 14-1 requires the issuer of certain convertible
      debt instruments that may be settled in cash (or other assets) on
      conversion to separately account for the liability (debt) and equity
      (conversion option) components of the instrument in a manner that reflects
the issuer's non-convertible debt borrowing rate. FSP APB 14-1 is effective for
fiscal years beginning after December 15, 2008 on a retroactive basis.
F-13
In September 2008, FASB issued FSP No.
133-1 and FIN 45-4, "Disclosures about Credit Derivatives and Certain
Guarantees", an amendment of FASB Statement No. 133 and FASB Interpretation No.
45; and Clarification of the Effective Date of FASB Statement No. 161. This FSP
is intended to improve disclosures about credit derivatives by requiring more
information about the potential adverse effects of changes in credit risk on the
financial position, financial performance, and cash flows of the sellers of
credit derivatives. The provisions of the FSP that amend Statement 133 and FIN
45 are effective for reporting periods (annual or interim) ending after November
15, 2008.
This FSP amends FASB Statement No.
133,
Accounting for Derivative Instruments and Hedging Activities
, to
require disclosures by sellers of credit derivatives, including credit
derivatives embedded in hybrid instruments. This FSP also amends FASB
Interpretation (FIN) No. 45,
Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to
Others
, to require an additional disclosure about the current status of the
payment/performance risk of a guarantee. The provisions of the FSP that amend
Statement 133 and FIN 45 are effective for reporting periods (annual or interim)
ending after November 15, 2008.
Finally, this FSP clarifies the
effective date in FASB Statement No. 161,
Disclosures about Derivative
Instruments and Hedging Activities.
The disclosures required by Statement
161 should be provided for any reporting period (annual or quarterly interim)
beginning after November 15, 2008. For example, an entity with a March 31 fiscal
year-end should provide the disclosures for its fourth quarter interim period
ending March 31, 2009, in its 2009 annual financial statements. This
clarification of the effective date of Statement 161 is effective upon issuance
of the FSP.
The Company is currently evaluating
the potential impact, if any, of the adoption of the above recent accounting
pronouncements on its consolidated results of operations and financial
condition.
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
2008
2007
Trade accounts receivable
$
25,421,293
$
33,031,997
Less
:
Allowance for doubtful accounts
(127,967
)
(172,309
)
$
25,293,326
$
32,859,688
F-14
Allowance for Bad Debt:
2008
2007
Beginning Balance
$
172,309
$
226,881
Additions to Allowance
-
Less
:
Bad
      debt written-off
(44,342
)
(54,572
)
$
127,967
$
172,309
The Company offers credit terms of
between 30 to 60 days to most of their international distributors as well as
domestic supermarkets and wholesalers, and between 0 to 15 days for most of
their agents.
5.
OTHER RECEIVABLES
Other receivables consisted of the following as of
      December 31:
2008
2007
Advances to suppliers
$
663,302
$
2,858,351
Advances to Employees for job/travel disbursements
3,160,886
3,027,007
Amount due by a non-related enterprise
1,278,501
1,063,932
Other non-related receivables
5,030
451,183
Business taxes prepayment
-
21,876
Sundry deposits
-
130,627
$
5,107,719
$
7,552,976
6.
INVENTORIES
Inventories consisted of the following as of December
      31:
2008
2007
Raw materials
$
9,636,050
$
5,278,484
Work in Process
1,143,766
4,828,790
Finished goods
14,048,106
7,796,070
$
24,827,922
$
17,903,344
7.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consisted of the following
      as of December 31:
2008
2007
At cost:
Buildings
$
27,798,849
$
15,547,205
Landscaping,
      plant, and tree
2,752,101
2,784,136
Machinery and equipment
7,229,512
5,732,776
Office equipment
859,818
28,520
Motor vehicles
39,824
658,547
$
38,680,104
$
24,751,184
F-15
Less
:
accumulated depreciation
Buildings
(1,192,855
)
(698,732
)
Machinery and equipment
(2,628,710
)
(1,954,257
)
Office equipment
(414,478
)
(15,643
)
Motor vehicles
(24,992
)
(318,468
)
(4,261,035
)
(2,987,100
)
Construction in Progress
5,782,617
2,258,097
$
40,201,686
$
24,022,181
Construction in progress mainly
comprises capital expenditures for construction of the Company's new corporate
campus, including offices, factories and staff dormitories. Capital commitments
for the construction are immaterial for the three years above.
Landscaping, plant and tree is chestnut
trees investment in the development of agricultural operations, which have not
been the significant source of the raw materials needed for the Company's
operations to date.
8.
LAND USE RIGHTS, NET
Land use rights consisted of the following as of December
      31
:
2008
2007
Land use rights,
at cost
$
4,236,266
$
3,173,931
Less
:
Accumulated
      amortization
(285,339
)
(126,910
)
$
3,950,927
$
3,047,021
Land use rights represent the prepaid land use right. The
      PRC government owns the land on which the Company's corporate campus is
      being constructed.
9.
SHORT-TERM DEBTS
Short-term debts consisted of the following as of
      December 31:
2008
2007
Loans from Junan County Construction Bank,
•
Interest rate at 6.264% per annum due 8/31/2007
$
-
$
410.167
•
Interest rate at 6.264% per annum due 9/7/2007
-
343,173
•
Interest rate at 7.776% per annum due 12/18/2007
-
261,139
•
Interest rate at 7.776% per annum due 12/18/2007
-
355,478
•
Interest rate at 8.541% per annum due 3/5/2008
-
355,478
•
Interest rate at 8.892% per annum due 7/23/2008
-
328,133
•
Interest rate at 6.314% per annum due 9/17/2008
-
256,696
•
Interest rate at 6.264% per annum due between 1/10/2007 and 9/7/2007
-
-
•
Interest rate at 7.452% per annum due 2/24/2009
102,127
-
•
Interest rate at 10.452% per annum due 1/22/2009
1,575,676
-
•
Interest rate at 7.236% per annum due 2/3/2009
116,717
-
F-16
Loan from Junan
    County Agriculture Bank,
• Interest rate at 10.251% per annum due 1/11/2008
-
231,061
• Interest rate at 10.557% per annum due 1/11/2008
-
345,907
• Interest rate at 11.016% per annum due 2/21/2008
-
191,411
2008
2007
• Interest rate at 11.169% per annum due 6/7/2008
-
123,050
• Interest rate at 11.169% per annum due 6/7/2008
-
41,017
• Interest rate at 11.169% per annum due 6/29/2008
-
347,274
• Interest rate at 11.169% per annum due 6/29/2008
-
109,378
• Interest rate at 11.169% per annum due 7/3/2008
-
505,872
• Interest rate at 7.884% per annum due 7/18/2008
-
273,444
• Interest rate at 11.628% per annum due 7/25/2008
-
191,411
• Interest rate at 11.628% per annum due 8/1/2008
-
82,033
• Interest rate at 12.393% per annum due 10/30/2008
-
410,167
• Interest rate at 12.393% per annum due 11/11/2008
-
239,264
• Interest rate at 12.393% per annum due 11/14/2008
-
205,083
• Interest rate at 12.393% per annum due 11/14/2008
-
199,614
• Interest rate at 12.393% per annum due 11/22/2008
-
410,167
• Interest rate at 12.393% per annum due 11/29/2008
-
287,117
• Interest rate at 12.393% per annum due 12/4/2008
-
410,167
• Interest rate at 12.393% per annum due 12/13/2008
-
410,167
• Interest rate at 7.65% to 10.404% per annum due between 1/10/2007 and
    12/5/2007
-
-
• Interest rate at
    12.699% per annum due 8/6/2009
583,584
-
• Interest rate at 12.699% per annum due 8/18/2009
656,532
-
• Interest rate at
    12.699% per annum due 8/18/2009
364,740
-
• Interest rate at 10.577% per annum due 3/27/2009
1,458,959
-
Loan from Junan
    County Industrial and Commercial Bank,
• Interest rate at 6.120% per annum due 1/11/2007
-
546,889
• Interest rate at 8.424% per annum due 3/7/2007
-
806,661
• Interest rate at 6.120% per annum due 11/10/2007
-
136,722
• Interest rate at 8.073% per annum due 12/7/2007
-
1,278,353
• Interest rate at 7.956% per annum due 1/18/2008
-
478,528
• Interest rate at 7.956% per annum due 1/18/2008
-
546,889
• Interest rate at 6.9545% per annum due 2/8/2008
-
604,299
• Interest rate at 6.570% per annum due 2/8/2008
-
546,889
• Interest rate at 7.956% per annum due 3/5//2008
-
1,367,222
• Interest rate at 8.892% per annum due 3/7/2008
-
410,167
• Interest rate at 6.12% per annum due 6/30/2008
-
706,766
• Interest rate at 7.290% per annum due 6/30/2008
-
232,428
F-17
•
Interest rate
    at 3.5% to 6.12% per annum due between 1/11/2007 and 12/10/2007
-
-
•
Interest rate
    at 6.120% per annum due 1/10/2009
145,896
-
•
Interest rate
    at 8.541% per annum due 3/4/2009
393,919
-
•
Interest rate
    at 3.1725% per annum due 2/19/2009
240,035
-
•
Interest rate
    at 3.1725% per annum due 2/19/2009
118,161
-
•
Interest rate
    at 10.1825% per annum due 2/26/2009
120,762
-
2008
2007
•
Interest rate
    at 10.1825% per annum due 3/5/2009
173,670
Loan from Junan County Merchants Bank,
•
Interest rate
    at 6.210% per annum due 3/13/2008 -
1,367,222
Loan from Junan County Agricultural
    Financial Institution,
•
Interest rate
    at 9.750% per annum due 5/20/2008
-
25,977
•
Interest rate
    at 12.420% per annum due 6/20/2008
-
68,361
•
Interest rate
    at 10.935% per annum due 10/1/2008
-
2,597,722
•
Interest rate
    at 9.765% per annum due between 1/13/2007 and 5/22/2007
-
-
•
Interest rate
    at 9.765% per annum  due between 1/13/2007 and 5/22/2007
-
-
Loan from Linyi Commercial Bank,
•
Interest rate
    at 10.71% per annum due 2/6/2008
-
615,250
•
Interest rate
    at 10.71% per annum due 2/9/2008
-
497,221
•
Interest rate
    at 13.73% per annum due
-
136,722
•
Interest rate
    at 9.765% to 10.4715% per annum  due between 1/9/2007 and 11/29/2007
-
-
•
Interest rate
    at 13.073% per annum due 1/5/2009
685,711
-
•
Interest rate
    at 13.073% per annum due 1/5/2009
656,532
•
Interest rate
    at 8.539% per annum due 3/27/2009
1,458,959
•
Interest rate
    at 8.539% per annum due 3/27/2009
141,885
Loan from Junan Agricultural Development
    Bank,
•
Interest rate
    at 7.290% per annum due 9/26/2008
-
1,367,222
•
Interest rates
    at 5.3625% to 6.435% per annum due between 7/19/2007 and 9/4/2007
-
-
Loan from Beijing Miyun County Shilipu
    Rural Financial Institution,
•
Interest rates
    at 7.56% to 9.18% per annum  due between 3/30/2007 and 5/27/2007
-
-
•
Interest rates
    at 8.539% per annum due 9/30/2009
2,772,023
-
Loan from China Agricultural Bank, Miyun
•
Interest rate
    at 7.02% per annum due 7/18/2007
-
-
F-18
Loan
    from China Agricultural Bank, Luotian Branch
• Interest rate at 7.722% per annum due 8/30/2008
-
1,039,089
• Interest rates at 7.605% to 7.95% per due 6/30/2007 and 9/5/2007
-
-
2008
2007
• Interest rate at 7.47% per annum due 9/7/2009
817,017
-
• Interest rate at 7.47% per annum
    due 9/7/2009
291,792
-
Bank of
    Beijing
• Interest rate at 7.722% per annum
    due 7/28/2009
291,792
-
Bank of
    China, Junan Branch,
• Interest rate at 7.500% per annum
    due 5/19/2009
4,014
9,815
United
    Commercial Bank, China Branch
• Interest rate at 5.494% per annum
    due 1/14/2009
1,156,955
-
International Trust Co., Ltd.,
• Interest rate at 7.839% per annum due 5/19/2009
-
1,367,222
Credit
    Union, Junan
• Interest rate at 8.5837% per annum
    due 1/7/2009
43,769
-
• Interest rate at 8.5837% per annum due 1/12/2009
43,769
-
International Trust and Investment Co., Ltd.
• Interest rate at 0.67% per annum due 6/13/2008
-
-
$
14,414,996
$
24,077,504
The short-term loans, which are denominated in the functional
currency Renminbi (RMB), were primarily obtained for general working capital.
All overdue loans were extended by its financial institution.
10.
NOTES PAYABLE
Notes payable consisted of the following as of December 31:
2008
2007
Notes to Industrial and Commercial Bank,
•
Bank
    commission charge at 3.99% due December 20, 2007
$
-
$
546,889
•
Bank
    commission charge at 3.99% due December 12, 2007
-
1,093,778
•
Bank
    commission charge at 3.99% due December 18, 2007
-
1,093,778
F-19
•
Bank
    commission charge at 3.744% due June 1, 2007
-
-
Notes to Linyi Commercial Bank,
•
Bank
    commission charge at 2.85%, due May 20, 2007
-
-
Notes to Junan County Construction Bank,
•
Bank
    commission charge at 4%, due 1/12/2009
554,405
-
Notes to Junan County Agriculture Bank,
•
Bank
    commission charge at 4%, due 1/16/2009
277,202
-
Loan to Jinan Branch, Shenzhen Development
    Bank,
•
Bank charge
    commission charge at 3.96%, due 2/6/2009
4,376,878
-
$
5,208,485
$
2,734,444
All overdue notes were extended by its
financial institution.
11.
ACCRUED EXPENSES AND OTHER PAYABLE
Accrued expenses and other payables consisted of the
      following as of December 31:
2008
2007
Accrued salaries and wages
$
605,471
$
302,356
Accrued utility expenses
481,678
515,092
Accrued interest expenses
-
-
Accrued transportation expenses
1,103,112
371,839
Other accruals
-
2,848,985
Business and other taxes
1,979,650
-
Purchases disbursements payables
6,018,057
12,359,109
Interest Payable
-
180,696
Accrued staff welfare
103,269
206,031
$
10,291,237
$
16,784,108
12.
LONG-TERM DEBTS
Long-term debts consisted of the following as of December
      31:
2008
2007
Loan from Bank of China, Junan
    Branch,
•
Interest rates
    at 0.67% per annum due
5/19/2009
$
-
$
-
Loan from
    Agricultural Development Luotian Government,
• Interest rates at 0.67% per annum due - 12/11/2010
102,542
• Interest rates at 2.10% per annum due 12/11/2011
25,532
-
Loan from United
    Commercial Bank, China Branch
• Interest rates at 5.494% per annum due 1/14/2011
551,443
-
Less
: Current
    maturities of long-term debts
-
-
$
576,975
$
102,542
F-20
13.
MINORITY INTERESTS
This represents the 19.8% equity of Shangdong Lorain held
      by a state-owned interest, Shandong Economic Development Investment
      Corporation.
14.
CAPITALIZATION
Dating back to May 3, 2007, the Company underwent a
      reverse-merger and a concurrent financing transaction that resulted in
      24,923,178 shares of outstanding common stock that remained unchanged
      until through December 31, 2007. During the course of 2008, several
      holders of warrants issued in connection with the financing transaction
      exercised their rights to purchase shares at the prescribed exercise
      price. The holders of the warrants exercised the right to purchase a total
      of 360,207; however, because the holders did not pay in cash for the
      warrants, 110,752 of those shares were cancelled as consideration in lieu
      of the warrant holders paying in cash. Ultimately, 249,455 of new shares
      were issued to those who exercised their warrant. The Company also made an
      adjustment to it outstanding share count for rounding errors as result of
      the split and reverse splits made at the time of the reverse merger. The
      number of shares in the adjustment was an addition of seven shares. The
      Company believes the adjustment of seven shares is immaterial to both
      prior and current earnings per share calculation. As detailed in the table
      below, the total number of outstanding shares at December 31, 2008 was
      25,172,640.
F-21
Additional
Number of
Common Stock
Paid-in
Type of
      Shares
Shares
Capital
Capital
Free Trading Shares
8,406,244
$
8,406
$
17,340,648
Restricted Shares
16,766,396
16,766
6,846,371
25,172,640
$
25,172
$
24,187,019
15.
INCOME TAXES
All of the Group's income before income
taxes and related tax expenses are from PRC sources. In accordance with the
relevant tax laws and regulations of PRC, the corporation income tax rate is
33%. However, also in accordance with the relevant taxation laws in the PRC,
some of the subsidiaries of the Group are eligible for tax exemption. In
particular, from the time that a company has its first profitable tax year, the
company is exempt from corporate income tax for its first two year and is then
entitled to a 50% tax reduction for the succeeding three year. Actual income tax
expenses reported in the consolidated statements of income and comprehensive
income differ from the amounts computed by applying the PRC statutory income tax
rate of 33% to income before income tax for the period from August 4, 2006 (date
of incorporation) to December 31, 2008 for the following reasons: -
2008
2007
Income before tax
$
18,680,832
$
12,595,196
Tax at the income tax rate
4,670,208
3,778,559
Effect of tax exemption granted
(1,666,943
)
(1,643,643
)
Income tax
$
3,003,265
$
2,134,916
Per Share Effect of Tax Exemption
2008
2007
Effect of tax exemption granted
$
1,666,943
$
1,643,643
Weighted-Average Shares Outstanding
25,172,640
24,923,178
Per share effect
$
0.0662
$
0.0659
Effective January 1, 2008, PRC
government implements a new 25% tax rate across the board for all enterprises
regardless of whether domestic or foreign enterprise without any tax holiday
which is defined as "two-year exemption followed by three-year half exemption"
hitherto enjoyed by tax payers. As a result of the new tax law of a standard 15%
tax rate, tax holidays terminated as of December 31, 2007. However, PRC
government has established a set of transition rules to allow enterprises
already started tax holidays before January 1, 2008, to continue enjoying the
tax holidays until being fully utilized.
Based on the background of each
constituent of our group, the income tax rates applicable to the four
constituents for 2007, 2008 and 2009 are depicted in the following table.
F-22
Income Tax Rate
2007
2008
2009
Junan Hongran
15%
15%
25%
Luotian Lorain
0%
15%
15%
Beijing Lorain
0%
0%
15%
Shangdong Lorain
30%
25%
25%
16.
SALES BY PRODUCT TYPE
Sales by categories of product
consisted of the following as of December 31:
Category
2008
2007
Chestnut
$
83,027,719
$
45,799,404
Convenience food
25,736,534
15,288,515
FCB food
23,596,064
21,007,044
Total
$
132,360,317
$
82,094,963
Revenue by geography consisted of the
following as of December 31:
Country
2008
2007
Australia
$
-
$
18,710
Belgium
1,893,467
2,040,636
Canada
-
14,112
China
91,442,654
48,566,474
France
1,579,449
284,101
Germany
722,436
44,527
Holland
346,140
586,379
Hong Kong
189,790
71,860
Japan
21,764,764
17,077,937
Kuwait
-
364,893
Malaysia
1,395,654
1,569,794
Mexico
-
-
Saudi Arabia
32,961
684,321
Singapore
1,054,239
2,442,038
South Korea
8,338,475
5,174,079
Taiwan
331,723
57,819
United Arab Emirates
-
239,565
United Kingdom
2,775,230
1,793,707
United States of America
493,335
1,064,011
Other
-
-
Total
$
132,360,317
$
82,094,963
F-23
American Lorain Corporation
CONTENTS
PAGES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-25
CONSOLIDATED BALANCE SHEETS
F-26–F-27
CONSOLIDATED STATEMENTS OF INCOME
F-28
CONSOLIDATED STATEMENTS OF CASH FLOWS
F-29
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
F-30
NOTES TO FINANCIAL STATEMENTS
F-31-F-48
F-24
REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM
To:
The Board of Directors and Stockholders of American Lorain Corporation
We have reviewed the accompanying interim consolidated balance sheets of
American Lorain Corporation (the "Company") as of September 30, 2009 and
December 31, 2008, and the related statements of income, stockholders' equity,
and cash flows for the three-month and nine-month periods ended September 30,
2009 and 2008. These interim consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim consolidated financial statements for them
to be in conformity with U.S. generally accepted accounting principles.
South San Francisco, California
Samuel H. Wong & Co., LLP
November 2, 2009
Certified Public Accountants
F-25
AMERICAN LORAIN CORPORATION
CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(Stated in US
Dollars)
(Audited)
Note
9/30/2009
12/31/2008
ASSETS
Current Assets
Cash and cash
      equivalents
$
4,161,802
$
2,841,339
Restricted cash
3
1,008,007
3,715,998
Short-term
      investment
51,919
113,069
Trade accounts receivable
4
17,745,011
25,293,326
Other
      receivables
5
4,402,879
5,107,719
Inventory
6
35,606,922
24,827,922
Advance to
      suppliers
7
12,528,032
415,009
Prepaid expenses and taxes
1,077,904
1,228,648
Total
      current assets
$
76,582,476
$
63,543,030
Property, plant and equipment,
net
8
40,667,653
40,201,686
Land use rights,
net
9
3,918,315
3,950,927
Other assets
      & goodwill
2,047
-
TOTAL ASSETS
$
121,170,491
$
107,695,643
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank loans
10
$
34,588,160
$
14,414,996
Long-term bank
      loans current portion
83,000
-
Notes payable
11
-
5,208,485
Accounts payable
2,417,468
6,072,883
Taxes payable
1,413,194
2,682,658
Accrued
      liabilities and other payables
12
4,788,869
10,291,237
Customers deposits
78,836
748,732
Total
      Current Liabilities
$
43,369,527
$
39,418,991
Long Term Liabilities
Long term bank
      loans
13
321,544
576,975
TOTAL LIABILITIES
$
43,691,071
$
39,995,966
See Accompanying Notes to the Financial Statements and
Accountant's Report
F-26
AMERICAN LORAIN CORPORATION
CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(Stated in US
Dollars)
(Audited)
Note
9/30/2009
12/31/2008
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value,
      200,000,000
      shares
authorized;
      25,177,640 and 25,172,640 shares issued
      and
outstanding as of
      September 30, 2009 and December
      31,
2008, respectively
15
25,177
25,172
Additional paid-in
      capital
24,273,650
24,187,019
Statutory reserves
5,680,512
5,438,723
Retained earnings
35,615,406
27,748,126
Accumulated other comprehensive income
6,212,145
5,178,616
Non-controlling
      interests
14
5,672,530
5,122,021
$
77,479,420
$
67,699,677
TOTAL LIABILITIES AND
STOCKHOLDERS'
      EQUITY
$
121,170,491
$
107,695,643
See Accompanying Notes to the Financial Statements and
Accountant's Report
F-27
AMERICAN LORAIN CORPORATION
CONSOLIDATED STATEMENTS OF
INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND
2008
(Stated in US Dollars)
Three months ended
Nine months ended
September 30,
September 30,
Note
2009
2008
2009
2008
Net revenues
17
$
38,674,651
$
36,727,394
$
83,841,112
$
75,680,120
Cost of revenues
(29,566,601
)
(29,000,724
)
(64,279,971
)
(58,819,320
)
Gross profit
$
9,108,050
$
7,726,670
$
19,561,141
$
16,860,800
Operating expenses
Selling and marketing
      expenses
(1,165,107
)
(831,138
)
(3,556,271
)
(2,066,156
)
General and administrative expenses
(
      906,847
)
(847,896
)
(
      2,798,044
)
(2,480,240
)
Operating income
$
7,036,096
$
6,047,636
$
13,206,826
$
12,314,404
Investment income
Government subsidy income
43,864
393
240,118
37,635
Interest and other income
24,196
180,641
232,844
288,439
Other expenses
(52,694
)
56,706
(234,298
)
(48,281
)
Interest expense
(857,089
)
(627,148
)
(2,205,740
)
(1,900,846
)
Earnings before tax
$
6,194,373
$
5,658,228
$
11,239,750
$
10,691,351
Income tax
2(r), 16
(1,396,694
)
(904,827
)
(2,580,172
)
(1,788,402
)
Income before minority interests
$
4,797,679
$
4,753,401
$
8,659,578
$
8,902,949
Net income attributable to:
-Parent
$
4,497,364
$
4,458,659
$
8,109,069
$
8,307,737
-Non-controlling Interest
300,315
294,742
550,509
595,212
$
4,797,679
$
4,753,401
$
8,659,578
$
8,902,949
Earnings per share
2(v)
- Basic
$
0.18
$
0.18
$
0.32
$
0.33
-
      Diluted
$
0.18
$
0.18
$
0.32
$
0.33
Weighted average shares outstanding
- Basic
25,177,640
24,923,178
25,177,640
24,923,178
- Diluted
25,200,136
24,923,178
25,717,588
25,282,206
See Accompanying Notes to the Financial Statements and
Accountant's Report
F-28
AMERICAN LORAIN CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOW
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND
2008
(Stated in US Dollars)
Three months ended
Nine months ended
September 30,
September 30,
2009
2008
2009
2008
Cash flows from operating activities
Net income
$
4,497,364
$
4,458,659
$
8,109,069
$
8,307,737
Minority interest
300,316
294,741
550,509
595,212
Share based compensation
80,484
0
86,636
0
Depreciation
276,693
461,968
942,173
975,125
Amortization
22,217
11,332
158,209
209,102
(Increase)/decrease
      in accounts & other receivables
1,776,531
10,487,405
7,583,260
23,939,692
(Increase)/decrease in inventories
(8,751,246
)
(12,644,355
)
(10,778,999
)
(14,099,060
)
Increase/(decrease)
      in accounts & other payables
(961,609
)
(1,722,767
)
(22,389,528
)
(15,296,367
)
Net cash (used in)/provided by
      operating activities
(2,759,250
)
1,346,983
(15,738,671
)
4,631,441
Cash flows from investing activities
Purchase of plant and equipment
(881,610
)
(82,023
)
(1,408,140
)
(5,739,946
)
Payment of
      construction in progress
0
(1,294,028
)
0
0
(Increase)/decrease in restricted
      cash
(14,642
)
(242,639
)
2,707,991
(2,472,807
)
Payments for land
      use rights
(4,590
)
(174,839
)
(125,600
)
(1,123,069
)
Proceeds from sale of investment
      securities
58,384
0
61,151
0
Purchase of
      investment securities
0
(31,539
)
0
(1,620,924
)
Payments for deposits
0
(2,751,740
)
(2,045
)
(2,751,740
)
Net cash used in investing activities
(842,458
)
(4,576,808
)
1,233,357
(13,708,486
)
Cash flows from financing activities
Bank borrowings
2,465,431
3,405,635
20,000,733
4,738,607
Notes payable
(1,614,364
)
(2,070,085
)
(5,208,485
)
1,743,973
Net cash provided by/(used in) financing
      activities
$
851,067
$
1,335,550
$
14,792,248
$
6,482,580
Net Increase/(decrease) of cash and cash equivalents
(2,750,641
)
(1,894,275
)
286,934
(2,594,465
)
Effect of foreign currency translation
80,722
1,960,246
1,033,529
4,384,819
Cash and cash equivalents–beginning of year
6,831,721
8,494,356
2,841,339
6,769,973
Cash and cash equivalents–end of year
$
4,161,802
$
8,560,327
$
4,161,802
$
8,560,327
Supplementary cash flow information:
Interest
      received
$
3,892
$
34,200
$
70,502
$
68,612
Interest paid
$
857,089
$
627,148
$
2,205,740
$
1,900,846
Taxes
      paid
$
1,396,694
$
904,827
$
2,580,172
$
1,788,402
See Accompanying Notes to the Financial Statements and
Accountant's Report
F-29
AMERICAN LORAIN CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(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, 2008
24,923,178
$
24,923
$
24,187,268
$
4,497,647
$
13,985,824
$
1,846,708
$
3,887,021
$
48,429,391
Issuance of Common Stock
249,455
249
(249
)
-
-
-
-
-
Share Adjustment to Match Transfer
Agent
7
-
-
-
-
-
-
-
Net Income
-
-
-
-
14,703,378
-
-
14,703,378
Appropriations to Statutory Reserves
-
-
-
941,076
(941,076
)
-
-
-
Non-controlling Interests
-
-
-
-
-
-
1,235,000
1,235,000
Foreign Currency Translation
Adjustment
-
-
-
-
-
3,331,908
-
3,331,908
Balance, December 31, 2008
25,172,640
$
25,172
$
24,187,019
$
5,438,723
$
27,748,126
$
5,178,616
$
5,122,021
$
67,699,677
Balance, January 1, 2009
25,172,640
$
25,172
$
24,187,019
$
5,438,723
$
27,748,126
$
5 ,178,616
$
5,122,021
$
67,699,677
Issuance of Common Stock
5,000
5
6,147
-
-
-
-
6,152
Issuance Stock Options
80,484
80,484
Net Income
-
-
-
-
8,109,069
-
-
8,109,069
Appropriations to Statutory Reserves
-
-
-
241,789
(241,789
)
-
-
-
Non-controlling Interests
-
-
-
-
-
-
550,509
550,509
Foreign Currency Translation
Adjustment
-
-
-
-
-
1,033,529
-
1,033,529
Balance, September 30, 2009
25,177,640
$
25,177
$
24,273,650
$
5,680,512
$
35,615,406
$
6,212,145
$
5,672,530
$
77,479,420
Comprehensive
Comprehensive
Income
Income
9/30/2009
12/31/2008
Total
Net Income
$
8,109,069
$
14,703,378
$
22,812,447
Foreign Currency Translation Adjustment
1,033,542
3,331,908
4,365,450
$
9,142,611
$
18,035,286
$
27,177,897
See Accompanying Notes to the Financial Statements and Accountant's
Report
F-30
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
1.
PRINCIPAL ACTIVITIES
The Company develops, manufactures, and sells convenience
      foods (such as cut fruit and premixed salads, which are known as lightly
      processed; ready-to-cook (or "RTC") meals; ready-to-eat (or "RTE") meals
      and meals ready-to-eat (or "MRE"); chestnut products; and frozen, canned,
      and bulk foods, in hundreds of varieties. The Company operates through
      indirect Chinese subsidiaries. The products are sold in 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, canned, and bulk food ("FCB food").
2.
SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES
(a)
Method of Accounting
The Company maintains its general ledger and journals
      with the accrual method accounting for financial reporting purposes. The
      financial statements and notes are representations of management.
      Accounting policies adopted by the Company conform to generally accepted
      accounting principles in the United States of America and have been
      consistently applied in the presentation of financial statements, which
      are compiled on the accrual basis of accounting.
(b)
Principles of consolidation
The consolidated financial statements, which include the
      Company and its subsidiaries, are compiled in accordance with generally
      accepted accounting principles in the United States of America. All
      significant inter-company accounts and transactions have been eliminated.
      The consolidated financial statements include 100% of assets, liabilities,
      and net income or loss of those wholly-owned subsidiaries; ownership
      interests of minority investors are recorded as minority
  interests.
As of September 30, 2009, the detailed identities of the
      consolidating subsidiaries are as follows: -
Place of
Attributable
Registered
Name of Company
incorporation
equity interest
capital
%
Shandong Green Foodstuff Co., Ltd
PRC
80.2
$
12,901,823
(RMB 100,860,000
)
Luotian Green Foodstuff Co., Ltd
PRC
100
$
3,240,013
(RMB 25,328,800
)
Junan Hongrun Foodstuff Co., Ltd
PRC
100
$
16,245,603
(RMB 127,000,000
)
Beijing Green Foodstuff Co., Ltd
PRC
100
$
1,279,181
(RMB 10,000,000
)
International Lorain Holding, Inc
Cayman Islands
100
(c)
Use of estimates
The preparation of the financial statements in conformity
      with generally accepted accounting principles in the United States of
      America requires management to make estimates and assumptions that affect
      the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements
      and the reported amounts of revenues and expenses during the reporting
      periods. Management makes these estimates using the best information
      available at the time the estimates are made; however actual results could
      differ materially from those estimates.
(d)
Economic and political risks
The Company's operations are conducted in the PRC.
      Accordingly, the Company's business, financial condition and results of
      operations may be influenced by the political, economic and legal
      environment in the PRC, and by the general state of the PRC
  economy.
The Company's operations in the PRC are subject to
      special considerations and significant risks not typically associated with
      companies in North America and Western Europe. These include risks
      associated with, among others, the political, economic and legal environment and foreign
      currency exchange. The Company's results may be adversely affected by
      changes in the political and social conditions in the PRC, and by changes
      in governmental policies with respect to laws and regulations,
      anti-inflationary measures, currency conversion, remittances abroad, and
      rates and methods of taxation, among other things.
F-31
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
(e)
Lease prepayments
Lease prepayments represent the cost of land use rights
      in the PRC. Land use rights are carried at cost and amortized on a
      straight-line basis over the period of rights of 50 years.
(f)
Property, plant and equipment
Plant and equipment are carried at cost less accumulated
      depreciation. Depreciation is provided over their estimated useful lives,
      using the straight-line method. Estimated useful lives of the plant and
      equipment are as follows:
Buildings
40 years
Machinery and equipment
10 years
Motor vehicles
10 years
Office equipment
5 years
The cost and related accumulated depreciation of assets
      sold or otherwise retired are eliminated from the accounts and any gain or
      loss is included in the statement of income. The cost of maintenance and
      repairs is charged to income as incurred, whereas significant renewals and
      betterments are capitalized.
(g)
Accounting for the Impairment of Long-Lived
      Assets
The long-lived assets held and used by the Company are
      reviewed for impairment whenever events or changes in circumstances
      indicate that the carrying amount of assets may not be recoverable. It is
      reasonably possible that these assets could become impaired as a result of
      technology or other industry changes. Determination of recoverability of
      assets to be held and used is by comparing the carrying amount of an asset
      to future net undiscounted cash flows to be generated by the
  assets.
If such assets are considered to be impaired, the
      impairment to be recognized is measured by the amount by which the
      carrying amount of the assets exceeds the fair value of the assets. Assets
      to be disposed of are reported at the lower of the carrying amount or fair
      value less costs to sell. During the reporting years, there was no
      impairment loss.
(h)
Construction in progress
Construction in progress represents direct costs of
      construction or acquisition and design fees incurred. Capitalization of
      these costs ceases and the construction in progress is transferred to
      plant and equipment when substantially all the activities necessary to
      prepare the assets for their intended use are completed. No depreciation
      is provided until it is completed and ready for intended use.
(i)
Investment securities
The Company classifies its equity securities into trading
      or available-for-sale. Trading securities are bought and held principally
      for the purpose of selling them in the near term. All securities not
      included in trading securities are classified as
  available-for-sale.
Trading and available-for-sale securities are recorded at
      fair value. Unrealized holding gains and losses on trading securities are
      included in the net income. Unrealized holding gains and losses, net of
      the related tax effect, on available for sale securities are excluded from
      net income and are reported as a separate component of other comprehensive
      income until realized. Realized gains and losses from the sale of
      available-for-sale securities are determined on a specific-identification
      basis.
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.
F-32
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
Premiums and discounts are amortized or accreted over the
      life of the related available-for-sale security as an adjustment to yield
      using the effective-interest method. Dividend and interest income are
      recognized when earned.
(j)
Inventories
Inventories consisting of finished goods and raw
      materials are stated at the lower of cost or market value. Finished goods
      are comprised of direct materials, direct labor and an appropriate
      proportion of overhead.
(k)
Trade receivables
Trade receivables are recognized and carried at the
      original invoice amount less allowance for any uncollectible amounts. An
      estimate for doubtful accounts is made when collection of the full amount
      is no longer probable. Bad debts are written off as incurred.
(l)
Customer deposits
Customer deposits were cash received from customers in
      connection with orders of products to be delivered in future
    periods.
(m)
Cash and cash equivalents
The Company considers all highly liquid investments
      purchased with original maturities of three months or less to be cash
      equivalents.
(n)
Advertising
All advertising costs are expensed as incurred.
(o)
Shipping and handling
All shipping and handling are expensed as
  incurred.
(p)
Research and development
All research and development costs are expensed as
      incurred.
(q)
Retirement benefits
Retirement benefits in the form of contributions under
      defined contribution retirement plans to the relevant authorities are
      charged to the consolidated statement of income as incurred.
(r)
Income taxes
The Company uses the accrual method of accounting to
      determine and report its taxable reduction of income taxes for the year in
      which they are available. The Company has implemented Statement of
      Financial Accounting Standards (SFAS) No. 109, Accounting for Income
      Taxes. Income tax liabilities computed according to the United States and
      People's Republic of China (PRC) tax laws are provided for the tax effects
      of transactions reported in the financial statements and consists of taxes
      currently due plus deferred taxes related primarily to differences between
      the basis of fixed assets and intangible assets for financial and tax
      reporting. The deferred tax assets and liabilities represent the future
      tax return consequences of those differences, which will be either taxable
      or deductible when the assets and liabilities are recovered or settled.
      Deferred taxes also are recognized for operating losses that are
      available to offset future income taxes. A
valuation allowance is created to evaluate deferred tax assets if it is more
likely than not that these items will either expire before the Company is able
to realize that tax benefit, or that future realization is uncertain.
F-33
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
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 25%
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
But Not Over
Of Amount Over
15%
0
50,000
0
25%
50,000
75,000
50,000
34%
75,000
100,000
75,000
39%
100,000
335,000
100,000
34%
335,000
10,000,000
335,000
35%
10,000,000
15,000,000
10,000,000
38%
15,000,000
18,333,333
15,000,000
35%
18,333,333
-
-
Based on the consolidated net income for the period ended
      September 30, 2009 and the year ended December 31, 2008, the Company shall
      not be subject to income tax.
(s)
Statutory reserves
Statutory reserves are referring to the amount
      appropriated from the net income in accordance with laws or regulations,
      which can be used to recover losses and increase capital, as approved, and
      are to be used to expand production or operations.
(t)
Foreign currency translation
The accompanying financial statements are presented in
      United States dollars. The functional currency of the Company is the
      Renminbi (RMB). The financial statements are translated into United States
      dollars from RMB at year-end exchange rates as to assets and liabilities
      and average exchange rates as to revenues and expenses. Capital accounts
      are translated at their historical exchange rates when the capital
      transactions occurred.
9/30/2009
12/31/2008
9/30/2008
Period end RMB : US$ exchange rate
6.8376
6.8542
6.8551
Average period RMB : US$ exchange rate
6.8425
6.9622
6.9989
The RMB is not freely convertible into foreign currency
      and all foreign exchange transactions must take place through authorized
      institutions. No representation is made that the RMB amounts could have
      been, or could be, converted into US$ at the rates used in
    translation.
(u)
Revenue recognition
The Company's revenue recognition policies are in
      compliance with Staff accounting bulletin (SAB) 104. Sales revenue is
      recognized at the date of shipment to customers when a formal arrangement
      exists, the price is fixed or determinable, the delivery is completed, no
      other significant obligations of the Company exist and collectibility
      is reasonably assured. Payments received before all of the
      relevant criteria for revenue recognition are satisfied are recorded as
      unearned revenue.
F-34
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
The Company's revenue consists of invoiced value of
      goods, net of a value-added tax (VAT). No product return or sales discount
      allowance is made as products delivered and accepted by customers are
      normally not returnable and sales discount is normally not granted after
      products are delivered.
(v)
Earnings per share
Basic earnings per share is computed by dividing net
      income by the weighted average number of ordinary shares outstanding
      during the period. Diluted earnings per share is computed by dividing net
      income by the sum of the weighted average number of ordinary shares
      outstanding and dilutive potential ordinary shares during the years.
      During the nine months ended September 30, 2009 and the year ended
      December 31, 2008, no dilutive potential ordinary shares were
    issued.
The Company computes earnings per share ("EPS") in
      accordance with Statement of Financial Accounting Standards No. 128,
      "Earnings per share" ("SFAS No. 128"), and SEC Staff Accounting Bulletin
      No. 98 ("SAB 98"). SFAS No. 128 requires companies with complex capital
      structures to present basic and diluted EPS. Basic EPS is measured as the
      income or loss available to common shareholders divided by the weighted
      average common shares outstanding for the period. Diluted EPS is similar
      to basic EPS, but presents the dilutive effect on a per share basis of
      potential common shares (e.g., convertible securities, options, and
      warrants) as if they had been converted at the beginning of the periods
      presented, or issuance date, if later. Potential common shares that have
      an anti-dilutive effect (i.e., those that increase income per share or
      decrease loss per share) are excluded from the calculation of diluted
      EPS.
(w)
Commitments and contingencies
Liabilities for loss contingencies arising from claims,
      assessments, litigation, fines and penalties and other sources are
      recorded when it is probable that a liability has been incurred and the
      amount of the assessment can be reasonably estimated.
(x)
Comprehensive income
Comprehensive income is defined to include all changes in
      equity except those resulting from investments by owners and distributions
      to owners. Among other disclosures, all items that are required to be
      recognized under current accounting standards as components of
      comprehensive income are required to be reported in a financial statement
      that is presented with the same prominence as other financial statements.
      The Company's current component of other comprehensive income is the
      foreign currency translation adjustment.
(y)
Recent accounting pronouncements
In May 2009, the FASB issued SFAS No. 165, "Subsequent
      Events" ("SFAS 165"). SFAS 165 is intended to establish general standards
      of accounting for and disclosure of events that occur after the balance
      sheet date but before financial statements are issued or are available to
      be issued. It requires the disclosure of the date through which an entity
      has evaluated subsequent events and the basis for that date, that is,
      whether that date represents the date the financial statements were issued
      or were available to be issued. SFAS 165 is effective for interim or
      annual financial periods ending after June 15, 2009.
In June 2009, FASB issued FASB Statement No. 166,
      Accounting for Transfers for Financial Assets and FASB Statement No. 167,
      a revision to FASB Interpretation No. 46 (Revised December 2003),
      Consolidation of Variable Interest Entities.
Statement 166 is a revision to FASB Statement No. 140,
      Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities, 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.
F-35
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
Statement 167 is a revision to FASB Interpretation No.
      46 (Revised December 2003), Consolidation of Variable Interest Entities,
      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.
On July 1, 2009, FASB issued FASB Statement No. 168,
      The "FASB Accounting Standards Codification" and the Hierarchy of
      Generally Accepted Accounting Principles. The ASC has become the source of
      authoritative US GAAP recognized by the FASB to be applied by
      nongovernmental entities and provides that all such guidance carries an
      equal level of authority. The ASC is not intended to change or alter
      existing GAAP. The ASC is effective for interim and annual periods ending
      after September 15, 2009.
The Company is currently evaluating the
      potential impact, if any, of the adoption of the above recent accounting
      pronouncements on its consolidated results of operations and financial
      condition.
3.
RESTRICTED CASH
Restricted Cash represents interest bearing deposits
      placed with banks to secure banking facilities in the form of loans and
      notes payable. The restriction of funds is based upon the duration of the
      related borrowing facility. 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 nine month time deposits that pay
      interest at the national time deposit rate.
4.
TRADE ACCOUNTS
RECEIVABLE
9/30/2009
12/31/2008
Trade accounts receivable
$
17,970,577
$
25,421,293
Less
:
Allowance for doubtful accounts
(225,566
)
(127,967
)
$
17,745,011
$
25,293,326
Allowance for bad debt:
9/30/2009
12/31/2008
Beginning balance
$
(127,967
)
$
(172,309
)
Additions to allowance
(97,599
)
-
Bad debt written-off
-
44,342
$
(225,566
)
$
(127,967
)
The Company offers credit terms of
between 30 to 60 days to most of their international distributors as well as
domestic supermarkets and wholesalers, and between 0 to 15 days for most of
their agents.
F-35
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
5.
OTHER RECEIVABLES
Other receivables consisted of the following as of
      September 30, 2009 and December 31, 2008:
9/30/2009
12/312008
Advances to employees for job/travel
      disbursements
$
2,180,628
$
3,160,886
Amount due by a non-related enterprise
1,991,252
1,278,501
Tender deposit
36,563
-
Other
194,436
668,332
$
4,402,879
$
5,107,719
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.
6.
INVENTORY
Inventories consisted of the following as of September
      30, 2009 and December 31, 2008:
9/30/2009
12/312008
Raw materials
$
17,607,376
$
9,636,050
Work in progress
-
1,143,766
Finished goods
17,999,546
14,048,106
$
35,606,922
$
24,827,922
7.
ADVANCE TO SUPPLIERS
Advance to suppliers represents prepayments made to
      vendors for goods and services that the Company anticipates using within
      its one year operating cycle. As a result of the seasonality of the
      Company's business, there are significant increases in the balance of this
      account before the Company's peak season, which are the third and fourth
      quarters of the calendar year.
Advance to suppliers consisted of the following as of
      September 30, 2009:
9/30/2009
Raw materials
$
3,647,645
Packaging materials
675,073
Shipping
55,900
Equipment
136,525
Construction materials
7,843,049
Other
169,840
$
12,528,032
F-36
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
8.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consisted of the following
      as of September 30, 2009 and December 31,
2008:
9/30/2009
12/31/2008
At Cost:
Buildings
$
27,866,338 $
27,798,849
Landscaping, plant, and
      tree
2,758,782
2,752,101
Machinery and equipment
7,494,138
7,229,512
Office equipment
796,557
859,818
Motor vehicles
25,926
39,824
$
38,941,741 $
38,680,104
Less
:
Accumulated depreciation
Buildings
(1,657,426
)
(1,192,855
)
Landscaping, plant, and tree
-
-
(3,072,410
)
Machinery and equipment
(2,628,710
)
Office equipment
(455,071
)
(414,478
)
Motor vehicles
(18,302
)
(24,992
)
(5,203,209
)
(4,261,035
)
Construction in Progress
6,929,121
5,782,617
$
40,667,653 $
40,201,686
Construction in progress is mainly comprised of capital
      expenditures for construction of the Company's new corporate campus,
      including offices, factories, and staff dormitories. Capital commitments
      for the construction are immaterial for the two years above.
Landscaping, plants, and trees are the Chestnut
      subsidiary's investment in the development of agricultural operations,
      which have not been the significant source of the raw materials needed for
      the Company's operations to date.
9.
LAND USE RIGHTS, NET
Land use rights consisted of the following as of
      September 30, 2009 and December 31,
2008
:
9/30/2009
12/31/2008
Land use rights,
at cost
$
4,361,862
$
4,236,266
Less
:
Accumulated
      amortization
(443,547
)
(285,339
)
$
3,918,315
$
3,950,927
Land use rights represent the Company's
purchase of usage rights for a parcel of land for a specified duration of time.
The PRC government owns the land on which the Company's corporate campus is
being constructed.
F-37
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
10.
SHORT-TERM BANK LOANS
Short-term bank loans consisted of the following as of
      September 30, 2009 and December 31, 2008:
9/30/2009
12/31/2008
Loans from Junan County Construction
      Bank,
●
Interest rate at 5.3460% per annum due1/07/2010
$
1,462,501
$
-
●
Interest rate at 5.3460% per annum due 9/1/2010
1,170,001
-
●
Interest rate at 5.3460% per annum due 12/15/2010
394,875
-
●
Interest rate at 5.3460% per annum due12/19/2009
1,170,001
-
●
Interest rate at 7.452% per annum due 2/24/2009
-
102,127
●
Interest rate at 10.452% per annum due 1/22/2009
-
1,575,676
●
Interest rate at 7.236% per annum due 2/3/2009
-
116,717
Loan from Junan County Agriculture Bank,
●
Interest rate at 7.9650% per annum due 8/23/2010
1,608,752
-
●
Interest rate at 7.2900% per annum due 12/01/2009
1,901,252
-
●
Interest rate at 7.027% per annum due 11/21/2009
643,501
-
●
Interest rate at 7.9650% per annum due 3/17/2010
3,363,753
-
●
Interest rate at 8.2620% per annum due12/17/2009
1,755,002
-
●
Interest rate at 8.2620% per annum due 12/17/2009
2,193,752
-
●
Interest rate at 7.290% per annum due 9/23/2010
1,447,877
●
Interest rate at 12.699% per annum due 8/6/2009
583,584
●
Interest rate at 12.699% per annum due 8/18/2009
656,532
●
Interest rate at 12.699% per annum due 8/1/2009
364,740
●
Interest rate at 10.577% per annum due 3/27/2009
-
1,458,959
Loan from Junan County Industrial and
      Commercial Banks,
●
Interest rate at 5.3460% per annum due10/9/2009
438,750
-
●
Interest rate at 5.3460% per annum due10/13/2009
541,126
-
●
Interest rate at 5.3460% per annum due11/19/2009
694,688
-
●
Interest rate at 5.3460% per annum due 10/25/2009
614,251
-
●
Interest rate at 5.3460% per annum due 11/23/2009
497,251
-
●
Interest rate at 5.3460% per annum due 12/22/2009
463,613
●
Interest rate at 6.120% per annum due 1/10/2009
-
145,896
●
Interest rate at 8.541% per annum due 3/4/2009
-
393,919
●
Interest rate at 3.1725% per annum due 2/19/2009
-
240,035
●
Interest rate at 3.1725% per annum due 2/19/2009
-
118,161
●
Interest rate at 10.1825% per annum due 2/26/2009
-
120,762
●
Interest rate at 10.1825% per annum due 3/5/2009
-
173,670
Loan from Junan County Agricultural Financial Institution,
●
Interest rate at 9.1155% per annum due 1/22/2010
1,170,001
-
●
Interest rate at 9.1155% per annum due 12/23/2009
438,750
-
●
Interest rate at 9.1155% per annum due 12/23/2009
146,250
-
●
Interest rate at 9.1155% per annum due 12/23/2009
438,750
-
F-38
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
9/30/2009
12/31/2008
Loan from Linyi Commercial Bank,
●
Interest rate at 9.293% per annum due 6/15/2010
$
1,462,501 $
-
●
Interest rate at 9.293% per annum due
      1/19/2010
658,126
-
●
Interest rate at 9.293%per annum due 12/14/2009
687,376
-
●
Interest rate at 9.293% per annum due
      6/16/2010
1,462,501
-
●
Interest rate at 13.073% per annum due 1/5/2009
-
685,711
●
Interest rate at 13.073% per annum due
      1/5/2009
-
656,532
●
Interest rate at 8.539% per annum due 3/27/2009
-
1,458,959
●
Interest rate at 8.539% per annum due
      3/27/2009
-
141,885
Loan from Beijing Miyun County Shilipu Rural
Financial Institution,
●
Interest rates at 7.434% per annum due
      1/20/2010
1,462,502
-
●
Interest rates at 8.539% per annum due 9/30/2009
-
2,772,023
Loan from China Merchants Bank,
      Beijing
●
Interest rate at 5.310% per annum due 3/29/2010
731,251
-
Loan from China Agricultural Bank,
      Luotian
Branch
●
Interest rate at 6.372% per annum due 8/25/2010
1,901,252
-
●
Interest rate at 7.47% per annum due
      9/7/2009
-
817,017
●
Interest rate at 7.47% per annum due 9/7/2009
-
291,792
Bank of Beijing
●
Interest rate at 6.903% per annum due 7/29/2010
292,500
-
●
Interest rate at 7.722% per annum due
      7/28/2009
-
291,792
Bank of China, Junan Branch,
●
Interest rate at 7.500% per annum due
      5/19/2009
-
4,014
United Commercial Bank, China Branch
●
Interest rate at 5.494% per annum due
      1/14/2010
1,050,077
-
●
Interest rate at 5.494% per annum due 1/14/2009
-
1,156,955
HSBC Miyun Branch
●
Interest rate at 6.804% per annum due 11/13/2009
351,000
-
Credit Union, Junan
●
Interest rate at 8.5837% per annum due 1/7/2009
-
43,769
●
Interest rate at 8.5837% per annum due
      1/12/2009
-
43,769
LinYi Yizhou Limited Company
●
Interest rate at 0.9% per month due
      11/13/2009
1,257,751
-
●
Interest rate at 0.9% per month due 10/08/2009
716,626
-
$
34,588,160 $
14,414,996
The short-term loans are revolving
lines of credit, which are denominated in the functional currency Renminbi
(RMB), were primarily obtained for general working capital.
All overdue loans were extended by the
financial institution.
F-39
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
11.
NOTES PAYABLE
Notes payable consisted of the following as of September
      30, 2009 and December 31, 2008:
9/30/2009
12/31/2008
Notes to Junan County Construction
      Bank,
●
Bank commission charge at 4%, due 1/12/2009
$
-
$
554,405
●
Bank commission charge at 5.8320%, due
      8/13/2009
-
-
●
Bank commission charge at 5.8320%, due 8/25/2009
-
-
Notes to Junan County Agriculture Bank,
●
Bank commission charge at 4%, due 1/16/2009
-
277,202
Loan to Jinan Branch, Shenzhen Development
      Bank,
●
Bank charge commission charge at 3.96%, due 2/6/2009
-
4,376,878
$
-
$
5,208,485
12.
ACCRUED EXPENSES AND OTHER PAYABLE
Accrued expenses and other payables consisted of the
      following as of September 30, 2009 and December 31,
2008:
9/30/2009
12/31/2008
Business and other taxes
$
960,758
$
1,979,650
Accrued staff welfare
556,316
103,269
Accrued salaries and wages
109,123
605,471
Accrued utility expenses
289,246
481,678
Accrued interest expenses
-
-
Accrued transportation expenses
314,075
1,103,112
Other accruals
1,337,486
-
Purchases disbursements payables
1,221,865
6,018,057
$
4,788,869
$
10,291,237
13.
LONG-TERM DEBTS
Long-term debts consisted of the following as of
      September 30, 2009 and December 31, 2008:
9/30/2009
12/31/2008
Loan from Agricultural Development
      Luotian Government,
●
Interest rates at 0.67% per annum due 12/11/2010
$
109,688
$
-
●
Interest rates at 2.10% per annum due
      12/11/2011
25,594
25,532
Loan from United Commercial Bank, China Branch
●
Interest rates at 5.494% per annum due
      1/14/2011
186,262
551,443
$
321,544
$
576,975
14.
NON-CONTROLLING INTERESTS
The non-controlling interests represents the 19.8% equity
      of Shandong Green Foodstuff Co., Ltd. held by the Shandong Economic
      Development Investment Corporation, which is a state-owned
  interest.
F-40
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
15.
CAPITALIZATION
Dating back to May 3, 2007, the Company underwent a
      reverse-merger and a concurrent financing transaction that resulted in
      24,923,178 shares of outstanding common stock that remained unchanged
      until through December 31, 2007. During the course of 2008, several
      holders of warrants issued in connection with the financing transaction
      exercised their rights to purchase shares at the prescribed exercise
      price. The holders of the warrants exercised the right to purchase a total
      of 360,207; however, because the holders did not pay in cash for the
      warrants, 110,752 of those shares were cancelled as consideration in lieu
      of the warrant holders paying in cash. Ultimately, 249,455 of new shares
      were issued to those who exercised their warrant. The total number of
      outstanding shares at September 30, 2009 was 25,177,640.
16.
INCOME TAXES
All of the Group's income before income taxes and related
      tax expenses are from PRC sources. In accordance with the relevant tax
      laws and regulations of PRC, the corporation income tax rate is 33%.
      However, also in accordance with the relevant taxation laws in the PRC,
      some of the subsidiaries of the Group are eligible for tax exemption. In
      particular, from the time that a company has its first profitable tax
      year, the company is exempt from corporate income tax for its first two
      year and is then entitled to a 50% tax reduction for the succeeding three
      year. Actual income tax expenses reported in the consolidated statements
      of income and comprehensive income differ from the amounts computed by
      applying the PRC statutory income tax rate of 33% to income before income
      tax for the period from August 4, 2006 (date of incorporation) to
      September 30, 2009 for the following reasons:
-
9/30/2009
9/30/2008
Income before tax
$
11,439,761
$
10,691,351
Tax at the income tax rate
2,859,940
2,672,838
Effect of tax exemption granted
(279,768
)
(884,436
)
Income tax
$
2,580,172
$
1,788,402
Per Share Effect of Tax
Exemption
9/30/2009
12/31/2008
Effect of tax exemption granted
$
279,768
$
884,436
Weighted-Average Shares Outstanding
25,177,640
24,923,178
Per share effect
$
0.01
$
0.04
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 25%
tax rate, tax holidays terminated as of December 31, 2007. However, PRC
government has established a set of transition rules to allow enterprises
already started tax holidays before January 1, 2008, to continue enjoying the
tax holidays until being fully utilized.
Based on the background of each
constituent of our group, the income tax rates applicable to the four
constituents for 2008 and 2009 are depicted in the following table.
Income Tax Rate
2008
2009
Junan Hongrun
15%
25%
Luotian Lorain
15%
15%
Beijing Lorain
0%
15%
Shandong Lorain
25%
25%
F-41
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
17.
SALES BY PRODUCT TYPE
Sales by categories of product at September 30, 2009 and
      2008 was as follows: -
Category
9/30/2009
9/30/2008
Chestnut
$
44,852,695
$
39,609,810
Convenience Food
18,099,093
16,364,820
FCB Food
20,858,242
19,705,490
Others
31,082
-
Total
$
83,841,112
$
75,680,120
Revenue by geography at September 30,
2009 and 2008 was as follows: -
Country
9/30/2009
9/30/2008
Belgium
$
1,203,354
$
1,797,772
Italy
-
177,153
Chile
-
426,507
China
68,980,929
59,321,493
France
723,383
868,028
Germany
395,209
722,394
Holland
142,385
-
Hong Kong
342,428
-
Japan
4,245,059
4,374,448
India
-
519,401
Malaysia
422,013
144,469
Netherlands
-
508,340
Saudi Arabia
993,350
110,292
Kuwait
76,989
-
Singapore
725,402
207,396
South Korea
4,206,399
3,833,565
Sweden
-
83,606
Taiwan
399,103
523,231
United Arab Emirates
-
174,323
United Kingdom
289,426
1,457,012
United States of America
541,028
207,711
Spain
154,655
222,979
Total
$
83,841,112
$
75,680,120
18.
SUBSEQUENT EVENT
On October 13, 2009, the Company filed a Definitive
      Information Statement on Schedule 14C with the US Securities and Exchange
      Commission and mailed it to shareholders disclosing that a written consent
      in lieu of an annual meeting had been signed and delivered to the Company
      by the majority shareholder authorizing the following actions: To elect
      six directors to hold office until 2010; to ratify the Company's
      independent registered public accounting firm
for fiscal year 2009; and to reincorporate the Company in the
      State of Nevada through a redomicile merger. On November 9, 2009, the
      waiting period pursuant to Exchange Act Rule 14c-2 expired, and the first
      two actions became effective. In addition, the Company anticipates closing
      the redomicile merger as promptly as practicable.
F-42
AMERICAN LORAIN CORPORATION
NOTES TO FINANCIAL
STATEMENTS - SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(STATED IN US
DOLLARS)
On October 28, 2009, the Company filed a Form 8-K with
      the US Securities and Exchange Commission disclosing that the Company
      entered into a Securities Purchase Agreement dated on the same date by and
      between the Company and the accredited investors signatories thereto.
      Pursuant to the agreement the Company agreed to issue to the Investors (i)
      5,011,169 shares (the "Shares") of common stock, par value $0.001 per
      share (the "Common Stock"), (ii) Series A Warrants to purchase 1,753,909
      shares of Common Stock (the "Series A Warrant Shares") and (iii) Series B
      Warrants to purchase 501,115 shares of Common Stock (the "Series B Warrant
      Shares" and, collectively with the Series A Warrant Shares, the "Warrant
      Shares"). The aggregate purchase price is approximately $12 million.
      Pursuant to the Purchase Agreement, Investors have a right to participate
      in up to 25%, in the aggregate, of certain future financing transactions
      conducted by the Company within the next eighteen (18) months.
The Company entered into a registration rights agreement:
      the Company agreed to prepare and file a registration statement covering
      the resale of the Shares and the Warrant Shares with the SEC.
The Company is obligated to pay Rodman & Renshaw,
      LLC, as lead placement agent, and FT Global Inc., as co-lead placement
      agent, in the aggregate, a commission equal to 6% of the aggregate
      purchase price.
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 nine months ended September 30, 2009, the Company
      recorded a total of $86,636 of shared based compensation expense. The
      Company issued warrants that upon exercise would result in the issuance of
      1,321,385 common shares. These warrants vest over three years, where
      33.33% vest annually. The expense related to the warrants was $31,677. The
      Company also recorded expenses of $48,808 and $6,152 for the expected
      issuance of 30,891 common shares and the already issued 5,000 common
      shares to participants, respectively. The common shares to be and already
      issued to participants vest immediately. The entire stock option
      compensation expenses were recorded as general and administrative expenses
      given the nature of the work contribution of the grantees.
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
1,344,586 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 nine months ended September 30, 2009 the Company has yet to
repatriate its earnings, accordingly it has not recognized any deferred tax
assets or liability in regards to benefits derived from the issuance of stock
options.
The Company used the Black-Scholes
Model to value the warrants granted. The following shows the weighted average
fair value of the grants and the assumptions that were employed in the model:
Weighted-average fair value of grants:
$
0.2877
Risk-free interest rate:
2.51%
Expected volatility:
7.15%
Expected life in months:
60.00
F-43
7,566,863 shares of common stock
PROSPECTUS
[_______], 2009
F-44
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of common stock being registered. All amounts, other than the SEC registration fee, are estimates. We
will pay all these expenses.
Amount to
be
Paid
SEC Registration Fee
$
1,372.11
Legal Fees and Expenses
60,000
Accounting Fees and Expenses
5,000
Blue Sky Fees and Expenses
2,325
Total
$
68,697.11
Item 14. Indemnification of Directors and Officers
Our articles of incorporation provide for the indemnification of our present and prior directors and officers or any person who may have served at our request as a director or officer of another corporation in which we own shares of capital stock or
of which we are a creditor, against expenses actually and necessarily incurred by them in connection with the defense of any actions, suits or proceedings in which they, or any of them, are made parties, or a party, by reason of being or having been
director(s) or officer(s) of us or of such other corporation, in the absence of negligence or misconduct in the performance of their duties. This indemnification policy could result in substantial expenditure by us, which we may be unable to
recoup.
Insofar as indemnification by us for liabilities arising under the Exchange Act may be permitted to our directors, officers and controlling persons pursuant to provisions of our articles of incorporation and bylaws, or otherwise, we have been
advised that in the opinion of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of
any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Exchange Act and will be governed by the final adjudication of such issue.
At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding
which may result in a claim for such indemnification.
Item 15. Recent Sales of Unregistered Securities
On April 5, 2007, we issued 100,000 shares of Series A Voting Convertible Preferred Stock to Halter Financial Investments, L.P. for a consideration of $415,000. Each share of Series A Voting Convertible Preferred Stock was entitled to 428.56
votes and can be converted into 428.56 shares of our common stock. The foregoing transfers were made in reliance upon exemptions provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering and
Regulation D promulgated thereunder.
On May 3, 2007, we issued 697,633 shares of our Series B Voting Convertible Preferred Stock to stockholders of ILH. The total consideration for these shares of our Series B Voting Convertible Preferred Stock was 5,099,503 shares of common stock of
ILH, which constituted all the issued and outstanding capital stock of ILH. We did not receive any cash consideration in connection with the share exchange. The number of our shares issued to the stockholders of ILH was determined based on an
arms-length negotiation. The issuance of our shares to these individuals was made in reliance upon exemptions from the registration requirements of the Securities Act pursuant to Regulation S thereunder.
On May 3, 2007, we also completed a private placement pursuant to which we issued and sold to certain accredited investors 604,674 shares of our Series B Voting Convertible Preferred Stock for approximately $19.8 million pursuant to a
Securities
Purchase Agreement dated May 3, 2007. The issuance of our shares to these investors was made in reliance on the exemption provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering and
Regulation D promulgated thereunder.
F-45
On October 28, 2009, we entered into a Securities Purchase Agreement pursuant to which we agreed to issue to the investors signatories thereto 5,011,169 shares of common stock, Series A Warrants to purchase 1,753,909 shares of Common Stock and
Series B Warrants to purchase 501,115 shares of Common Stock. In addition, Series A Warrants to purchase an aggregate of 300,671 shares of Common Stock were issued to Redman, FT Global and their employees. The aggregate purchase price was
approximately $12 million.
The initial exercise price of each of the Series A Warrants and Series B Warrants is $3.70 per share, subject to certain adjustments set forth therein, including adjustments in the event of certain future financing transactions conducted by the
Company or in the event of a stock dividend or stock split. The Series A Warrants become exercisable six months from the date of issuance and have a term of five years thereafter. The Series B Warrants become exercisable six months from the date of
issuance and have a term of 30 months thereafter. The issuance of our shares to these investors and brokers was made in reliance on the exemption provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a
public offering and Regulation D promulgated thereunder.
In instances described above where we issued securities in reliance upon Regulation D, we relied upon Rule 506 of Regulation D of the Securities Act. These stockholders who received the securities in such instances made representations that (a) the
stockholder is acquiring the securities for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the
meaning of the Securities Act, (b) the stockholder agrees not to sell or otherwise transfer the purchased shares unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions from such
registration are available, (c) the stockholder has knowledge and experience in financial and business matters such that he, she or it is capable of evaluating the merits and risks of an investment in us, (d) the stockholder had access to all of our
documents, records, and books pertaining to the investment and was provided the opportunity to ask questions and receive answers regarding the terms and conditions of the offering and to obtain any additional information which we possessed or were
able to acquire without unreasonable effort and expense, and (e) the stockholder has no need for the liquidity in its investment in us and could afford the complete loss of such investment. Management made the determination that the investors in
instances where we relied on Regulation D are accredited investors (as defined in Regulation D) based upon management's inquiry into their sophistication and net worth. In addition, there was no general solicitation or advertising for
securities issued in reliance upon Regulation D.
In instances described above where we indicate that we relied upon Section 4(2) of the Securities Act in issuing securities, our reliance was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by
us which did not involve a public offering; (b) there were only a limited number of offerees; (c) there were no subsequent or contemporaneous public offerings of the securities by us; (d) the securities were not broken down into smaller
denominations; and (e) the negotiations for the sale of the stock took place directly between the offeree and us.
Item 16. Exhibits and Financial Statement Schedules
The following exhibits are included as part of this Form S-1.
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.
F-46
Exhibit No.
Description
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, by and between American Lorain Corporation and the selling stockholders. Incorporated by reference to Exhibit 4.3 to the registrant's current report on Form 8-K
filed on October 29, 2009.
5.1
Opinion of Holland & Hart LLP**
10.1
Employment Agreement, effective September 22, 2008, by and between American Lorain Corporation and Yilun Jin. Incorporated by reference to Exhibit 10.1 to the registrant's current report on Form 8-K filed on September 18, 2008.
10.2
Securities Purchase Agreement, dated as of October 28, 2009, by and between American Lorain Corporation and the selling stockholders. Incorporated by reference to Exhibit 10.1 to the registrant's current report on Form 8-K
filed on October 29, 2009.
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. Incorporated by reference to Exhibit 21 to the registrant's current report on Form 8-K filed on May 9, 2007.
23.1
Consent of Holland & Hart LLP, included in Exhibit 5.1.**
23.2
Consent of Samuel H. Wong & Co., LLP, an independent registered accounting firm.*
24
Power of Attorney (set forth on the signature page).*
* Filed herewith.
** To be filed by amendment
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(a)
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(b)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(c)
To include material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it is first used after effectiveness.
Provided, however,
that no statement made in a registration statement or prospectus that is part of the registration statement or made in
a document
incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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(5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Shandong,
on the 27
th
day of November, 2009.
AMERICAN LORAIN CORPORATION
:
By
/
s/ Si Chen
Si Chen
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Each person whose signature appears below
constitutes and appoints Si Chen and Yilun Jin, and each of them individually, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature
Title
Date
/s/ Si Chen
Chairman, Director and Chief Executive Officer
November 27, 2009
Mr. Si Chen
(Principal Executive Officer)
/s/ Yilun Jin
Chief Financial Officer
November 27, 2009
Mr. Yilun Jin
(Principal Financial and
Accounting Officer)
/s/ Yundong Lu
Chief Operating Officer and Director
November 27, 2009
Mr. Yundong Lu
/s/ Delkai Yin
Director
November 27, 2009
Mr. Delkai Yin
/s/ Yongjun Li
Director
November 27, 2009
Mr. Yongjun Li
/s/ Maoquan Wei
Director
November 27, 2009
Mr. Maoquan Wei
/s/ Tad M. Ballantyne
Director
November 27, 2009
Tad M. Ballantyne
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EXHIBIT INDEX
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.
5.1
Opinion of Holland & Hart LLP**
10.1
Employment Agreement, effective September 22, 2008, by and between American Lorain Corporation and Yilun Jin. Incorporated by reference to Exhibit 10.1 to the registrant's current report on Form 8-K filed on September 18, 2008.
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.
10.2
Securities Purchase Agreement dated as of October 28, 2009, by and between American Loan Corporation and the Selling Stockholders. Incorporated by reference to Exhibit 10.1 to the registrant's current report on Form 8-K filed
on October 29, 2009.
21
List of subsidiaries of the registrant. Incorporated by reference to Exhibit 21 to the registrant's current report on Form 8-K filed on May 9, 2007.
23.1
Consent of Holland & Hart LLP, included in Exhibit 5.1.**
23.2
Consent of Samuel H. Wong & Co., LLP, an independent registered accounting firm.*
24
Power of Attorney (set forth on the signature page).
* Filed herewith.
** To be filed by amendment
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