Planet Green Holdings Corp. - Quarter Report: 2014 March (Form 10-Q)

American Lorain Corp.: Form 10-Q - Filed by newsfilecorp.com

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, 2014

[ ] 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 Zhong Road
Junan County
Shandong, People’s Republic of China, 276600
(Address, including zip code, of principal executive offices)

(86) 539-7317959
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See 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]
(Do not check if a smaller reporting company)

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 15, 2014 was 34,616,714.

AMERICAN LORAIN CORPORATION

FORM 10-Q
For the Quarterly Period Ended March 31, 2014

TABLE OF CONTENTS

	PAGE
PART I - FINANCIAL INFORMATION	2
ITEM 1 FINANCIAL STATEMENTS	2
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	34
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41
ITEM 4 CONTROLS AND PROCEDURES	41

PART II - OTHER INFORMATION	42
ITEM 1 LEGAL PROCEEDINGS	42
ITEM 1A RISK FACTORS	42
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	42
ITEM 3 DEFAULTS UPON SENIOR SECURITIES	42
ITEM 4 MINE SAFETY DISCLOSURES	42
ITEM 5 OTHER INFORMATION	42
ITEM 6 EXHIBITS	43
SIGNATURES	44

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, 2013 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.

Use of Certain Defined Terms

Except where the context otherwise requires and for the purposes of this report only:

“We,” “us” and “our” refer to ALN, and except where the context requires otherwise, our wholly-owned and majority-owned direct and indirect operating subsidiaries.
“ALN” refers to American Lorain Corporation, a Nevada corporation (formerly known as Millennium Quest, Inc.).
“Athena” refers to Athena, a limited liability company organized under the laws of France that is majority- owned by JunanHongrun.
“ILH” refers to International Lorain Holding, Inc., a Cayman Islands company that is wholly - owned by ALN.
“Junan Hongrun” refers to Junan Hongrun Foodstuff Co., Ltd.
“Luotian Lorain” refers to Luotian Green Foodstuff Co., Ltd.
“Beijing Lorain” refers to Beijing Green Foodstuff Co., Ltd.
“Shandong Lorain” refers to Shandong Green Foodstuff Co., Ltd.
“Dongguan Lorain” refers to Dongguan Green Foodstuff Co., Ltd.
“Shandong Greenpia” refers to Shandong Greenpia Foodstuff Co., Ltd.
“RMB” refers to Renminbi, the legal currency of China.
“U.S. dollar”, “$” and “US$” refer to the legal currency of the United States.
“China” and “PRC” refer to the People’s Republic of China (excluding Hong Kong and Macau).

ITEM 1. Financial Statements

AMERICAN LORAIN CORPORATION

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014 AND DECEMBER 31, 2013

(Stated in US Dollars)

AMERICAN LORAIN CORPORATION

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014 AND DECEMBER 31, 2013

(Stated in US Dollars)

CONTENTS	PAGES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	4
CONSOLIDATED BALANCE SHEET	5 – 6
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME	7
CONSOLIDATED STATEMENTS OF CASH FLOWS	8
CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY	9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	10 – 33

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, 2014 and December 31, 2013, and the related statements of income, stockholders’ equity, and cash flows for the three months period ended March 31, 2014 and 2013. 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 reviews, 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.

We have previously audited, in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), the balance sheets of American Lorain Corporation as of December 31, 2013, and the related statements of income, comprehensive income, retained earnings, and cash flows for the year then ended (not presented herein); and in our report dated March 25, 2014, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 2013, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

San Mateo, California	WWC, P.C.
May 10, 2014	Certified Public Accountants

AMERICAN LORAIN CORPORATION
CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

				*(Audited)*
		At March 31,		At December 31,
ASSETS		2014		2013
Current assets
Cash and cash equivalents	$	42,718,737	$	33,857,193
Restricted cash		3,582,526		1,842,989
Trade accounts receivable		37,958,359		54,071,475
Other receivables		6,601,741		5,698,020
Related party receivable		3,429,180		-
Inventory		53,119,664		41,950,253
Advance to suppliers		37,010,073		42,400,517
Prepaid expenses and taxes		3,593,944		2,168,573
Deferred tax asset		179,169		180,679
Security deposits and other assets		3,215,161		3,242,259
Total current assets	$	191,408,554	$	185,411,958

Non-current assets
Investment		2,100,000		-
Property, plant and equipment, net		86,916,090		87,561,341
Construction in Progress, net		13,555,072		13,665,470
Land use rights, net		16,168,475		16,407,543
TOTAL ASSETS	$	310,148,191	$	303,046,312

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term bank loans	$	36,068,420	$	29,400,694
Convertible promissory note		3,500,000		-
Long-term debt – current portion		5,697,451		5,713,865
Accounts payable		3,388,991		4,015,502
Taxes payable		2,293,125		4,422,133
Accrued liabilities and other payables		4,952,894		2,315,815
Customers deposits		91,009		166,450
Total current liabilities	$	55,991,890	$	46,034,459

Long-term liabilities
Long-term bank loans		6,184,314		8,079,831
Notes payable and debenture		45,440,530		45,823,514

TOTAL LIABILITIES	$	107,616,734	$	99,937,804

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

AMERICAN LORAIN CORPORATION
CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

				*(Audited)*
		At March 31,		At December 31,
		2014		2013

STOCKHOLDERS’ EQUITY
Preferred Stock, $.001 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively		-		-
Common Stock, $0.001 par value, 200,000,000 shares authorized; 34,616,714 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		34,617		34,617
Additional paid-in capital		53,487,389		53,487,389
Statutory reserves		18,396,513		18,396,513
Retained earnings		100,848,325		99,257,837
Accumulated other comprehensive income		18,606,036		20,928,244
Non-controlling interests		11,158,577		11,003,908
TOTAL STOCKHOLDER’S EQUITY	$	202,531,457	$	203,108,508

TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	310,148,191	$	303,046,312

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

AMERICAN LORAIN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 2014 AND 2013
(Stated in US Dollars)

		For the three months period ended
		March 31,
		2014			2013

Net revenues	$	31,689,458		$	34,809,916
Cost of revenues		(25,584,237	)		(27,412,665	)
Gross profit	$	6,105,221		$	7,397,251

Operating expenses
Selling and marketing expenses		(1,074,791	)		(1,791,483	)
General and administrative expenses		(2,089,541	)		(1,421,984	)
		(3,164,332	)		(3,213,467	)

Operating income	$	2,940,889		$	4,183,784

Government subsidy income		1,508,250			318,593
Interest income		16,056			6,909
Other income		88,940			186,649
Other expenses		(134,140	)		(7,118	)
Interest expense		(1,924,973	)		(1,060,767	)

Earnings before tax	$	2,495,022		$	3,628,050

Income tax		(749,865	)		(1,014,398	)

Net income	$	1,745,157		$	2,613,652

Other comprehensive income:
Foreign currency translation gain/(loss)		(2,322,208	)		783,291
Comprehensive Income/(Loss)		(577,051	)		3,396,943
Net income attributable to:

-Common stockholders	$	1,590,488		$	2,518,686
-Non-controlling interest		154,669			94,966
	$	1,745,157		$	2,613,652

Earnings per share
- Basic	$	0.05		$	0.07
- Diluted	$	0.05		$	0.07

Weighted average shares outstanding
- Basic		34,616,714			34,616,714
- Diluted		34,616,714			34,616,714

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

AMERICAN LORAIN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 2014 AND 2013
(Stated in US Dollars)

		For the Three Months Ended March 31,
		2014			2013
Cash flows from operating activities
Net income	$	1,745,157		$	2,613,652
Stock and share based compensation		-			-
Depreciation of fixed assets		799,679			972,550
Amortization of intangible assets		91,027			42,519
Adjustment to statutory reserve		-			-
(Increase)/decrease in accounts & other receivables		17,095,217			9,525,967
(Increase)/decrease in inventories		(11,169,411	)		(9,672,367	)
Decrease/(increase) in prepayment		(1,425,371	)		(1,259,125	)
Decrease/(increase) in deferred tax asset		1,510			(965	)
Increase/(decrease) in accounts and other payables		(118,439	)		(3,586,059	)
Net cash (used in)/provided by operating activities		7,019,369			(1,363,828	)

Cash flows from investing activities
(Purchase)/Sale of investment		(2,100,000	)		270,019
Purchase of plant and equipment		(44,031	)		(615,497	)
Payment for the purchase of land use rights		148,041			(34,689	)
(Increase)/decrease in restricted cash		(1,739,537	)		1,701,157
(Increase)/decrease in deposit		27,098			(3,194,815	)
Net cash used in investing activities		(3,708,429	)		(1,873,825	)

Cash flows from financing activities
Repayment of bank borrowings		(14,050,278	)		(3,510,676	)
Proceeds from bank borrowings		18,423,090			7,351,838
Proceeds from long-term borrowings and notes payable		3,500,000			(1,863,002	)
Net cash provided by/(used in) financing activities	$	7,872,812		$	1,978,160

Net Increase/(decrease) of Cash and Cash Equivalents		11,183,752			(1,259,493	)

Effect of foreign currency translation on cash and cash equivalents		(2,322,208	)		783,291

Cash and cash equivalents–beginning of period		33,857,193			32,345,603
Cash and cash equivalents–end of period	$	42,718,737		$	31,869,400

Supplementary cash flow information:
Interest received	$	16,056		$	6,909
Interest paid	$			$	1,039,123
Income taxes paid	$			$	3,125,023

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

AMERICAN LORAIN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2014 AND YEAR ENDED DECEMBER 31, 2013
(STATED IN US DOLLARS)

	Number Of Shares	Common Stock	Additional Paid-in Capital	Statutory Reserves	Retained Earnings		Accumulated Other Comprehensive Income		Non- Controlling Interests	Total

Balance, January 1, 2013	34,616,714	34,617	53,487,389	16,922,494	84,097,961		16,210,661		9,949,228	180,702,350
Net income	-	-	-	-	17,688,575		-		-	17,688,575
Allocation to non-controlling interests	-	-	-	-	(1,054,680	)	-		1,054,680	-
Appropriations to statutory reserve	-	-	-	1,474,019	(1,474,019	)	-		-	-
Foreign currency translation adjustment	-	-	-	-	-		4,717,583		-	4,717,583
Balance, December 31, 2013	34,616,714	34,617	53,487,389	18,396,513	99,257,837		20,928,244		11,003,908	203,108,508

Balance, January 1, 2014	34,616,714	34,617	53,487,389	18,396,513	99,257,837		20,928,244		11,003,908	203,108,508
Net income	-	-	-	-	1,745,157		-		-	1,745,157
Allocation to non-controlling interests	-	-	-	-	(154,669	)	-		154,669	-
Foreign currency translation adjustment	-	-	-	-	-		(2,322,208	)	-	(2,322,208	)
Balance, March 31, 2014	34,616,714	34,617	53,487,389	18,396,513	100,848,325		18,606,036		11,158,577	202,531,457

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

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(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. On November 12, 2009, the Company filed a statement of merger in the state of Nevada to transfer the Company’s jurisdiction from Delaware to Nevada.

	(b)	Organization History of International Lorain Holding Inc. and its subsidiaries

		ALN owns 100% of the equity of International Lorain Holding Inc. (“ILH”). ILH is a Cayman Islands company incorporated on August 4, 2006 and was wholly-owned by Mr. Hisashi Akazawa until May 3, 2007. ILH presently has two direct wholly-owned subsidiaries, Junan Hongrun and Luotian Lorain, and three indirectly wholly-owned subsidiaries through Junan Hongrun, which are Beijing Lorain, Dongguan Lorain, and Shandong Greenpia Foodstuff Co., Ltd. (“Shandong Greenpia”).

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

		On April 9, 2009, the Company, through its Junan Hongrun subsidiary, invested cash to establish Dongguan Lorain. Dongguan Lorain is indirectly 100% beneficially owned by the Company.

		On June 28, 2010, the Company signed an equity transfer agreement with Shandong Greenpia. Shandong Greenpia was originally directly owned by Taebong Inc. and Shandong Luan Trade Company. The Company paid $2,100,000to Korean Taebong Inc. for 50% equity of Shandong Greenpia on September 20, 2010. On September 23, 2010, the Company issued 731,707 shares of restricted stock at an agreed price of $2.87 per share to the owner of Shandong Luan Trade Company, Mr. Ji Zhenwei, for the remaining 50% equity of Shandong Greenpia. Since September 23, 2010, Shandong Greenpia was directly owned by both Junan Hongrun and ILH. As a result, Shandong Greenpia is 100% owned by the Company. Accordingly, the Company booked a gain of $383,482 which is included in the statement of income as other income.

	(c)	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 domestic markets as well as exported to foreign countries and regions such as Japan, Korea and Europe.

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 periods ended March 31, 2014 in order to be consistent with the presentation provided for the year ended December 31, 2013. There was no impact in earnings for the regrouping.

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

	(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 non-controlling investors are recorded as non-controlling interests.

		As of March 31, 2014, the detailed identities of the consolidating subsidiaries are as follows:

	*Place of*	*Attributable*		*Registered*
*Name of Company*	*incorporation*	*equity interest %*		*capital*
Shandong Lorain Co., Ltd.	PRC	80.2	$	13,122,576
Luotian Lorain Co., Ltd.	PRC	100		4,110,550
Junan Hongrun Foodstuff Co., Ltd.	PRC	100		48,556,452
Beijing Lorain Co., Ltd.	PRC	100		1,622,876
Shandong Greenpia Foodstuff Co., Ltd.	PRC	100		2,492,738
Dongguan Lorain Co., Ltd.	PRC	100		162,288
International Lorain Holding Inc.	Cayman Islands	100		50,501,875

		On February 7, 2014, Junan Hongrun acquired 51% of Athena group and its subsidiaries. The investment of Athena group is not yet consolidated into the financial statements since the acquisition is still subject to the approval of Department of Commerce of Shandong Province, PRC although the title has been passed to Junan Hongrun.

	(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.

	(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.

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

		Premiums and discounts are amortized or accreted over the life of the related available-for-sale security as an adjustment to yield using the effective-interest method. Dividend and interest income are recognized when earned.

	(f)	Trade receivables

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

	(g)	Inventories

		Inventories consisting of finished goods and raw materials are stated at the lower of cost or market value. Finished goods are comprised of direct materials, direct labor and an appropriate proportion of overhead.

	(h)	Customer deposits and advances to suppliers

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

		Advance to suppliers is a good faith deposit paid to the supplier for the purpose of committing the supplier to provide product promptly upon delivery of the Company’s purchase order for raw materials, supplies, equipment, building materials etc. Pursuant to the Company’s arrangements with its suppliers, this deposit is generally 20% of the total amount contracted for. This type of transaction is classified as a prepayment category under the account name “Advance to Suppliers” until such time as the Company’s purchase order is delivered, at which point this account is reduced by reclassification of the applicable amount to the appropriate asset account such as inventory or fixed assets or construction in progress.

	(i)	Property, plant and equipment

		Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method with a salvage value of 10%. Estimated useful lives of the plant and equipment are as follows:

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

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

	(j)	Construction in progress

		Construction in progress represents direct and indirect construction or acquisition costs. The construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until the asset is completed and ready for intended use.

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

	(k)	Land Use Rights

		Land use rights are carried at cost and amortized on a straight-line basis over a specified period. Amortization is provided using the straight-line method over 40-50 years.

	(l)	Accounting for the Impairment of Long-Lived Assets

		The long-lived assets held by the Company are reviewed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 360-10-35, “Accounting for the Impairment or Disposal of Long-Lived Assets,” 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. 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 2014 and 2013.

	(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.

		The Company has implemented ASC Topic 740, “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.

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

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

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

Taxable Income
Rate	Over	But Not Over	Of Amount Over
15%	0	50,000	0
25%	50,000	75,000	50,000
34%	75,000	100,000	75,000
39%	100,000	335,000	100,000
34%	335,000	10,000,000	335,000
35%	10,000,000	15,000,000	10,000,000
38%	15,000,000	18,333,333	15,000,000
35%	18,333,333	-	-

	(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 $1,474,019 and$2,264,420from retained earnings to statutory reserves for the years ended December 31, 2013 and 2012. 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.

	3/31/2014	12/31/2013	3/31/2013
Period end/Year end RMB: US$ exchange rate	6.1619	6.1104	6.2666
Average period/yearly RMB: US$ exchange rate	6.1156	6.1905	6.2769

		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.

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

		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 its 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 is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of ordinary shares outstanding and potential dilutive securities during the year. During the period ended December 31, 2013, no warrants were issued nor options were granted. For the year ended December 31, 2010, 81,155 warrants were issued to certain service providers. For the year ended December 31, 2009, 1,334,573 stock options were granted to employees pursuant to the Company’s equity incentive plan; 2,255,024 warrants were issued to investors in connection with a PIPE financing. These warrants and options could be potentially dilutive if the market price of the Company’s common stock exceeds the exercise price for these securities.

		The Company computes earnings per share (“EPS”) in accordance with Statement of Financial Accounting Standards No. 128, “Earnings per share” (“SFAS No. 128”), and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). SFAS No. 128 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

	(v)	Financial Instruments

		The Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

As of March 31, 2014 and December 31, 2013, the Company did not identify any assets and liabilities that were required to be presented on the balance sheet at fair value.

The following tables present the Company’s financial assets and liabilities at fair value in accordance to ASC 820-10:

At March 31,		Quoted in		Significant
2014:		Active Markets		Other		Significant
		for Identical		Observable		Unobservable
		Assets		Inputs		Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Financial assets:
Cash	$	42,718,737	$	-	$	-	$	42,718,737
Restricted Cash		3,582,526		-		-		3,582,526
Total financial assets	$	46,301,263	$	-	$	-	$	46,301,263

Financial liabilities:
Notes payable	$	-	$	-	$	-	$	-
Total financial liabilities	$	-	$	-	$	-	$	-

At December 31,		Quoted in		Significant
2013:		Active Markets		Other		Significant
		for Identical		Observable		Unobservable
		Assets		Inputs		Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Financial assets:
Cash	$	33,857,193	$	-	$	-	$	33,857,193
Restricted Cash		1,842,989		-		-		1,842,989
Total financial assets	$	35,700,182	$	-	$	-	$	35,700,182

Financial liabilities:
Notes payable	$	-	$	-	$	-	$	-
Total financial liabilities	$	-	$	-	$	-	$	-

	(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.

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

		The Company uses FASB ASC Topic 220, “Reporting Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except the changes in paid- in capital and distributions to stockholders due to investments by stockholders. Comprehensive income for the periods ended March 31, 2014 and 2013 included net income and foreign currency translation adjustments.

	(y)	Recent accounting pronouncements

		In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. There is diversity in practice in the presentation of unrecognized tax benefits in those instances. Some entities present unrecognized tax benefits as a liability unless the unrecognized tax benefit is directly associated with a tax position taken in a tax year that results in, or that resulted in, the recognition of a net operating loss or tax credit carryforward for that year and the net operating loss or tax credit carryforward has not been utilized. Other entities present unrecognized tax benefits as a reduction of a deferred tax asset for a net operating loss or tax credit carryforward in certain circumstances. The objective of the amendments in this Update is to eliminate that diversity in practice.

		As of March 31, 2014, there are no other recently issued accounting standards not yet adopted that would have a material effect on the Company’s consolidated financial statements

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.

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

4.	TRADE ACCOUNTS RECEIVABLE

		3/31/2014			12/31/2013
Trade accounts receivable	$	38,394,557		$	54,511,350
Less: Allowance for doubtful accounts		(436,198	)		(439,875	)
	$	37,958,359		$	54,071,475

Allowance for bad debt:		3/31/2014			12/31/2013
Beginning balance	$	(439,875	)	$	(443,898	)
Additions to allowance		-			-
Bad debt written-off		3,677			4,023
Ending balance	$	(436,198	)	$	(439,875	)

	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, 2014 and December 31, 2013:

		3/31/2014		12/31/2013
Advances to employees for job/travel disbursements		1,578,805		637,808
Amount due by a non-related enterprise		169,030		163,656
Other non-related receivables		328,336		333,411
Other related receivables		148,666		149,350
Short-term investment sale receivable		4,376,904		4,413,795
	$	6,601,741	$	5,698,020

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

Specifically, the company uses every available employee to arrange purchases with desirable chestnut or other raw material growers. However, because many of these growers are in rural farming areas of China where traditional banking and credit arrangements are difficult to implement, the Company must utilize cash purchases and also must contract for its future needs by placing a good faith deposit in cash with the growers. However none of these advances to employees for delivery to the growers on behalf of the Company are “personal loans” to the employees. Advances to employees for purchase of materials in other receivables are adjusted to advances to suppliers as of December 31, 2013.

Related party receivable consisted of the following as of March 31, 2014 and December 31, 2013:

		3/31/2014		12/31/2013
Chen, Si	$	67,523	$	67,523
You, Huadong		81,143		81,827
	$	148,666	$	149,350

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.

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

In order to satisfy certain criteria for obtaining the long-term loan with DEG, as noted in footnote 12, Junan Hongrun lent money to Mr. You, Huadong to purchase life insurance.

Related party receivable amounts are disclosed as other related receivables in other receivables.

On March 13, 2011, the Company entered into an agreement with Jiangsu Heng An Industrial Investment Group Co., Ltd. to sell the Company’s short-term investment in the amount of $ 7,764,577 (RMB 49,604,000) of a parcel of land located in Junan Town, Shandong Province, to construct residential buildings. The land was sold to Jiangsu Heng An at a total sale price of RMB 69,604,000 and a guaranteed gross profit of RMB 20,000,000 without consideration of profit/(loss) of the residential building project. The gain on the sale of the short-term investment excluding taxes payable was recorded as other income on the statements of income and comprehensive income. Title of the land transferred from the Company to Jiangsu Heng An with receipt of an initial deposit of RMB 15,000,000. As of March 31, 2014, a total of RMB 42,029,955 has been received and RMB 26,970,045 (USD 4,376,904) is classified as Other Receivable. According to the contract, the Company will be entitled to receive RMB 9,000,000 within 5 days after the title transfer and construction approval is complete, and RMB 27,000,000 within 5 days after the residential building main frame is completed.

6.	INVENTORIES

	Inventories consisted of the following as of March 31, 2014 and December 31, 2013:

		3/31/2014		12/31/2013
Raw materials	$	34,261,281	$	26,262,278
Finished goods		18,858,383		15,687,975
	$	53,119,664	$	41,950,253

7.	PROPERTY, PLANT AND EQUIPMENT

	Property, plant, and equipment consisted of the following as of March 31, 2014 and December 31, 2013:

		3/31/2014			12/31/2013
At Cost:
Buildings	$	80,645,722		$	81,325,426
Landscaping, plant and tree		10,882,285			10,974,003
Machinery and equipment		11,456,220			12,837,463
Office equipment		679,594			681,060
Motor vehicles		2,890,688			582,128
	$	106,554,509		$	106,400,080
Less: Accumulated depreciation
Buildings		(8,364,611	)		(7,975,238	)
Landscaping, plant and tree		(3,293,182	)		(3,081,369	)
Machinery and equipment		(5,955,216	)		(6,916,526	)
Office equipment		(528,155	)		(524,931	)
Motor vehicles		(1,497,255	)		(340,675	)
		(19,638,419	)		(18,838,739	)
	$	86,916,090		$	87,561,341

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(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. During the year ended December 31, 2013, the Company purchased three greenhouses to grow seasonal crops in order to lower cost.

8.	LAND USE RIGHTS, NET

	Land use rights consisted of the following as of March 31, 2014 and December 31, 2013^:

		3/31/2014			12/31/2013
Land use rights, at cost	$	17,453,839		$	17,600,945
Utilities rights, at cost		50,484			50,909
Software, at cost		58,999			59,496
Patent, at cost		1,530			1,543
		17,564,852			17,712,893

Less: Accumulated amortization		(1,396,377	)		(1,305,350	)
	$	16,168,475		$	16,407,543

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, 2014 and 2013were $91,027and $42,519, respectively.

9.	SHORT-TERM BANK LOANS

	Short-term bank loans consisted of the following as of March 31, 2014 and December 31, 2013:

	Remark	3/31/2014	12/31/2013
Loan from Junan County Industrial and Commercial Bank of China,
• Interest rate at 6.3% per annum; due 2/21/2014		-	4,091,386
• Interest rate at 5.88% per annum; due 1/8/2014		-	1,145,588
• Interest rate at 5.88% per annum; due 4/15/2014		1,119,784	1,129,222
• Interest rate at 5.88% per annum; due 4/23/2014		1,079,213	1,088,308
• Interest rate at 6.44% per annum; due 7/2/2014		1,476,817	-
• Interest rate at 6.72% per annum; due 7/7/2014		1,168,471	-
• Interest rate at 7.20% per annum; due 12/10/2014		1,622,876	-

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

• Interest rate at 7.125% per annum; due 3/27/2015	4,057,190	-

Loan from Linyi Commercial Bank,
• Interest rate at 1.512% per annum due 1/9/2014	-	1,636,554
• Interest rate at 1.26% per annum due 1/10/2014	-	1,472,899

Loan from China Minsheng Bank Corporation, Linyi Branch
• Interest rate at 7.8% per annum due 2/26/2014	-	2,454,831
• Interest rate at 7.8% per annum due 1/17/2015	2,434,314	-
• Interest rate at 7.8% per annum due 2/26/2015	1,622,876	-

Loan from China Agricultural Bank, Luotian Branch
• Interest rate at 7.8% per annum due 8/20/2014	1,622,876	1,636,554
• Interest rate at 7.8% per annum due 9/3/2014	1,622,876	1,636,554

China Agricultural Development Bank
•Interest rate at 6.0% per annum due 1/3/2014	-	654,622
•Interest rate at 6.0% per annum due 8/19/2014	811,438	818,277
•Interest rate at 6.0% per annum due 1/5/2015	811,438	-

Bank of Beijing,
• Interest rate at 7.2% per annum due 6/19/2014	1,298,301	1,309,243

Luotian Sanliqiao Credit Union,
• Interest rate at 9.360% per annum due 12/31/2014	1,136,013	-
• Interest rate at 9.360% per annum due 1/21/2015	162,288	-

Beijing International Trust Co., Ltd.,
• Interest rate at 6.00% per annum due 9/23/2014	1,622,876	1,636,554

Bank of Ningbo ,
• Interest rate at 7.20% per annum due 9/25/2014	1,622,876	1,636,554

Hankou Bank, Guanggu Branch,
• Interest rate at 6.60% per annum due 9/12/2014	1,622,876	1,636,554

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

Agricultural Bank of China, Shandong Branch
• Interest rate at 7.2% per annum due 8/22/2014		-		1,636,554

Agricultural Bank of China, Junan Branch
• Interest rate at 7.2% per annum due 1/9/2015		210,974		-

Ping An Bank, Jinan Branch
• Interest rate at 6.72% per annum due 1/3/2014		-		1,145,588
• Interest rate at 6.72% per annum due 5/2/2014		-		818,277
• Interest rate at 7.00% per annum due 7/13/2014		1,136,013		-

Luzhen Credit Union,
• Interest rate at 10.40% per annum due 2/27/2014		-		490,966

Postal Savings Bank of China
• Interest rate at 8.75% per annum due 12/27/2014		4,868,628		-

Bank of Rizhao
• Interest rate at 7.80% per annum due 1/17/2015		1,622,876

China Construction Bank
• Variable Interest rate, due 4/1/2014		795,210		801,912
• Variable Interest rate, due 4/30/2014		519,320		523,697

	$	36,068,420	$	29,400,694

	The short-term loans, which are denominated in the functional currency Renminbi (RMB), were primarily obtained for general working capital. If not otherwise indicated in the below remarks, short-term loans are guaranteed by either companies within the group or personnel who hold a management role within the group.

10.	CONVERTIBLE PROMISSORY NOTE

	Convertible Promissory Note consisted of the following as of March 31, 2014 and December 31, 2013:

		3/31/2014		12/31/2013

Note issued by Jade Lane Group Limited
• Interest rate at 4.50% per annum due 9/13/2014	$	3,500,000	$	-
	$	3,500,000	$	-

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

Under the terms of the Note, interest on the outstanding Principal Amount accrues at a rate of 4.5% per annum, and all accrued but unpaid interest is due and payable on June 30, 2014 and on the last day of each quarter thereafter. If the Note is not converted pursuant to the terms of the Note, additional interest on the outstanding Principal Amount shall accrue at a rate of 4.5% per annum and payable at the maturity of the Note. Unless the Note is otherwise accelerated or converted, the unpaid Principal Amount of the Note, together with all accrued but unpaid interest, is due and payable, at the election of the Holder, on September 13, 2014 or March 13, 2015 (“Maturity Date”), provided, however, if Holder fails to notify the Company in writing by August 13, 2014 that it elects the maturity date of September 13, 2014, then the Maturity Date will be extended to March 13, 2015.

In addition, under the terms of the Note, at any time commencing on or after September 13, 2014 and before March 13, 2015, the Holder, at Holder’s option and upon five (5) days prior written notice to the Company, may convert in whole or in part the outstanding Principal Amount into a number of shares of Common Stock of the Company (“Common Stock”) on a per share conversion price of $1.15 per share, as may be adjusted from time to time pursuant to the terms and conditions of the Note (“Conversion Price”); provided, however, the Company will not effect any conversion of the Note, and the Holder will not have the right to convert any portion of the Note, to the extent (but only to the extent) that the Holder would beneficially own in excess of the Beneficial Ownership Limitation (as defined below), which beneficial ownership will be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. The “Beneficial Ownership Limitation” is 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of the Note.

The Note is secured by the personal guarantee of Si Chen, the Company’s chief executive officer and chairman.

11.	TAXES PAYABLES

	Taxes payable consisted of the following as of March 31, 2014 and December 31, 2013:

		3/31/2014		12/31/2013
Value added tax payable	$	106,628	$	592,341
Corporate income tax payable		1,003,247		2,572,663
Employee payroll tax withholding		6,333		6,344
Property tax payable		48,589		73,768
Stamp tax payable		1,473		1,485
Business tax payable		157,593		158,921
Land use tax payable		24,943		64,062
Import tariffs		-		271
Capital gain tax payable		944,319		952,278
	$	2,293,125	$	4,422,133

12.	ACCRUED EXPENSES AND OTHER PAYABLE

	Accrued expenses and other payables consisted of the following as of March 31, 2014 and December 31, 2013:

		3/31/2014		12/31/2013
Accrued salaries and wages	$	155,796	$	32,731
Accrued utility expenses		163,568		39,765
Accrued interest expenses		1,775,466		927,986
Accrued transportation expenses		229,423		144,061
Other accruals		324,575		-
Business and other taxes		2,091,340		885,972
Disbursement payable		203,309		-
Accrued staff welfare		9,417		285,300
	$	4,952,894	$	2,315,815

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

13.	LONG-TERM DEBT

	Current portions of long-term debt consisted of the following as of March 31, 2014 and December 31, 2013:

		3/31/2014		12/31/2013

Loans from China Development Bank
• Interest rate at 7.07% per annum due 5/20/2014		$ 973,725		$ 981,933
• Interest rate at 7.07% per annum due 11/20/2014		973,726		981,932

Loans from Deutsche Investitions-und Entwicklungsgesellschaft mbH (“DEG”)
• Interest rate at 5.510% per annum due 3/15/2014		-		1,875,000
• Interest rate at 5.510% per annum due 9/15/2014		1,875,000		1,875,000
• Interest rate at 5.510% per annum due 3/15/2015		1,875,000		-
	$	5,697,451	$	5,713,865

Non-current portions of long-term debt consisted of the following as of March 31, 2014 and December 31, 2013:

		3/31/2014		12/31/2013
Loans from Deutsche Investitions-und Entwicklungsgesellschaft mbH (“DEG”)
• Interest rate at 5.510% per annum due 9/16/2016	$	3,750,000	$	5,625,000

Loans from China Development Bank
• Interest rate at 7.07% per annum due 9/24/2015		2,434,314		2,454,831
	$	6,184,314	$	8,079,831

The Company’s loan with DEG began repaying the loan in semi-annual installments on September 15, 2012. As of March 31, 2014 and December 31, 2013, the Company has repaid $7,500,000 and $5,625,000 in principal. The loan was collateralized with the following terms:

	(a.)	Create and register a first ranking mortgage in the amount of about USD 12,000,000 on its land and building in favor of DEG.

	(b.)	Undertake to provide a share pledge of Mr. Si Chen shares in the sponsor in the amount of about USD 12,000,000 and being the majority shareholder in the sponsor in form and substance satisfactory to DEG

	(c.)	The total amount of the first ranking mortgage as indicated in the Loan Agreement (Article 12(1)(a)) and the value of the pledged shares of Mr. Si Chen (Loan Agreement (Article 12(1)(a))) should be at least USD 24,000,000.

	(d.)	Undertake to provide a guarantee from the Shareholder in form and substance satisfactory to DEG.

Non-current portions of notes payable and debentures consisted of the following as of March 31, 2014 and December 31, 2013:

		3/31/2014		12/31/2013
Note payable issued by Shanghai Pudong Development Bank
• Interest rate at 5.9% per annum due 12/28/2015		12,983,008		13,092,432
Debenture issued by Guoyuan Securities Co., Ltd.
• Interest rate at 10% per annum due 8/28/2016		16,228,761		16,365,541

Debenture issued by Daiwa SSC Securities Co. Ltd.
• Interest rate at 9.5% per annum due 11/8/2015		16,228,761		16,365,541
	$	45,440,530	$	45,823,514

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

14.	CAPITALIZATION

	Dating back to May 3, 2007, the Company underwent a reverse-merger and a concurrent financing transaction that resulted in 24,923,178 shares of outstanding common stock that remained unchanged until through December 31, 2007. In connection with the financing, the Company also issued 1,037,858 and 489,330 warrants to the PIPE investors and placement agent, respectively. During 2008, several holders of warrants issued in connection with the financing transaction exercised their rights to purchase shares at the prescribed exercise price. The holders of the warrants exercised the right to purchase a total of 360,207 shares; however, because the holders did not pay in cash for the warrants, 110,752 of those shares were cancelled as consideration in lieu of the warrant holders paying in cash. Ultimately, 249,455 of new shares were issued to those who exercised their warrant. The Company also made an adjustment to its outstanding share count for rounding errors as result of the split and reverse splits made at the time of the reverse merger. The number of shares in the adjustment was an addition of seven shares. The Company believes the adjustment of seven shares is immaterial to both prior and current earnings per share calculation. As detailed in the table below, the total number of outstanding shares at December 31, 2013 was 34,616,714.

	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 September 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.

	For 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 year 2011, the Company transferred 2,636,160 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 year 2012, the Company issued 108,840 shares to its employees as employee stock compensation. The Company transferred 2,264,420 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

American Lorain Corporation
Capitalization Reconciliation Table

	Par value authorized	Issuance date	Shares outstanding
Common stock at 1/1/2009	200,000,000		25,172,640
New shares issued to employees and vendors during 2009		Various dates	56,393
New shares issued to PIPE investors		10/28/2009	5,011,169
New shares issued to service provider during 2010		2/10/2010	2,000
New shares issued to PIPE investors		9/10/2010	3,440,800
New shares issued to employee		9/23/2010	5,000
New shares issued as acquisition consideration		9/24/2010	731,707
New shares issued to service provider during 2011		5/5/2011	25,000
New shares issued to employees per stock incentive plan		7/20/2011	27,092
New shares issued to employees per stock incentive plan		11/21/2011	36,073
New shares issued to employees per stock incentive plan		10/5/2012	108,840
Common stock at 3/31/2014			34,616,714

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

15.	NON-CONTROLLING INTERESTS

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

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

16.	SALES BY PRODUCT TYPE

	Sales by categories of product consisted of the following as of March 31, 2014 and 2013:

Category		3/31/2014		3/31/2013
Chestnut	$	17,354,271	$	16,654,887
Convenience food		7,430,682		10,620,643
Frozen food		6,904,505		7,534,386
Total	$	31,689,458	$	34,809,916

Revenue by geography consisted of the following as of March 31, 2014 and 2013:

Country		3/31/2014		3/31/2013
Australia	$	-	$	-
Belgium		539,242		-
China		21,485,129		26,011,792
Denmark		-		1,467,653
France		156,315		463,415
Germany		-		431,619
Hong Kong		48,644		46,377
Israel		52,938		-
Japan		2,091,541		2,536,962
Malaysia		330,060		382,432
Netherlands		-		264,859
Philippines		247,730		78,222
Portugal		2,768,464		-
Saudi Arabia		111,381		-
Russia		-		117,160
Singapore		309,962		113,416
South Korea		2,581,086		2,515,014
Taiwan		80,496
Thailand		397,506		45,404
United Kingdom		447,493		292,475
United States		41,471		43,116
Total	$	31,689,458	$	34,809,916

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%.

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

The following tables provide the reconciliation of the differences between the statutory and effective tax expenses for the periods ended March 31, 2014 and 2013:

		3/31/2014			3/31/2013
Income attributed to PRC	$	2,548,148		$	3,704,227
Loss attributed to US		(53,125	)		(76,177	)
Income before tax		2,495,023			3,628,050


PRC Statutory Tax at 25% Rate		749,865			1,014,398
Effect of tax exemption granted		-			-

Income tax	$	749,865		$	1,014,398

Per Share Effect of Tax Exemption

		3/31/2014		3/31/2013
Effect of tax exemption granted	$	-	$	-
Weighted-Average Shares Outstanding Basic		34,616,714		34,616,714
Per share effect	$	-	$	0.02

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, 2014 and 2013:

	3/31/2014	3/31/2013
U.S. federal statutory income tax rate	35%	35%
Lower rates in PRC, net	-10%	-10%
Tax holiday for foreign investments	5.05%	2.96%
The Company’s effective tax rate	30.05%	27.96%

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

The Company has accrued a deferred tax asset as a result of its net operating loss in and before March 31, 2014because 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 2014 and 2013 in the following table.

	China Income Tax Rate
Subsidiary	2014	2013
International Lorain	0%	0%
Junan Hongrun	25%	25%
Luotian Lorain	25%	25%
Beijing Lorain	25%	25%
Shandong Lorain	25%	25%
Shandong Greenpia	25%	25%
Dongguan Lorain	25%	25%

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

18.	EARNINGS PER SHARE

	Components of basic and diluted earnings per share were as follows:

		3/31/2014		3/31/2013

Basic Earnings Per Share Numerator
Net Income	$	1,590,488	$	2,518,686
Income Available to Common Stockholders	$	1,590,488	$	2,518,686

Diluted Earnings Per Share Numerator
Income Available to Common Stockholders	$	1,590,488	$	2,518,686

Income Available to Common Stockholders on Converted Basis	$	1,590,488	$	2,518,686

Original Shares:
Additions from Actual Events
-Issuance of Common Stock		34,616,714		34,616,714
Basic Weighted Average Shares Outstanding		34,616,714		34,616,714

Dilutive Shares:
Additions from Potential Events
-Exercise of Investor Warrants & Placement Agent Warrants		-		-
- Exercise of Employee & Director Stock Options		-		-
Diluted Weighted Average Shares Outstanding:		34,616,714		34,616,714

Earnings Per Share
- Basic	$	0.05	$	0.07
- Diluted	$	0.05	$	0.07

Weighted Average Shares Outstanding
- Basic		34,616,714		34,616,714
- Diluted		34,616,714		34,616,714

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

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

During the years ended December 31, 2013 and 2012, the Company recorded a total of $0 and $503,493 stock option and its related general and administrative expenses.

During the period ended March 31, 2014, the Company did not grant any stock option.

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

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

No tax benefit has yet to be accrued or realized. For the period ended December 31, 2013, 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:

		2012		2011
Weighted-average fair value of grants:	$	1.3629	$	1.1909
Risk-free interest rate:		0.33%		0.96%
Expected volatility:		59.93%		4.58%
Expected life in months:		36.00		36.00

20.	LEASE COMMITMENTS

	(a.)	The Company 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, 2014 are shown in the following table:

From	To		Lease payment
1/1/2014	12/31/2014	$	69,514
1/1/2015	12/31/2015		92,685
1/1/2016	12/31/2016		92,685
1/1/2017	12/31/2017		92,685
1/1/2018	8/9/2018		56,641
		$	404,210

The outstanding lease commitment as of December 31, 2013 was $404,210.

The minimum future lease payments for this property at December 31, 2013 are shown in the following table:

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

From	To		Lease payment
1/1/2014	12/31/2014	$	92,685
1/1/2015	12/31/2015		92,685
1/1/2016	12/31/2016		92,685
1/1/2017	12/31/2017		92,685
1/1/2018	8/9/2018		56,641
		$	427,381

		The outstanding lease commitment as of December 31, 2013 was $427,381.

	(b.)	During the year ended December 31, 2013, the Company entered into three operating lease agreement leasing three plots of land of where greenhouses are maintained to grow seasonal crops. The lease was signed by Junan Hongrun Foodstuff Co., Ltd. and expires on April 25, 2033, May 19, 2033, and June 19, 2033, respectively.

		The minimum future lease payments for this property at March 31, 2014 are shown in the following tables:

From

Greenhouse 1

From

Greenhouse 2

From

Greenhouse 3

4/1/2014

12/31/2014

58,596

4/1/2014

12/31/2014

71,336

4/1/2014

12/31/2014

8,504

1/1/2015

12/31/2015

78,128

1/1/2015

12/31/2015

95,114

1/1/2015

12/31/2015

11,339

1/1/2016

12/31/2016

78,128

1/1/2016

12/31/2016

95,114

1/1/2016

12/31/2016

11,339

1/1/2017

12/31/2017

78,128

1/1/2017

12/31/2017

95,114

1/1/2017

12/31/2017

11,339

1/1/2018

12/31/2018

78,128

1/1/2018

12/31/2018

95,114

1/1/2018

12/31/2018

11,339

1/1/2019

12/31/2019

78,128

1/1/2019

12/31/2019

95,114

1/1/2019

12/31/2019

11,339

1/1/2020

12/31/2020

78,128

1/1/2020

12/31/2020

95,114

1/1/2020

12/31/2020

11,339

1/1/2021

12/31/2021

78,128

1/1/2021

12/31/2021

95,114

1/1/2021

12/31/2021

11,339

1/1/2022

12/31/2022

78,128

1/1/2022

12/31/2022

95,114

1/1/2022

12/31/2022

11,339

1/1/2023

12/31/2023

85,773

1/1/2023

12/31/2023

102,527

1/1/2023

12/31/2023

12,097

1/1/2024

12/31/2024

89,289

1/1/2024

12/31/2024

105,683

1/1/2024

12/31/2024

12,757

1/1/2025

12/31/2025

89,289

1/1/2025

12/31/2025

105,683

1/1/2025

12/31/2025

12,757

1/1/2026

12/31/2026

89,289

1/1/2026

12/31/2026

105,683

1/1/2026

12/31/2026

12,757

1/1/2027

12/31/2027

89,289

1/1/2027

12/31/2027

105,683

1/1/2027

12/31/2027

12,757

1/1/2028

12/31/2028

89,289

1/1/2028

12/31/2028

105,683

1/1/2028

12/31/2028

12,757

1/1/2029

12/31/2029

89,289

1/1/2029

12/31/2029

105,683

1/1/2029

12/31/2029

12,757

1/1/2030

12/31/2030

89,289

1/1/2030

12/31/2030

105,683

1/1/2030

12/31/2030

12,757

1/1/2031

12/31/2031

89,289

1/1/2031

12/31/2031

105,683

1/1/2031

12/31/2031

12,757

1/1/2032

12/31/2032

89,289

1/1/2032

12/31/2032

105,683

1/1/2032

12/31/2032

12,757

1/1/2033

4/25/2033

42,261

1/1/2033

5/19/2033

50,322

1/1/2033

6/19/2033

5,530

1,615,255

1,936,244

231,656

The outstanding lease commitment for the three greenhouses as of March 31, 2014 was $3,783,155.

The minimum future lease payments for this property at December 31, 2013 are shown in the following tables:

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(Stated in US Dollars)

From

Greenhouse 1

From

Greenhouse 2

From

Greenhouse 3

1/1/2014

12/31/2014

78,128

1/1/2014

12/31/2014

95,114

1/1/2014

12/31/2014

11,339

1/1/2015

12/31/2015

78,128

1/1/2015

12/31/2015

95,114

1/1/2015

12/31/2015

11,339

1/1/2016

12/31/2016

78,128

1/1/2016

12/31/2016

95,114

1/1/2016

12/31/2016

11,339

1/1/2017

12/31/2017

78,128

1/1/2017

12/31/2017

95,114

1/1/2017

12/31/2017

11,339

1/1/2018

12/31/2018

78,128

1/1/2018

12/31/2018

95,114

1/1/2018

12/31/2018

11,339

1/1/2019

12/31/2019

78,128

1/1/2019

12/31/2019

95,114

1/1/2019

12/31/2019

11,339

1/1/2020

12/31/2020

78,128

1/1/2020

12/31/2020

95,114

1/1/2020

12/31/2020

11,339

1/1/2021

12/31/2021

78,128

1/1/2021

12/31/2021

95,114

1/1/2021

12/31/2021

11,339

1/1/2022

12/31/2022

78,128

1/1/2022

12/31/2022

95,114

1/1/2022

12/31/2022

11,339

1/1/2023

12/31/2023

85,773

1/1/2023

12/31/2023

102,527

1/1/2023

12/31/2023

12,097

1/1/2024

12/31/2024

89,289

1/1/2024

12/31/2024

105,683

1/1/2024

12/31/2024

12,757

1/1/2025

12/31/2025

89,289

1/1/2025

12/31/2025

105,683

1/1/2025

12/31/2025

12,757

1/1/2026

12/31/2026

89,289

1/1/2026

12/31/2026

105,683

1/1/2026

12/31/2026

12,757

1/1/2027

12/31/2027

89,289

1/1/2027

12/31/2027

105,683

1/1/2027

12/31/2027

12,757

1/1/2028

12/31/2028

89,289

1/1/2028

12/31/2028

105,683

1/1/2028

12/31/2028

12,757

1/1/2029

12/31/2029

89,289

1/1/2029

12/31/2029

105,683

1/1/2029

12/31/2029

12,757

1/1/2030

12/31/2030

89,289

1/1/2030

12/31/2030

105,683

1/1/2030

12/31/2030

12,757

1/1/2031

12/31/2031

89,289

1/1/2031

12/31/2031

105,683

1/1/2031

12/31/2031

12,757

1/1/2032

12/31/2032

89,289

1/1/2032

12/31/2032

105,683

1/1/2032

12/31/2032

12,757

1/1/2033

4/25/2033

42,261

1/1/2033

5/19/2033

50,322

1/1/2033

6/19/2033

5,530

1,634,787

1,960,022

234,491

The outstanding lease commitment for the three greenhouses as of December 31, 2013 was $3,829,300.

21.	INVESTMENT COMMITMENTS AND LIABILITIES

	On February 7, 2014, American Lorain Corporation (the "Company"), through its indirect wholly owned subsidiary, Junan Hongrun Foodstuff Co., Ltd. (“Junan Hongrun”) entered into a Share Purchase Agreement with Intiraimi, a limited liability company organized under the laws of France (the "Intiraimi Purchase Agreement"). Pursuant to the terms of the Intiraimi Purchase Agreement, Junan Hongrun agreed to acquire from Intiraimi 10,000 shares of Athena, a limited liability company organized under the laws of France (“Athena”), or 40% of the share capital of Athena, for an aggregate purchase price of €1,500,000 (or approximately US$2,032,050) of which (i) €1,000,000 (or approximately US$1,354,700) will be payable within 20 days of the execution of the Intiraimi Purchase Agreement, and (ii) the remaining €500,000 (or approximately US$677,350) (“Deferred Payment”) will be payable on February 7, 2015 if certain conditions are met. On February 7, 2014, Junan Hongrun also entered into a Reiterative Share Purchase Agreement with Biobranco II, a company organized under Portuguese law (the " Biobranco Purchase Agreement"). Pursuant to the terms of the Biobranco Purchase Agreement, Junan Hongrun will acquire from Biobranco 2,750 shares of Athena, or 11% of the share capital of Athena, for an aggregate purchase price of €495,000 (or approximately US$670,600), payable within 20 days of the execution of the Biobranco Purchase Agreement. Upon closing of the two transactions, the Company, through Junan Hongrun, will own 51% of the share capital of Athena. Junan Hongrun agreed to pledge 12,750 shares, or 51% share capital, of Athena acquired in the above transactions to Intiraimi to guarantee the Deferred Payment. The Company intends to proceed with the acquisition and fulfill the Deferred Payment in good faith should the conditions set forth in the Intiraimi Purchase Agreement are met. As of the date of this report, the transaction is still not yet completed because the acquisition is subject to approval by Department of Commerce of Shandong Province, PRC and hence the accounts for Athena are not consolidated. In connection with the acquisition of a 51% controlling interest in Athena, on February 7, 2014, Junan Hongrun entered into a Shareholders’ Agreement (the “Shareholder Agreement”) with Athena and each of the other shareholders of Athena (“Current Shareholders”), which defines the rights of the Junan Hongrun and the Current Shareholders, and their respective undertaking as it relates to Athena. The Shareholder Agreement provides, among other things, that American Lorain will finance Cacovin, a company based in Portugal and a wholly owned subsidiary of Athena, up to three million Euros. Please refer the form 8-K the Company filed with Securities and Exchange Commission on February 13 for details.

22.	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.

AMERICAN LORAIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014 AND DECEMBER 31, 2013
(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.

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

Overview

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

Chestnut products;
Convenience foods (including ready-to-cook, or RTC, foods, ready-to-eat, or RTE, foods and meals ready- to-eat, or MRE); and
Frozen food products.

We conduct our production activities mainly in China. Our products are sold in Chinese domestic markets as well as exported to foreign countries and regions such as Japan, South Korea and Europe. We derive most of our revenues from sales in China, Japan and South Korea. In 2014, our primary strategy is to continue building our brand recognition in China through consistent marketing efforts towards supermarkets, wholesalers, and significant customers, enhancing the cooperation with other manufacturers and factories and enhancing the turnover for our existing chestnut, convenience and frozen food products. In addition, we are working to expand our marketing efforts in Asia, Europe, and the Middle East. We currently have limited sales and marketing activity in the United States, although our long-term plan is to significantly expand our activities there.

Domestic sales in the first quarter of 2014 accounted for 67.8% as compared to 74.7% over the same period of last year. 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 supermarkets and wholesale customers in China contributed approximately 21.8% in revenues for the quarter compared to 21.6% in the first quarter of 2013.

On February 7, 2014, American Lorain Corporation (the "Company"), through its indirect wholly owned subsidiary, Junan Hongrun Foodstuff Co., Ltd. (“Junan Hongrun”) entered into a Share Purchase Agreement with Intiraimi, a limited liability company organized under the laws of France (the "Intiraimi Purchase Agreement"). Pursuant to the terms of the Intiraimi Purchase Agreement, Junan Hongrun agreed to acquire from Intiraimi 10,000 shares of Athena, a limited liability company organized under the laws of France (“Athena”), or 40% of the share capital of Athena, for an aggregate purchase price of €1,500,000 (or approximately US$2,032,050) of which (i) €1,000,000 (or approximately US$1,354,700) will be payable within 20 days of the execution of the Intiraimi Purchase Agreement, and (ii) the remaining €500,000 (or approximately US$677,350) (“Deferred Payment”) will be payable on February 7, 2015 if certain conditions are met.

On February 7, 2014, Junan Hongrun also entered into a Reiterative Share Purchase Agreement with Biobranco II, a company organized under Portuguese law (the " Biobranco Purchase Agreement"). Pursuant to the terms of the Biobranco Purchase Agreement, Junan Hongrun will acquire from Biobranco 2,750 shares of Athena, or 11% of the share capital of Athena, for an aggregate purchase price of €495,000 (or approximately US$670,600), payable within 20 days of the execution of the Biobranco Purchase Agreement.

As of the date of this report, the transaction is still not yet completed because the acquisition is subject to approval by Department of Commerce of Shandong Province, PRC and hence the accounts for Athena are not consolidated.

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 2014, the cost of our raw materials decreased from $23.5 million to $21.5 million, as compared to the first quarter of 2013, for a decrease of approximately 8.4% . 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.

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.

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 26.6% of our working capital from the proceeds of short-term loans from Chinese banks in the first quarter of 2014, as compared to 27.0% over the same period last year. 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 balance of short-term bank loans as of March 31, 2014 was approximately $36.1 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 also secured a $15 million loan from Deutsche Investitions - und Entwicklungsgesellshaft (“DEG”) in May 2010, which we have fully drawn down in 2011. 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.

Our business, operating results or financial condition will be adversely affected in the event of unfavorable economic conditions, including the ongoing global economy and capital markets disruptions. 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.

Results of Operations

Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013

The following table summarizes the results of our operations during the three-month periods ended March 31, 2014 and March 31, 2013, respectively and provides information regarding the dollar and percentage increase or (decrease) from the three-month period ended March 31, 2014 compared to the three-month period ended March 31, 2013.

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

	Three months ended March 31,		Increase /	Increase /
			Decrease	Decrease
(In Thousands of USD)	2014	2013	($)	(%)
Net revenues	31,689	34,810	-3,121	-9.0%
Cost of revenues	-25,584	-27,413	1,829	-6.7%
Gross profit	6,105	7,397	-1,292	-17.5%
Operating expenses
Selling and marketing expenses	-1,075	-1,791	716	-40.0%
General and administrative expenses	-2,089	-1,422	-667	46.9%
Operating Income	2,941	4,184	-1,243	-29.7%
Government subsidy income	1,508	319	1189	372.7%
Interest and other income	105	194	-89	-45.9%
Other expenses	-134	-7	-127	1814.3%
Interest expense	-1,925	-1,061	-864	81.4%
Earnings before tax	2,495	3,628	-1,133	-31.2%
Income tax	-750	-1,014	264	-26.0%
Income before minority interests	1,745	2,614	-869	-33.2%
Minority interests	155	95	60	63.2%
Net income	1,590	2,519	-929	-36.9%

Revenue

Net Revenues. Our net revenue for the three months ended March 31, 2014 amounted to $31.7 million, which represents a decrease of approximately $3.1 million, or 9.0%, from the three-month period ended on March 31, 2013, in which our net revenue was $34.8 million. The overall decrease was attributable to the increase / decrease in sales of each of our product segments, as reflected in the following table:

	Three
	months
	ended
(in thousands of U.S. dollars)	3/31/2014	3/31/2013
Category	($)	($)	($)	(%)
Chestnut	17,354,271	16,654,887	699,384	4.2%
Convenience food	7,430,682	10,620,643	-3,189,961	-30.0%
Frozen food	6,904,505	7,534,386	-629,881	-8.4%
Total	31,689,458	34,809,916	-3,120,458	-9.0%

Cost of Revenues. During the three months ended March 31, 2014, we experienced a decrease in cost of revenue of $1.8 million, in comparison to the three months ended March 31, 2013, from approximately $27.4 million to $25.6 million, reflecting a decrease of approximately 6.7% . Approximately a decrease of $2.0 million was attributable to raw material costs, which decreased from $23.5 million during the three months ended March 31, 2013 to $21.5 million, or approximately 8.4%, during the three months ended March 31, 2014.

The other factors contributed to $0.2 million 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 decreased $1.3 million, or 17.5%, to $6.1 million for the three months ended March 31, 2014 from $7.4 million for the same period in 2013 as a result of lower revenues, offset by lower costs of revenues, for the reasons indicated immediately above. Our gross margins decreased from 21.3% to 19.3% due to inflation pressure in the Chinese domestic market. Gross profit margins by product segment during the three months ended March 31, 2014 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 decreased $0.7 million during the first quarter of 2014, as compared to the same period over last year. The following table reflects the main factors that contributed to the decrease as well as the dollar amount that each factor contributed to this decrease:

Decrease in Costs in the Three
Months Ended March 31, 2014 over
the Three Months Ended March 31, 2013

(in U.S. dollars)
Transportation		511,933
Port Fee		148,464
Storage Rental		309,223

The decreases listed in the table above were partially offset by increase in other expenses such as wage fees.

General and Administrative Expenses. We experienced an increase in general and administrative expense of $0.7 million from approximately $1.4 million to approximately $2.1 million for the three months ended March 31, 2014, compared to the same period in 2013. 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
Land Use Fee		36,762
Consulting Fee		30,573
Heating Fee		35,177

The increases listed in the table above were partially offset by decreases in dollar amount of other factors, including entertainment and travel expense.

Income Before Taxation and Minority Interest

Income before taxation and minority interest decreased $1.1 million, or 31.2%, to $2.5 million for the three months ended March 31, 2014 from $3.6 million for the same period of 2013. The decrease was mainly attributable to the decrease of our sales revenue in the three months ended March 31, 2014 as compared to the three months ended March 31, 2013.

Income Taxes

Income taxes decreased $264,533, or 26.0%, to $0.8 million in the first quarter of 2014, as compared to $1.0 million in the first quarter of 2013, primarily attributable to the lower earnings before tax.

Net Income

Net income decreased $0.9 million, or 36.9%, to $1.6 million for the three months ended March 31, 2014 from $2.5 million for the same period of 2013. The decrease was attributable to decreased sales revenue and partially offset by decreased cost of goods sold in the three months ended March 31, 2014 as compared to the three months ended March 31, 2013.

Liquidity and Capital Resources

As of March 31, 2014, we had cash and cash equivalents (including restricted cash) of $46.3 million. Our cash and cash equivalents increased by approximately $10.6 million from December 31, 2013 primarily due to cash provided by operating activities and financing activities, partially offset by cash used in investments 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,
	2014		2013
Net cash provided by (used in) operating activities	7,019		(1,364	)
Net cash provided by (used in) investing activities	(3,708	)	(1,874	)
Net cash provided by (used in) financing activities	7,873		1,978
Net cash flow (outflow)	11,184		(1,259	)

Operating Activities

Net cash provided by operating activities was $7.0 million for the three months period ended March 31, 2014 and net cash used in operating activities in the first quarter of 2013 was approximately $1.4 million. The increase of approximately $8.4 million in net cash flows provided by operating activities in the first three months of 2014 was primarily a higher decrease in accounts and other receivables of $7.6 million, partially offset by higher increase in inventories of approximately $1.5 million as compared to the same period in 2013.

Investing Activities

Net cash used in investing activities for the three months period ended March 31, 2014 was $3.7 million, representing an increase of $1.8 million in net cash used in investing activities from $1.9 million for the same period of 2013. The difference was primarily a result of higher increase in restricted cash of $3.4million, partially offset by $3.2 million decrease in deposit in 2014 compared with the same period in 2013.

Financing Activities

Net cash provided by financing activities for the three months period ended March 31, 2014 was $7.9 million, representing an increase of $5.9 million from $2.0 million net cash provided by financing activities during the same period in 2013. The increase of the net cash provided by financing activities was primarily a result of higher net bank borrowings and issuance of convertible promissory note in the first quarter of 2014.

Loan Facilities

As of March 31, 2014, 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 $36.1 million as of March 31, 2014, compared with $29.4million as of December 31, 2013. In addition, 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 2012.

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, 2014, the details pertaining to our subsidiaries were as follows:

	*Place of*	*Attributable equity*		*Registered*
*Name of Company*	*incorporation*	*interest %*		*capital*
Shandong Lorain Co., Ltd	PRC	80.2	$	13,122,576
Luotian Lorain Co., Ltd	PRC	100		4,110,550
Junan Hongrun Foodstuff Co., Ltd	PRC	100		48,556,452
Beijing Lorain Co., Ltd	PRC	100		1,622,876
Shandong Greenpia Foodstuff Co., Ltd	PRC	100		2,492,738
Dongguan Lorain Co,, Ltd	PRC	100		162,288
International Lorain Holding Inc.	Cayman Islands	100		50,501,875

On February 7, 2014, Junan Hongrun acquired 51% of Athena group and its subsidiaries. The investment of Athena group is not yet consolidated into the financial statements since the acquisition is still subject to the approval of Department of Commerce of Shandong Province, PRC although the title has been passed to Junan Hongrun.

Accounting for the Impairment of Long-Lived Assets -- The long-lived assets held and used by us are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets.

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the reporting 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 July 2013, the FASB issued ASU No. 2013-11, “Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. There is diversity in practice in the presentation of unrecognized tax benefits in those instances. Some entities present unrecognized tax benefits as a liability unless the unrecognized tax benefit is directly associated with a tax position taken in a tax year that results in, or that resulted in, the recognition of a net operating loss or tax credit carryforward for that year and the net operating loss or tax credit carryforward has not been utilized. Other entities present unrecognized tax benefits as a reduction of a deferred tax asset for a net operating loss or tax credit carryforward in certain circumstances. The objective of the amendments in this Update is to eliminate that diversity in practice.

As of March 31, 2014, there are no other recently issued accounting standards not yet adopted that would have a material effect on the Company’s consolidated financial statements

Off-Balance Sheet Arrangements

We do not have any off-balance arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

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 the design and operation of our disclosure controls and procedures as of March 31, 2014. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2014, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were not effective due to the continuing material weakness in our internal control over financial reporting.

The material weakness and significant deficiency identified by our management as of March 31, 2014 relates to the ability of the Company to record transactions and provide disclosures in accordance with U.S. GAAP. We did not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of US GAAP commensurate with our financial reporting requirements. For example, our staff members do not hold licenses such as Certified Public Accountant or Certified Management Accountant in the U.S., have not attended U.S. institutions for training as accountants, and have not attended extended educational programs that would provide sufficient relevant education relating to U.S. GAAP. Our staff needs substantial training to meet the demands of a U.S. public company and our staff’s understanding of the requirements of U.S. GAAP-based reporting are inadequate.

Changes in Internal Controls over Financial Reporting.

During the three months ended March 31, 2014, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations Over Internal Controls.

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

The following exhibits are filed as part of this Report

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.*

101.INS	XBRL Instance Document (1)
101.SCH	XBRL Taxonomy Extension Schema (1)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase (1)
101.DEF	XBRL Taxonomy Extension Definition Linkbase (1)
101.LAB	XBRL Taxonomy Extension Label Linkbase (1)
101.FRE	XBRL Taxonomy Extension Presentation Linkbase (1)

* Filed herewith.

(1) XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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 15, 2014	AMERICAN LORAIN CORPORATION

	/s/ Si Chen
	Si Chen
	Chief Executive Officer
	(Principal Executive Officer)



	/s/ David She
	David She
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)