---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: March 31, 2011

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

Commission File No. 001-34449

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

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

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

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

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

Yes [X]             No [     ]

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

Yes [     ]             No [     ]

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

Large accelerated filer [     ]         Accelerated filer [     ]         Non-accelerated filer [     ]         Smaller reporting company [X]

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

Yes [     ]             No [X]

The numbers of shares outstanding of the issuer’s class of common stock as of May 16, 2011 was 34,419,709.

---

TABLE OF CONTENTS

	PAGE
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS	1
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 4 CONTROLS AND PROCEDURES	35
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS	36
ITEM 1A RISK FACTORS	36
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	36
ITEM 3 DEFAULTS UPON SENIOR SECURITIES	36
ITEM 4 REMOVED AND RESERVED	36
ITEM 5 OTHER INFORMATION	36
ITEM 6 EXHIBITS	36
SIGNATURES	37

---

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

AMERICAN LORAIN CORPORATION

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011 AND DECEMBER 31, 2010

(Stated in US Dollars)

 

---

AMERICAN LORAIN CORPORATION

CONTENTS	PAGES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	1
CONSOLIDATED BALANCE SHEETS	2 – 3
CONSOLIDATED STATEMENTS OF INCOME	4
CONSOLIDATED STATEMENTS OF CASH FLOWS	5
CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY	6 – 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8 – 27

---

REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM

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

We have reviewed the accompanying interim consolidated Balance Sheets of American Lorain Corporation (“the Company”) as of March 31, 2011 and December 31, 2010, and the related statements of income, stockholders’ equity, and cash flows for the three months ended March 31, 2011 and 2010. 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.

	/s/ Samuel H. Wong & Co., LLP
San Mateo, California	Samuel H. Wong & Co., LLP
May 5, 2011	Certified Public Accountants

1

---

AMERICAN LORAIN CORPORATION
CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

							(Audited)
ASSETS		Note		At March 31, 2011			At December 31, 2010
Current assets
Cash and cash equivalents		2 (d)	$	18,603,272		$	12,730,626
Restricted cash		3		4,858,780			2,308,898
Short-term investment				7,794,153			9,447,585
Trade accounts receivable		4		21,835,538			33,226,612
Other receivables		5		1,976,234			1,492,850
Inventories		6		38,730,930			29,807,198
Advance to suppliers				7,467,094			7,744,976
Prepaid expenses and taxes				949,956			434,061
Deferred tax asset				104,689			103,713
Security deposits and other Assets				628,998			693,858
Total current assets			$	102,949,644		$	97,990,377
Non-current assets
Property, plant and equipment, net		7		72,782,827			72,095,007
Land use rights, net		8		4,884,453			4,877,438
Deposit				15,878			20,297
TOTAL ASSETS			$	180,632,802		$	174,983,119
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term bank loans		9	$	16,139,139		$	25,164,469
Long-term debt – current portion		13		220,998			218,935
Notes payable		10		6,106,777			4,249,977
Accounts payable				5,468,206			6,284,532
Taxes payables		11		1,248,383			3,266,502
Accrued liabilities and other payables		12		1,780,060			1,335,947
Customers deposits				1,180,590			89,370
Total current liabilities			$	32,144,153		$	40,609,732
Long-term liabilities
Long-term debt		13		15,126,807			5,030,930
TOTAL LIABILITIES			$	47,270,960		$	45,640,662

See Accompanying Notes to the Financial Statements and Accountant’s Report
2

---

AMERICAN LORAIN CORPORATION
CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

		Note		At March 31, 2011			(Audited) At December 31, 2010
STOCKHOLDERS’ EQUITY
Preferred Stock, $.001 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively				-			-
Common stock, $0.001 par value, 200,000,000 shares authorized; 34,419,709 and 34,419,709 shares issued and outstanding as of March 31, 2011 and December 31, 2010, respectively		14		34,420			34,420
Additional paid-in capital		14		52,545,183			52,371,481
Statutory reserves		2 (r)		12,060,229			11,340,739
Retained earnings				50,395,173			48,688,375
Accumulated other comprehensive income				10,753,537			9,475,745
Non-controlling interests		15		7,573,300			7,431,697
TOTAL STOCKHOLDER’S EQUITY			$	133,361,842		$	129,342,457
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY			$	180,632,802		$	174,983,119

See Accompanying Notes to the Financial Statements and Accountant’s Report
3

---

AMERICAN LORAIN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
(Stated in US Dollars)

		Note		March 31, 2011			March 31, 2010
Net revenues		2 (t),16	$	30,449,805		$	24,560,216
Cost of revenues				(23,674,895	)		(18,836,126	)
Gross profit			$	6,774,910		$	5,724,090
Operating expenses
Selling and marketing expenses				(1,362,686	)		(1,372,352	)
General and administrative expenses				(1,475,947	)		(1,016,452	)
				(2,838,633	)		(2,388,804	)
Operating income			$	3,936,277		$	3,335,286
Government subsidy income				293,093			181,421
Interest income				2,475			2,804
Other income				44,609			119,277
Other expenses				(159,572	)		(27,523	)
Interest expense				(653,123	)		(920,424	)
				(472,518	)		(644,445	)
Earnings before tax			$	3,463,759		$	2,690,841
Income tax		2 (q),17		(895,868	)		(671,992	)
Net income			$	2,567,891		$	2,018,849
Net income attributable to:
-Common stockholders			$	2,426,288		$	1,860,531
-Non-controlling interest				141,603			158,318
			$	2,567,891		$	2,018,849
Earnings per share		2 (u), 18
- Basic			$	0.07		$	0.07
- Diluted			$	0.07		$	0.07
Weighted average shares outstanding
- Basic				34,419,709			26,075,413
- Diluted				35,155,958			26,730,651

See Accompanying Notes to the Financial Statements and Accountant’s Report
4

---

AMERICAN LORAIN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
(Stated in US Dollars)

		March 31, 2011			March 31, 2010
Cash flows from operating activities
Net income	$	2,567,891		$	2,018,849
Stock and share based compensation		173,702			249,006
Depreciation of fixed assets		483,601			365,569
Amortization of intangible assets		44,886			35,720
Write down of short-term investments		44,909			-
(Increase)/decrease in accounts & other receivables		11,998,911			4,089,021
(Increase)/decrease in inventories		(8,923,732	)		(9,473,698	)
Decrease/(increase) in advance to suppliers and prepayment		(238,013	)		(238,115	)
Decrease/(increase) in deferred tax asset		(977	)		-
Increase/(decrease) in accounts, tax and other payables		(2,390,331	)		(301,956	)
Net cash (used in)/provided by operating activities		3,760,847			(3,255,604	)
Cash flows from investing activities
Purchase of plant and equipment		(791,155	)		(427,535	)
Payment of construction in progress		(380,266	)		-
Proceeds[DS1] from short-term investments		1,698,341			22,227
(Increase)/decrease in restricted cash		(2,549,882	)		181,835
Payments for the purchase of land use rights		(51,902	)		(14,887	)
Payments for security deposits		69,279			-
Net cash used in investing activities		(2,005,585	)		(238,360	)
Cash flows from financing activities
Repayment of notes		(1,196,589	)		-
Proceeds from issuance of notes		3,053,390			-
Proceeds from bank borrowings		11,449,469			17,853,746
Repayment of bank borrowings		(10,376,859	)		(17,961,100	)
Net cash provided by/(used in) financing activities	$	2,929,411		$	(107,354	)
Net Increase/(decrease) of Cash and Cash Equivalents		4,684,673			(3,601,318	)
Effect of foreign currency translation on cash and cash equivalents		1,187,973			19,450
Cash and cash equivalents–beginning of year		12,730,626			12,111,532
Cash and cash equivalents–end of year	$	18,603,272		$	8,529,664
Supplementary cash flow information:
Interest received	$	2,475		$	2,804
Interest paid	$	653,123		$	909,715
Income taxes paid	$	2,028,968		$	1,839,950

See Accompanying Notes to the Financial Statements and Accountant’s Report
5

---

AMERICAN LORAIN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE -MONTH PERIOD AND YEAR ENDED MARCH 31, 2011 AND DECEMBER 31, 2010
(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, 2010		30,240,202		$	30,240		$	35,268,603		$	8,895,477		$	38,455,349		$	6,068,569		$	6,022,883		$	94,741,121
Issuance of share based compensation		7,000			7			890,203			-			-			-			-			890,210
Issuance of common stock for cash		3,440,800			3,441			9,630,800			-			-			-			-			9,634,241
Issuance cost of common stock		-			-			(678,567	)		-			-			-			-			(678,567	)
Appropriations to additional paid in capital		-			-			5,161,175			-			(5,161,175	)		-			-			-
Acquisition of Shandong Greenpia		731,707			732			2,099,267			-			-			-			-			2,099,999
Net income		-			-			-			-			19,248,277			-			-			19,248,277
Appropriations to statutory reserves		-			-			-			2,445,262			(2,445,262	)		-			-			-
Allocation to non-controlling interests		-			-			-			-			(1,408,814	)		-			1,408,814			-
Unrealized gain (loss) on investment		-			-			-			-			-			(587,117	)		-			(587,117	)
Foreign currency translation adjustment		-			-			-			-			-			3,994,293			-			3,994,293
Balance, December 31, 2010		34,419,709		$	34,420		$	52,371,481		$	11,340,739		$	48,688,375		$	9,475,745		$	7,431,697		$	129,342,457
Balance, January 1, 2011		34,419,709		$	34,420		$	52,371,481		$	11,340,739		$	48,688,375		$	9,475,745		$	7,431,697		$	129,342,457
Issuance of share based compensation		-			-			173,702			-			-			-			-			173,702
Net income		-			-			-			-			2,567,891			-			-			2,567,891
Appropriations to statutory reserves		-			-			-			719,490			(719,490	)		-			-			-
Allocation to non-controlling interests		-			-			-			-			(141,603	)		-			141,603			-
Unrealized gain (loss) on investment		-			-			-			-			-			44,909			-			44,909
Foreign currency translation adjustment		-			-			-			-			-			1,232,883			-			1,232,883
Balance, March 31, 2011		34,419,709		$	34,420		$	52,545,183		$	12,060,229		$	50,395,173		$	10,753,537		$	7,573,300		$	133,361,842

See Accompanying Notes to the Financial Statements and Accountant’s Report
6

---

AMERICAN LORAIN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE -MONTH PERIOD AND YEAR ENDED MARCH 31, 2011 AND DECEMBER 31, 2010
(STATED IN US DOLLARS)

		March 31, 2011			December 31, 2010
Comprehensive Income
Net Income	$	2,567,891		$	19,248,277
Other Comprehensive Income
Foreign Currency Translation Adjustment		1,232,883			3,994,293
Total Comprehensive Income	$	3,800,774		$	23,242,570

See Accompanying Notes to the Financial Statements and Accountant’s Report
7

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

1.	ORGANIZATION, BASIS OF PRESENTATION, AND PRINCIPAL ACTIVITIES
	(a)	Organization history of American Lorain Corporation (formerly known as Millennium Quest, Inc.)
		American Lorain Corporation (the “Company” or “ALN”) was originally a Delaware corporation incorporated on February 4, 1986. From inception through May 3, 2007, the Company did not engage in any active business operations other than in search and evaluation of potential business opportunity to become an acquiree of a reverse-merger deal. On May 3, 2007, the Company entered into a share exchange agreement as described under “Reverse-Merger” below. On November 12, 2009, the Company filed a statement of merger in the state of Nevada to transfer the Company’s jurisdiction from Delaware to Nevada.
	(b)	Organization History of International Lorain Holding Inc. and its subsidiaries
		ALN owns 100% of the equity of International Lorain Holding Inc. (“ILH”). ILH is a Cayman Islands company incorporated on August 4, 2006 and was wholly-owned by Mr. Hisashi Akazawa until May 3, 2007. ILH presently has two direct wholly-owned subsidiaries, Junan Hongrun and Luotian Lorain, and three indirectly wholly-owned subsidiaries through Junan Hongrun, which are Beijing Lorain, Dongguan Lorain, and Shandong Greenpia Foodstuff Co., Ltd. (“Shandong Greenpia”).
		In addition, the Company directly and indirectly has 80.2% ownership of Shandong Lorain. The other 19.8% interest is owned by the State under the name of Shandong Economic Development Investment Co. Ltd., which is not included as a part of the Group.
		On April 9, 2009, the Company, through its Junan Hongrun subsidiary, invested cash to establish Dongguan Lorain. Dongguan Lorain is indirectly 100% beneficially owned by the Company.
		On June 28, 2010, the Company signed an equity transfer agreement with Shandong Greenpia. Shandong Greenpia was originally directly owned by Taebong Inc. and Shandong Luan Trade Company. The Company paid $2,100,000 to Korean Taebong Inc. for 50% equity of Shandong Greenpia on September 20, 2010. On September 23, 2010, the Company issued 731,707 shares of restricted stock at an agreed price of $2.87 per share to the owner of Shandong Luan Trade Company, Mr. Ji Zhenwei, for the remaining 50% equity of Shandong Greenpia. Since September 23, 2010, Shandong Greenpia was directly owned by both Junan Hongrun and ILH. As a result, Shandong Greenpia is 100% owned by the Company.
	(c)	Reverse-Merger
		On May 3, 2007, the Company entered into a share exchange agreement with ILH whereby the Company consummated its acquisition of ILH by issuance of 697,663 Series B voting convertible preferred shares to the shareholders of ILH in exchange of 5,099,503 ILH shares. Concurrently on May 3, 2007, the Company also entered into a securities purchase agreement with certain investors and Mr. Hisashi Akazawa and Mr. Si Chen (each a “beneficial owner”) whereby the Company issued 319,913 (after reverse-split at 32.84 from 10,508,643) common shares to its shareholders as consideration of the Company’s reverse-merger with Lorain.
		The share exchange transaction is sometimes referred to hereafter as the “reverse-merger transaction.” The share exchange transaction has been accounted for as a recapitalization of ALN where the Company (the legal acquirer) is considered the accounting acquiree and ILH (the acquiree) is considered the accounting acquirer. As a result of this transaction, the Company is deemed to be a continuation of the business of ILH.
		Accordingly, the accompanying consolidated financial statements are those of the accounting acquirer, ILH. The historical stockholders’ equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction occurred as of the beginning of the first period presented. See also Note 14 Capitalization.

8

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

	(d)	Business Activities
		The Company develops, manufactures, and sells convenience foods (including ready-to-cook (or RTC) foods; ready-to-eat (or RTE) foods and meals ready-to-eat (or MRE); chestnut products; and frozen foods, in hundreds of varieties. The Company operates through indirect Chinese subsidiaries. The products are sold in 26 provinces and administrative regions in China and 42 foreign countries. Food products are categorized into three types: (1) chestnut products, (2) convenience food, and (3) frozen food.
2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	(a)	Method of Accounting
		The Company maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements, which are compiled on the accrual basis of accounting.
		The Company regrouped certain accounts in its presentation of changes in assets and liabilities in the statement of cash flows for the three months ended March 31, 2011 in order to be consistent with the presentation provided for the year ended December 31, 2010. There was no impact in earnings for the regrouping.
	(b)	Principles of consolidation
		The consolidated financial statements which include the Company and its subsidiaries are compiled in accordance with generally accepted accounting principles in the United States of America. All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100% of assets, liabilities, and net income or loss of those wholly-owned subsidiaries; ownership interests of minority investors are recorded as minority interests.
		As of March 31, 2011, the detailed identities of the consolidating subsidiaries are as follows:

			Place of			Attributable equity			Registered
	Name of Company		incorporation			interest %			capital
	Shandong Lorain Co., Ltd		PRC			80.20		$	15,398,238
	Luotian Lorain Co., Ltd		PRC			100			3,866,933
	Junan Hongrun Foodstuff Co., Ltd		PRC			100			45,678,692
	Beijing Lorain Co., Ltd		PRC			100			1,526,694
	Shandong Greenpia Foodstuff Co.,Ltd		PRC			100			2,345,002
	Dongguan Lorain Co,,Ltd		PRC			100			152,669
	International Lorain Holding Inc.		Cayman Islands			100			47,508,817

	(c)	Use of estimates
		The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.
	(d)	Cash and cash equivalents
		The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

9

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

	(e)	Investment securities
		The Company classifies securities it holds for investment purposes into trading or available-for-sale. Trading securities are bought and held principally for the purpose of selling them in the near term. All securities not included in trading securities are classified as available-for-sale.
		Trading and available-for-sale securities are recorded at fair value. Unrealized holding gains and losses on trading securities are included in the net income. Unrealized holding gains and losses, net of the related tax effect, on available for sale securities are excluded from net income and are reported as a separate component of other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis.
		A decline in the market value of any available-for-sale security below cost that is deemed to be other-than- temporary results in a reduction in carrying amount to fair value. The impairment is charged as an expense to the statement of income and comprehensive income and a new cost basis for the security is established. To determine whether impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year end, and forecasted performance of the investee.
		Premiums and discounts are amortized or accreted over the life of the related available-for-sale security as an adjustment to yield using the effective-interest method. Dividend and interest income are recognized when earned.
	(f)	Trade accounts receivables
		Trade accounts receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.
	(g)	Inventories
		Inventories consisting of finished goods and raw materials are stated at the lower of cost or market value. Finished goods are comprised of direct materials, direct labor and an appropriate proportion of overhead.
	(h)	Customer deposits and advances to suppliers
		Customer deposits were received from customers in connection with orders of products to be delivered in future periods.
		Advances to suppliers are good faith deposits paid to suppliers for the purpose of committing suppliers to provide product promptly upon delivery of the Company’s purchase order for raw materials, supplies, equipment, building materials etc. Pursuant to the Company’s arrangements with its suppliers, this deposit is generally 20% of the total amount contracted for. This type of transaction is classified as a prepayment category under the account name “Advance to Suppliers” until such time as the Company’s purchase order is delivered, at which point this account is reduced by reclassification of the applicable amount to the appropriate asset account such as inventory or fixed assets or construction in progress.
	(i)	Property, plant and equipment, net
		Property, plant and equipment, net 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 property, plant and equipment are as follows:

10

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

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

		The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.
	(j)	Construction in progress
		Construction in progress represents direct and indirect construction or acquisition costs. The construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until the asset is completed and ready for intended use.
	(k)	Land Use Rights
		Land use rights are carried at cost and amortized on a straight-line basis over a specified period.
	(l)	Accounting for the Impairment of Long-Lived Assets
		The long-lived assets held by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. An impairment is present if carrying amount of an asset is less than its undiscounted cash flows to be generated.
		If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Company believes no impairment has occurred to its assets during 2010 and through March 31, 2011.
	(m)	Advertising
		All advertising costs are expensed as incurred.
	(n)	Shipping and handling
		All shipping and handling are expensed as incurred.
	(o)	Research and development
		All research and development costs are expensed as incurred.
	(p)	Retirement benefits
		Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to the consolidated statement of income as incurred.
	(q)	Income taxes
		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.

11

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

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			-			-

	(r)	Statutory reserves
		Statutory reserves are referring to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover losses and increase capital, as approved, and are to be used to expand production or operations. The Company transferred $2,445,262 from retained earnings to statutory reserves during 2010. PRC laws prescribe that an enterprise operating at a profit, must appropriate, on an annual basis, an amount equal to 10% of its profit. Such an appropriation is necessary until the reserve reaches a maximum that is equal to 50% of the enterprise’s PRC registered capital.
	(s)	Foreign currency translation
		The accompanying financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). The financial statements are translated into United States dollars from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

12

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

			3/31/2011			12/31/2010			3/31/2010
	Year end RMB : US$ exchange rate		6.5501			6.6118			6.8361
	Average yearly RMB : US$ exchange rate		6.5713			6.7788			6.8360

		The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US Dollars at the rates used in translation.
	(t)	Revenue recognition
		The Company's revenue recognition policies are in compliance with Staff accounting bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.
		The Company's revenue consists of invoiced value of goods, net of a value-added tax (VAT). The Company allows its customers to return products if they are defective. However, this rarely happens and amounts returned have been de minimis.
		The Company gradually switched its sales model from direct sales to third party distributor model and issues 1% sales incentive to distributors. The Company modified it accounting policy for the recognition of revenue accordingly. Given the circumstances of how the Company conducts its incentive program, the Company books the payments settled in cash as a contra account to Gross Revenue, and includes the amount in its reported “net revenue”. The Company has considered the guidance in FASB ASC 605-50 (EITF 01-9) and will account for its sales incentive program accordingly.
	(u)	Earnings per share
		Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are computed by dividing net income by the sum of the weighted average number of ordinary shares outstanding and potential dilutive securities during the year. During the years ended December 31, 2010, 81,155 warrants were issued to certain service providers. During the year ended December 31, 2009, 1,334,573 stock options were granted to employees pursuant to the Company’s equity incentive plan and; 2,255,024 warrants were issued to investors in connection with a PIPE financing. These warrants and options could be potentially dilutive if the market price of the Company’s common stock exceeds the exercise price for these securities.
		The Company computes earnings per share (“EPS”) in accordance with Statement of Financial Accounting Standards No. 128, “Earnings per share” (“SFAS No. 128”), and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). SFAS No. 128 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
	(v)	Financial Instruments
		The Company’s financial instruments are cash and cash equivalents, accounts receivable, other receivable, advances to suppliers, advances to employees, bank loans and notes, accounts payable, other payable, dividend payable, accrued liabilities, and long-term liabilities. The recorded values of cash and cash equivalents, accounts receivable, other receivable, advances to suppliers, advances to employees, bank loans and notes, accounts payable, other payable, dividend payable and accrued liabilities approximate their fair values based on their short-term nature. The recorded values of long-term liabilities approximate their fair values, as interest approximates market rates.

13

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

	(w)	Commitments and contingencies
		Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
	(x)	Comprehensive income
		Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The Company’s current component of other comprehensive income includes the foreign currency translation adjustment and unrealized gain or loss.
	(y)	Recent accounting pronouncements
		In April 2010, the FASB issued an Accounting Standard Update (“ASU”) No.2010-13,”Compensation-Stock Compensation” (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades,” which address the classification of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. Topic 718 is amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades shall not be considered to contain a market, performance, or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity classification. The amendments in this update should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings. The cumulative-effect adjustment should be calculated for all awards outstanding as of the beginning of the fiscal year in which the amendments are initially applied, as if the amendments had been applied consistently since the inception of the award. ASU 2010-13 is effective for interim and annual periods beginning on or after December 15, 2010 and is not expected to have a material impact on the Company’s consolidated financial position or results of the operations.
		In January 2011, the FASB issued an Accounting Standard Update (“ASU”) No, 2011-01, “Receivables Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, to be concurrent with the effective date of the guidance for determining what constitutes a troubled debt restructuring, as presented in proposed Accounting Standards Update, Receivables (Topic 310): Clarifications to Accounting for Troubled Debt Restructurings by Creditors. The amendments in this Update apply to all public-entity creditors that modify financing receivables within the scope of the disclosure requirements about troubled debt restructurings in Update 2010-20. Under the existing effective date in Update 2010-20, public- entity creditors would have provided disclosures about troubled debt restructurings for periods beginning on or after December 15, 2010. The amendments in this Update temporarily defer that effective date, enabling public-entity creditors to provide those disclosures after the Board clarifies the guidance for determining what constitutes a troubled debt restructuring. The deferral in this Update will result in more consistent disclosures about troubled debt restructurings. This amendment does not defer the effective date of the other disclosure requirements in Update 2010-20. In the proposed Update for determining what constitutes a troubled debt restructuring, the Board proposed that the clarifications would be effective for interim and annual periods ending after June 15, 2011. For the new disclosures about troubled debt restructurings in Update 2010-20, those clarifications would be applied retrospectively to the beginning of the fiscal year in which the proposal is adopted. The Company does not expect to have a material impact on the Company’s consolidated financial position or results of the operations.

14

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

3.	RESTRICTED CASH
	Restricted Cash represents interest bearing deposits placed with banks to secure banking facilities in the form of loans and notes payable. The restriction of funds is based on time. The funds that collateralize loans are held for 60 days in savings account that pay interest at the prescribed national daily savings account rate. For funds that underline notes payable, the cash is deposited in six month time deposits that pay interest at the national time deposit rate.
4.	TRADE ACCOUNTS RECEIVABLE

			3/31/2011			12/31/2010
	Trade accounts receivable	$	22,174,604		$	33,562,514
	Less: Allowance for doubtful accounts		(339,066	)		(335,902	)
		$	21,835,538		$	33,226,612
	Allowance for bad debt:		3/31/2011			12/31/2010
	Beginning balance	$	(335,902	)	$	(267,590	)
	Additions to allowance		(3,164	)		(68,312	)
	Bad debt written-off		-			-
	Ending balance	$	(339,066	)	$	(335,902	)

	The Company offers credit terms of between 30 to 60 days to most of their domestic customers, including supermarkets and wholesalers, around 90 days to most of their international customers, and between 0 to 15 days for most of the third-party distributors the Company works with.
5.	OTHER RECEIVABLES
	Other receivables consisted of the following as of March 31, 2011 and December 31, 2010:

			3/31/2011			12/31/2010
	Advances to employees for purchase of materials	$	-		$	-
	Advances to employees for job/travel disbursements		1,205,368			764,725
	Amount due by a non-related enterprise		164,142			215,685
	Other non-related receivables		606,724			512,440
		$	1,976,234		$	1,492,850

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

Specifically, the company uses every available employee to arrange purchases with desirable chestnut or other raw material growers. However, because many of these growers are in rural farming areas of China where traditional banking and credit arrangements are difficult to implement, the Company must utilize cash purchases and also must contract for its future needs by placing a good faith deposit in cash with the growers. However none of these advances to employees for delivery to the growers on behalf of the Company are “personal loans” to the employees. Advances to employees for purchase of materials in other receivables are adjusted to advances to suppliers as of March 31, 2011.

15

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

Related party receivable consisted of the following as of March 31, 2011 and December 31, 2010:

			3/31/2011			12/31/2010
	Chen Si	$	128,999		$	123,467
	Lu Yundong		32,869			-
	Liu Gang		-			-
		$	161,868		$	123,467

	Related party receivable represented advances issued by management for job or travel disbursement in the normal course of business. The receivable had no impact on earnings. As with other employees, officers sign notes when cash is issued to them as job or travel disbursement.
6.	INVENTORIES
	Inventories consisted of the following as of March 31, 2011 and December 31, 2010:

			3/31/2011			12/31/2010
	Raw materials	$	15,171,059		$	18,128,883
	Finished goods		23,559,871			11,678,315
		$	38,730,930		$	29,807,198

7.	PROPERTY, PLANT AND EQUIPMENT
	Property, plant, and equipment consisted of the following as of March 31, 2011 and December 31, 2010:

			3/31/2011			12/31/2010
	At Cost:
	Buildings	$	49,150,123		$	48,612,643
	Landscaping, plant and tree		2,879,872			2,852,998
	Machinery and equipment		9,835,538			9,544,910
	Office equipment		528,464			501,977
	Motor vehicles		451,579			420,020
		$	62,845,576		$	61,932,548
	Less: Accumulated depreciation
	Buildings		(3,028,493	)		(2,729,161	)
	Landscaping, plant and tree		(71,997	)		(23,775	)
	Machinery and equipment		(4,226,129	)		(3,998,121	)
	Office equipment		(330,691	)		(312,872	)
	Motor vehicles		(237,925	)		(225,832	)
			(7,895,235	)		(7,289,761	)
	Construction in Progress		17,832,486			17,452,220
		$	72,782,827		$	72,095,007

Construction in progress is mainly comprised of capital expenditures for construction of the Company’s new corporate campus, including offices, factories, and staff dormitories located at Junan Hongrun. Capital commitments for the construction are immaterial for the two years above.

16

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

Landscaping, plants, and trees accounts for the orchards that the Company has developed for agricultural operations. These orchards as well as the young trees which were purchased as nursery stock are capitalized into fixed assets. The depreciation is then calculated on a 30-year straight-line method when production in commercial quantities begins. The orchards have begun production in small quantities and the Company has accounted for depreciation commencing July 1, 2010.

8.	LAND USE RIGHTS
	Land use rights consisted of the following as of March 31, 2011 and December 31, 2010:

			3/31/2011			12/31/2010
	Land use rights, at cost	$	5,561,827		$	5,509,925
	Less: Accumulated amortization		(677,374	)		(632,487	)
		$	4,884,453		$	4,877,438

	All lands are owned by the government in China. Land use rights represent the Company’s purchase of usage rights for a parcel of land for a specified duration of time, typically 50 years. The land use rights are then amortized over the period of usage. Amortization expense for the years ended March 31, 2011 and December 31, 2010 were $ 44,886 and $144,611, respectively.
9.	SHORT-TERM BANK LOANS
	Short-term bank loans consisted of the following as of March 31, 2011 and December 31, 2010:

			Remark			3/31/2011			12/31/2010
	Loans from Junan County Construction Bank,
	• Interest rate at 5.610% per annum due 1/6/2011				$	-		$	128,558
	• Interest rate at 5.841% per annum due 1/14/2011					-			483,983
	• Interest rate at 5.610% per annum due 1/28/2011					-			3,223
	• Interest rate at 5.841% per annum due 3/4/2011					-			393,236
	• Interest rate at 5.841% per annum due 9/9/2011					-			1,209,958
	Loan from Junan County Agriculture Bank,
	• Interest rate at 6.903% per annum due 3/30/2011					-			95,284
	• Interest rate at 7.434% per annum due 8/23/2011		A			1,526,694			1,512,447
	Loan from Junan County Industrial and Commercial Banks,
	• Interest rate at 5.100% per annum due 1/18/2011								756,224
	• Interest rate at 5.100% per annum due 1/20/2011								756,224
	• Interest rate at 5.100% per annum due 1/26/2011								1,134,336
	• Interest rate at 5.100% per annum due 2/8/2011								635,228
	• Interest rate at 5.100% per annum due 2/22/2011								1,240,207
	• Interest rate at 4.860% per annum due 3/15/2011								1,134,336

17

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

	• Interest rate at 5.600% per annum due 5/20/2011		B			427,474			-
	Loan from Linyi Commercial Bank,
	• Interest rate at 11.510% per annum due 1/21/2011					-			680,601
	• Interest rate at 11.676% per annum due 12/15/2011		C			687,012			680,601
	• Interest rate at 12.201% per annum due 1/10/2012		C			687,012			-
	Loan from China Agricultural Bank, Luotian Branch
	• Interest rate at 6.372% per annum due 8/25/2010								-
	• Interest rate at 6.372% per annum due 9/12/2011					1,068,686			1,134,336
	Bank of Beijing,
	• Interest rate at 6.672% per annum due 10/28/2011					305,339			302,489
	East West Bank (Formerly United Commercial Bank), China Branch,
	• Interest rate at 5.494% per annum due 11/14/2011		D			820,671			897,052
	HSBC Miyun Branch,
	• Interest rate at 5.840% per annum due 6/09/2011		E			305,339			302,489
	• Interest rate at 6.372% per annum due 6/29/2011					816,781			983,091
	• Interest rate at 6.804% per annum due 4/8/2011		E			305,339			302,489
	Shenzhen Development Bank,
	• Interest rate at 5.310% per annum due 9/14/2011					763,347			756,224
	China Development Bank,
	• Interest rate at 5.841% per annum due 6/27/2011		F			3,053,390			3,024,895
	Luotian Agricultural Development Bank,
	• Interest rate at 0.670% per month due 12/11/2010					28,626			113,433
	Luotian Sanliqiao Credit Union,
	• Interest rate at 6.300% per annum due 11/5/2011					763,347			756,224
	Beijing Rural Commercial Bank, Shilibao Branch,
	• Interest rate at 7.434% per annum due 8/10/2011					2,595,380			2,571,161
	China Agricultural Bank, Shandong Branch

18

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

	• Interest rate at 7.2280% per annum due 12/27/2011		1,526,694			1,512,447
	Shandong Junan Rural Credit Union
	• Interest rate at 9.1155% per annum due 2/07/2011		-			1,209,958
	Beijing International Trust Co., Ltd., (“BITIC”)
	• Interest rate at 6.600% per annum due 12/14/2011		458,008			453,734
		$	16,139,139		$	25,164,469

	The short-term loans, which are denominated in the functional currency Renminbi (RMB), were primarily obtained for general working capital.
	Remark:
	A: A parcel of 12,726 square meters land use right and an 8,162 square meters building was used as collateral for this loan.
	B: Accounts Receivable in the amount of $1,650,000 was used as collateral for this loan
	C: Machinery of $857,737 was used as collateral for these two loans.
	D: A parcel of 19,507 square meters land use right, owned by Sishui Xinlu, was used as collateral for this loan.
	E: Machinery and equipment was used as collateral for this loan.
	F: A land of 25,463 square meters was used as collateral
10.	NOTES PAYABLE
	Notes payable consisted of the following as of March 31, 2011 and December 31, 2010:

			3/31/2011			12/31/2010
	Junan County Construction Bank,
	• due at 1/26/2011	$	-		$	378,112
	• due at 1/30/2011		-			846,971
	Qingdao Evergrowing Bank,
	• due at 6/13/2011		3,053,388			3,024,895
	Agricultural Bank of China
	• due at 9/17/2011		3,053,388			-
		$	6,106,777		$	4,249,977

11.	TAXES PAYABLES
	Taxes payable consisted of the following as of March 31, 2011 and December 31, 2010:

19

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

			3/31/2011			12/31/2010
	Value added tax payable	$	80,623		$	377,562
	Corporate income tax payable		1,067,467			2,808,466

	Employee payroll tax withholding		9,053			5,096
	Property tax payable		38,347			38,819
	Stamp tax payable		2,768			4,679
	Sales tax payable		11,794			76
	Land use tax payable		31,405			24,943
	Import tariffs		6,926			6,861
		$	1,248,383		$	3,266,502

12.	ACCRUED EXPENSES AND OTHER PAYABLES
	Accrued expenses and other payables consisted of the following as of March 31, 2011 and December 31, 2010:

			3/31/2011			12/31/2010
	Accrued salaries and wages	$	3,044		$	-
	Accrued utility expenses		116,409			24,825
	Accrued interest expenses		29,203			38,353
	Accrued transportation expenses		192,522			472,836
	Other accruals		286,163			110,683
	Business and other taxes		872,108			479,850
	Disbursement payable		242,953			177,543
	Accrued staff welfare		37,658			31,857
		$	1,780,060		$	1,335,947

13.	LONG-TERM DEBT
	Current portions of long-term debt consisted of the following as of March 31, 2011 and December 31, 2010:

			3/31/2011			12/31/2010
	Loans from Luotian Agricultural Development Bank
	• Interest rate at 2.100% per annum due 12/11/2011		26,718			26,468
	Loans from East West Bank (Formerly United Commercial Bank), China Branch
	• Interest rate at 5.494% per annum due 11/14/2011		194,280			192,467
		$	220,998		$	218,935

Non-current portions of long-term debt consisted of the following as of March 31, 2011 and December 31, 2010:

			3/31/2011			12/31/2010
	Loans from Deutsche Investitions-und Entwicklungsgesellschaft mbH (“DEG”)
	• Interest rate at 5.510% per annum due 9/16/2016		15,126,807			5,030,930
		$	15,126,807		$	5,030,930

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

	(a.)	Create and register a first ranking mortgage in the amount of about USD 12,000,000 on its land and building in favor of DEG.
	(b.)	Undertake to provide a share pledge of Mr. Si Chen shares in the sponsor in the amount of about USD 12,000,000 and being the majority shareholder in the sponsor in form and substance satisfactory to DEG

20

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

	(c.)	The total amount of the first ranking mortgage as indicated in the Loan Agreement (Article 12(1)(a)) and the value of the pledged shares of Mr. Si Chen (Loan Agreement (Article 12(1)(a))) should be at least USD 24,000,000.
	(d.)	Undertake to provide a guarantee from the Shareholder in form and substance satisfactory to DEG.

14.	CAPITALIZATION
	Dating back to May 3, 2007, the Company underwent a reverse-merger and a concurrent financing transaction that resulted in 24,923,178 shares of outstanding common stock that remained unchanged until through December 31, 2007. In connection with the financing, the Company also issued 1,037,858 and 489,330 warrants to the PIPE investors and placement agent, respectively. During 2008, several holders of warrants issued in connection with the financing transaction exercised their rights to purchase shares at the prescribed exercise price. The holders of the warrants exercised the right to purchase a total of 360,207 shares; however, because the holders did not pay in cash for the warrants, 110,752 of those shares were cancelled as consideration in lieu of the warrant holders paying in cash. Ultimately, 249,455 of new shares were issued to those who exercised their warrant. The Company also made an adjustment to its outstanding share count for rounding errors as result of the split and reverse splits made at the time of the reverse merger. The number of shares in the adjustment was an addition of seven shares. The Company believes the adjustment of seven shares is immaterial to both prior and current earnings per share calculation. As detailed in the table below, the total number of outstanding shares at March 31, 2011 was 31,419,709.
	During the year 2009, the Company issued 56,393 shares of stock to its employees and vendors and 5,011,169 shares to investors. The Company issued 1,334,573 stock options to employees on July 28, 2009. 1,753,909 shares of Series A warrants and 501,115 shares of Series B warrants were issued to investors on October 28, 2009.
	During the year 2010, the Company issued 2,000 shares to a service provider on February 10, 2010 and 81,155 warrants to various service providers on January 5, 2010. The Company issued to investors 3,440,800 shares at an agreed price of $2.80 per share for a PIPE financing on September 10, 2010. This financing brought $8,955,730 net proceeds to the Company. The Company issued 5,000 shares to its employee on 9/23/2010. 731,707 shares of restricted stock were issued to the owner of Shandong Greenpia, Mr. Ji Zhenwei on September 24, 2010 as part of acquisition cost. The total number of shares issued and outstanding is 34,419,709 as of March 31, 2011.
	During the year 2010, the Company transferred 5,161,176 from retained earnings to additional paid up capital and 2,445,262 from retained earnings to statutory reserve. These transfers are to be used for future company development, recovery of losses and increase of capital, as approved, to expand production or operations.
	For the period ended March 31, 2011, the Company transferred 719,490 from retained earnings to statutory reserve. These transfers are to be used for future company development, recovery of losses and increase of capital, as approved, to expand production or operations.

American Lorain Corporation Capitalization Reconciliation Table

21

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

15.	NON-CONTROLLING INTERESTS
	The non-controlling interest represents the 19.8% equity of Shandong Lorain held by the Shandong Economic Development Investment Corporation, which is a state-owned interest.
16.	SALES BY PRODUCT TYPE
	Sales by categories of product consisted of the following as of March 31, 2011 and 2010:

Revenue by geography consisted of the following as of March 31, 2011 and 2010:

22

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

17.	INCOME TAXES
	All of the Company’s operations are in the PRC, and in accordance with the relevant tax laws and regulations of PRC, the corporate income tax rate is 25%.
	The following tables provide the reconciliation of the differences between the statutory and effective tax expenses for the periods ended March 31, 2011 and 2010.

The difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows for the periods ended March 31, 2011 and 2010:

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

23

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

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

The Company’s has detailed the tax rates for its subsidiaries for 2011 and 2010 in the following table.

18.	EARNINGS PER SHARE
	Components of basic and diluted earnings per share were as follows for the periods ended March 31, 2011 and 2010:

24

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

19.	SHARE BASED COMPENSATION

On July 27, 2009, the Company’s Board of Directors adopted the American Lorain Corporation 2009 Incentive Stock Plan (the “Plan”). The Plan provides that the maximum number of shares of the Company’s common stock that may be issued under the Plan is 2,500,000 shares. The Company’s employees, directors, and service providers are eligible to participate in the Plan.

For the year ended December 31, 2009, the Company recorded a total of $166,346 of shared based compensation expense. The Company issued warrants that upon exercise would result in the issuance of 1,334,573 common shares. These stock options vest over three years, where 33.33% vest annually. The expense related to the stock options was $107,375. The Company also recorded expense of $58,971 for the issuance of 56,393 common shares to participants, respectively. The common shares vested immediately. Given the materiality and nature of share based compensation, the entire expense has been recorded as general and administrative expenses.

During the period ended March 31, 2011 and December 31, 2010, the Company recorded a total of $173,702 and $890,209 stock option and its related general and administrative expenses.

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

No tax benefit has yet to be accrued or realized. For the period ended March 31, 2011, 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:

25

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

20.	LEASE COMMITMENTS
	The Company has entered into an operating lease agreement leasing a factory building located in Dongguan, China. The lease was signed by Shandong Lorain on behalf of Dongguan Lorain and expires on August 9, 2018.
	The minimum future lease payments for this property at March 31, 2011 are shown in the following table:

The outstanding lease commitment as of March 31, 2011 was $662,370.

The minimum future lease payments for this property at December 31, 2010 are shown in the following table:

	The outstanding lease commitment as of December 31, 2010 was $683,332.
21.	RISKS
	A.	Credit risk
		Since the Company’s inception, the age of account receivables have been less than one year indicating that the Company is subject to minimal risk borne from credit extended to customers.
	B.	Interest risk
		The company subject to the interest rate risk when their short term loans become due and require refinancing.
	C.	Economic and political risks
		The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by changes in the political, economic, and legal environments in the PRC.
		The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

26

---

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011 AND DECEMBER 31, 2010
(Stated in US Dollars)

D.	Environmental risks
	The Company has procured environmental licenses required by the PRC government. The Company has both a water treatment facility for water used in its production process and secure transportation to remove waste off site. In the event of an accident, the Company has purchased insurance to cover potential damage to employees, equipment, and local environment.
E.	Inflation Risk
	Management monitors changes in prices levels. Historically inflation has not materially impacted the company’s financial statements; however, significant increases in the price of raw materials and labor that cannot be passed on the Company’s customers could adversely impact the Company’s results of operations.

27

---

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Caution Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to the factors described in the section captioned “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission.

In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

Overview

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

- chestnut products,

- convenience foods (including ready-to-cook foods, ready-to-eat foods, and meals ready-to-eat); and

- frozen foods.

We conduct our production activities in China. Our products are sold in 26 provinces and administrative regions in China and 42 foreign countries. We believe that we are the largest processed chestnut foods manufacturer in China. We have developed brand equity for our chestnut products in China, Japan and South Korea over the past 10 to 15 years. We produced over 50 high value-added processed chestnut products in the first quarter of 2011. We derive most of our revenues from sales in China, Japan and South Korea. Our primary strategy for 2011 is to expand our brand equity in the Chinese market for our convenience foods products while maintaining the steady growth and brand recognition for our chestnut products and frozen products. In addition, we are working to expand our marketing efforts in Asia, North America, Europe and the Middle East. We currently have limited sales and marketing activity in the United States, although our long-term plan is to significantly expand our activities there.

Sales in the first quarter of 2011 benefited from exports to Korea and Japan and indicated that American Lorain’s key export markets in northeast Asia are continuing to rebound after a soft year in 2009. In the coming quarters, American Lorain anticipates higher demand for its traditional chestnut product line along with its fast growing convenience business line, including the bean products, lunch boxes, and pickle vegetables.

Frozen foods sold primarily to select export markets in Europe and wholesale customers like Yums! Foods in China contributed approximately 17.7% in revenues for the quarter compared to 18.4% in the first quarter of 2010. American Lorain will continue servicing its frozen food customers but as part of a broader marketing strategy and in response to a highly competitive environment, we are not actively seeking new customers.

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

Production Factors that Affect our Financial and Operational Condition

Our business depends on obtaining a reliable supply of various agricultural products, including chestnuts, vegetables, fruits, red meat, fish, eggs, rice, flour and packaging products. During the first quarter of 2011, the cost of our raw materials increased from $17.2 million to $21.2 million, as compared to the first quarter of 2010, for an increase of approximately 24.7% . 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.

28

---

Seasonality

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

We have been working to reduce the seasonality in our business primarily by putting more efforts in expanding our convenience food business line. The percentage revenue contribution from convenience food increased from 28.9% in the first quarter of 2010 to 32.9% in the first quarter of 2011, while revenue contribution from chestnuts declined from 52.8% to 49.4% over the same period of time.

Uncertainties that Affect our Financial Condition

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

We funded approximately 23.0% of our working capital from the proceeds of short-term loans from Chinese banks in the first quarter of 2011, as compared to 68.4% over the same period last year, as we obtained $15 million long term loan from Deutsche Investitions- und Entwicklungsgesellshaft (“DEG”) and thus reduced our reliance on short term bank loans. However, we expect to continue to fund our working capital requirements with such loans in the future. Such loans are generally secured by our fixed assets, receivables and/or guarantees by third parties. Our loan balance from short-term bank loans as of March 31, 2011 was approximately $16.1 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, commencing 2010, the Chinese government is implementing more stringent credit policies to curb inflation and soaring property prices, which could negatively impact our ability to obtain or roll over these short term loans, and hence not having sufficient funds available to pay all of our borrowings upon maturity. Failure to roll over our short-term borrowings at maturity or to service our debt could result in the imposition of penalties, including increases in rates of interest, legal actions against us by our creditors, or even insolvency. In addition, we completed two private placement financings in September 2010 and October 2009 with net proceeds of $9.0 million and $10.9 million, respectively, the proceeds of which were primarily used as working capital. We can provide no assurances that we will be able to enter into any future financing or refinancing agreements on terms favorable to us, especially considering the current instability of the capital markets.

We anticipate that our existing capital resources and cash flows from operations and current and expected short-term bank loans will be adequate to satisfy our liquidity requirements for the next 12 months. However, if available liquidity is not sufficient to meet our operating and loan obligations as they come due, our plans include obtaining alternative financing arrangements or further reducing expenditures as necessary to meet our cash requirements. However, there is no assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity. Currently, the capital markets for small capitalization companies are extremely difficult and banking institutions have become stringent in their lending requirements. Accordingly, we cannot be sure of the availability or terms of any third party financing.

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

In 2010, we shortened credit terms for many of our international and domestic distributors from between 30 and 180 days to between 30 and 60 days for domestic distributors. Our large customers may fail to meet these shortened credit terms, in which case we may not have sufficient cash flow to fund our operating costs and our business could be adversely affected.

Results of Operations

Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010

The following table summarizes the results of our operations during the three-month periods ended March 31, 2011 and March 31, 2010, respectively and provides information regarding the dollar and percentage increase or (decrease) from the three-month period ended March 31, 2011 compared to the three-month period ended March 31, 2010.

29

---

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

		Three months ended March 31,
		2011 (In Thousands)			2010 (In Thousands)			Dollar($) Increase (Decrease)			Percent age (% ) Increase (Decrease)
Net revenues		30,450			24,560			5,890			24.0%
Cost of revenues		(23,675	)		(18,836	)		(4,839	)		25.7%
Gross profit		6,775			5,724			1,051			18.4%
Operating expenses
Selling and marketing expenses		(1,363	)		(1,372	)		9			(0.7	)%
General and administrative expenses		(1,519	)		(1,016	)		(503	)		49.5%
Operating Income		3,893			3,336			557			16.7%
Government subsidy income		302			181			121			66.9%
Interest and other income		38			122			(84	)		(68.9	)%
Other expenses		(116	)		(28	)		(88	)		314.3%
Interest expense		(653	)		(920	)		267			(29.0	)%
Earnings before tax		3,464			2,691			773			28.7%
Income tax		(896	)		(672	)		(224	)		33.3%
Income before minority interests		2,568			2,019			549			27.2%
Minority interests		136			158			(22	)		(13.9	)%
Net income		2,432			1,861			571			30.7%

Revenue

Net Revenues. Our net revenue for the three months ended March 31, 2011 amounted to $30.4 million, which represents an increase of approximately $5.9 million, or 24.0%, from the three-month period ended on March 31, 2010, in which our net revenue was $24.6 million. 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)		Three months ended						Increase / Decrease			Increase / Decrease
		3/31/2011			3/31/2010
Category		($)			($)			($)			(%)
Chestnut products		15,050,594			12,960,561			2,090,033			16.1%
Convenience products		10,003,660			7,089,176			2,914,484			41.1%
Frozen products		5,395,552			4,510,479			885,073			19.6%
Total		30,449,805			24,560,216			5,889,589			24.0%

30

---

Cost of Revenues. During the three months ended March 31, 2011, we experienced an increase in cost of revenue of $4.8 million, in comparison to the three months ended March 31, 2010, from approximately $18.8 million to $23.7 million, reflecting an increase of approximately 25.7% . Approximately 85.3%, or $4.2 million, of this increase was attributable to an increase in raw material costs, which increased from $17.2 million during the three months ended March 31, 2010 to $21.2 million, or approximately 24.7%, during the three months ended March 31, 2011.

The factors that contributed to the remaining 14.7% 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 $1.1 million, or 18.4%, to $6.8 million for the three months ended March 31, 2011 from $5.7 million for the same period in 2010 as a result of higher revenues, offset by higher costs of revenues, for the reasons indicated immediately above. Our gross margins decreased from 23.3% to 22.2% because our product mix in the period ended March 31, 2011 consisted of fewer chestnuts and more convenience foods, as compared to the period ended March 31, 2010. Our convenience foods generate slightly lower margins than our chestnut products. Gross profit margins by product segment during the three months ended March 31, 2011 were: 25-28% for chestnuts, 22-24% for convenience foods and 16-18% for frozen foods.

Operating Expenses

Selling and Marketing Expenses. Our selling and marketing expenses saw a modest $9,666 decrease during the first quarter of 2011, as compared to the same period over last year. The decrease was mostly due to the decrease in sea transportation fees offsetting the increase in other selling expenses. The following table reflects the main factors that contributed to the increase as well as the dollar amount that each factor contributed to this increase:

(in U.S. dollars)		Increase in Costs in the Three Months Ended March 31, 2011 over the Three Months Ended Mar 31, 2010
Wage		44,963
Entertainment		15,668
Supermarket fee		164,498

The increases listed in the table above were mostly offset by the decreases in sea transportation fees, due to some of our customers used FOB instead of CIF in shipping and thus the sea transportation cost is born by our customers.

General and Administrative Expenses. We experienced an increase in general and administrative expense of approximately $0.5 million from approximately $1.0 million to approximately $1.5 million for the three months ended March 31, 2011, compared to the same period in 2010. The following table reflects the main factors that contributed to this increase as well as the dollar amount that each factor contributed to this increase:

Factor		Dollar Increase
Wages and welfare		151,319
Insurance Fees		61,072
Repairment expense		63,076

The increases listed in the table above were partially offset by decreases in dollar amount of other factors, including office expenses, entertainment fees, stock option expense, etc.

Income Before Taxation and Minority Interest

Income before taxation and minority interest increased $0.8 million, or 28.7%, to $3.5 million for the three months ended March 31, 2011 from $2.7 million for the same period of 2010. The increase was mainly attributable to the increase of our sales revenue as described above in the three months ended March 31, 2011 as compared to the three months ended March 31, 2010.

Income Taxes

Income taxes increased $223,876, or 33.3%, to $895,868 in the first quarter of 2011, as compared to $671,992 in the first quarter of 2010. This increase was primarily attributable to the higher earnings before tax and in part attributable to a higher income tax rate for our subsidiary Luotian Lorain in 2011 as compared to 2010.

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.

31

---

The income tax rates applicable to our Chinese operating subsidiaries in 2011 and 2010 are depicted in the following table:

		2011			2010
Junan Hongrun		25%			25%
Luotian Lorain		25%			15%
Beijing Lorain		15%			15%
Shandong Lorain		25%			25%
Dongguan Lorain		25%			25%
Shandong Greenpia		25%			25%

Net Income

Net income increased $571,774, or 30.7%, to $2.4 million for the three months ended March 31, 2011 from $1.9 million for the same period of 2010. The increase was attributable to increased sales revenue and partially offset by increased cost of goods sold, higher operating expenses and higher income tax in the three months ended March 31, 2011 as compared to the three months ended March 31, 2010.

Liquidity and Capital Resources

As of March 31, 2011, we had cash and cash equivalents (including restricted cash) of $23.5 million. Our cash and cash equivalents increased by approximately $8.4 million from December 31, 2010 as our operations generate cash and as we obtain cash from financing activities. The following table provides detailed information about our net cash flow for all financial statements periods presented in this report.

		Cash Flow (in thousands)
		Three Months Ended
		March 31,
		2011			2010
Net cash provided by (used in) operating activities		3,761			(3,256	)
Net cash provided by (used in) investing activities		(2,006	)		(238	)
Net cash provided by (used in) financing activities		2,929			(107	)
Net cash flow (outflow)		4,685			(3,601	)

Operating Activities

Net cash provided by operating activities was $3.8 million for the three months period ended March 31, 2011 and net cash used in operating activities in the first quarter of 2010 was approximately $3.3 million. The increase of approximately $7.0 million in net cash flows provided by operating activities in the first three months of 2011 was primarily a result of additional decrease in accounts and other receivables of $7.9 million, partially offset by additional decrease in accounts and other payables of approximately $2.1 million as compared to the same period in 2010.

Investing Activities

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

Net cash used in investing activities for the three months period ended March 31, 2011 was $2.0 million, representing an additional increase of $1.8 million from net cash used in investing activities of $0.2 million for the same period of 2010. The increase was primarily due to increase in restricted cash in 2011.

Financing Activities

Net cash provided by financing activities for the three months period ended March 31, 2011 was $2.9 million, representing an increase of $3.0 million from $0.1 million net cash used in financing activities during the same period in 2010. The increase of the net cash provided by financing activities was primarily a result of net increase in bank borrowings as well as issuance of notes in the first quarter of 2011.

32

---

Loan Facilities

As of March 31, 2011, 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 $16.1 million as of March 31, 2011, compared with $25.2 million as of December 31, 2010. We are also carrying a long term loan of $15 million from DEG due in March 2016, with eight equal semi-annual principal payments commencing September 2010. In addition, on February 8, 2011, Industrial and Commercial Bank of China granted us a line of credit of approximately $16.2 million. The line of credit was granted to us with specific allocation of 38% to Junan Hongrun, 38% to Shandong Lorain, and 24% to Beijing Lorain, our three major operating subsidiaries. The line of credit is effective for one year. As of March 31, 2011, we drew down $427,474 from this line of credit.

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.

Critical Accounting Policies

The preparation of financial statements in conformity with United States generally accepted accounting principles requires our management to make assumptions, estimates and judgments that affect the amounts reported in our financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require significant judgments and estimates in the preparation of financial statements, including the following:

Method of Accounting -- We maintain our general ledger and journals with the accrual method accounting for financial reporting purposes. Accounting policies adopted by us conform to generally accepted accounting principles in the United States and have been consistently applied in the presentation of our financial statements, which are compiled on the accrual basis of accounting.

Use of estimates -- The preparation of the financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from those estimates.

Principles of consolidation -- Our consolidated financial statements, which include information about our company and our subsidiaries, are compiled in accordance with generally accepted accounting principles in the United States. All significant inter-company accounts and transactions have been eliminated. Our consolidated financial statements include 100% of assets, liabilities, and net income or loss of our wholly-owned subsidiaries. Ownership interests of minority investors are recorded as minority interests.

As of March 31, 2011, the details pertaining to our subsidiaries were as follows:

Name of Company		Place of incorporation			Attributable equity interest %			Registered capital
Shandong Lorain Co., Ltd		PRC			80.20		$	15,398,238
Luotian Lorain Co., Ltd		PRC			100			3,866,933
Junan Hongrun Foodstuff Co., Ltd		PRC			100			45,678,692
Beijing Lorain Co., Ltd		PRC			100			1,526,694
Shandong Greenpia Foodstuff Co.,Ltd		PRC			100			2,345,002
Dongguan Lorain Co,,Ltd		PRC			100			152,669
International Lorain Holding Inc.		Cayman Islands			100			47,508,817

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.

33

---

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the reporting period, there was no impairment loss.

Revenue recognition -- Our revenue recognition policies are in compliance with Staff Accounting Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of ours exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

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

Recent Accounting Pronouncements

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

In January 2011, the FASB issued an Accounting Standard Update (“ASU”) No, 2011-01, “Receivables Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, to be concurrent with the effective date of the guidance for determining what constitutes a troubled debt restructuring, as presented in proposed Accounting Standards Update, Receivables (Topic 310): Clarifications to Accounting for Troubled Debt Restructurings by Creditors. The amendments in this Update apply to all public-entity creditors that modify financing receivables within the scope of the disclosure requirements about troubled debt restructurings in Update 2010-20. Under the existing effective date in Update 2010-20, public-entity creditors would have provided disclosures about troubled debt restructurings for periods beginning on or after December 15, 2010. The amendments in this Update temporarily defer that effective date, enabling public-entity creditors to provide those disclosures after the Board clarifies the guidance for determining what constitutes a troubled debt restructuring. The deferral in this Update will result in more consistent disclosures about troubled debt restructurings. This amendment does not defer the effective date of the other disclosure requirements in Update 2010-20. In the proposed Update for determining what constitutes a troubled debt restructuring, the Board proposed that the clarifications would be effective for interim and annual periods ending after June 15, 2011. For the new disclosures about troubled debt restructurings in Update 2010-20, those clarifications would be applied retrospectively to the beginning of the fiscal year in which the proposal is adopted. The Company does not expect to have a material impact on the Company’s consolidated financial position or results of the operations.

Off-Balance Sheet Arrangements

We do not have any off-balance arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

34

---

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2011. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2011, our disclosure controls and procedures were effective.

Changes in Internal Controls over Financial Reporting.

During the fiscal quarter ended March 31, 2011, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

35

---

PART II. OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

From time to time, we have disputes that arise in the ordinary course of business. Currently, there are no material legal proceedings to which we are a party, or to which any of our property is subject.

ITEM 1A.  RISK FACTORS

Not applicable.

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

None

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.     REMOVED AND RESERVED

Not applicable

ITEM 5.     OTHER INFORMATION

On January 28, 2011, we drew down the final $10 million from the loan provided by DEG.

On February 8, 2011, Industrial and Commercial Bank of China granted American Lorain a line of credit of approximately $16.2 million. The line of credit was granted to American Lorain with specific allocation of 38% to Junan Hongrun, 38% to Shandong Lorain, and 24% to Beijing Lorain, American Lorain's three major operating subsidiaries. The line of credit is effective for one year. As of March 31, 2011, we drew down approximately $427,474 from this line of credit..

ITEM 6.     EXHIBITS

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

36

---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 16, 2011

AMERICAN LORAIN CORPORATION

/s/ Si Chen                                                         
Si Chen
Chief Executive Officer

/s/ David She                                                     
David She
Chief Financial Officer

37

---