---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

(Mark One)

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

For the fiscal year ended: March 31, 2011

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

For the transition period from ____________to _____________

Commission File No. 001-34440

CHINA NUTRIFRUIT GROUP
LIMITED(Exact name of registrant as specified in its
charter)

|Nevada                                           | 87-0395695                          
|------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                    |                                     

5th Floor, Chuangye Building,
Chuangye Plaza Industrial Zone 3, Daqing Hi-Tech Industrial Development Zone
Daqing, Heilongjiang 163316 Peoples Republic of
China(Address of principal executive offices)

(86) 459-8972870(Registrants telephone
number, including area code)

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

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

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

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

Yes [  ]      No [X]

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

Yes [  ]      No [X]

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

Yes [X]      No [  ]

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

Yes [  ]      No [  ]

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

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

|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 registrant is a shell company
(as defined in Rule 12b-2 of the Act).

Yes [  ]       No [X]

---

As of September 30, 2010 (the last business day of the
registrants most recently completed second fiscal quarter), the aggregate
market value of the shares of the registrants common stock held by
non-affiliates (based upon the closing price of such shares as reported on the
NYSE AMEX) was approximately $23 million. Shares of the registrants common
stock held by each executive officer and director and each person who owns 10%
or more of the outstanding common stock have been excluded from the calculation
in that such persons may be deemed to be affiliates of the registrant. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

There were a total of 36,915,762 shares of the registrants
common stock outstanding as of June 20, 2011.

DOCUMENTS INCORPORATED BY REFERENCE

None.

---



|CHINA NUTRIFRUIT GROUP LIMITED          
|----------------------------------------
|                                        
|Annual Report on FORM 10-K              
|For the Fiscal Year Ended March 31, 2011
|                                        

TABLE OF CONTENTS

PART I

|Item 1.  | Business.                                                                                                                | 1 
|-------- | ------------------------------------------------------------------------------------------------------------------------ | --
|Item 1A. | Risk Factors.                                                                                                            | 12
|Item 1B. | Unresolved Staff Comments.                                                                                               | 12
|Item 2.  | Properties.                                                                                                              | 25
|Item 3.  | Legal Proceedings                                                                                                        | 25
|Item 4.  | (Removed and Reserved)                                                                                                   | 25
|         |                                                                                                                          |   
|PART II 
|         |                                                                                                                          |   
|Item 5.  | Market for Registrants Common
      Equity, Related Stockholder Matters and Issuer Purchases of Equity
      Securities | 25
|Item 6.  | Selected Financial Data                                                                                                  | 26
|Item 7.  | Managements Discussion and
      Analysis of Financial Condition and Results of Operations                              | 27
|Item 7A. | Quantitative and Qualitative
      Disclosures About Market Risk.                                                        | 33
|Item 8.  | Financial Statements and
      Supplementary Data                                                                        | 34
|Item 9.  | Changes in and Disagreements
      with Accountants on Accounting and Financial Disclosure.                              | 34
|Item 9A. | Controls and Procedures.                                                                                                 | 34
|Item 9B. | Other Information.                                                                                                       | 35
|         |                                                                                                                          |   
|PART III
|         |                                                                                                                          |   
|Item 10. | Directors, Executive Officers
      and Corporate Governance                                                             | 35
|Item 11. | Executive Compensation.                                                                                                  | 38
|Item 12. | Security Ownership of Certain
      Beneficial Owners and Management and Related Stockholder Matters.                    | 40
|Item 13. | Certain Relationships and
      Related Transactions, and Director Independence                                          | 40
|Item 14. | Principal Accounting Fees and
      Services                                                                             | 42
|         |                                                                                                                          |   
|PART IV 
|         |                                                                                                                          |   
|Item 15. | Exhibits, Financial Statement
      Schedules.                                                                           | 43

---

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. We use words such as believe,
expect, anticipate, project, target, plan, optimistic, intend,
aim, will or similar expressions which are intended to identify
forward-looking statements. Such statements include, among others, those
concerning market and industry segment growth and demand and acceptance of new
and existing products; any projections of sales, earnings, revenue, margins or
other financial items; any statements of the plans, strategies and objectives of
management for future operations; any statements regarding future economic
conditions or performance; uncertainties related to conducting business in
China, as well as all assumptions, expectations, predictions, intentions or
beliefs about future events. You are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, as well as assumptions, that, if they were to ever materialize or
prove incorrect, could cause our results to differ materially from those
expressed or implied by such forward-looking statements. Such risks and
uncertainties, among others, include:

- our ability to attract new customers;
- market demand for our existing and new products;
- our ability to employ and retain qualified employees;
- our ability to stay abreast of market trends and technological advances;
- competition and competitive factors in the markets in which we compete;
- general economic and business conditions in China and in the local
  economies in which we regularly conduct business, which can affect demand for
  our products;
- changes in laws, rules and regulations governing the business community in
  China in general and the fruit processing industry in particular; and
- the risks identified in Item 1A. Risk Factors included herein.

All statements other than statements of historical fact are
statements that could be deemed forward-looking statements. We assume no
obligation and do not intend to update these forward-looking statements, except
as required by law.

Use of Terms

Except as otherwise indicated by the context, all references in
this report to: (i) we, the Company, us, our company, our, and China
Nutrifruit are to the combined businesses of China Nutrifruit Group Limited and
its consolidated subsidiaries; (ii) Fezdale are to Fezdale Investments
Limited, a British Virgin Islands corporation, our direct, wholly-owned
subsidiary; (iii) Longheda are to Daqing Longheda Food Company Limited, a
Chinese corporation, our indirect, wholly-owned subsidiary; (iv) Securities
Act are to the Securities Act of 1933, as amended; (v) Exchange Act are to
the Securities Exchange Act of 1934, as amended; (vi) RMB are to Renminbi, the
legal currency of China; (vii) U.S. dollar, $ and US$ are to the legal
currency of the United States; and (viii) China, Chinese and PRC are to
the Peoples Republic of China.

PART I

ITEM 1. BUSINESS.

Business Overview

We are a leading producer of premium specialty fruit based
products in China. We are primarily engaged, through our indirect Chinese
subsidiaries, in developing, processing, marketing and distributing a variety of
food products processed primarily from premium specialty fruits grown in
Northeast China, mainly including golden berry, crab apple, blueberry,
raspberry, blackcurrant and seabuckthorn. Our primary product offering includes
concentrate juice, nectar, glazed fruits, concentrate pulp as well as fresh
fruits. We have been producing our premium specialty fruit based products since
2004.

1

---

We sell our products through a nationwide sales and
distribution network covering approximately 18 provinces in China. As of March
31, 2011, this network was comprised of approximately 44 distributors. Our
processed fruit products are mainly sold to food producers for further
processing into fruit juice and other fruit related foods, and our fresh fruits
are mainly sold to fruit supermarkets.

Quality and safety are of primary importance to us. We have
established quality control and food safety management systems for all stages of
our business, including raw material sourcing, producing, packaging, storage and
transportation of our products. We currently operate from our manufacturing
facilities located in Daqing and Mudanjiang, Heilongjiang province, China, where
an abundant supply of a variety of premium specialty fruits is available. We
have five fruit processing lines with an aggregate capacity of 17,160 tons.

Corporate History and Structure

We are a Nevada holding company and conduct substantially all
of our business in China through our operating subsidiaries, Longheda and Daqing
Senyang Fruit and Vegetable Food Technology Company Limited (Daqing Senyang).
We indirectly own all of the equity in Longheda as a result of our 100%
ownership of Fezdale and Fezdales intermediate ownership of Solar Sun Holdings
Limited. Both Fezdale and Solar Sun Holdings Limited are intermediate holding
companies and have no other significant assets and operations. Longheda was
incorporated in China in 2004. Subsequently, in a series of transactions between
2007 and 2008, Solar Sun Holdings Limited acquired 100% ownership of Longheda.
Jumbo Gloss Limited is a private limited liability company that was established
on October 13, 2009 under the laws of the British Virgin Islands. Jumbo Gloss
Limited has no business operations other than its 100% ownership of Daqing
Senyang which was incorporated in China on June 29, 2010 for the purpose of
operating our new fruit and vegetable powder production. We expect the new fruit
and vegetable powder production line to begin operations in July 2011, and its
annual production capacity is expected to be approximately 10,000 tons.

The following chart reflects our organizational structure as of
the date of this report.



We were originally incorporated in the State of Utah on April
22, 1983 under the name Portofino Investment, Inc. In January 1984, we changed
our name to Fashion Tech International, Inc. In April 1999, our stockholders
approved a merger with Fashion Tech International, Inc., a Nevada corporation,
to change the domicile of the Company from Utah to Nevada. We were a
developmental-stage company from inception to January 1, 1984, when we became
the holding company of certain operating or development-stage subsidiaries. From April
1, 1985 to August 14, 2008, we re-entered development-stage status.

2

---

On August 14, 2008, we acquired Fezdale in a reverse
acquisition transaction, which involved a financing transaction and a related
share exchange transaction whereby all of our current business operations were
acquired by Fezdale. In the share exchange transaction, 100% of the issued and
outstanding shares of Fezdale were exchanged for 30,166,878 shares of our common
stock, thereby making the existing stockholders of Fezdale owners of 83.5% of
our stock and also making Fezdale our wholly owned subsidiary. In the related
financing transaction, we completed a private placement in which we sold
3,085,840 newly issued shares of our common stock for aggregate proceeds of $8.6
million.

Our Industry

According to a report on Chinas fruit processing industry
issued by Beijing Business & Intelligence Consulting Co. Ltd., an
independent market research firm, which is hereinafter referred to as the BBIC
Report, Chinas fruit processing industry has grown significantly in the past
several years. The total output of processed fruit products in China grew from
$22.2 billion in 2006 to $66.2 billion in 2009, representing a Compound Annual
Growth Rate (CAGR) of approximately 31.4%. The sales value of processed fruit
products in China grew from $21.0 billion in 2006 to $65.2 billion in 2010,
representing a CAGR of approximately 32.7%. The following table sets forth the
output and CAGR of four categories of processed fruit products.

Output Value Breakdown of Fruit Processing Industry in
China(in Billions of U.S.$, except for CAGR data)

|                         |   | 2006 |  |   | 2007 |  |   | 2008 |  |   | 2009 |  |   | 2010 |  |  | CAGR   | 
|------------------------ | - | ---- |  | - | ---- |  | - | ---- |  | - | ---- |  | - | ---- |  |  | ------ | 
|Canned Fruit             | $ | 3.7  |  | $ | 4.3  |  | $ | 6.3  |  | $ | 7.8  |  | $ | 9.7  |  |  | 27.25% | 
|Deep Processed Fruit*    |   | 13.1 |  |   | 16.1 |  |   | 23.6 |  |   | 29.1 |  |   | 41.8 |  |  | 33.65% | 
|Fruit Juice and Beverage |   | 4.4  |  |   | 5.7  |  |   | 7.6  |  |   | 10.2 |  |   | 11.2 |  |  | 26.31% | 
|Glazed Fruits            |   | 1.0  |  |   | 1.4  |  |   | 2.0  |  |   | 2.6  |  |   | 3.5  |  |  | 36.78% | 

* Deep processed fruits include nectar, dried fruit and fruit
wine, etc.

Source: 2006-2011 Chinese Fruit processing industry Investment
Decision Consultation and Industrial Competitiveness Research Report, Beijing
Business & Intelligence Consulting Co. Ltd.

The table below sets forth the sales and CAGR of the fruit
processing industry in China from 2006 to 2010

Sales of Fruit Processing Industry in China,
2006-2010(in Billions of U.S.$, except for CAGR data)

|      |   | 2006 |  |   | 2007 |  |   | 2008 |  |   | 2009 |  |   | 2010 |  |   | CAGR   | 
|----- | - | ---- |  | - | ---- |  | - | ---- |  | - | ---- |  | - | ---- |  | - | ------ | 
|Sales | $ | 21.0 |  | $ | 26.1 |  | $ | 37.9 |  | $ | 47.0 |  | $ | 65.2 |  | $ | 32.74% | 

Source: 2006-2011 Chinese Fruit processing industry Investment
Decision Consultation and Industrial Competitiveness Research Report, Beijing
Business & Intelligence Consulting Co. Ltd.

We anticipate that growth in Chinas fruit processing industry,
especially,  premium specialty fruit-based products, will mainly be driven by
the following factors:

The low per capita rate of fruit consumption in
China. With approximately a quarter of the worlds population, China
represents a key growth driver for the global fruit food market. Per capita
fruit juice consumption in China is currently well below that of major developed
countries according to Euromonitor.

Growing affluence fosters increased consumption of
processed fruit products.Chinas economy has grown significantly
in recent years. According to the National Bureau of Statistics of China (the
NBS), Chinas gross domestic product (GDP) has increased from RMB12.0
trillion ($1.6 trillion) in 2002 to RMB39.8 trillion ($5.8 trillion) in 2010.
According to the Economic Blue Book issued by the Academy of Social Science of
China, Chinas GDP is expected to grow 9.9% in 2010 and the growth rate will
reach 10% in 2011. Chinas economic growth has resulted in a significant
increase in household disposable income in China. According to the NBS, between
2002 and 2009, urban household disposable income per capita increased from
RMB7,703 ($1,055) to RMB17,175 ($2,512), or a CAGR of approximately 12.1%, and
rural per capita cash income increased from RMB2,476 ($339) to RMB5,153 ($754),
or a CAGR of approximately 11.0%. We believe that as GDP and disposable income
increase, processed fruit products will become more affordable and consumers will generally spend an increasing portion of their
disposable income on healthy nutritional products, such as our premium specialty
fruit-based products.

3

---

Greater health awareness is expected to affect
consumption of fruit and processed fruit products.We believe
that concern for improved living standards and growing household disposable
income have led to greater health awareness among the population. As people
become more affluent, we believe that their spending on quality health food and
nutritional products, like our products, will increase. The juice beverage
market in China continued growing steadily in 2010 as the growth in urban
population and disposable income continued to drive demand for natural and
healthy beverage products. According to the BBIC Report, the world fruit juice
consumption is expected to increase from 33 billion liters in 1997 to 74 billion
liters in 2020.

Government aims to promote the growth of Chinas fruit
processing industry.According to the BBIC Report, approximately 20-30%
of fruit grown in China is lost, less than 50% of the total harvested fruit can
be commercialized, and less than 10% of the total commercialized fruit is
processed. We believe that the Chinese government will promote the development
of the fruit and fruit processing industry, as evidenced by the Development
Program of Food Processing Industry 2006-2010 report issued by the PRC Ministry
of Agriculture (MOA).

Our Products

Our primary product offerings include concentrate juice,
nectar, glazed fruits, concentrate pulp as well as fresh fruits. We are also in
the process of developing several new products.

The following charts set forth our product offerings
categorized by both product and source fruit type in terms of net sales for the
fiscal years 2011 and 2010:

Product Mix  By Product



4

---

Product Mix  By Fruit Type



Concentrate Juice

Concentrate juice is our primary product line, accounting for
approximately 48.0% and 47.6% of our total net sales in fiscal years 2011 and
2010, respectively. We currently produce primarily six types of concentrate
juice: golden berry, crab apple, blueberry, raspberry, seabuckthorn and
blackcurrant. We currently have two concentrate production lines which are
allocated for the production of all of six types of concentrates with an annual
total production capacity of 9,960 tons. We plan to continue to focus on
concentrate juice, which is our fastest growing product line with the greatest
market demand. To achieve this end, we are upgrading our concentrate juice
production line in Mudanjiang which is expected to be completed in July 2011 and
will increase its designed production capacity from 6,000 tons to approximately
9,000 tons. In addition, we also started the construction of a new multi-purpose
concentrate paste production line in Zhaoyuan, Helongjiang province with a
production capacity of approximately 9,600 tons which is expected to begin trail
production in July 2011.

Among the six types of concentrate, the new seabuckthorn and
blackcurrant concentrate generally have the highest gross margin and crab apple
concentrate consumes most of our production capacity even though it has a
relatively lower gross margin. We produce more crab apple concentrate despite
its relatively lower gross margin mainly because of the high demand for crab
apple products and abundant supply of fresh crab apples, which has the largest
supply in Northeast China as compared to the other source fruits.

Crab apple is a special species of apple which has much higher
acidity than the normal species of apple. The apple concentrate produced in
China commonly has an acidity of 1.2 to 1.8 while crab apple concentrate
typically has acidity over 3.2. The only way to raise the acidity of apple
concentrate is to mix it with another apple concentrate with higher acidity.
Since apple concentrates that are exported from China to overseas markets are
usually required to have an acidity of no less 2.0, the local producers of apple
concentrate need large quantities of high acidity apple concentrate to add to
their low acidity apple concentrate. Therefore, crab apple concentrate is in
high demand in the market.

Nectar

Our nectar product line accounted for approximately 8.3% and
9.5% of our total net sales in fiscal years 2011 and 2010, respectively. Nectar
is an unfermented and unconcentrated pulp product. To produce nectar, fresh
fruits are crushed and then instantaneously sterilized under high temperature
without adding any additives other than citric acid. It preserves the
nutritional value and flavor of the fresh fruit and elongates shelf life. Nectar
is easy to store and transport, thus providing the producers of fresh fruit
based products a much better alternative material than fresh fruit.

5

---

We currently produce and sell nectar products using only golden
berries. Our nectar products are commonly re-processed into a wide variety of
products, including bottled fruit juice, fruit ice cream, nectar beverages,
biscuits, fruit jam and fruit yogurt. Our nectar products were certified as
green food by the China Green Food Development Center in May 2006.

Glazed Fruits

Our glazed fruits product line accounted for approximately
25.6% and 22.8% of our total net sales in fiscal years 2011 and 2010,
respectively. Glazed fruit is preserved fruit with high sugar content and is a
popular, traditional Chinese food. Glazed fruits have a long shelf life and are
commonly consumed as snacks.

We currently produce and sell our glazed fruits products using
golden berries, blueberries, seabuckthorn and blackcurrant. We launched our
glazed blueberry products in December 2009 and seabuckthorn and blackcurrant
glazed fruit products in the second fiscal quarter of 2011 which were well
received by our customers. In December 2009, we added a new glazed fruits
production line with an annual production capacity of 1,200 tons in our Daqing
factory which increased our total annual production capacity of glazed fruit
products to 2,400 tons. We are in the process of upgrading our glazed fruits
production line in our Daqing facility, which is expected to be completed in
July 2011. We expect that after the upgrade, this glazed fruits production line
will be able to produce dried fruit products, including dried golden berry and
dried cherry tomato.

Our glazed fruits are mainly sold as a premium snack. Due to
the special taste of golden berries and blueberries, our products are also
commonly used in a wide variety of foods such as baked foods. Our glazed golden
berry fruit products were certified as green food by China Green Food
Development Center in May 2006.

Concentrate Pulp

Since fiscal year 2008, due to demand from our distributors, we
started to distribute apple concentrate pulp products and pear concentrate pulp
products. These concentrate products are processed by third party vendors
according to our technical requirements and standards. Sales from concentrate
pulp contributed approximately 15.5% and 12.9% of our total net sales in fiscal
years 2011 and 2010, respectively.

Fresh Fruit

Sales from fresh golden berries accounted for approximately
2.6% and 3.0% of our total net sales in fiscal years 2011 and 2010,
respectively. We sell fresh golden berries to our distributors during the
picking season which is typically mid-July to mid-November every year. We
purchase fresh golden berries from local farmers in Heilongjiang province and
sort them into different grades. Only the top-grade golden berries that are
freshest and have the best color, shape and aroma are sold as fresh fruit. The
rest of the fresh golden berries are further processed into glazed fruits,
nectar, or concentrate.

Golden berries are especially difficult to preserve and usually
perish within one week after harvest. To achieve longer shelf life, we keep the
fresh fruit in ice houses before we pack them with preservative packing. With
these measures, our products can generally remain fresh after long distance
transportation and have at least one week longer of shelf life than other
similar products in the market.

Others

Beverages accounted for approximately 4.2% of our total net
sales in fiscal years 2010. Beverage products usually require large capital for
advertising and special sales and marketing efforts. We decided to cease
beverage production in March 2010 and believe that we will be more profitable by
focusing on our primary high-end premium products.

New products under development

We plan to further diversify our product mix to cater to
different customer tastes and preferences. We are building a new fruit and
vegetable power production line, which is expected to become operational in July
2011. We plan to produce tomato and pumpkin powder in the first year of
operation of this production line.

6

---

Production

Production Facility

Our primary production facility is located in Daqing,
Heilongjiang province and started production in 2004. The facility is located
on an approximately 24,217-square-meter tract and encompasses approximately
5,998 square meters of plant and warehouse space. We built another processing
facility in Mudanjiang, Helongjiang province in August 2008 where a 6,000 ton
concentrate juice production line is located.

We currently own and operate five fruit processing lines with
an aggregate processing capacity of 17,160 tons. The average utilization rate of
our fruit processing lines was approximately 94.5% in fiscal year 2011. Since
fresh fruits are difficult to preserve, particularly in the hot season, we
generally keep no inventory of fresh fruits during production. We believe the
current utilization rate of the fruit processing lines is close to the highest
rate we can achieve while maintaining no inventory. Our production is mainly
conducted from mid-July to mid-November each year because our primary source
fruits are typically harvested during that time and must be processed right
away.

To meet the expected growth of our business and to broaden our
product offerings, we are currently building a new fruit and vegetable powder
manufacturing facility with an expected annual production capacity of
approximately 10,000 tons in Daqing. The new facility is funded by proceeds from
our preferred stock offering in 2009 and is expected to begin production in July
2011. The new facility will produce tomato, pumpkin and other popular fruit and
vegetable powders that can be used as ingredients in a variety of products,
including baby food, ready-to-drink mixes, instant soup mixes, snacks and other
confectionery items. We plan to build another fruit and vegetable powder
production line with an expected annual production capacity of approximately
10,000 tons in Daqing. We are also currently constructing a new factory facility
in Zhaoyuan, Helongjiang which will house a new multi-purpose concentrate paste
production line with an expected annual production capacity of approximately
9,600 tons. We plan to use this new multi-purpose concentrate paste production
line to produce tomato paste initially. As part of our vertical integration
strategy, we anticipate not only selling the concentrate paste products to
customers, but also using the concentrate paste products as raw materials for
our fruit and vegetable powder production line during the non-harvest season. We
plan to leverage our established supplier relationship and distributor network
to cross sell our new fruit and vegetable powder products and concentrate paste
products.

We upgraded our concentrate juice production lines at our
facilities in Daqing and Mudanjiang in 2010. The upgrades included the purchase
of additional equipment and implementation of more advanced production
techniques. We are in the process of upgrading our glazed fruit production line
in our Daqing facility and the concentrate juice production line in our
Mudanjiang facility, which is expected to be complete before the commencement of
the new production season in July 2011. We expect that the upgraded glazed
production line will be able to produce dried golden berry. In addition, the
planned upgrade to the concentrate juice production line in Mudanjiang is
expected to increase its annual production capacity from 6,000 tons to
approximately 9,000 tons. We expect the upgrading will result in more efficient
use of raw materials and have a favorable impact on gross margin.

Production Process

The processing of our concentrate juice, nectar and glazed
fruits begins with the collection of fresh fruits from fruit farmers. Fresh
fruits are first sorted and washed after arriving in our facility. Cleaned fresh
fruits then go through the following processes to be made into different
products.

- Nectar: crush fresh fruits into tiny granules  beat crushed fruits into
  raw nectar  homogenize raw nectar in a blending tank  pasteurize and
  sterilize the raw nectar  fill aseptic bags with sterilized nectar.
- Concentrate juice: crush and beat fresh fruits into mashes  press fruit
  mashes until fruit juice comes out  mix raw fruit juice with proper amount of
  compound enzyme to remove pectin and starch  filter concentrate fruit juice
  in three-way concentrators to achieve the target content of soluble solids,
  acidity and other quality standards as well as no additives  fill the aseptic
  bags with concentrates.
- Concentrate pulp: crush and beat fresh fruits into mashes  mix raw fruit
  pulp  filter concentrate pulp in three-way concentrators to achieve the
  target content of soluble solids, acidity and other quality standards as well
  as no additives  fill the aseptic bags with concentrate pulp.

7

---

- Glazed fruits: separate fresh fruits into different grades  go through
  needling machine to get the fruits needled at the surface  blanch needled
  fruits in a blanching boiler  evacuate the air from fruits  soak evacuated
  fruits in sugar solution in a sugaring tank  bake sugared fruits in a group
  of tunnel dryers.

Quality Control

Our production facility has ISO 9001 and HACCP series
qualifications. We have established a quality control and food safety management
system for the purchase of raw materials, fruit processing, packaging, storage
and distribution. We have also adopted internal quality standards that we
believe are stricter than the standards mandated by the PRC government. Our
quality control team closely monitors and tests the quality of our products to
ensure compliance with these standards.

High quality raw materials are crucial to the production of
quality fruit products. Therefore, we rigorously examine and test fresh fruits
arriving at our plant. Any fruits that fail to meet our quality standard will be
rejected. We perform routine product inspection and sample testing at our
production facility and adhere to strict hygiene standards. For example, every
employee involved in production is required to change into specially made
clothes, wear working caps and shoes. No one is allowed to enter our production
room unless he or she is directly involved in the production process.

All of our products undergo inspection at each stage of the
production process, as well as post-production inspection and final checking
before distribution for sales. Products in storage or in the course of
distribution are also subject to regular quality testing.

Raw Materials and Suppliers

Raw Materials

Our business depends on maintaining a regular, timely and
adequate supply of high-quality fresh fruits, which accounted for approximately
79% of our cost of sales in fiscal year 2011. Our facility is strategically
located in Heilongjiang province, where an abundant supply of source fruits is
available. The close proximity of our facility to the orchards enables us to
purchase fresh fruits at a lower cost. Our other raw materials mainly include
packing materials (e.g. aseptic bags) and auxiliary processing materials (e.g.
sugar and additives) that are widely available.

Suppliers and Supply Arrangements

We employ different procurement strategies to support our rapid
growth based on the source fruit type. We coordinate primarily with the local
government for the supply of golden berries and rely on a large group of vendors
for the supply of other source fruits.

Golden berries in Heilongjiang are mainly grown in four fruit
farms. We estimate that the annual output of golden berries at these four fruit
farms is approximately 100,000 tons, which accounts for approximately 50% of the
total output of golden berries in Heilongjiang province. Our processing volume
of golden berries (including those sold as fresh fruits) in fiscal year 2011 was
approximately 30,850 tons. We currently purchase a majority of our golden
berries from two of these fruit farms -- Hailun and Nehe. It is costly and
inefficient to purchase fresh fruits from each individual farmer so we
coordinate with the local governments which plan and coordinate the overall
fruit planting activities of individual farmers.

We normally sign written agreements with the local governments
of Hailun and Nehe at the beginning of each year, which generally have a
one-year term. The agreement typically sets forth the total quantity of golden
berries to be purchased by us and a predetermined minimum price. The local
governments deliver the demand information to individual farmers and coordinate
corresponding growth and harvesting activities. In the picking season, we submit
our daily request of golden berries to the local governments, who then instruct
the farmers to deliver fresh fruits to our plant on a timely basis. The final
purchase price is based on the prevailing market price, subject to a
predetermined minimum price. This arrangement cuts down our procurement costs
significantly and allows the local governments to protect and maximize the
interests of constituent farmers.

We generally purchase other source fruits directly from vendors
as there is no centralized farm base for these fruits. As an alternative, we
have developed a large group of agents who purchase fruits from the local
farmers and then re-sell them to us. Our sourcing staff maintains close
communication with our agents to ensure their efficiency and loyalty. Our
sourcing staff also spends a lot of time developing new agents in the planting
area of these fruits. We believe we have established an effective and loyal
group of agents who are able to provide us with sufficient fresh fruits to
support our growth.

8

---

Marketing, Sales and Distribution

Sales and Distribution

We currently sell our products directly to approximately 44
regional distributors in China who then sell the products to various customers,
including food processors, supermarkets and wholesale stores. As of March 31,
2011, our sales team consisted of 18 employees. We divide the national market
into six regions and assign each region a sales team. Northern China is
currently our biggest market, accounting for approximately 54.4% of our total
net sales in fiscal year 2011.

We generally require our distributors to pay the full purchase
price in cash before we deliver the products. We also offer credit for our
products to selected existing distributors with excellent credit records and
with whom we maintained long-term business relationships. The credit term is
generally up to 45 days. We utilize different pricing policies based on the type
of source fruit. For instance, the price of our golden berry products is set
based on raw material costs to ensure stable profit margin. We believe that we
are a leading golden berry processor in China and the only processor in
Northeast China which allows us to have strong pricing power. For products based
on other source fruits, we price our products at the prevailing market
price.

Distributors normally have distribution rights to sell our
products within a defined territory. We typically enter into a one-year contract
with each of our distributors at the beginning of the year. The contract
generally requires a 15-day notice of the purchase amount prior to the required
delivery date. We have the right to supervise and monitor distributors sale of
our products. We generally have a no return policy. According to our standard
distribution agreement, we are liable for any loss resulted from a quality
problem only if the distributor provides certification from relevant
authorities. However, distributors will bear any losses caused by their
negligence in the storage of the products. We offer no sales rebates or rewards
to our distributors.

We believe we maintain stable relationships with our
distributors, and many of them have been our distributors for more than three
years. Our top ten distributors accounted for approximately 71.2% and 64.6% of
our total net sales in fiscal year 2011 and 2010, respectively. The biggest
distributor accounted for approximately 16.6% and 13.5% of our total net sales
in fiscal years 2011 and 2010, respectively. In fiscal year 2011, our two
biggest distributors Beijing Huanpenyuan Food Company Limited and Harbin
Shengjinlai Economic and Technology Development Company Limited accounted for
approximately 16.6% and 13.2% of our total net sales, respectively.

Marketing

As of March 31, 2011, we have four marketing personnel who are
responsible for market research, promotion and advertisement. We strengthen our
market presence through various types of marketing campaigns. We participate in
several domestic and international trade fairs, such as China National Sugar and
Alcoholic Commodities Fair and International China Harbin Fair for Trade and
Economic Cooperation. These trade fairs help to promote our reputation and name
recognition in the industry.

Our Competition

Since we process premium specialty fruits grown in Northeast
China, we face little direct competition from the processors of common fruits or
broad-based food processors. Our main competitors are local fruit processors
that offer products similar to ours. Most of our competitors are small-sized
local processors that process only one or two types of specialty fruits.
Compared to these competitors, we believe we have more diversified products,
higher production capacity and greater resources. Our major competitors in China
include Dalian Xinlian Food Company, Shandong Longkou Fudi Food Co. Ltd.,
Zhalantun Changzheng Beverage Factory and Muxing Quick Frozen Food Factory.

Research and Development

Our research and development activities focus on new product
development for new premium specialty fruits and quality improvement. In fiscal
year 2011, we successfully launched blackcurrant and seabuckthorn concentrate
juice and glazed fruit products. After the technology cooperation agreement with
Heilongjiang Ba Yi Land Reclamation University (HLAU), an agriculture
university in China, expired this year, we concentrated on our internal research
and development effort. We benefited from our cooperation with HLAU and
developed several kinds of fruit and vegetable powder products, including
tomato, pumpkin and carrot. We are also doing research and development on dried
fruit products and new fruit paste products. We currently have five employees
dedicated to research and development.

9

---

Newly developed products will be put into production and
commercialized when certain criteria are met, including: market demand is
material, adequate supplies of raw material are secured to allow for efficient
mass production, and production capacity is in place.

Intellectual Property

We believe that our product formulations are proprietary or
have proprietary aspects. We have not
registered or applied for protections in China for most of our intellectual
property or proprietary technologies relating to the formulations of our
products. See Item 1A, Risk FactorsRisks Related to Our BusinessOur inability
to protect our trademarks, patent and trade secrets may prevent us from
successfully marketing our products and competing effectively. Although we
believe that, as of today, patents and copyrights have not been essential to
maintaining our competitive market position, we intend to assess appropriate
occasions in the future for seeking patent and copyright protections for those
aspects of our business that provide significant competitive advantages.

We sell our concentrate juice, glazed fruit and nectar products
under the brand of 农珍之冠. Our chairman Changjun Yu transferred the trademark for
农珍之冠 in both class 29 and class 32 to our company which was approved by the
Trademark Office of the State of Administration for Industry and Commerce of
China in March 2009. The trademark expires in 2018.

We rely on trade secret protection and confidentiality
agreements to protect our proprietary information and know-how. Our management
and each of our research and development personnel have entered into a standard
annual employment contract, which includes a confidentiality clause and a clause
acknowledging that all inventions, designs, trade secrets, works of authorship,
developments and other processes generated by them on our behalf are our
property, and assigning to us any ownership rights that they may claim in those
works. Despite our precautions, it may be possible for third parties to obtain
and use, without our consent, intellectual property that we own or are licensed
to use. Unauthorized use of our intellectual property by third parties, and the
expenses incurred in protecting our intellectual property rights, may adversely
affect our business. See Item 1A, Risk factorsRisks Related to Our
BusinessOur inability to protect our trademarks, patent and trade secrets may
prevent us from successfully marketing our products and competing
effectively.

Regulation

Because our operating subsidiaries are located in the PRC, we
are regulated by the national and local laws of the PRC. The food industry, of
which fruit based products form a part, is subject to extensive regulation in
China. The following paragraphs summarize the most significant PRC regulations
governing our business in China.

We are also subject to the PRCs foreign currency regulations.
The PRC government has controlled Renminbi reserves primarily through direct
regulation of the conversion of Renminbi into other foreign currencies. Although
foreign currencies, which are required for current account transactions, can
be bought freely at authorized PRC banks, the proper procedural requirements
prescribed by PRC law must be met. At the same time, PRC companies are also
required to sell their foreign exchange earnings to authorized PRC banks and the
purchase of foreign currencies for capital account transactions still requires
prior approval of the PRC government.

Food Hygiene and Safety Laws and Regulations

As a producer of food products in China, we are subject to a
number of PRC laws and regulations governing food safety and hygiene, including:

- the PRC Product Quality Law;
- the PRC Food Safety Law;
- the Implementation Rules on the PRC Food Safety Law;
- the Measures of the Administration on the New Food-Additives;

10

---

- the Measures of the Filing of the Enterprise Standard of the Food Safety;
- the Implementation Rules on the Administration and Supervision of Quality
  and Safety in Food Producing and Processing Enterprises;
- the Regulation on the Administration of Production Licenses for Industrial
  Products;
- the General Standards for the Labeling of Prepackaged Foods;
- the Standardization Law;
- the Regulation on Administration of Bar Code of Merchandise; and
- the PRC Metrology Law.

These laws and regulations set out safety and hygiene standards
and requirements for various aspects of food production, such as the use of
additives, production, packaging, handling, labeling and storage, as well as
facilities and equipment. Failure to comply with these laws and regulations may
result in confiscation of our products and proceeds from the sales of
non-compliant products, destruction of our products and inventory, fines,
suspension of production and operations, product recalls, revocation of
licenses, and, in extreme cases, criminal liability.

Environmental Regulations

We are subject to various governmental regulations related to
environmental protection. The major environmental regulations applicable to us
include:

- the Environmental Protection Law of the PRC;
- the Law of PRC on the Prevention and Control of Water Pollution;
- Implementation Rules of the Law of PRC on the Prevention and Control of
  Water Pollution;
- the Law of PRC on the Prevention and Control of Air Pollution;
- Implementation Rules of the Law of PRC on the Prevention and Control of
  Air Pollution;
- the Law of PRC on the Prevention and Control of Solid Waste Pollution; and
- the Law of PRC on the Prevention and Control of Noise Pollution.

We have obtained all permits and licenses required for
production of our products and believe we are in material compliance with all
applicable laws and regulations.

Environmental Matters

Our manufacturing facilities are subject to various pollution
control regulations with respect to noise, water and air pollution and the
disposal of waste and hazardous materials. We are also subject to periodic
inspections by local environmental protection authorities. We believe we are in
material compliance with the relevant PRC environmental laws and regulations and
are not currently subject to any pending actions alleging any violations of
applicable PRC environmental laws.

Our Employees

As of March 31, 2011, we employed a total of approximately 516
full-time employees. The following table sets forth the number of our employees
by function.

|Department                       |  | Number of | 
|-------------------------------- |  | --------- | 
|                                 |  | Employees | 
|Senior Management                |  | 11        | 
|Human Resources & Administration |  | 61        | 
|Production                       |  | 348       | 
|Procurement                      |  | 3         | 
|Marketing                        |  | 4         | 
|Sales                            |  | 17        | 
|Logistic                         |  | 36        | 
|Research & Development           |  | 5         | 
|Quality Control                  |  | 20        | 
|Accounting                       |  | 11        | 
|TOTAL                            |  | 516       | 

11

---

Our employees are not represented by a labor organization or
covered by a collective bargaining agreement. We have not experienced any
material work stoppages.

We are required under PRC law to make contributions to the
employee benefit plans at specified percentages of our after-tax profit. In
addition, we are required by PRC law to cover employees in China with various
types of social insurance. We believe that we are in material compliance with
the relevant PRC laws.

Seasonality

As is typical in the fruit processing industry, we experience
seasonality in our business. Our fruit processing production lines are mainly
carried out from mid-July to mid-November each year because our primary source
fruits are typically harvested during that period and must be processed right
away. As a result of seasonality in production, our personnel, working capital
requirements, cash flow and inventories vary substantially throughout the year.
In fiscal year 2011, sales during the second, third and forth fiscal quarters
accounted for approximately 26.7%, 25.5% and 36.8% of our total net sales
respectively. Generally we experience lesser sales in the first fiscal quarter
because of lower demand and decreased inventory levels.

Insurance

We have property insurance for our facility located in Daqing
and Mudanjiang City. We believe our insurance coverage is customary and standard
for companies of comparable size in comparable industries in China.

We do not have any business liability, interruption or
litigation insurance coverage for our operations in China. Insurance companies
in China offer limited business insurance products. While business interruption
insurance is available to a limited extent in China, we have determined that the
risks of interruption, cost of such insurance and the difficulties associated
with acquiring such insurance on commercially reasonable terms make it
impractical for us to have such insurance. Therefore, we are subject to business
and product liability exposure. See Item 1A, Risk FactorsRisks Related to Our
BusinessWe have limited insurance coverage and do not carry any business
interruption insurance, third-party liability insurance for our production
facilities or insurance that covers the risk of loss of our products in
shipment.

Litigation

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

Available Information

Our Internet website address is www.chinanutrifruit.com.
We make available at this address, free of charge, our Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all
amendments to those reports as soon as reasonably practicable after such
material is electronically filed with or furnished to the United States
Securities and Exchange Commission, or SEC. Information available on our website
is not incorporated by reference in and is not deemed a part of this report. The
public may read and copy any materials we file with the SEC at the SECs Public
Reference Room at 100 F. Street, N.E., Washington, DC, 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports,
proxy and information statements, and other information regarding issues that
file electronically with the SEC at www.sec.gov.

ITEM 1A. RISK FACTORS.

The shares of our common stock are highly speculative in
nature, involve a high degree of risk and should be purchased only by persons
who can afford to lose the entire amount invested in the common stock. Before
purchasing any of the shares of common stock, you should carefully consider the
following factors relating to our business and prospects. Youshould pay particular attention to the fact that we conduct
all of our operations in China and are governed by a legal and regulatory
environment that in some respects differs significantly from the environment
that may prevail in the U.S. and other countries. If any of the following risks
actually occurs, our business, financial condition or operating results will
suffer, the trading price of our common stock could decline, and you may lose
all or part of your investment.

12

---

RISKS RELATED TO OUR BUSINESS

The recent financial crisis could negatively affect our
business, results of operations, and financial condition.

While the financial crisis has stabilized in China, the global
economy remains precarious and faces many challenges, which affect our business
in a variety of ways. Our ability to access the capital markets may be
restricted at a time when we would like, or need, to raise capital, which could
have an impact on our flexibility to react to changing economic and business
conditions. In addition, these economic conditions also impact levels of
consumer spending, which may remain depressed for the foreseeable future.
Consumer purchases of discretionary items generally decline during recessionary
periods and other periods where disposable income is adversely affected. If
demand for our products fluctuates as a result of economic conditions or
otherwise, our revenue and gross margin could be harmed.

Any ill effects, product liability claims, recalls,
adverse publicity or negative public perception regarding particular fruits we
use as raw materials, our products or our industry in general could harm our
sales and cause consumers to avoid our products.

The food industry is subject to risks posed by food spoilage
and contamination, product tampering, product recall, and consumer product
liability claims. Our operations could be impacted by both genuine and
fictitious claims regarding our and our competitors products. In the event of
product contamination or tampering, we may need to recall some of our products.
A widespread product recall could result in significant loss due to the cost of
conducting a product recall including destruction of inventory and the loss of
sales resulting from the unavailability of the product for a period of time.

In addition, any adverse publicity or negative public
perception regarding particular fruits we use as raw materials, our products,
our actions relating to our products, or our industry in general could result in
a substantial drop in demand for our products. This negative public perception
may include publicity regarding the safety or quality of particular fruits we
use as raw materials or products in general, of other companies or of our
products specifically. Negative public perception may also arise from regulatory
investigations or product liability claims, regardless of whether those
investigations involve us or whether any product liability claim is successful
against us. We could also suffer losses from a significant product liability
judgment against us. Either a significant product recall or negative publicity,
involving either our company or our competitors, could also result in a loss of
consumer confidence in our products or the food category, and an actual or
perceived loss of value of our brands, materially impacting consumer demand.

Any fluctuations in raw material supply and prices may
negatively impact our revenue.

A secure supply of principal raw materials is crucial to our
operation. Fresh fruits accounted for approximately 79% of our cost of sales in
fiscal year 2011. The per unit costs of producing our products are subject to
the supply and price volatility of raw materials, especially fresh fruits which
are affected by factors such as weather, growing conditions and pests that are
beyond our control. According to the BBIC Report, approximately 20-30% of fruit
grown in China is lost. Historically, we have been able to meet our fresh fruit
supply needs by building our processing facilities in close proximity to
orchards and by collaborating with local government and establishing an
effective group of vendors. Increases in the price of fresh fruits would
negatively impact our gross margins if we are not able to offset such price
increases through increases in our selling price or changes in our product
mix.

If we cannot maintain a consistent and cost-effective
supply of source fruits, our results of operations, financial condition and
business prospects will deteriorate.

The availability, size, quality and cost of source fruits for
the production of our products are subject to operational risks inherent to
farming, such as crop size, quality, and yield fluctuation caused by poor
weather and growing conditions, pest and disease problems, and other factors
beyond our control. These and other operational risks could cause significant
fluctuations in the availability and cost of the source fruits we use as raw
materials. The prices of our fresh source fruits and other raw materials are
generally determined by the market, and may change at any time. Increases in
prices for any of these raw materials could have a material adverse impact on
our ability to achieve profitability.

13

---

Currently, we source our fresh golden berries primarily from
two fruit farms pursuant to cooperation agreements with local governments and
other fruits from agents who procure fruit for us from individual farmers. While
we believe that we have adequate sources of raw materials and that we in general
maintain good supplier relationships, if we are unable to continue to find
adequate suppliers for our raw materials on economic terms acceptable to us, it
will adversely affect our results of operations, financial condition and
business prospects.

Product liability claims against us could result in
adverse publicity and potentially significant monetary damages.

As with other manufacturers of fruit based products, we are
also exposed to risks associated with product liability claims if the
consumption of our products results in injury or death. Although our products
have not been the subject of any product liability claims, if any such claims
are brought against us, we cannot predict what impact such product liability
claims or resulting negative publicity would have on our business or on our
brand image. The successful assertion of product liability claims against us
could result in potentially significant monetary damages, diversion of
management resources and require us to make significant payments and incur
substantial legal expenses. We do not have product liability insurance and have
not made provisions for potential product liability claims. Therefore, we may
not have adequate resources to satisfy a judgment if a successful claim is
brought against us. Even if a product liability claim is not successfully
pursued to judgment by a claimant, we may still incur substantial legal expenses
defending against such a claim and our brand image and reputation would suffer.
Finally, serious product quality concerns could result in governmental actions
against us, which, among other things, could result in the suspension of
production or distribution of our products, loss of certain licenses, or other
governmental penalties.

If we become directly subject to the recent scrutiny,
criticism and negative publicity involving U.S.-listed Chinese companies, we may
have to expend significant resources to investigate and resolve the matter which
could harm our business operations, stock price and reputation and could result
in a loss of your investment in our stock, especially if such matter cannot be
addressed and resolved favorably.

Recently, U.S. public companies that have substantially all of
their operations in China, particularly companies like us which have completed
so-called reverse merger transactions, have been the subject of intense
scrutiny, criticism and negative publicity by investors, financial commentators
and regulatory agencies, such as the United States Securities and Exchange
Commission. Much of the scrutiny, criticism and negative publicity has centered
around financial and accounting irregularities and mistakes, a lack of effective
internal controls over financial accounting, inadequate corporate governance
policies or a lack of adherence thereto and, in many cases, allegations of
fraud. As a result of the scrutiny, criticism and negative publicity, the
publicly traded stock of many U.S. listed Chinese companies has sharply
decreased in value and, in some cases, has become virtually worthless. Some of
these companies are now subject to shareholder lawsuits, SEC enforcement actions
and are conducting internal and external investigations into the allegations. It
is not clear what effect this sector-wide scrutiny, criticism and negative
publicity will have on our company, our business and our stock price. If we
become the subject of any unfavorable allegations, whether such allegations are
proven to be true or untrue, we will have to expend significant resources to
investigate such allegations and/or defend our company. This situation will be
costly and time consuming and distract our management from growing our company.
If such allegations are not proven to be groundless, our company and business
operations will be severely and your investment in our stock could be rendered
worthless.

We compete in an industry that is brand-conscious, and
unless we are able to establish and maintain brand name recognition our sales
may be negatively impacted.

Our business is substantially dependent upon awareness and
market acceptance of our products and brand by our targeted consumers. In
addition, our business depends on acceptance by our independent distributors and
consumers of our brand. Although we believe that we have made progress towards
establishing market recognition for our brand 农珍之冠 in the Chinese fruit
products industry, it is too early in the product life cycle of the brand to
determine whether our products and brand will achieve and maintain satisfactory
levels of acceptance by independent distributors and retail consumers.

We compete in an industry characterized by rapid changes
in consumer preferences, so our inability to continue developing new products to
satisfy our consumers changing preferences would have a material adverse effect
on our sales volumes.

Our products are processed from premium specialty fruits and
sell at a high price. A decline in the consumption of our products could occur
as a result of a change in consumer preferences, perceptions and spending habits
at any time. Future success will depend partly on our ability to anticipate or
adapt to such changes and to offer, on a timely basis, new products that meet
consumer preferences. Our failure to adapt our product offering to respond to
such changes may result in reduced demand and lower prices for our products,
resulting in a material adverse effect on our sales volumes, sales and
profits.

Our current market distribution and penetration is limited as
compared with the potential market and so our initial views as to customer
acceptance of a particular product can be erroneous, and there can be no
assurance that true market acceptance will ultimately be achieved. In addition,
customer preferences are also affected by factors other than taste. If we do not
adjust to respond to these and other changes in customer preferences, our sales
may be adversely affected.

We rely primarily on third-party distributors, which
could affect our ability to efficiently and profitably distribute and market our
products, maintain our existing markets and expand our business into other
geographic markets.

We do not sell our products directly to end customers. Instead,
we rely on third-party distributors for the sale and distribution of our
products. As of March 31, 2011, this network consisted of approximately 44
distributors. We typically do not enter into long-term agreements with
distributors and have no control over their everyday business activities. To the
extent that our distributors are detracted from selling our products or do not
expend sufficient efforts in managing and selling our products, our sales will
be adversely affected. Our ability to maintain our distribution network and
attract additional distributors will depend on a number of factors, many of
which are outside of our control. Some of these factors include: (i) the level
of demand for our brand and products in a particular distribution area; (ii) our
ability to price our products at levels competitive with those offered by
competing products and (iii) our ability to deliver products in the quantity and
at the time ordered by distributors.

14

---

There can be no assurance that we will be able to meet all or
any of these factors in any of our current or prospective geographic areas of
distribution. Furthermore, a shortage of adequate working capital may make it
impossible for us to do so. Our inability to achieve any of these factors in a
geographic distribution area will have a material adverse effect on our
relationships with our distributors in that particular geographic area, thus
limiting our ability to maintain and expand our market, which will likely
adversely effect our revenues and financial results.

We generally do not have long-term agreements with our
distributors, and we may need to spend significant time and incur significant
expense in attracting and maintaining key distributors.

Our marketing and sales strategy presently, and in the future,
will rely on the performance of our independent distributors and our ability to
attract additional distributors. We generally have one-year written agreements
with our distributors which are renewable at the beginning of every year. In
addition, despite the terms of the written agreements with certain of our
significant distributors, we have no assurance as to the level of performance
under those agreements, or that those agreements will not be terminated. There
is also no assurance that we will be able to maintain our current distribution
relationships or establish and maintain successful relationships with
distributors in new geographic distribution areas. Moreover, there is the
additional possibility that we will have to incur significant expenses to
attract and maintain key distributors in one or more of our geographic
distribution areas in order to profitably exploit our geographic markets. We may
not have sufficient working capital to allow us to do so.

A large percentage of our net sales has been derived from
sales to a limited number of distributors, and our business will suffer if sales
to these distributers decline.

A significant portion of our net sales historically has been
derived from a limited number of distributors. Our top ten distributors
accounted for approximately 71.2% and 64.6% of our total net sales in fiscal
year 2011 and 2010, respectively. In fiscal year 2011, our two biggest
distributors Beijing Huanpenyuan Food Company Limited and Harbin Shengjinlai
Economic and Technology Development Company Limited accounted for approximately
16.6% and 13.2% of our total net sales, respectively. Any significant reduction
in demand for products manufactured by any of these major distributors and/or
their customers and any decrease in their demand for our products could harm our
sales and business operations. The loss of one or more of these distributors
could damage our business, financial condition and results of operations.

Failure to execute our business expansion plan could
adversely affect our financial condition and results of operations.

We are currently building a new fruit and vegetable powder
facility in Daqing and a new factory facility in Zhaoyuan with a new
multi-purpose concentrate paste production line. We also plan to build another
fruit and vegetable powder production line with an expected annual production
capacity of approximately 10,000 tons in Daqing. Our decision to increase our
production capacity was based in part on our projections of market reception,
increases in our sales volume and growth in the size of the premium specialty
fruit and vegetable based product market in China. If actual customer demand
does not meet our projections, we will likely suffer overcapacity problems and
may have to leave capacity idle, which may reduce our overall profitability and
adversely affect our financial condition and results of operations. Our future
success depends on our ability to expand our business to address growth in
demand for our current and future products. Our ability to add production
capacity and increase output is subject to significant risks and uncertainties,
including:

- the unavailability of additional funding to expand our production capacity,
  purchase additional fixed assets and purchase raw materials on favorable terms
  or at all;
- delays and cost overruns as a result of a number of factors, many of which
  may be beyond our control, such as problems with equipment vendors and
  suppliers of raw materials;
- failure to maintain high quality control standards;
- shortage of source fruits;
- our inability to obtain, or delays in obtaining, required approvals by
  relevant government authorities;
- diversion of significant management attention and other resources; and
- failure to execute our expansion plan effectively.

15

---

As our business grows, we will need to implement a variety of
new and upgraded operational and financial systems, procedures and controls,
including improvements to our accounting and other internal management systems
by dedicating additional resources to our reporting and accounting functions,
and improvements to our record keeping and contract tracking system. We will
need to respond to competitive market conditions and continue to enhance
existing products and develop new products, and retain existing customers and
attract new customers. We will also need to recruit more personnel and train and
manage our growing employee base. Furthermore, we will need to maintain and
expand our relationships with our current and future customers, suppliers,
distributors and other third parties, and there is no guarantee that we will
succeed.

If we encounter any of the risks described above, or are
otherwise unable to establish or successfully operate additional production
capacity or to increase production output, we may be unable to grow our business
and revenues, reduce our operating costs, maintain our competitiveness or
improve our profitability, and our business, financial condition, results of
operations and prospects may be adversely affected.

Because we experience seasonal fluctuations in our sales,
our quarterly results will fluctuate and our annual performance will depend
largely on results from three quarters.

Our business is highly seasonal in production, reflecting the
harvest season of our primary source fruits during the months from mid-July to
mid-November. Typically, a substantial portion of our revenues are earned during
our second, third and forth fiscal quarters. We generally experience lowest
revenues during our first fiscal quarter. Sales in the second, third and forth
fiscal quarters accounted for approximately 26.7%, 25.5% and 36.8% of our total
net sales for the fiscal year ended March 31, 2011, respectively. If sales in
these quarters are lower than expected, our operating results would be adversely
affected, and it would have a disproportionately large impact on our annual
operating results.

Due to our rapid growth in recent years, our past results
may not be indicative of our future performance and evaluating our business and
prospects may be difficult.

Our business has grown and evolved rapidly in recent years as
demonstrated by our growth in net sales for the fiscal year ended March 31, 2011
to $87.0 million from $56.4 million for fiscal year 2009. We may not be able to
achieve similar growth in future periods, and our historical operating results
may not provide a meaningful basis for evaluating our business, financial
performance and prospects. Moreover, our ability to achieve satisfactory
production results at higher volumes is unproven. Therefore, you should not rely
on our past results or our historical rate of growth as an indication of our
future performance.

Our growth strategy may require additional capital that
may not be available on favorable terms or at all.

We have, in the past, sold our common stock to raise additional
capital. Our business expansion requires significant capital and although we
believe that our current cash and cash flow from operations will be sufficient
to meet our present and reasonably anticipated cash needs, we may, in the
future, require additional cash resources due to changed business conditions,
implementation of our strategy to expand our production capacity or other
investments or acquisitions we may decide to pursue. If our own financial
resources are insufficient to satisfy our capital requirements, we may seek to
sell additional equity or debt securities or obtain additional credit facilities
and there can be no assurance that such financing will be available as needed
or, if available, on terms favorable to us. Any additional equity financing may
be dilutive to shareholders and such additional equity securities may have
rights, preferences or privileges that are senior to those of our existing
common stock. The incurrence of indebtedness would result in increased debt
service obligations and could require us to agree to operating and financial
covenants that would restrict our operations. If we are unable to generate
sufficient cash flow from operating activities or obtain funds for required
payments of interest and principal on such additional indebtedness, or if we
fail to comply with our debt covenants, we will be in default. Any failure by us
to raise additional funds on terms favorable to us, or at all, could limit our
ability to expand our business operations and could harm our overall business
prospects.

We depend heavily on key personnel, and turnover of key
employees and senior management could harm our business.

Our future business and results of operations depend in
significant part upon the continued contributions of our key technical and
senior management personnel, including Changjun Yu, our Chairman and Chief
Executive Officer and Colman Cheng, our Chief Financial Officer. None of these
key management members currently owns any shares of common stock or any other
equity interest in the Company. Although they have signed employment agreements
with our subsidiary Fezdale which include a non-competition provision
which prohibits them from engaging in the food processing industry during the
term of the agreement and for two years after the termination of employment,
such employment agreements can be terminated at will. If we lose any of these
key employees and are unable to find a qualified replacement in a timely manner,
our business will be negatively impacted. In addition, if a key employee fails
to perform in his or her current position, or if we are not able to attract and
retain skilled employees as needed, our business could suffer. Significant
turnover in our senior management could significantly deplete the institutional
knowledge held by our existing senior management team. We depend on the skills
and abilities of these key employees in managing the reclamation, technical, and
marketing aspects of our business, any part of which could be harmed by turnover
in the future.

16

---

The concentration of ownership of our securities by our
controlling stockholders who do not participate in the management of our
business can result in stockholder votes that are not in our best interests or
the best interests of our minority stockholders.

Mr. Yiu Fai Kung and Mr. Kwan Mo Ng, collectively beneficially
own approximately 79% of our outstanding voting securities, giving them
controlling interest in the Company. However, neither Mr. Kung nor Mr. Ng is an
executive officer or director of the Company and is not a participant in any way
in the day to day affairs of the Company. Mr. Kung and Mr. Ng may have little or
no knowledge of the details of the Companys operations and do not participate
in the corporate governance of the Company. In addition, this concentration of
ownership may also have the effect of discouraging, delaying or preventing a
future change of control, which could deprive our stockholders of an opportunity
to receive a premium for their shares as part of a sale of our company and might
reduce the price of our shares.

Our inability to protect our trademarks, patent and trade
secrets may prevent us from successfully marketing our products and competing
effectively.

Failure to protect our intellectual property could harm our
brands and our reputation, and adversely affect our ability to compete
effectively. Further, enforcing or defending our intellectual property rights,
including our trademarks, patents, copyrights and trade secrets, could result in
the expenditure of significant financial and managerial resources. We produce,
market and sell our products under 农珍之冠. We regard our intellectual property,
particularly our trademarks and trade secrets to be of considerable value and
importance to our business and our success. We rely on a combination of
trademark and trade secrecy laws, and contractual provisions to protect our
intellectual property rights. There can be no assurance that the steps taken by
us to protect these proprietary rights will be adequate or that third parties
will not infringe or misappropriate our trademarks, trade secrets (including our flavor concentrate trade secrets) or similar proprietary rights. In addition,
there can be no assurance that other parties will not assert infringement claims
against us, and we may have to pursue litigation against other parties to assert
our rights. Any such claim or litigation could be costly and we may lack the
resources required to defend against such claims. In addition, any event that
would jeopardize our proprietary rights or any claims of infringement by third
parties could have a material adverse affect on our ability to market or sell
our brands, and profitably exploit our products.

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

As directed by Section 404 of the Sarbanes-Oxley Act of 2002,
or SOX 404, the SEC adopted rules requiring public companies to include a
report of management on the companys internal controls over financial reporting
in their annual reports, including Form 10-K. In addition, the independent
registered public accounting firm auditing a companys financial statements must
also attest to the operating effectiveness of the companys internal controls.
As a smaller reporting company, we are currently exempt from the auditor
attestation requirements. We can provide no assurance that we will comply with
all of the requirements imposed thereby. There can be no positive assurance that
we will receive a positive attestation from our independent auditors, when
required. In the event we identify significant deficiencies or material
weaknesses in our internal controls that we cannot remediate in a timely manner
or we are unable to receive a positive attestation from our independent auditors
with respect to our internal controls, investors and others may lose confidence
in the reliability of our financial statements.

17

---

We have limited insurance coverage and do not carry any
business interruption insurance, third-party liability insurance for our
production facilities or insurance that covers the risk of loss of our products
in shipment.

Operation of our facilities involves many risks, including
equipment failures, natural disasters, industrial accidents, power outages,
labor disturbances and other business interruptions. Furthermore, if any of our
products are faulty, then we may become subject to product liability claims or
we may have to engage in a product recall. We do not carry any business
interruption insurance, product recall or third-party liability insurance for
our production facilities or with respect to our products to cover claims
pertaining to personal injury or property or environmental damage arising from
defects in our products, product recalls, accidents on our property or damage
relating to our operations. Therefore, our existing insurance coverage may not
be sufficient to cover all risks associated with our business. As a result, we
may be required to pay for financial and other losses, damages and liabilities,
including those caused by natural disasters and other events beyond our control,
out of our own funds, which could have a material adverse effect on our
business, financial condition and results of operations.

We may be exposed to liabilities under the Foreign
Corrupt Practices Act and Chinese anti-corruption laws, and any determination
that we violated these laws could have a material adverse effect on our
business.

We are subject to the Foreign Corrupt Practice Act, or FCPA,
and other laws that prohibit improper payments or offers of payments to foreign
governments and their officials and political parties by U.S. persons and
issuers as defined by the statute, for the purpose of obtaining or retaining
business. We have operations, agreements with third parties and we make most of
our sales in China. PRC also strictly prohibits bribery of government officials.
Our activities in China create the risk of unauthorized payments or offers of
payments by the employees, consultants, sales agents or distributors of our
Company, even though they may not always be subject to our control. It is our
policy to implement safeguards to discourage these practices by our employees.
However, our existing safeguards and any future improvements may prove to be
less than effective, and the employees, consultants, sales agents or
distributors of our Company may engage in conduct for which we might be held
responsible. Violations of the FCPA or Chinese anti-corruption laws may result
in severe criminal or civil sanctions, and we may be subject to other
liabilities, which could negatively affect our business, operating results and
financial condition. In addition, the U.S. government may seek to hold our
Company liable for successor liability FCPA violations committed by companies in
which we invest or that we acquire.

18

---

RISKS RELATED TO DOING BUSINESS IN CHINA

Adverse changes in political and economic policies of the
PRC government could impede the overall economic growth of China, which could
reduce the demand for our products and damage our business.

We conduct substantially all of our operations and generate
most of our revenue in China. Accordingly, our business, financial condition,
results of operations and prospects are affected significantly by economic,
political and legal developments in China. The PRC economy differs from the
economies of most developed countries in many respects, including:

- a higher level of government involvement;
- a early stage of development of the market-oriented sector of the economy;
- a rapid growth rate;
- a higher level of control over foreign exchange; and
- the allocation of resources.

As the PRC economy has been transitioning from a planned
economy to a more market-oriented economy, the PRC government has implemented
various measures to encourage economic growth and guide the allocation of
resources. While these measures may benefit the overall PRC economy, they may
also have a negative effect on us.

Although the PRC government has in recent years implemented
measures emphasizing the utilization of market forces for economic reform, the
PRC government continues to exercise significant control over economic growth in
China through the allocation of resources, controlling the payment of foreign
currency-denominated obligations, setting monetary policy and imposing policies
that impact particular industries or companies in different ways.

Any adverse change in economic conditions or government
policies in China could have a material adverse effect on the overall economic
growth in China, which in turn could lead to a reduction in demand for our
services and consequently have a material adverse effect on our business and
prospects.

PRC food hygiene and safety laws may become more onerous,
which may adversely affect our operations and financial performance and lead to
an increase in our costs which we may be unable to pass on to our
customers.

Operators within the PRC fruit processing industry are subject
to compliance with PRC food hygiene and safety laws and regulations. Such laws
and regulations require all enterprises engaged in the production of fruit based
products to obtain a hygiene license. They also set out hygiene standards with
respect to food and food additives, packaging and containers, labeling on
packaging as well as hygiene requirements for food production and sites,
facilities and equipment used for the transportation and the sale of food.
Failure to comply with PRC food hygiene and safety laws may result in fines,
suspension of operations, loss of hygiene license and, in certain cases,
criminal proceedings against an enterprise and its management. Although we are
in compliance with current PRC food hygiene and safety laws and regulations, in
the event that such laws and regulations become more stringent or widen in
scope, we may fail to comply with such laws, or if we comply, our production and
distribution costs may increase, and we may be unable to pass these additional
costs on to our customers.

Uncertainties with respect to the PRC legal system could
limit the legal protections available to you and us.

We conduct substantially all of our business through our
operating subsidiaries in the PRC. Our operating subsidiaries are generally
subject to laws and regulations applicable to foreign investments in China and,
in particular, laws applicable to foreign-invested enterprises. The PRC legal
system is based on written statutes, and prior court decisions may be cited for
reference but have limited precedential value. Since 1979, a series of new PRC
laws and regulations have significantly enhanced the protections afforded to
various forms of foreign investments in China. However, since the PRC legal
system continues to rapidly evolve, the interpretations of many laws,
regulations and rules are not always uniform and enforcement of these laws,
regulations and rules involve uncertainties, which may limit legal protections
available to you and us. In addition, any litigation in China may be protracted
and result in substantial costs and diversion of resources and management
attention. In addition, all of our executive officers and most of our directors
are residents of China and not of the United States, and substantially all the assets of these
persons are located outside the United States. As a result, it could be
difficult for investors to affect service of process in the United States or to
enforce a judgment obtained in the United States against our Chinese operations
and subsidiary.

19

---

You may have difficulty enforcing judgments against us.

We are a Nevada holding company and most of our assets are
located outside of the United States. Substantially all of our current
operations are conducted in the PRC. In addition, most of our directors and
officers are nationals and residents of countries other than the United States.
A substantial portion of the assets of these persons is located outside the
United States. As a result, it may be difficult for you to effect service of
process within the United States upon these persons. It may also be difficult
for you to enforce in U.S. courts judgments on the civil liability provisions of
the U.S. federal securities laws against us and our officers and directors, most
of whom are not residents in the United States and the substantial majority of
whose assets are located outside of the United States. In addition, there is
uncertainty as to whether the courts of the PRC would recognize or enforce
judgments of U.S. courts. Grandall Legal Group, our counsel as to PRC law, has
advised us that the recognition and enforcement of foreign judgments are
provided for under the PRC Civil Procedures Law. Courts in China may recognize
and enforce foreign judgments in accordance with the requirements of the PRC
Civil Procedures Law based on treaties between China and the country where the
judgment is made or on reciprocity between jurisdictions. China does not have
any treaties or other arrangements that provide for the reciprocal recognition
and enforcement of foreign judgments with the United States. In addition,
according to the PRC Civil Procedures Law, courts in the PRC will not enforce a
foreign judgment against us or our directors and officers if they decide that
the judgment violates basic principles of PRC law or national sovereignty,
security or the public interest. So it is uncertain whether a PRC court would
enforce a judgment rendered by a court in the United States.

If we are found to have failed to comply with applicable
laws, we may incur additional expenditures or be subject to significant fines
and penalties.

Our operations are subject to PRC laws and regulations
applicable to us. However, many PRC laws and regulations are uncertain in their
scope, and the implementation of such laws and regulations in different
localities could have significant differences. In certain instances, local
implementation rules and/or the actual implementation are not necessarily
consistent with the regulations at the national level. Although we strive to
comply with all the applicable PRC laws and regulations, we cannot assure you
that the relevant PRC government authorities will not later determine that we
have not been in compliance with certain laws or regulations.

In addition, our facilities and products are subject to many
laws and regulations administered by the PRC State Administration for Industry
and Commerce, the PRC State Administration of Taxation, the PRC Ministry of
Health and Hygiene Permitting Office, the PRC General Administration of Quality
Supervision, Inspection and Quarantine, and the PRC State Food and Drug
Administration Bureau relating to the processing, packaging, storage,
distribution, advertising, labeling, quality, and safety of food products. Our
failure to comply with these and other applicable laws and regulations in China
could subject us to administrative penalties and injunctive relief, as well as
civil remedies, including fines, injunctions and recalls of our products. It is
possible that changes to such laws or more rigorous enforcement of such laws or
with respect to our current or past practices could have a material adverse
effect on our business, operating results and financial condition. Further,
additional environmental, health or safety issues relating to matters that are
not currently known to management may result in unanticipated liabilities and
expenditures.

The PRC government exerts substantial influence over the
manner in which we must conduct our business activities.

The PRC government has exercised and continues to exercise
substantial control over virtually every sector of the Chinese economy through
regulation and state ownership. Our ability to operate in China may be harmed by
changes in its laws and regulations, including those relating to taxation,
import and export tariffs, environmental regulations, land use rights, property
and other matters. We believe that our operations in China are in material
compliance with all applicable legal and regulatory requirements. However, the
central or local governments of the jurisdictions in which we operate may impose
new, stricter regulations or interpretations of existing regulations that would
require additional expenditures and efforts on our part to ensure our compliance
with such regulations or interpretations.

Accordingly, government actions in the future, including any
decision not to continue to support recent economic reforms and to return to a
more centrally planned economy or regional or local variations in the
implementation of economic policies, could have a significant effect on economic
conditions in China or particular regions thereof and could require us to divest
ourselves of any interest we then hold in Chinese properties or joint
ventures.

20

---

Future inflation in China may inhibit our ability to
conduct business in China.

In recent years, the Chinese economy has experienced periods of
rapid expansion and highly fluctuating rates of inflation. These factors have
led to the adoption by the Chinese government, from time to time, of various
corrective measures designed to restrict the availability of credit or regulate
growth and contain inflation. High inflation may in the future cause the Chinese
government to impose controls on credit and/or prices, or to take other action,
which could inhibit economic activity in China, and thereby harm the market for
our products and our company.

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

Substantially all our sales revenue and expenses are
denominated in RMB. Under PRC law, the RMB is currently convertible under the
current account, which includes dividends and trade and service-related
foreign exchange transactions, but not under the capital account, which
includes foreign direct investment and loans. Currently, our PRC operating
subsidiary may purchase foreign currencies for settlement of current account
transactions, including payments of dividends to us, without the approval of the
State Administration of Foreign Exchange, or SAFE, by complying with certain
procedural requirements. However, the relevant PRC government authorities may
limit or eliminate our ability to purchase foreign currencies in the future.
Since a significant amount of our future revenue will be denominated in RMB, any
existing and future restrictions on currency exchange may limit our ability to
utilize revenue generated in RMB to fund our business activities outside China
that are denominated in foreign currencies.

Foreign exchange transactions by our PRC operating subsidiary
under the capital account continue to be subject to significant foreign exchange
controls and require the approval of or need to register with PRC government
authorities, including SAFE. In particular, if our PRC operating subsidiary
borrows foreign currency through loans from us or other foreign lenders, these
loans must be registered with SAFE, and if we finance the subsidiary by means of
additional capital contributions, these capital contributions must be approved
by certain government authorities, including the Ministry of Commerce, or
MOFCOM, or their respective local counterparts. These limitations could affect
their ability to obtain foreign exchange through debt or equity financing.

Fluctuations in exchange rates could adversely affect our
business and the value of our securities.

The value of our common stock will be indirectly affected by
the foreign exchange rate between the U.S. dollar and RMB and between those
currencies and other currencies in which our sales may be denominated.
Appreciation or depreciation in the value of the RMB relative to the U.S. dollar
would affect our financial results reported in U.S. dollar terms without giving
effect to any underlying change in our business or results of operations.
Fluctuations in the exchange rate will also affect the relative value of any
dividend we issue that will be exchanged into U.S. dollars, as well as earnings
from, and the value of, any U.S. dollar-denominated investments we make in the
future.

Since July 2005, the RMB has no longer been pegged to the U.S.
dollar. Although the Peoples Bank of China regularly intervenes in the foreign
exchange market to prevent significant short-term fluctuations in the exchange
rate, the RMB may appreciate or depreciate significantly in value against the
U.S. dollar in the medium to long term. Moreover, it is possible that in the
future PRC authorities may lift restrictions on fluctuations in the RMB exchange
rate and lessen intervention in the foreign exchange market.

Very limited hedging transactions are available in China to
reduce our exposure to exchange rate fluctuations. To date, we have not entered
into any hedging transactions. While we may enter into hedging transactions in
the future, the availability and effectiveness of these transactions may be
limited, and we may not be able to successfully hedge our exposure at all. In
addition, our foreign currency exchange losses may be magnified by PRC exchange
control regulations that restrict our ability to convert RMB into foreign
currencies.

Restrictions under PRC law on our PRC subsidiaries
ability to make dividends and other distributions could materially and adversely
affect our ability to grow, make investments or acquisitions that could benefit
our business, pay dividends to you, and otherwise fund and conduct our
businesses.

Substantially all of our revenues are earned by our PRC
subsidiaries. However, PRC regulations restrict the ability of our PRC
subsidiaries to make dividends and other payments to their offshore parent
companies. PRC legal restrictions permit payments of dividend by our PRC subsidiaries only out of their
accumulated after-tax profits, if any, determined in accordance with PRC
accounting standards and regulations. Our PRC subsidiaries are also required
under PRC laws and regulations to allocate at least 10% of their respective
annual after-tax profits determined in accordance with PRC GAAP to a statutory
general reserve fund until the amounts in said fund reaches 50% of their
respective registered capital. Allocations to these statutory reserve funds can
only be used for specific purposes and are not transferable to us in the form of
loans, advances or cash dividends. Any limitations on the ability of our PRC
subsidiaries to transfer funds to us could materially and adversely limit our
ability to grow, make investments or acquisitions that could be beneficial to
our business, pay dividends and otherwise fund and conduct our business.

21

---

Failure to comply with PRC regulations relating to the
establishment of offshore special purpose companies by PRC residents may subject
our PRC resident stockholders to personal liability, limit our ability to
acquire PRC companies or to inject capital into our PRC subsidiaries, limit our
PRC subsidiaries ability to distribute profits to us or otherwise materially
adversely affect us.

Our ability to conduct foreign-exchange activities in the PRC
is subject to uncertainties surrounding the interpretation of SAFE regulations,
one of which is Circular 75. Under the Notice on Relevant Issues in the Foreign
Exchange Control over Financing and Return Investment Through Special Purpose
Companies by Residents Inside China (as amended and supplemented, Circular
75), PRC residents must register with a local branch of SAFE (1) before they
establish or gain control of an overseas special purpose vehicle, or SPV, for
the purpose of overseas equity financing (including convertible debt financing);
(2) when they contribute their assets or equity interests in a domestic
enterprise to an SPV or engage in overseas financing after contributing assets
or equity interests to an SPV; and (3) when their SPV undergoes a material
change outside of China, such as a change in share capital or merger or
acquisition. If any PRC resident who holds stock in an SPV fails to make the
required SAFE registration and make any amended registration, the onshore PRC
subsidiaries of that offshore company may be prohibited from distributing their
profits and the proceeds from any reduction in capital, share transfer or
liquidation to the offshore SPV. Failure to comply with the SAFE registration
and amendment registration requirements described above could result in
liability for evading PRC laws applicable to foreign exchange restrictions.

We have advised our shareholders who are PRC residents, as
defined in Circular 75, to register with the relevant branch of SAFE, as
currently required, in connection with their equity interests in us and our
acquisitions of equity interests in our PRC subsidiaries. However, we cannot
provide any assurances that their existing registrations have fully complied
with, and they have made all necessary amendments to their registration to fully
comply with, all applicable registrations or approvals required by Circular 75.
Moreover, because of uncertainty over how Circular 75 will be interpreted and
implemented, and how or whether SAFE will apply it to us, we cannot predict how
it will affect our business operations or future strategies. For example, our
present and prospective PRC subsidiaries ability to conduct foreign exchange
activities, such as the remittance of dividends and foreign currency-denominated
borrowings, may be subject to compliance with Circular 75 by our PRC resident
beneficial holders. In addition, such PRC residents may not always be able to
complete the necessary registration procedures required by Circular 75. We also
have little control over either our present or prospective direct or indirect
shareholders or the outcome of such registration procedures. A failure by our
PRC resident beneficial holders or future PRC resident shareholders to comply
with Circular 75, if SAFE requires it, could subject these PRC resident
beneficial holders to fines or legal sanctions, restrict our overseas or
cross-border investment activities, limit our subsidiaries ability to make
distributions or pay dividends or affect our ownership structure, which could
adversely affect our business and prospects.

The M&A Rule establishes more complex procedures for
some acquisitions of Chinese companies by foreign investors, which could make it
more difficult for us to pursue growth through acquisitions in
China.

On August 8, 2006, six PRC regulatory agencies, including the
CSRC, promulgated the Provisions Regarding Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors, or the M&A Rule, which became effective
on September 8, 2006 and was amended on June 22, 2009. The M&A Rule
establishes additional procedures and requirements that could make some
acquisitions of Chinese companies by foreign investors more time-consuming and
complex, including requirements in some instances that MOFCOM be notified in
advance of any change-of-control transaction and in some situations, require
approval of MOFCOM when a foreign investor takes control of a Chinese domestic
enterprise. In the future, we may grow our business in part by acquiring
complementary businesses, although we do not have any plans to do so at this
time. The M&A Rule also requires MOFCOM antitrust review of any
change-of-control transactions involving certain types of foreign acquirers.
Complying with the requirements of the M&A Rule to complete such
transactions could be time-consuming, and any required approval processes,
including obtaining approval from MOFCOM, may delay or inhibit our ability to complete such transactions, which could
affect our ability to expand our business or maintain our market share.

22

---

We face uncertainty from the Circular on Strengthening
the Administration of Enterprise Income Tax on Non-resident Enterprises Share
Transfer (Circular 698) released in December 2009 by China's State
Administration of Taxation (SAT), effective as of January 1, 2008.

Where a foreign investor indirectly transfers equity interests
in a Chinese resident enterprise by selling the shares in an offshore holding
company, and the latter is located in a country (jurisdiction) where the
effective tax burden is less than 12.5% or where the offshore income of its
residents is not taxable, the foreign investor must provide the PRC tax
authority in charge of that Chinese resident enterprise with the relevant
information within 30 days of the transfer.

Where a foreign investor indirectly transfers equity interests
in a Chinese resident enterprise through the abuse of form of organization and
there are no reasonable commercial purposes for such form with the result that
the corporate income tax liability is avoided, the PRC tax authorities shall
have the power to reassess the nature of the equity transfer in accordance with
the substance-over-form principle and deny the existence of an offshore
holding company that is used for tax planning purposes.

Income derived from equity transfers as mentioned in this
circular refers to income derived by nonresident enterprises from direct or
indirect transfers of equity interest in China resident enterprises, excluding
shares in Chinese resident enterprises that are bought and sold openly on the
stock exchange.

While the term indirectly transfer is not defined, we
understand that the relevant PRC tax authorities have jurisdiction regarding
requests for information over a wide range of foreign entities having no direct
contact with China. The relevant PRC tax authorities have not yet promulgated
any formal provisions or formally declared or stated how to calculate the
effective tax in the offshore country (jurisdiction) and to what extent and the
process of the disclosure to the PRC tax authority in charge of that Chinese
resident enterprise. Meanwhile, there are not any formal declarations with
regard to how to decide abuse of form of organization and reasonable
commercial purpose, which can be utilized by us to determine if our company
complies with the Circular 698.

Under the Enterprise Income Tax Law, we may be classified
as a resident enterprise of China. Such classification will likely result in
unfavorable tax consequences to us and our non-PRC stockholders.

China passed a new Enterprise Income Tax Law, or the EIT Law,
and its implementing rules, both of which became effective on January 1, 2008.
Under the EIT Law, an enterprise established outside of China with de facto
management bodies within China is considered a resident enterprise, meaning
that it can be treated in a manner similar to a Chinese enterprise for
enterprise income tax purposes. The implementing rules of the EIT Law define de
facto management as substantial and overall management and control over the
production and operations, personnel, accounting, and properties of the
enterprise.

On April 22, 2009, the State Administration of Taxation issued
the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment
Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to
Criteria of de facto Management Bodies, or the Notice, further interpreting the
application of the EIT Law and its implementation non-Chinese enterprise or
group controlled offshore entities. Pursuant to the Notice, an enterprise
incorporated in an offshore jurisdiction and controlled by a Chinese enterprise
or group will be classified as a non-domestically incorporated resident
enterprise if (i) its senior management in charge of daily operations reside or
perform their duties mainly in China; (ii) its financial or personnel decisions
are made or approved by bodies or persons in China; (iii) its substantial assets
and properties, accounting books, corporate chops, board and shareholder minutes
are kept in China; and (iv) at least half of its directors with voting rights or
senior management often resident in China. A resident enterprise would be
subject to an enterprise income tax rate of 25% on its worldwide income and must
pay a withholding tax at a rate of 10% when paying dividends to its non-PRC
stockholders. However, detailed measures on imposition of tax from
non-domestically incorporated resident enterprises are still unavailable.
Therefore, it is unclear how tax authorities will determine tax residency based
on the facts of each case.

We may be deemed to be a resident enterprise by Chinese tax
authorities. If the PRC tax authorities determine that we are a resident
enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC
tax consequences could follow.

23

---

First, we may be subject to the enterprise income tax at a rate
of 25% on our worldwide taxable income as well as PRC enterprise income tax
reporting obligations. In our case, this would mean that income such as interest
on financing proceeds and non-China source income would be subject to PRC
enterprise income tax at a rate of 25%. Second, although under the EIT Law and
its implementing rules dividends paid to us from our PRC subsidiary would
qualify as tax-exempt income, we cannot guarantee that such dividends will not
be subject to a 10% withholding tax, as the PRC foreign exchange control
authorities, which enforce the withholding tax, have not yet issued guidance
with respect to the processing of outbound remittances to entities that are
treated as resident enterprises for PRC enterprise income tax purposes. Finally,
it is possible that future guidance issued with respect to the new resident
enterprise classification could result in a situation in which a 10%
withholding tax is imposed on dividends we pay to our non-PRC stockholders and
with respect to gains derived by our non-PRC stockholders from transferring our
shares. We are actively monitoring the possibility of resident enterprise
treatment and are evaluating appropriate organizational changes to avoid this
treatment, to the extent reasonably possible. If we were treated as a resident
enterprise by PRC tax authorities, we would be subject to taxation in both the
U.S. and China, and our PRC tax may not be creditable against our U.S. tax.

RISKS RELATED TO THE MARKET FOR OUR STOCK GENERALLY

The market price of our common stock is volatile, leading
to the possibility of its value being depressed at a time when you may want to
sell your holdings.

The market price of our common stock is volatile, and this
volatility may continue. Numerous factors, many of which are beyond our control,
may cause the market price of our common stock to fluctuate significantly. In
addition to market and industry factors, the price and trading volume for our
common stock may be highly volatile for specific business reasons. Factors such
as variations in our revenues, earnings and cash flow, announcements of new
investments, cooperation arrangements or acquisitions, and fluctuations in
market prices for our products could cause the market price for our shares to
change substantially.

Securities class action litigation is often instituted against
companies following periods of volatility in their stock price. This type of
litigation could result in substantial costs to us and divert our managements
attention and resources.

Moreover, the trading market for our common stock will be
influenced by research or reports that industry or securities analysts publish
about us or our business. If one or more analysts who cover us downgrade our
common stock, the market price for our common stock would likely decline. If one
or more of these analysts cease coverage of us or fail to regularly publish
reports on us, we could lose visibility in the financial markets, which, in
turn, could cause the market price for our common stock or trading volume to
decline.

Furthermore, securities markets may from time to time
experience significant price and volume fluctuations for reasons unrelated to
operating performance of particular companies. These market fluctuations may
adversely affect the price of our common stock and other interests in our
company at a time when you want to sell your interest in us.

The market price of our stock may be affected by low
volume.

Although our common stock is traded on the NYSE Amex, the
trading volume of our common stock has generally been low. Reported average
daily trading volume in our common stock for the three month period ended June
20, 2011 was approximately 20,633 shares. Limited trading volume will subject
our shares of common stock to greater price volatility and may make it difficult
for our stockholders to sell their shares of common stock at a price that is
attractive to them.

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

Our Articles of Incorporation authorizes the board of directors
to issue up to 5,000,000 shares of preferred stock. The preferred stock may be
issued in one or more series, the terms of which may be determined at the time
of issuance by the board of directors without further action by the
stockholders. These terms may include preferences as to dividends and
liquidation, conversion rights, redemption rights and sinking fund provisions.
The issuance of any preferred stock could diminish the rights of holders of our
common stock, and therefore could reduce the value of such common stock. In
addition, specific rights granted to future holders of preferred stock could be
used to restrict our ability to merge with, or sell assets to, a third party.
The ability of the board of directors to issue preferred stock could make it
more difficult, delay, discourage, prevent or make it more costly to acquire or effect
a change-in-control, which in turn could prevent our stockholders from
recognizing a gain in the event that a favorable offer is extended and could
materially and negatively affect the market price of our common stock.

24

---

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

Not Applicable.

ITEM 2.      PROPERTIES.

There is no private land ownership in China. Individuals and
companies are permitted to acquire land use rights for specific purposes. We
were granted land use rights from the PRC government for approximately 24,217
and 37,309 square meters of land located at No. 3, Xin Fa Street, Daqing Hi-tech
Industrial Development Zone, Daqing City and Bei Dian Village, Wu Lin Town, Lin
Kou County, Mudangjiang City, respectively. The land use rights of these two
parcels of land will expire on May 19, 2055 and February 28, 2058,
respectively.

We recently acquired the land use right for approximately
41,000 square meters of land located in Daqing to build our new fruit and
vegetable powder manufacturing facility. The new facility is expected to begin
production in July 2011 and will produce tomato, pumpkin and other popular fruit
and vegetable powders that can be used as ingredients in a variety of products,
including baby food, ready-to-drink mixes, instant soup mixes, snacks and other
confectionery items. The land use right will expire in 2061.

We believe that all our properties have been adequately
maintained, are generally in good condition, and are suitable and adequate for
our business.

ITEM 3.      LEGAL
PROCEEDINGS.

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

ITEM 4.      (REMOVED AND
RESERVED).

PART II

ITEM 5.      MARKET FOR
REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.

Market Information

Our common stock is quoted on the NYSE Amex and trades under
the symbol CNGL. The following table sets forth, for the periods indicated,
the high and low closing prices of our common stock. These prices reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.

|                          |   | **Closing Bid Prices(1)** | 
|------------------------- | - | ------------------------- | 
|                          |   | High                      | 
|Year Ended March 31, 2011 |   |                           | 
|1stQuarter                | $ | 3.67                      | 
|2ndQuarter                |   | 3.24                      | 
|3rdQuarter                |   | 3.15                      | 
|4thQuarter                |   | 3.60                      | 
|                          |   |                           | 
|Year Ended March 31, 2010 |   |                           | 
|1stQuarter                | $ | 4.00                      | 

25

---

|           |  | **Closing Bid Prices(1)** | 
|---------- |  | ------------------------- | 
|           |  | High                      | 
|2ndQuarter |  | 4.50                      | 
|3rdQuarter |  | 4.26                      | 
|4thQuarter |  | 4.67                      | 

________________________________(1) The above table sets
forth the range of high and low closing prices per share of our common stock as
reported by www.finance.yahoo.comfor the
periods indicated.

Approximate Number of Holders of Our Common Stock

As of June 20, 2011, there were approximately 473 holders of
record of our common stock. This number excludes the shares of our common stock
owned by stockholders holding stock under nominee security position
listings.

Dividends

Other than dividends paid by our subsidiary Longheda to its
shareholders before our acquisition of Fezdale, we have never declared dividends
or paid cash dividends. Our board of directors will make any future decisions
regarding dividends. We currently intend to retain and use any future earnings
for the development and expansion of our business and do not anticipate paying
any cash dividends in the foreseeable future.

Our board of directors has complete discretion on whether to
pay dividends. Even if our board of directors decides to pay dividends, the
form, frequency and amount will depend upon our future operations and earnings,
capital requirements and surplus, general financial condition, contractual
restrictions and other factors that the board of directors may deem relevant.

Securities Authorized for Issuance Under Equity Compensation
Plans

On October 19, 2010, our board of directors approved the China
Nutrifruit Group Limited 2010 Equity Incentive Plan, which was amended on
December 10, 2010. On January 12, 2011, our shareholders approved the plan at
the Companys annual meeting of shareholders. As of the date of this report, the
Company has not issued any securities under such plan.

Recent Sales of Unregistered Securities

We have not sold any equity securities during the fiscal year
ended March 31, 2011 that were not previously disclosed in a quarterly report on
Form 10-Q or a current report on Form 8-K that was filed during the 2011 fiscal
year.

Purchases of Equity Securities

No repurchases of our common stock were made during the fourth
quarter of 2011.

ITEM 6.      SELECTED FINANCIAL
DATA.

Not Applicable.

26

---

ITEM 7.      MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following managements discussion and analysis should be
read in conjunction with our financial statements and the notes thereto and the
other financial information appearing elsewhere in this report. In addition to
historical information, the following discussion contains certain
forward-looking information. See Special Note Regarding Forward Looking
Statements above for certain information concerning those forward looking
statements.

Overview

We are a leading producer of premium specialty fruit based
products in China. We are primarily engaged, through our indirect Chinese
subsidiaries, in developing, processing, marketing and distributing a variety of
food products processed primarily from premium specialty fruits grown in
Northeast China, mainly including golden berry, crab apple, blueberry,
raspberry, blackcurrant and seabuckthorn. Our primary product offering includes
concentrate juice, nectar, glazed fruits, concentrate pulp as well as fresh
fruits.

We sell our products through an extensive nationwide sales and
distribution network covering 18 provinces in China. As of March 31, 2011, this
network was comprised of approximately 44 distributors. Our processed fruit
products are mainly sold to food producers for further processing into fruit
juice and other fruit related foods, and our fresh fruits are mainly sold to
fruit supermarkets.

Our manufacturing facilities are located in Daqing City and
Mudanjiang City, Heilongjiang Province, China where an abundant supply of
various premium specialty fruits is readily available. We currently have five
fruit processing lines with an aggregate capacity of 17,160 tons.

Principal Factors Affecting Our Financial
Performance

Our operating results are primarily affected by the following
factors:

- Growth of Chinas fruit processing industry.We believe that
  the recent growth in processed fruit product consumption in China is largely
  attributable the increased affordability of processed fruit products and
  increased health and wellness consciousness in China. We expect these factors
  to continue to drive industry growth, especially in our primary markets 
  premium specialty processed fruit products. Such growth will not only increase
  the overall market size for processed fruit products, but will also benefit
  companies that are well positioned to sell in these markets.
- Product Offering and Pricing.Processed fruit products
  including concentrate juice, glazed fruit, nectar and concentrate pulp have
  been, and are expected to remain, our primary product offering. Our processed
  fruit products accounted for approximately 97.4% and 92.8% of our total net
  sales for fiscal years ended March 31, 2011 and 2010, respectively. The gross
  margin for our processed fruit products was approximately 47.0% for the fiscal
  year ended March 31, 2011. We plan to continue to focus on our higher margin
  processed fruit products and further expand our product portfolio in the
  future. Because we have strong bargaining power on golden berry products, we
  generally closely tie the pricing of gold berry products to the raw material
  prices to ensure a stable profit margin. We price our other products with
  reference to the prevailing market price.
- Fluctuations in Raw Material Supply and Prices.The per unit
  cost of producing our products is subject to the supply and price volatility
  of raw materials, especially fresh fruits which are affected by factors such
  as weather, growing conditions and pests that are beyond our control. Fresh
  fruits accounted for approximately 79% of our total cost of sales in fiscal
  year 2011. Historically, we have been able to meet our fresh fruit supply
  needs by building our processing facilities in close proximity to orchards and
  by collaborating with local government and establishing an effective group of
  vendors. Increases in the price of fresh fruits would negatively impact our
  gross margins if we are not able to offset such price increases through
  increases in our selling price or change in product mix.
- PRC Government Policy Promoting the Development of the Fruit
  Processing Industry.In the PRC central governments eleventh
  five-year guideline, the central government emphasized its determination to
  solve the problems of farmers, boost modern agriculture
  and increase rural affluence. After the onset of the economic crisis in late
  2008, the Ministry of Agriculture also stated its objective to promote fruit
  processing and fruit commercialization. We believe that our business model is
  structured within the framework of these Ministry of Agriculture initiatives
  and that government policies will continue to have a positive impact on the
  sale of our products.

27

---

- Expansion of our production capacity.We believe expansion of
  our capacity is needed to satisfy increased demand for our products. The
  average utilization rate for our five fruit processing production lines was
  approximately 94.5% in fiscal year 2011. In order to increase our production
  capacity, we plan to make capital investments to build additional production
  lines to satisfy the projected demand for our products.

Results of Operations

Year Ended March 31, 2011 Compared to Year Ended March
31, 2010

The following table sets forth key components of our results of
operations for the periods indicated, both in dollars and as a percentage of our
net sales.

(All amounts, other than percentages and per share number, in
thousands of U.S. dollars)

|                                           |   | Fiscal Year Ended |  |  | Fiscal Year Ended | 
|------------------------------------------ | - | ----------------- |  |  | ----------------- | 
|                                           |   | March 31, 2011    |  |  | March 31, 2010    | 
|                                           |   | In                |  |  | As a              | 
|                                           |   | Thousands         |  |  | Percentage        | 
|                                           |   | (audited)         |  |  | of Net Sales      | 
|Net sales                                  | $ | 86,954            |  |  | 100.0%            | 
|Costs of sales                             |   | 46,137            |  |  | 53.1%             | 
|Gross profit                               |   | 40,817            |  |  | 46.9%             | 
|Selling expenses                           |   | 3,100             |  |  | 3.6%              | 
|General and administrative expenses        |   | 4,354             |  |  | 5.0%              | 
|Interest expenses                          |   | 5                 |  |  | -                 | 
|Other income                               |   | 85                |  |  | 0.1%              | 
|Gain on disposal of property and equipment |   | -                 |  |  | -                 | 
|Income before income taxes                 |   | 33,444            |  |  | 38.5%             | 
|Income taxes                               |   | 8,700             |  |  | 10.0%             | 
|Net income                                 |   | 24,743            |  |  | 28.5%             | 
|Earnings per share:                        |   |                   |  |  |                   | 
|Basic                                      | $ | 0.66              |  |  |                   | 
|Diluted                                    | $ | 0.62              |  |  |                   | 

The functional currency of the Company is RMB, however, our
financial information is expressed in USD. The results of operations reported in
the table above is based on an exchange rate of RMB6.73 to $1 for the fiscal
year ended March 31, 2011 and the rate of RMB6.84 to $1 for the fiscal year
ended March 31, 2010.

Net Sales

Net sales increased $14.0 million, or 19.3%, to $86.9 million
in fiscal year 2011 from $72.9 million in fiscal year 2010. The increase was
mainly attributable to the increased sales volume of our products, especially
our glazed fruit and concentrate pulp products. Market demand for our products
remained strong in fiscal year 2011, due in part to growth in the health
conscious urban population and a rise in per capita disposable income in China.
Sales of glazed fruit and concentrate pulp grew significantly from $16.6 million
and $9.4 million, respectively, in fiscal year 2010 to $22.3 million and $13.5
million, respectively, in fiscal year 2011. Our new glazed fruit production line
started operation in December 2009 and we produced more glazed fruit products in
fiscal year 2011 as compared to last fiscal year. In addition, sales of
concentrate juice products increased from $34.7 million in fiscal year 2010 to
$41.7 million in fiscal year 2011, primarily due to the increased per unit sales
price resulting from the increased cost of our source fruits crab apple,
blueberry and raspberry. We continuously monitor our pricing policies and have
generally been able to pass the increased raw material costs to our customers. We also benefited from our new products,
blackcurrant and seabuckthorn glazed fruit and concentrate juice which were
launched during fiscal year 2011 and were well received by the market. In fiscal
year 2011, we generated approximately $4.3 million of net sales from our new
blackcurrant and seabuckthorn glazed fruit products and $2.8 million of net
sales from our blackcurrant and seabuckthorn concentrate juice products,
respectively.

28

---

The following table sets forth percentage of net sales
generated by each product for the fiscal years ended March 31, 2011 and 2010:

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

|                  |   | Fiscal Year Ended |  |  | Fiscal Year Ended | 
|----------------- | - | ----------------- |  |  | ----------------- | 
|                  |   | March 31, 2011    |  |  | March 31, 2010    | 
|                  |   |                   |  |  | As a              | 
|                  |   | In                |  |  | Percentage        | 
|Product           |   | Thousands         |  |  | of Net Sales      | 
|Fresh fruit       | $ | 2,243             |  |  | 2.6%              | 
|Glazed fruit      |   | 22,289            |  |  | 25.6%             | 
|Nectar            |   | 7,231             |  |  | 8.3%              | 
|Concentrate juice |   | 41,707            |  |  | 48.0%             | 
|Concentrate pulp  |   | 13,484            |  |  | 15.5%             | 
|Beverage          |   | -                 |  |  | -                 | 
|Total             | $ | 86,954            |  |  | 100.0%            | 

Cost of Sales

Cost of sales increased $6.5 million, or 16.3%, to $46.1
million in fiscal year 2011 from $39.7 million in fiscal year 2010. This
increase was primarily due to, and consistent with, the increase in our sales
volume. As a percentage of net sales, our cost of sales decreased to 53.1% in
fiscal year 2011 from 54.4% in fiscal year 2010. The percentage decrease was
mainly due to the change in product mix. We sold a higher percentage of glazed
fruit products in fiscal year 2011, which generally had a lower per unit cost as
compared to our concentrate juice and concentrated pulp products.

Gross Profit and Gross Margin

Gross profit increased $7.5 million to $40.8 million in fiscal
year 2011 from $33.3 million in fiscal year 2010. Gross profit as a percentage
of net sales was 46.9% and 45.6% for fiscal years 2011 and 2010, respectively.
The modest increase in gross margin was mainly due to the change in product mix.
In fiscal year 2011, a bigger percentage of our net sales was generated from
sales of  higher margin glazed fruit products.

The gross margins for concentrate juice, glazed fruit, nectar
and concentrate pulp products for fiscal year 2011 were 42.8%, 54.0%, 67.5% and
37.1%, as compared to 43.4%, 52.6%, 68.3% and 31.8% for the same period last
year, respectively. The average gross margin of our concentrate juice products
decreased slightly as compared to fiscal year 2010 mainly because of the
slightly lower average sales price of the blueberry concentrate juice products
in fiscal year 2011. The gross margin for our glazed fruit products increased in
fiscal year 2011 mainly because both of our glazed fruit production lines ran in
full capacity during our harvest season in fiscal year 2011 and we were able to
produce more glazed fruit products using fresh fruits which are generally
cheaper than frozen fresh fruit. In contrast, in fiscal year 2010, we used more
frozen fresh fruit for the production of glazed fruit products because our new
glazed fruit production line started operation during the non-harvest season. We
used frozen fresh fruit during the non-harvest season in order to maximize the
utilization rate of our glazed fruit production line and increase sales volume.
The gross margin for concentrate pulp products increased in fiscal year 2011
mainly because the sales price for pear concentrate pulp in the China market
increased significantly during the 2011 fiscal year as compared to last fiscal
year.

Selling and General and Administrative
Expenses

Selling and general and administrative expenses decreased
$69,774, or 0.9%, to $7.5 million in fiscal year 2011 from $7.5 million in
fiscal year 2010 mainly due to the decrease of selling expenses as discussed
below.

29

---

Selling expenses decreased $447,152, or 12.6%, to $3.1 million
in fiscal year 2011 from $3.5 million in fiscal year 2010. As a percentage of
net sales, our selling expenses decreased to 3.6% in fiscal year 2011 from 4.9%
in fiscal year 2010. Due to well established relationships with our existing
customers, we received repeat orders with higher volume from our existing
clients, which led to lower sales related expenses for fiscal year 2011. In
addition, we incurred less selling expenses due to the cessation of the
production and sale of beverage products in fiscal year 2011.

General and administrative expenses increased $377,378, or
9.5%, to $4.4 million in fiscal year 2011 from $4.0 million in fiscal year 2010.
As a percentage of net sales, general and administrative expenses decreased to
5.0% in fiscal year 2011, as compared to 5.5% in fiscal year 2010. The slight
dollar increase in general and administrative expenses was mainly attributable
to the increase in staff salary and benefits, and depreciation expenses incurred
in connection with our new glazed fruit production line which became operational
in December 2009. The percentage decrease was mainly attributable to economy of
scales and effective cost control over our general and administrative expenses
during the year.

Interest Expenses

We incurred $4,912 of interest expense for the fiscal year
ended March 31, 2011. We had no interest expense in fiscal year 2010.

Income before Income Taxes

Income before income taxes increased $7.3 million, or 28.1%, to
$33.4 million in fiscal year 2011 from $26.1 million in fiscal year 2010. Income
before income taxes as a percentage of net sales increased from 35.8% in fiscal
year 2010 to 38.5% in fiscal year 2011. The percentage increase was primarily
attributed to the increase in sales volume and gross margin.

Provision for Income Taxes

Our provision for income taxes was $8.7 million and $6.9
million for the fiscal years ended March 31, 2011 and 2010, respectively. The
increase was mainly due to an increase in net income before income tax. As a
percentage of net sales, provision for income taxes increased from 9.4% for the
2010 fiscal year to 10.0% for the 2011 fiscal year.

We file separate tax returns in the United States and China.
Income taxes of our PRC subsidiary are calculated in accordance with taxation
principles currently effective in the PRC. For China Nutrifruit Group Limited,
applicable U.S. tax laws are followed. The applicable tax rate for Longheda is
25%.

All our business operations are done through our PRC
subsidiaries and we may rely on dividends from our PRC operating subsidiaries.
The EIT Law and its implementing rules generally provide that a 10% withholding
tax applies to China-sourced income derived by non-resident enterprises for PRC
enterprise income tax purposes. We expect that such 10% withholding tax will
apply to dividends paid to us by our PRC subsidiaries, but this treatment will
depend on our status as a non-resident enterprise. For a detailed discussion of
PRC tax issues related to resident enterprise status, see Item 1A, Risk
factorsRisks Related to Doing Business in China Under the Enterprise Income
Tax Law, we may be classified as a resident enterprise of China. Such
classification will likely result in unfavorable tax consequences to us and our
non-PRC stockholders.

Net Income

Net income increased $5.5 million, or 28.5%, to $24.7 million
in 2011 from $19.3 million in 2010, as a cumulative effect of all of the factors
discussed above.

Liquidity and Capital Resources

As of March 31, 2011, we had cash and cash equivalents of
approximately $43.5 million. The following table provides detailed information
about our net cash flow for all financial statement periods presented in this
report.

30

---

Cash Flow(All amounts in thousands of U.S.
dollars)

|                                                           |   | Fiscal Year Ended March 31, |  
|---------------------------------------------------------- | - | --------------------------- | -
|                                                           |   | 2011                        |  
|Net cash provided by operating activities                  | $ | 25,790                      |  
|Net cash used in investing activities                      |   | (20,686                     | )
|Net cash provided by financing activities                  |   | 1,066                       |  
|Effect of exchange rate on cash and cash equivalents       |   | 1,378                       |  
|Cash and cash equivalents at beginning of
      the period |   | 35,994                      |  
|Cash and cash equivalents at end of period                 |   | 43,542                      |  

Operating Activities

Net cash provided by operating activities was $25.8 million in
fiscal year 2011, an increase of $4.1 million, or 19.0% from $21.7 million net
cash provided by operating activities in fiscal year 2010. Net cash provided by
operating activities for the 2011 fiscal year was mainly attributable to our net
income of $24.7 million.

Investing Activities

Net cash used in investing activities was $20.7 million in
fiscal year 2011, as compared to $1.7 million in fiscal year 2010. In fiscal
year 2011, we spent approximately $5.9 million and $10.6 million in the
construction of the new fruit and vegetable powder factory and as advance
payment for assembling the fruit and vegetable powder production line,
respectively. In addition, we spent approximately $4.3 million in upgrading our
concentrate juice production line in the first quarter of fiscal year 2011.

Our cash used in investing activities during fiscal year 2010
was primarily for the purchase of a new glazed fruit production line in December
2009 for approximately $2.7 million, which was partially offset by the proceeds
from disposal of the beverage production line of approximately $1.0 million.

Financing Activities

Net cash provided by financing activities was approximately
$1.1 million in fiscal year 2011, as compared to $11.3 million in fiscal year
2010. In September 2010, we made a dividend payment in the aggregate amount of
$809,550 to holders of our Series A Convertible Preferred Stock in accordance
with its terms and received a return of $931,630 from the dividend holdback
escrow account established in connection with the private placement of the
Series A Convertible Preferred Stock. We also received an approximately $0.9
million advance from a director for the operating working capital for Daqing
Senyang.

Net cash provided by financing activities in fiscal year 2010
was mainly attributable to the receipt of $12.2 million in net proceeds from a
private placement financing transaction which closed in October 2009. On October
8, 2009, we completed a private placement of Series A Convertible Preferred
stock and warrants and issued 403,418 units at a purchase price of $33.00 per
unit for gross proceeds of $13,309,000. Each unit consists of one share of our
newly-designated Series A Convertible Preferred Stock, par value $0.001 per
share, and one warrant to purchase 2.5 shares of our common stock. The warrants
are immediately exercisable at a per share price of $3.30 (subject to customary
adjustments) and have a term of four years.

Capital Expenditures

Our capital expenditures were $20.7 million and $2.7 million
for the fiscal years ended March 31, 2011 and 2010, respectively. Our capital
expenditures were mainly used to upgrade and expand our production capacity. Our
planned capital expenditures for the fiscal year ending March 31, 2012 will be
for upgrading existing production lines and expanding production capacity.
However, our actual capital expenditure may differ depending on our cash flow
status.

On February 23, 2010, we entered into a $0.96 million revolving
credit facility with the Heilongjiang Rural Credit Union with a term of three
years. This facility is secured by our land and buildings located in Daqing
City. On February 25, 2010,

31

---

we entered into another $1.31 million revolving credit facility
with the Longjiang Bank with a term of two years. This facility was secured by
our land and buildings in Mudanjiang City. Both facilities are for our working
capital needs during our production season. As of the date of this report, we
did not draw down on either facility and did not have any outstanding bank
loan.

We believe that our currently available working capital, after
receiving the aggregate proceeds of our capital raising activities and credit
facilities referred to above, should be adequate to sustain our operations at
our current levels through at least the next twelve months. We may require
additional cash resources due to changing business conditions, implementation of
our strategy to expand our production capacity or other investments or
acquisitions we may decide to pursue. If our own financial resources are
insufficient to satisfy our capital requirements, we may seek to sell additional
equity or debt securities or obtain additional credit facilities. The sale of
additional equity securities could result in dilution to our stockholders. The
incurrence of indebtedness would result in increased debt service obligations
and could require us to agree to operating and financial covenants that would
restrict our operations. Financing may not be available in amounts or on terms
acceptable to us, if at all. Any failure by us to raise additional funds on
terms favorable to us, or at all, could limit our ability to expand our business
operations and could harm our overall business prospects.

Critical Accounting Policies and Estimates

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

Use of estimates

The preparation of the consolidated financial statements in
conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent liabilities at the date of the financial statements, and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from these estimates.

Trade accounts receivable

In the normal course of business the Company extends credit to
customers. Trade accounts receivable, less allowance for doubtful accounts,
reflects the net realizable value of receivables, and their approximate fair
value. On a regular basis, the Company evaluates its trade accounts receivable
and establishes an allowance for doubtful accounts based on a combination of
specific customer circumstances, credit conditions, and payment history. A
receivable is considered past due if payments have not been received within the
agreed upon invoice terms. No allowance for doubtful accounts at March 31, 2011
(2010: nil) was recorded.

Inventories

The cost of finished products inventories includes raw
materials, direct labor and indirect production costs. Inventories are stated at
the lower of cost or market. The Company uses first-in, first-out methods to
value its inventories. During the idle production period, overhead costs include
depreciation are treated as current-period charges, which are expensed to
general and administrative expense instead of cost of sales.

Property and equipment, net

Property and equipment are recorded at cost and are depreciated
on a straight-line basis over the estimated useful lives of the assets.
Maintenance and repairs are expensed as incurred. The principal estimated useful
lives generally are: buildings 20 years; leasehold improvements  10 years;
machinery  10 years; furniture, fixtures and office equipment  5 years; motor
vehicles  5 years. Depreciation of property and equipment was $2,372,023 and
$1,590,023 for the years ended March 31, 2011 and 2010, respectively. During the
idle period of the plant, depreciation is treated as current-period charges,
which charge directly to general and administrative expense.

32

---

Revenue recognition

We recognize revenue from sales of products, where persuasive
evidence of an arrangement exists, delivery has occurred, the sellers price is
fixed or determinable and collectibility is reasonably assured. This generally
occurs when the customer receives the product or at the time title passes to the
customer. Customers generally do not have the right to return product unless
damaged or defective. Net sales are comprised of gross sales reduced by customer
returns, trade promotions and discounts.

Impairment of long-lived assets

Long-lived assets, except indefinite-lived intangible assets,
are reviewed for impairment when circumstances indicate the carrying value of an
asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of the assets to future net cash
flows estimated by the Company to be generated by such assets. If such assets
are considered to be impaired, the impairment to be recognized is the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of by sale are recorded as held for sale at the lower of
carrying value or estimated net realizable value.

All land in the PRC is owned by the PRC government. The
government in the PRC, according to the relevant PRC law, may sell the right to
use the land for a specific period of time. Thus, all of the Companys land
located in the PRC is considered to be leasehold land and is stated at cost less
accumulated amortization and any recognized impairment loss. Amortization is
provided over the term of the land use agreements on a straight-line basis,
which is 50 years.

Recent Accounting Pronouncements

In April 2011, the FASB issued Accounting Standards Update
(ASU) 2011-02  Receivables (Topic 310): A Creditors Determination of Whether
a Restructuring Is a Troubled Debt Restructuring. This update to Receivables
(Topic 310) clarifies the guidance for a creditors evaluation of whether a
restructuring constitutes a troubled debt restructuring. This update clarifies,
when evaluating a restructuring as a troubled debt restructuring, whether a
creditor has granted a concession to a debtor and whether the debtor is
experiencing financial difficulties. The objective of this amendment is to
promote greater consistency in the application of US GAAP for debt
restructurings from the creditors perspective. The effective date of this
update is for the first interim period beginning after June 15, 2011, and should
be applied retrospectively to the beginning of the current year. The Company is
currently evaluating the impact of this standard, but would not expect it to
have a material impact on the Companys consolidated results of operations or
financial condition.

Management believes other recent accounting pronouncements
issued by the FASB and the SEC do not have a material impact on the Companys
present or future financial statements.

Effects of Inflation

Inflation and changing prices have not had a material effect on
our business and we do not expect that inflation or changing prices will
materially affect our business in the foreseeable future. However, our
management will closely monitor price changes and continually maintain effective
cost control in operations.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity or capital expenditures or capital resources that is
material to an investor in our securities.

Seasonality

The harvest season for our source fruits is generally from
mid-July to mid-November every year. As fruits collected cannot be stored at
room temperature for a long time, they must be processed as soon as they are
harvested. Our fruit processing production is generally busiest from mid-July to
mid-November every year.

33

---

We will generally experience higher sales in the second, third
and fourth fiscal quarters mainly due to distributors (i) efforts to obtain
adequate supply of our fruit processing products before the fruit supply
diminishes after production ceases in November; and (ii) anticipation of higher
demand for processed fruit products as a result of festive seasons, such as the
Middle Autumn festival, Christmas and the Chinese New Year which were in the
second, third and fourth quarter of our fiscal year.

ITEM 7A.     QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 8.        FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.

The full text of our audited consolidated financial statements
as of March 31, 2011 and 2010 begins on page F-1 of this annual report.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

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

As required by Rule 13a-15 under the Exchange Act, our
management, including our Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of March 31, 2011. Based on that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that as of March
31, 2011, and as of the date that the evaluation of the effectiveness of our
disclosure controls and procedures was completed, our disclosure controls and
procedures were effective to satisfy the objectives for which they are intended.

Managements Annual Report on Internal Control Over
Financial Reporting

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. The Exchange Act defines internal control
over financial reporting as a process designed by, or under the supervision of,
our principal executive and principal financial officers and effected by our
board of directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America and includes those
policies and procedures that:

- Pertain to the maintenance of records that in reasonable detail accurately
  and fairly reflect the transactions and dispositions of the assets of the
  Company;
- Provide reasonable assurance that transactions are recorded as necessary to
  permit preparation of financial statements in accordance with accounting
  principles generally accepted in the United States of America, and that our
  receipts and expenditures are being made only in accordance with
  authorizations of our management and directors; and
- Provide reasonable assurance regarding prevention or timely detection of
  unauthorized acquisition, use or disposition of our assets that could have a
  material effect on our financial statements.

34

---

All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control
over financial reporting as of March 31, 2011. In making this assessment,
management used the framework set forth in the report entitled Internal Control
- Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission, or COSO. The COSO framework summarizes each of the
components of a companys internal control system, including (i) the control
environment, (ii) risk assessment, (iii) control activities, (iv) information
and communication, and (v) monitoring. Based on our assessment we determined
that, as of March 31, 2011, our internal control over financial reporting was
effective at the reasonable assurance level based on those criteria.

This annual report does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting. Managements report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only managements report in this annual report.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over
financial reporting during the fourth quarter of fiscal year 2011 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

ITEM 9B.     OTHER INFORMATION.

We have no information to disclose that was required to be
disclosed in a report on Form 8-K during fourth quarter of fiscal year 2011, but
was not reported.

PART III

ITEM 10.      DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE.

Directors and Executive Officers

The following sets forth information about our directors and
executive officers as of the date of this report:

|NAME                 | AGE | POSITION                                              
|-------------------- | --- | ------------------------------------------------------
|Changjun Yu          | 39  | Chairman, Chief Executive
      Officer, President    
|Jingfu Li            | 68  | Director                                              
|Chun Wai (Tony) Chan | 39  | Director                                              
|William Haus         | 48  | Director                                              
|Jizeng Zhang         | 63  | Director                                              
|Colman Cheng         | 43  | Chief Financial Officer, Treasurer and
      Secretary
|Aijun Wang           | 46  | Vice President of Sales                               

Changjun Yu. Mr. Yu is the founder of our subsidiary
Longheda and has served as the chairman of our board of directors since the
completion of the reverse acquisition of Fezdale on August 14, 2008. On July 3,
2010, Mr. Yu was elected as our chief executive officer and president. Mr. Yu
has been the chairman of our subsidiary Longheda since its formation in 2004.
From 2001 to 2003, Mr. Yu was the vice president of sales of Haerbin Shengjinlai
Economic and Technology Development Co. Ltd. From 1997 to 2000, he served as the
vice president of production and then vice president of sales of Shandong
Qingzhou Dajinxing Aviation Beverage Co. Ltd. Mr. Yu has over 15 years of
experience in the food industry. Mr. Yu was selected to serve as a director on
the board in connection with his leadership, business management skills as well
as vision and strategic experience, which he has acquired from his management
roles in prior years. Mr. Yu has not held any other public company directorship
during the past five years.

35

---

Jingfu Li.Mr. Li has over 40 years of teaching
experience in the subject of horticulture. For the last 18 years, Mr. Li has
been working as a professor and doctoral advisor at the Northeast Agricultural
University in China. He has also served key roles in horticulture related
organizations, such as chairman of the Horticultural Society of Heilongjiang
Province, editor of Journal of Chinese Vegetables, member of Crop Varieties
Validation Committee in Heilongjiang Province, executive director of the
Horticultural Society of China, and chairman of Tomato Branch of the Society of
Horticulture in China. Mr. Li graduated from Northeast Agricultural University
(formerly known as Northeast Agricultural College) with a Bachelors in Science
degree in Horticulture. His outstanding contributions have been well recognized
by the government and he has been awarded with governmental allowance by the
State Council and first prize in Scientific Technology Advancement for
export-oriented vegetables, new varieties of hybrid technology and breeding in
Heilongjiang Province. Mr. Li was appointed as our independent director on June
11, 2009. Mr. Li was selected to serve as a director on our board in connection
with his knowledge and extensive experience of over 40 years in the horticulture
industry. Mr. Li has not held any other public company directorship during the
past five years.

Chun Wai (Tony) Chan.Mr. Chan has extensive experience
in general assurance and business advisory services in both Hong Kong and China.
Moreover, Mr. Chan has extensive experience in public listings in Hong Kong and
Singapore, mergers and acquisition as well as corporate finance. Mr. Chan is a
Certified Public Accountant in Hong Kong, Australia and an International
Associate of American Institute of CPAs. Since 2004, Mr. Chan has been working
as a director of a CPA practice. He holds a Masters degree in business
administration. Mr. Chan is the independent non-executive director of four
public companies listed on the Hong Kong Stock Exchange: Hans Energy Company
Limited, Honbridge Holdings Limited, Oriental City Group Holdings Limited and
Wai Chun Mining Industry Group Company Limited. Mr. Chan was appointed as our
independent director on June 11, 2009 and is the chairman of our Audit and
Governance and Nominating Committee. Mr. Chan was selected to serve as a
director on our board in connection with his substantial experience in general
assurance and business advisory and experience as directors of several public
companies, which provided him with a unique perspective on accounting and
financial reporting expertise. Other than noted above, Mr. Chan has not held any
other public company directorship during the past five years.

William P. Haus, CFA.Mr. Haus has extensive experience
in business and finance for public companies as well as China-based companies.
From August 2008 to February 2010, Mr. Haus was the Chief Executive Officer and
director of CS China Acquisition Corporation, a special purpose acquisition
corporation which completed a business combination with a China-based private
company. Over the past 28 years, Mr. Haus has worked in a variety of roles in
analyzing companies and evaluating companies as potential investments. From
September 2005 to May 2008, Mr. Haus was an Analyst for The Pinnacle Fund &
The Pinnacle China Fund, both of which were funds focused on investment
opportunities in the United States and China. From March 2000 to September 2005,
Mr. Haus was the Senior Equity Research Analyst covering the Healthcare
Information Technology and Pharmaceutical Outsourcing industries, for Advest,
Inc. and Stanford Financial Group, both securities brokerage firms. Currently,
Mr. Haus is manager of Haus Capital Management, LLC, a Texas-based company
focused on making equity investments in growth companies. Mr. Haus graduated
from the State University of New York College at Fredonia with a B.S. in
business administration and a B.A. in economics and received a Master of
Business Administration (MBA) from Boston University. He is a Chartered
Financial Analyst (CFA) and member of the CFA Institute. Mr. Haus is also
independent director of China Valves Technology, Inc. (NASDAQ: CVVT) and THT
Heat Transfer Technology, Inc. (NASDAQ: THTI). Mr. Haus experiences in
analyzing, investing, and consulting with China-based, U.S. listed companies and
other skills allow him to contribute to our company as an independent director
of our company. Mr. Haus was appointed as the Companys director on June 11,
2009 and he is the chairman of the Companys Compensation Committee. Other than
noted above, Mr. Haus has not held any other public company directorship during
the past five years.

Jizeng Zhang. Mr. Zhang joined our subsidiary Longheda
in 2004 as the administration supervisor and was subsequently promoted to be the
administrative officer in 2005. He is responsible for the Companys daily
administrative duties. Mr. Zhang has over 24 years of experience as a police
officer in Inner Mongolia where his most recent position was the Head of Police
Department at Da Yang Shu County, Inner Mongolia. From the experience of being
the Head of Police Department, Mr. Zhang provided a very effective
administrative control to the Company. Mr. Zhang has not held any other public
company directorship during the past five years.

Sing Kau (Colman) Cheng.Mr. Cheng has been our Chief
Financial Officer, Treasurer and Secretary since the completion of the reverse
acquisition of Fezdale on August 14, 2008 and the Chief Financial Officer of our
subsidiary Longheda since August 2007. From August 2006 to June 2007, he served
as an investment manager of KAB Asia Limited. From October 2004 to August 2006,
he was a financial controller and company secretary of A&K Education
Software Holdings Limited, a GEM listed company in Hong Kong. From February 2003
to October 2004, he was a senior auditor of CCIF CPA Limited.

36

---

Mr. Cheng received a bachelors degree in Accounting from Edith
Cowan University in Australia and is an associate member of both the Hong Kong
Institute of Certified Public Accountants and CPA Australia. Mr. Cheng has not
held any public company directorship during the past five years.

Aijun Wang.Mr. Wang joined China Nutrifruit as a sales
manager in July 2010 and became our vice president of sales in October 2010.
Prior to joining China Nutrifruit, he served as general manager of sales at
Mudanjiang Jianxin Cement Limited. Mr. Wang also worked at Mudanjiang Cement
Lime Mining for approximately 20 years, most recently as mine manager,
responsible for operations. He holds a bachelors degree in economics and
management from the Chinese Central Communist Party University.

There are no agreements or understandings for any of our
executive officers or director to resign at the request of another person and no
officer or director is acting on behalf of nor will any of them act at the
direction of any other person.

Directors are elected until their successors are duly elected
and qualified.

Family Relationships

There is no family relationship among any of our officers or
directors.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or
executive officers has, during the past ten years:

- been convicted in a criminal proceeding or been subject to a pending
  criminal proceeding (excluding traffic violations and other minor offenses);
- had any bankruptcy petition filed by or against the business or property of
  the person, or of any partnership, corporation or business association of
  which he was a general partner or executive officer, either at the time of the
  bankruptcy filing or within two years prior to that time;
- been subject to any order, judgment, or decree, not subsequently reversed,
  suspended or vacated, of any court of competent jurisdiction or federal or
  state authority, permanently or temporarily enjoining, barring, suspending or
  otherwise limiting, his involvement in any type of business, securities,
  futures, commodities, investment, banking, savings and loan, or insurance
  activities, or to be associated with persons engaged in any such activity;
- been found by a court of competent jurisdiction in a civil action or by the
  Securities and Exchange Commission or the Commodity Futures Trading Commission
  to have violated a federal or state securities or commodities law, and the
  judgment has not been reversed, suspended, or vacated;
- been the subject of, or a party to, any federal or state judicial or
  administrative order, judgment, decree, or finding, not subsequently reversed,
  suspended or vacated (not including any settlement of a civil proceeding among
  private litigants), relating to an alleged violation of any federal or state
  securities or commodities law or regulation, any law or regulation respecting
  financial institutions or insurance companies including, but not limited to, a
  temporary or permanent injunction, order of disgorgement or restitution, civil
  money penalty or temporary or permanent cease-and-desist order, or removal or
  prohibition order, or any law or regulation prohibiting mail or wire fraud or
  fraud in connection with any business entity; or
- been the subject of, or a party to, any sanction or order, not subsequently
  reversed, suspended or vacated, of any self-regulatory organization (as
  defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any
  registered entity (as defined in Section 1(a)(29) of the Commodity Exchange
  Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or
  organization that has disciplinary authority over its members or persons
  associated with a member.

37

---

Board Composition and Committees

The Company is governed by the board of directors that
currently consists of five members: Changjun Yu, Jizeng Zhang, William Haus,
Chun Wai (Tony) Chan and Jingfu Li. Since June 2009, the Board has established
three Committees: the Audit Committee, the Compensation Committee, and the
Corporate Governance and Nominating Committee. Each of the Audit Committee,
Compensation Committee and Corporate Governance and Nominating Committee are
comprised entirely of independent directors. From time to time, the Board may
establish other committees. The Board has adopted a written charter for each of
the Committees which is available on the Companys website
http://chinanutrifruit.com/CorporateGovernance.html. Printed copies of
these charters may be obtained, without charge, by contacting the Corporate
Secretary, China Nutrifruit Group Limited, 5th Floor, Chuangye Building,
Chuangye Plaza, Industrial Zone 3, Daqing Hi-Tech Industrial Development Zone,
Daqing, Heilongjiang, Peoples Republic of China, 163316.

Audit Committee

Our Audit Committee consists of Chun Wai (Tony) Chan, William
Haus, and Jingfu Li, each of whom is independent as that term is defined under
the NYSE Amex Company Guide. Mr. Chan serves as the chairman of our Audit
Committee. The Audit Committee oversees our accounting and financial reporting
processes and the audits of the financial statements of our company. Our board
of directors has determined that Mr. Chan qualifies as an audit committee
financial expert as defined in Item 407(d)(5) of Regulation S-K promulgated by
the SEC and that he is financially literate and independent in accordance with
the requirements of the SEC and the NYSE Amex.

The Audit Committee is responsible for, among other things:

- selecting our independent auditors and pre-approving all auditing and
  non-auditing services permitted to be performed by our independent auditors;
- reviewing with our independent auditors any audit problems or difficulties
  and managements response;
- reviewing and approving all proposed related-party transactions, as defined
  in Item 404 of Regulation S-K under the Securities Act;
- discussing the annual audited financial statements with management and our
  independent auditors;
- reviewing major issues as to the adequacy of our internal controls and any
  special audit steps adopted in light of significant internal control
  deficiencies;
- meeting separately and periodically with management and our internal and
  independent auditors; and
- such other matters that are specifically delegated to our Audit Committee
  by our Board from time to time.

Compensation Committee

Our Compensation Committee consists of Chun Wai (Tony) Chan,
William Haus and Jingfu Li, each of whom is independent as that term is
defined under the NYSE Amex Company Guide. Mr. Haus serves as the chairman of
our Compensation Committee. Our Compensation Committee assists the board in
reviewing and approving the compensation structure of our directors and
executive officers, including all forms of compensation to be provided to our
directors and executive officers. Our chief executive officer may not be present
at any committee meeting during which his compensation is deliberated. The
Compensation Committee is responsible for, among other things:

- approving and overseeing the compensation package for our executive
  officers;
- reviewing and making recommendations to the board with respect to the
  compensation of our directors;
- reviewing and approving corporate goals and objectives relevant to the
  compensation of our chief executive officer, evaluating the performance of our
  chief executive officer in light of those goals and objectives, and setting
  the compensation level of our chief executive officer based on this
  evaluation; and
- reviewing periodically and making recommendations to the board regarding
  any long-term incentive compensation or equity plans, programs or similar
  arrangements, annual bonuses, employee pension and welfare benefit plans.

38

---

The Compensation Committee has sole authority to retain and
terminate outside counsel, compensation consultants retained to assist the
Compensation Committee in determining the compensation of the Chief Executive
Officer or senior executive officers, or other experts or consultants, as it
deems appropriate, including sole authority to approve the firms fees and other
retention terms. The Compensation Committee may also form and delegate authority
to subcommittees and may delegate authority to one or more designated members of
the Compensation Committee. The Compensation Committee may from time to time
seek recommendations from the executive officers of the Company regarding
matters under the purview of the Compensation Committee, though the authority to
act on such recommendations rests solely with the Compensation Committee.

Governance and Nominating Committee

Our Governance and Nominating Committee consists of Chun Wai
(Tony) Chan, William Haus, and Jingfu Li, each of whom is independent as that
term is defined under the NYSE Amex Company Guide. Mr. Chan serves as the
chairman of our Governance and Nominating Committee. The Governance and
Nominating Committee assists the board of directors in identifying individuals
qualified to become our directors and in determining the composition of the
board and its committees. The Governance and Nominating Committee is responsible
for, among other things:

- identifying and recommending to the board nominees for election or
  re-election to the board, or for appointment to fill any vacancy;
- reviewing annually with the board the current composition of the board in
  light of the characteristics of independence, age, skills, experience and
  availability of service to us;
- identifying and recommending to the board the directors to serve as members
  of the boards committees; and
- monitoring compliance with our code of business conduct and ethics.

Code of Ethics

Our board of directors has adopted a code of ethics that
applies to all directors, officers and employees of the Company, including
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. The code of
ethics addresses, among other things, ethical conduct, conflicts of interest,
compliance with laws, regulations and policies, including disclosure
requirements under the federal securities laws, confidentiality, trading on
inside information, and reporting of violations of the code. A copy of the code
of ethics has been filed as Exhibit 14.1 to our Current Report on Form 10-K
filed on June 15, 2009. The code of ethics is available on our website at
http://www.chinanutrifruit.com/CorporateGovernance.html.
During the fiscal year ended March 31, 2011, there were no waivers of our code
of ethics.

ITEM 11.     EXECUTIVE
COMPENSATION.

Summary Compensation Table  2011 and 2010

The following table sets forth information concerning all cash
and non-cash compensation awarded to, earned by or paid to the named persons for
services rendered in all capacities during the noted periods. No other executive
officer received total annual salary and bonus compensation in excess of
$100,000.

Name and Principal Position
    Fiscal Year
    Salary ($)
    Bonus ($)
    Stock Awards ($)
    Option Awards
      ($)
    All Other Compensation
      ($)
    Total ($)Changjun Yu
      CEO and President
    2011
    116,449
    -
    -
    -
    -
    116,4492010
    87,741
    -
    -
    -
    -
    87,741Jinglin Shi, 
      CEO and President*
    2011
    22,394
    -
    -
    -
    -
    22,3942010
    83,586
    -
    -
    -
    -
    83,586


|* | Mr. Shi resigned from all positions he held with the
      Company on July 3, 2010 due to personal reasons and our chairman Changjun
      Yu replaced Mr. Shi as the new chief executive officer and president of
      the Company.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

39

---

Employment Agreements

On July 3, 2010, our subsidiary Fezdale entered into an
employment agreement with Changjun Yu, our chairman and newly appointed Chief
Executive Officer and President. Under the employment agreements, as amended,
Mr. Yu will receive an annual salary of RMB 960,000. Mr. Yu is subject to
customary confidentiality and non-competition covenants as provided in the
employment agreement.

On July 30, 2008, our subsidiary Fezdale entered into an
employment agreement with Jinglin Shi, our former Chief Executive Officer and
President. Under the employment agreement, Fezdale agreed to pay Mr. Shi an
annual salary of RMB 600,000 and Mr. Shi agreed to be subject to customary
confidentiality and non-competition covenants. On July 3, 2010, Mr. Shi resigned
from all positions he held with the Company due to personal reasons and our
chairman Changjun Yu replaced Mr. Shi as the new chief executive officer and
president of the Company. Mr. Shi did not receive any severance payment in
connection with his resignation.

We have not provided retirement benefits (other than a state
pension scheme in which all of our employees in China participate) or severance
or change of control benefits to our named executive officer.

Compensation of Directors

The table below sets forth the compensation of our directors
for the fiscal year ended March 31, 2011:

|                     |  |                  |  |  |            |  |  |                |  |  | Non-Equity     |  |  |              |  |  |           | 
|-------------------- |  | ---------------- |  |  | ---------- |  |  | -------------- |  |  | -------------- |  |  | ------------ |  |  | --------- | 
|                     |  |                  |  |  |            |  |  |                |  |  | Incentive Plan |  |  | All Other    |  |  |           | 
|                     |  | Fees Earned or   |  |  | Stock      |  |  | Option         |  |  | Compensation   |  |  | Compensation |  |  |           | 
|Name                 |  | Paid in Cash ($) |  |  | Awards ($) |  |  | **Awards ($)** |  |  | ($)            |  |  | ($)          |  |  | Total ($) | 
|Chun Wai (Tony) Chan |  | 20,000           |  |  | -          |  |  | -              |  |  | -              |  |  | -            |  |  | 20,000    | 
|William Haus         |  | 24,000           |  |  | -          |  |  | -              |  |  | -              |  |  | -            |  |  | 24,000    | 
|Jingfu Li            |  | 8,958            |  |  | -          |  |  | -              |  |  | -              |  |  | -            |  |  | 8,958     | 

Chun Wai (Tony) Chan, William Haus and Jingfu Li were appointed
as our directors effective as of June 11, 2009. We entered into separate
indemnification agreements with each of them. Under the terms of the
indemnification agreements, we agreed to indemnify the independent directors
against expenses, judgments, fines, penalties or other amounts actually and
reasonably incurred by the independent director in connection with any
proceeding if the independent director acted in good faith and in our best
interests. It is our practice to reimburse our directors for reasonable travel
expenses related to attendance at board of directors and committee meetings.

On June 11, 2009, we entered into independent director
agreement with each of Chun Wai (Tony) Chan, William Haus and Jingfu Li. Under
the terms of the agreements, the Company agreed to pay Mr. Chan an annual fee of
$20,000, Mr. Haus an annual fee of $24,000 and Mr. Li an annual fee of RMB
60,000,
as compensation for the services provided by them as directors of the Company.
The payment will be made on a quarterly basis.

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

Security Ownership of Certain Beneficial Owners and
Management

The following table sets forth information regarding beneficial
ownership of our common stock as of June 20, 2011 (i) by each person who is
known by us to beneficially own more than 5% of our common stock; (ii) by each
of our officers and directors; and (iii) by all of our officers and directors as
a group. Unless otherwise specified, the address of each of the persons set
forth below is in care of China Nutrifruit Group Limited, 5th Floor, Chuangye
Building, Chuangye Plaza, Industrial Zone 3, Daqing Hi-Tech Industrial
Development Zone, Daqing, Heilongjiang, China 163316.

40

---

Name and Address of Beneficial
      Owner
    Office, If Any
    Title of Class
    Amount and Nature of
      Beneficial Ownership(1)
    Percent of
      Class(2)Officers and DirectorsChangjun Yu
    Chairman, CEO, and President
    Common stock, $0.001 par value
    0
    *Jizeng Zhang
    Director
    Common stock, 
      $0.001 par value
    0
    *Jingfu Li
    Director
    Common stock, $0.001 par value
    0
    *Tony Chan
    Director
    Common stock, 
      $0.001 par value
    0
    *William Haus
    Director
    Common stock, $0.001 par value
    30,000 (3)
    *Colman Cheng
    Chief Financial Officer, 
      Treasure and
      Secretary
    Common stock, 
      $0.001 par value
    0
    *Aijun Wang
    Vice President of Sales
    Common stock, $0.001 par value
    0
    *All officers and directors as a group 
      (7 persons named
      above)
    
    Common stock, 
      $0.001 par value
    30,000 (3)
    *5% Security HoldersYiu Fai Kung (4)
    
    Common stock, 
      $0.001 par value
    21,116,815
    57.2%Honouryear Limited (5)
    
    Common stock, $0.001 par value
    15,517,217
    42.0%Bestsucceed Limited (6)
    
    Common stock, 
      $0.001 par value
    7,892,063
    21.4%


* Less than 1%

|(1) | Beneficial ownership is determined in accordance with the
      rules of the SEC and includes voting or investment power with respect to
      the ordinary shares.                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                     
|(2) | A total of 36,915,762 shares of Common Stock as of June
      20, 2011 are considered to be outstanding pursuant to SEC Rule
      13d-3(d)(1). For each beneficial owner above, any options exercisable
      within 60 days have been included in the denominator.
|    |                                                                                                                                                                                                                                                                     
|(3) | Includes 30,000 shares that vested on July 31,
    2010.                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                     
|(4) | Includes 15,517,217 shares owned by Honouryear Limited of
      which Yiu Fai Kung is the director and sole owner and has voting and
      investment control over the securities held by it.                                                                       
|    |                                                                                                                                                                                                                                                                     
|(5) | Yiu Fai Kung is the director and sole owner of Honouryear
      Limited and has voting and investment control over the securities held by
      it.                                                                                                                 
|    |                                                                                                                                                                                                                                                                     
|(6) | Kwan Mo Ng is the director and sole owner of Bestsucceed
      Limited and has voting and investment control over the securities held by
      it.                                                                                                                  

Changes in Control

There are no arrangements known to us, including any pledge by
any person of our securities, the operation of which may at a subsequent date
result in a change in control of the Company.

41

---

Securities Authorized for Issuance Under Equity Compensation
Plans

Our board of directors approved the China Nutrifruit Group
Limited 2010 Equity Incentive Plan on October 19, 2010 which was amended on
December 10, 2010 and approved by our shareholders on January 12, 2011. We have
not issued any securities under the plan as of the date of this report.

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

Except as set forth below, since the beginning of the 2010
fiscal year, there have not been any transaction, nor is there any currently
proposed transaction, in which we were or are to be a participant and the amount
involved exceeded or exceeds the lesser of $120,000 or one percent of the
average of our total assets at year-end for the last two completed fiscal years,
and in which any related person had or will have a direct or indirect material
interest (other than compensation described under Executive Compensation).

On January 6 and 26, 2011, our chairman, CEO and president
Changjun Yu loaned RMB 4,000,000 and RMB 2,200,000 (approximately $946,550 in
total) to our subsidiary Daqing Senyang for working capital purpose,
respectively. The loan is unsecured, interest free and payable on demand.

Promoters and Certain Control Persons

Since the beginning of the last fiscal year, there have not
been any transaction, nor is there any currently proposed transaction, in which
we were or are to be a participant and the amount involved exceeded or exceeds
$120,000, and in which any related person had or will have a direct or indirect
material interest (other than compensation described under Executive
Compensation).

Director Independence

Our board of directors is currently composed of 5 members, of
which Chun Wai (Tony) Chan, Jingfu Li and William Haus are independent as that
term is defined by the rules and regulations of the NYSE Amex. All actions of
the board of directors require the approval of a majority of the directors in
attendance at a meeting at which a quorum is present. Our directors have a duty
to act in good faith in our interest.

ITEM 14.     PRINCIPAL ACCOUNTING FEES
AND SERVICES.

Independent Auditors Fees

The following is a summary of the fees billed to the Company by
its principal accountants for professional services rendered for the fiscal
years ended March 31, 2011 and 2010:

|                   |   | Fiscal Year Ended March 31, | 
|------------------ | - | --------------------------- | 
|                   |   | 2011                        | 
|Audit Fees         | $ | 416,148                     | 
|Audit-Related Fees |   | -                           | 
|Tax Fees           |   | -                           | 
|All Other Fees     |   | -                           | 
|TOTAL              | $ | 416,148                     | 

Audit Fees consisted of the aggregate fees billed for
professional services rendered for the audit of our annual financial statements
and the reviews of the financial statements included in our Forms 10-Q and for
any other services that were normally provided in connection with our statutory
and regulatory filings or engagements.

Audit Related Fees consisted of the aggregate fees billed for
professional services rendered for assurance and related services that were
reasonably related to the performance of the audit or review of our financial
statements and were not otherwise included in Audit Fees.

42

---

Tax Fees consisted of the aggregate fees billed for
professional services rendered for tax compliance, tax advice and tax planning.
Included in such Tax Fees were fees for preparation of our tax returns and
consultancy and advice on other tax planning matters.

All Other Fees consisted of the aggregate fees billed for
products and services provided and not otherwise included in Audit Fees, Audit
Related Fees or Tax Fees.

Pre-Approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit
services performed by our auditors must be approved in advance by our board of
directors to assure that such services do not impair the auditors independence
from us. In accordance with its policies and procedures, our board of directors
pre-approved the audit service performed by HLB Hodgson Impey Cheng, Certified
Public Accountants for our financial statements as of and for the year ended
March 31, 2011.

PART IV

ITEM 15.     EXHIBITS, FINANCIAL
STATEMENT SCHEDULES. Financial Statements and Schedules

The consolidated financial statements filed as part of this
report are located as set forth in the index on page F-1 of this report.
Financial statement schedules have been omitted since they are either not
required, not applicable, or the information is otherwise included.

Exhibit List

The list of exhibits in the Exhibit Index to this Report is
incorporated herein by reference.

43

---

SIGNATURES

In accordance with section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this Report on Form 10-K to be
signed on its behalf by the undersigned, thereto duly authorized individual.

Date: June 22, 2011

| | CHINA NUTRIFRUIT GROUP LIMITED
| | ------------------------------
| |                               
| | By:                           
| |                               
| |                               
| |                               
| | By:                           
| |                               
| |                               

In accordance with the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Each person whose signature appears below hereby authorizes
Changjun Yu and Colman Cheng, and each or any of them, as attorneys-in-fact to
sign on his or her behalf, individually, and in each capacity stated below, and
to file all amendments and/or supplements to this annual report on Form
10-K.

|Signature              |  | Title                                           |  | Date         
|---------------------- |  | ----------------------------------------------- |  | -------------
|                       |  |                                                 |  |              
|/s/Changjun Yu         |  | Chairman, Chief Executive Officer and President |  | June 22, 2011
|Changjun Yu            |  | (Principal Executive Officer)                   |  |              
|                       |  |                                                 |  |              
|/s/Colman
      Cheng  |  | Chief
      Financial Officer                   |  | June 22, 2011
|Colman Cheng           |  | (Principal Financial and Accounting Officer)    |  |              
|                       |  |                                                 |  |              
|/s/Jizeng
      Zhang  |  | Director                                        |  | June 22, 2011
|Jizeng Zhang           |  |                                                 |  |              
|                       |  |                                                 |  |              
|/s/Chun
      Wai Chan |  | Director                                        |  | June 22, 2011
|Chun Wai Chan          |  |                                                 |  |              
|                       |  |                                                 |  |              
|/s/William
      Haus  |  | Director                                        |  | June 22, 2011
|William Haus           |  |                                                 |  |              
|                       |  |                                                 |  |              
|/s/Jingfu
      Li     |  | Director                                        |  | June 22, 2011
|Jingfu Li              |  |                                                 |  |              

44

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of China Nutrifruit
Group Limited

We have audited the accompanying consolidated balance sheets of
China Nutrifruit Group Limited and subsidiaries (the Company) as of March 31,
2011 and 2010, and the related consolidated statements of income, shareholders
equity and comprehensive income, cash flows for each of the years in the
two-year period ended March 31, 2011. These consolidated financial statements
are the responsibility of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of their
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by the management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company as of March 31, 2011 and 2010, and the results of their operations and
their cash flows for each of the years in the two-year period ended March 31,
2011, in conformity with accounting principles generally accepted in the United
States of America.

/s/ HLB Hodgson Impey Cheng Chartered Accountants
Certified Public Accountants

Hong Kong June 22, 2011

F-1

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|CONSOLIDATED BALANCE SHEETS                          
|AS OF MARCH
      31,                                

|                                                             |   | 2011        |  |   | 2010       | 
|------------------------------------------------------------ | - | ----------- |  | - | ---------- | 
|                                                             |   |             |  |   |            | 
|ASSETS                                                       |   |             |  |   |            | 
|Current assets:                                              |   |             |  |   |            | 
|Cash and equivalents                                         | $ | 43,542,075  |  | $ | 35,994,443 | 
|Proceeds from private placement held in escrow
      account |   | -           |  |   | 931,630    | 
|Trade receivables, net of
      allowance                    |   | 12,476,652  |  |   | 11,047,846 | 
|Inventory, net                                               |   | 6,419,152   |  |   | 4,179,910  | 
|Prepayments and deposits                                     |   | 264,878     |  |   | 114,732    | 
|Other current assets                                         |   | 1,527       |  |   | 1,464      | 
|Total current assets                                         |   | 62,704,284  |  |   | 52,270,025 | 
|Non-current assets:                                          |   |             |  |   |            | 
|Property and equipment, net                                  |   | 20,312,005  |  |   | 17,066,907 | 
|Prepayments and deposits                                     |   | 10,983,404  |  |   | -          | 
|Construction in progress                                     |   | 5,915,395   |  |   | -          | 
|Deferred tax assets                                          |   | 909,879     |  |   | 1,068,878  | 
|Land use rights, net                                         |   | 188,199     |  |   | 185,686    | 
|TOTAL ASSETS                                                 | $ | 101,013,166 |  | $ | 70,591,496 | 
|                                                             |   |             |  |   |            | 
|LIABILITIES AND SHAREHOLDERS EQUITY                         |   |             |  |   |            | 
|Current liabilities:                                         |   |             |  |   |            | 
|Other payables and accrued expenses                          | $ | 3,312,525   |  | $ | 2,379,246  | 
|Due to a director                                            |   | 946,550     |  |   | -          | 
|Trade payables                                               |   | 130,276     |  |   | 87,954     | 
|Income taxes payable                                         |   | 3,351,631   |  |   | 2,296,513  | 
|Total current liabilities                                    |   | 7,740,982   |  |   | 4,763,713  | 
|                                                             |   |             |  |   |            | 
|                                                             |   |             |  |   |            | 
|Commitments and Contingencies                                |   |             |  |   |            | 
|                                                             |   |             |  |   |            | 
|Shareholders equity:                                        |   |             |  |   |            | 
|Preferred stock                                              |   | 331         |  |   | 365        | 
|Common stock                                                 |   | 36,916      |  |   | 36,573     | 
|Additional paid-in-capital                                   |   | 36,492,566  |  |   | 36,492,875 | 
|Statutory reserves  restricted                              |   | 6,850,422   |  |   | 4,564,345  | 
|Accumulated other comprehensive income                       |   | 3,951,431   |  |   | 440,714    | 
|Retained earnings                                            |   | 45,940,518  |  |   | 24,292,911 | 
|TOTAL SHAREHOLDERS EQUITY                                   |   | 93,272,184  |  |   | 65,827,783 | 
|TOTAL LIABILITIES AND SHAREHOLDERS
      EQUITY             | $ | 101,013,166 |  | $ | 70,591,496 | 

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

F-2

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES           
|----------------------------------------------------------------
|                                                                
|CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
      INCOME
|YEARS ENDED
      MARCH 31,                                     

|                                                          |   | 2011        |   |   | 2010        |  
|--------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|Net sales                                                 | $ | 86,953,888  |   | $ | 72,916,955  |  
|Cost of sales                                             |   | (46,136,600 | ) |   | (39,655,534 | )
|Gross profit                                              |   | 40,817,288  |   |   | 33,261,421  |  
|Selling expenses                                          |   | (3,100,084  | ) |   | (3,547,236  | )
|General and administrative expenses                       |   | (4,354,005  | ) |   | (3,976,627  | )
|Operating earnings                                        |   | 33,363,199  |   |   | 25,737,558  |  
|Other income (expenses)                                   |   |             |   |   |             |  
|Interest expense                                          |   | (4,912      | ) |   | -           |  
|Other income                                              |   | 85,313      |   |   | 70,233      |  
|Gain on disposal of property and equipment                |   | -           |   |   | 290,407     |  
|Total other income                                        |   | 80,401      |   |   | 360,640     |  
|Earnings before income taxes                              |   | 33,443,600  |   |   | 26,098,198  |  
|Provision for income taxes                                |   | (8,700,366  | ) |   | (6,849,438  | )
|Net earnings                                              |   | 24,743,234  |   |   | 19,248,760  |  
|Other comprehensive income                                |   |             |   |   |             |  
|Foreign currency translation                              |   | 3,510,717   |   |   | 15,039      |  
|Total comprehensive income                                | $ | 28,253,951  |   | $ | 19,263,799  |  
|Earnings per share                                        |   |             |   |   |             |  
|Basic                                                     | $ | 0.66        |   | $ | 0.52        |  
|Diluted                                                   | $ | 0.62        |   | $ | 0.51        |  
|Weighted average number of common stock
      outstanding |   |             |   |   |             |  
|Basic                                                     |   | 36,736,834  |   |   | 36,153,554  |  
|Diluted                                                   |   | 40,056,599  |   |   | 38,051,749  |  

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

F-3

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES                        
|-----------------------------------------------------------------------------
|                                                                             
|CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY AND
      COMPREHENSIVE INCOME
|YEARS ENDED
      MARCH 31, 2011 AND 2010                                    

|                                             |  | Preferred stock |   |   | Common stock |   |  |            |  |   |        |  |   |            |   |   |            |  |   |            |  
|-------------------------------------------- |  | --------------- | - | - | ------------ | - |  | ---------- |  | - | ------ |  | - | ---------- | - | - | ---------- |  | - | ---------- | -
|                                             |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   |            |  |   |            |  
|                                             |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   |            |  |   |            |  
|                                             |  |                 |   |   |              |   |  |            |  |   |        |  |   | Additional |   |   | Statutory  |  |   |            |  
|                                             |  |                 |   |   |              |   |  |            |  |   |        |  |   | paid-in    |   |   | reserves - |  |   | Retained   |  
|                                             |  | Shares          |   |   | Amount       |   |  | **Shares** |  |   | Amount |  |   | capital    |   |   | restricted |  |   | earnings   |  
|                                             |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   |            |  |   |            |  
|                                             |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   |            |  |   |            |  
|Balance at April 1, 2009                     |  | -               |   | $ | -            |   |  | 36,125,754 |  | $ | 36,126 |  | $ | 16,746,971 |   | $ | 2,873,880  |  | $ | 6,734,616  |  
|Share-based payment                          |  | -               |   |   | -            |   |  | 30,000     |  |   | 30     |  |   | 116,970    |   |   | -          |  |   | -          |  
|Capital contribution                         |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | 7,414,995  |   |   | -          |  |   | -          |  
|Preferred stocks issued in private placement |  | 403,418         |   |   | 403          |   |  | -          |  |   | -      |  |   | 12,006,243 |   |   | -          |  |   | -          |  
|Warrants issued in private placement         |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | 1,302,354  |   |   | -          |  |   | -          |  
|Cost of raising capital                      |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | (1,094,279 | ) |   | -          |  |   | -          |  
|Conversion of preferred shares               |  | (38,309         | ) |   | (38          | ) |  | 383,090    |  |   | 383    |  |   | (345       | ) |   | -          |  |   | -          |  
|Conversion of warrants                       |  | -               |   |   | -            |   |  | 34,428     |  |   | 34     |  |   | (34        | ) |   | -          |  |   | -          |  
|Transfer to reserve                          |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | 1,690,465  |  |   | (1,690,465 | )
|Comprehensive income:                        |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   |            |  |   |            |  
|Net earnings                                 |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | 19,248,760 |  
|Translation adjustments                      |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | -          |  
|Balance at March 31, 2010 and 1 April 2010   |  | 365,109         |   | $ | 365          |   |  | 36,573,272 |  | $ | 36,573 |  | $ | 36,492,875 |   | $ | 4,564,345  |  | $ | 24,292,911 |  
|Conversion of preferred shares               |  | (34,249         | ) |   | (34          | ) |  | 342,490    |  |   | 343    |  |   | (309       | ) |   | -          |  |   | -          |  
|Payment of preferred shares dividend         |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | (809,550   | )
|Transfer to reserve                          |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | 2,286,077  |  |   | (2,286,077 | )
|Comprehensive income:                        |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   |            |  |   |            |  
|Net earnings                                 |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | 24,743,234 |  
|Translation adjustments                      |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | -          |  
|Balance at March 31, 2011                    |  | 330,860         |   | $ | 331          |   |  | 36,915,762 |  | $ | 36,916 |  | $ | 36,492,566 |   | $ | 6,850,422  |  | $ | 45,940,518 |  

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

F-4

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|CONSOLIDATED STATEMENTS OF CASH FLOWS                
|YEARS ENDED
      MARCH 31,                          

|                                                                                                     |   | 2011        |   |   | 2010       |  
|---------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ---------- | -
|Cash flows from operating
      activities:                                                          |   |             |   |   |            |  
|Net earnings                                                                                         | $ | 24,743,234  |   | $ | 19,248,760 |  
|Adjustments to reconcile
      net earnings to net cash provided
      by       operating activities |   |             |   |   |            |  
|Depreciation and
      amortization                                                                  |   | 2,374,751   |   |   | 1,593,811  |  
|Gain on
      disposal of property and equipment                                                     |   | -           |   |   | (290,407   | )
|Deferred income taxes                                                                                |   | 158,165     |   |   | 337,936    |  
|Share-based payments                                                                                 |   | -           |   |   | 117,000    |  
|Changes in operating assets and liabilities:                                                         |   |             |   |   |            |  
|Trade
      receivables                                                                              |   | (1,222,114  | ) |   | 391,901    |  
|Inventories                                                                                          |   | (1,840,967  | ) |   | (481,732   | )
|Prepayments and deposits                                                                             |   | (353,118    | ) |   | 364,046    |  
|Other current assets                                                                                 |   | (15         | ) |   | 1,463      |  
|Trade
      payables                                                                                 |   | 32,580      |   |   | (172,675   | )
|Other payables and
      accrued expenses                                                            |   | 895,817     |   |   | (319,909   | )
|Income
      taxes payable                                                                           |   | 1,001,321   |   |   | 877,429    |  
|Net cash provided by operating activities                                                            |   | 25,789,654  |   |   | 21,667,623 |  
|                                                                                                     |   |             |   |   |            |  
|Cash flows from investing activities:                                                                |   |             |   |   |            |  
|Purchases of property and equipment                                                                  |   | (4,333,519  | ) |   | (2,738,855 | )
|Addition of construction in progress                                                                 |   | (5,808,400  | ) |   | -          |  
|Prepayment for purchase of land use right,
      property and equipment                              |   | (10,543,839 | ) |   | -          |  
|Proceeds from disposal of property and equipment                                                     |   | -           |   |   | 1,038,273  |  
|Net cash used in investing activities                                                                |   | (20,685,758 | ) |   | (1,700,582 | )
|                                                                                                     |   |             |   |   |            |  
|Cash flows from financing
      activities:                                                          |   |             |   |   |            |  
|Proceeds from private placement held in escrow account                                               |   | -           |   |   | (931,630   | )
|Proceeds from borrowings                                                                             |   | 15,217,689  |   |   | -          |  
|Repayment of borrowings                                                                              |   | (15,217,689 | ) |   | -          |  
|Amount due to a director                                                                             |   | 943,497     |   |   | -          |  
|Proceeds from private placement                                                                      |   | -           |   |   | 13,309,000 |  
|Release of proceeds from private placement
      held in escrow account                              |   | 931,630     |   |   | -          |  
|Dividend paid                                                                                        |   | (809,550    | ) |   | -          |  
|Cost of raising capital                                                                              |   | -           |   |   | (1,094,279 | )
|Net cash provided by financing activities                                                            |   | 1,065,577   |   |   | 11,283,091 |  
|                                                                                                     |   |             |   |   |            |  
|Increase in cash and equivalents                                                                     |   | 6,169,473   |   |   | 31,250,132 |  
|                                                                                                     |   |             |   |   |            |  
|Effect of exchange rate on cash and equivalents                                                      |   | 1,378,159   |   |   | (24,231    | )
|                                                                                                     |   |             |   |   |            |  
|Cash and equivalents at beginning of year                                                            |   | 35,994,443  |   |   | 4,768,542  |  
|                                                                                                     |   |             |   |   |            |  
|Cash and equivalents at end of year                                                                  | $ | 43,542,075  |   | $ | 35,994,443 |  
|                                                                                                     |   |             |   |   |            |  
|Supplemental disclosure of cash flows information:                                                   |   |             |   |   |            |  
|Cash paid for:                                                                                       |   |             |   |   |            |  
|Interest                                                                                             | $ | 4,912       |   | $ | -          |  
|Income taxes                                                                                         | $ | 7,574,018   |   | $ | 5,634,883  |  
|                                                                                                     |   |             |   |   |            |  
|Supplemental disclosure of non-cash
      information:                                               |   |             |   |   |            |  
|Issuance of common stock by conversion of preferred stock                                            | $ | 343         |   | $ | 117,000    |  
|Issuance of warrant                                                                                  | $ | -           |   | $ | 367,155    |  
|Capital contribution                                                                                 | $ | -           |   | $ | 7,414,995  |  

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

F-5

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 1. NATURE OF BUSINESS

Nature of Business

China Nutrifruit Group Limited (the Company or CNGL) was
incorporated in the state of Utah on April 22, 1983 and changed its domicile
from Utah to Nevada in April 1999. The Company was not engaged in any business
and had no meaningful operations, income producing assets or significant
operating capital since at least 1989 until it acquired Fezdale Investments
Limited (Fezdale) on August 14, 2008.

On August 14, 2008, the Company acquired all of the equity
interests of Fezdale, a British Virgin Islands (BVI) corporation, through a
share exchange transaction (the Share Exchange Transaction), with the result
that the shareholders of Fezdale became the beneficial owners of 83.5% of the
Companys common stock. As a result of such Share Exchange Transaction, Fezdale
became a wholly-owned subsidiary of the Company and the former shareholders of
Fezdale became the Companys controlling shareholders. Accordingly, all
references to shares of Fezdales ordinary shares were restated to reflect the
equivalent numbers of the common stock of China Nutrifruit Group Limited.

The Share Exchange Transaction resulted in Fezdales former
shareholder obtaining a majority voting interest in the Company. Accounting
principles generally accepted in the United States of America (US GAAP)
require that a company whose shareholders retain the majority interest in a
combined business be treated as the acquirer for accounting purposes. As a
result, in the Share Exchange Transaction, Fezdale is treated as the accounting
acquirer and China Nutrifruit Group Limited is treated as the acquired party.
Accordingly, the Share Exchange Transaction was accounted for a recapitalization
of the Company. The equity section of the accompanying financial statements was
restated to reflect the recapitalization of the Company due to the Share
Exchange Transaction as of the first day of the first period presented. The
assets and liabilities acquired that, for accounting purposes, were deemed to
have been acquired by Fezdale were not significant.

Also, on August 14, 2008, the Companys majority shareholder,
Yiu Fai Kung (Mr. Kung), entered into escrow agreements with the private
placement investors and HFG International, Limited (HFG) pursuant to which Mr.
Kung agreed to deliver a certain number of shares of the Companys common stock
owned by him to the investors and HFG pro-rata in accordance with their
respective investment amount for no additional consideration if the after tax
net income for the fiscal year ended March 31, 2009 was less than $13,919,707
and fiscal year ended March 31, 2010 was less than $18,495,315.

For fiscal year ended March 31, 2010, the return to Mr. Kung of
any of the make good shares placed in escrow by him was considered to be a
separate compensatory arrangement because Mr. Kung was a director of the
Companys subsidiary Fezdale. The net income target of $13,955,178 for fiscal
year 2009 (before any charges related to the release of any shares from escrow)
was met. Accordingly, the Company recorded a non-cash charge to compensation
cost of $9,519,317 in the fourth quarter of 2009 related to the release from
escrow to Mr. Kung of 2,799,799 shares.

For the year ended March 31, 2010, the net income target of
$18,495,315 was met. Accordingly, 2,799,799 shares were released to Mr. Kung
from escrow. As Mr. Kung resigned from his position as Fezdales director and
the release of the escrowed shares was not contingent upon Mr. Kungs continuing
employment with the Company, the Company did not recognize any compensation
expenses relating to the release of the escrow shares to Mr. Kung in fiscal year
ended March 31, 2010.

On September 4, 2009, the Companys common stock started
trading on the NYSE Amex.

F-6

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 1. NATURE OF BUSINESS (CONTINUED)

On September 30, 2009, the Company entered into a securities
purchase agreement (the Private Placement Transaction) with certain accredited
investors (Investors) and effected the initial closing of the purchase and
sale of 359,502 units (the Unit) at $33.00 per Unit. Each Unit consists of one
share of the Companys newly-designated Series A Convertible Preferred Stock,
par value $0.001 per share (Series A Preferred Stock) and one warrant (the
Warrant) to purchase 2.5 shares of the Companys common stock. The Series A
Preferred Stock is convertible into ten shares of the Companys common stock
(subject to customary adjustments) and the Company is obligated to register the
underlying shares of common stock within thirty days after the closing date. In
connection with the initial closing of the offering, the Company raised
approximately $11.86 million.

On October 8, 2009, the Company effected the second and final
closing of the Private Placement Transaction and issued 43,916 additional Unit
for gross proceeds of $1,449,000.

On September 3, 2010, the Company paid dividends of $809,550 to
the holders of Series A Preferred Stock.

Fezdale Investments Limited

Fezdale is a private limited liability company incorporated in
the BVI on August 22, 2007.

In November 2007, Solar Sun Holdings Limited (Solar Sun), a
subsidiary of Fezdale, entered in a share purchase agreement with six owners of
Daqing Longheda Food Company Limited (Longheda) under which the six owners of
Longheda transferred 75% equity interests in Longheda to Solar Sun for
RMB40,000,000 ($5.87 million). In May 2008, the six founders of Longheda
transferred the remaining 25% equity interests in Longheda to Solar Sun. After
the transfer, Longheda became a wholly owned subsidiary of Solar Sun.

Solar Sun Holdings Limited

Solar Sun is a private limited liability company (the PLLC)
incorporated in Hong Kong on September 12, 2007. Solar Sun is a holding company
and has no assets or operations other than its ownership of Longheda.

Daqing Longheda Food Company Limited

Longheda was incorporated in Heilongjiang province of Peoples
Republic of China (the PRC) in June 2004. Longheda is primarily engaged in
developing, processing, marketing and distributing a variety of food products
processed primarily from premium specialty fruits grown in Northeast China,
mainly including golden berry, crab apple, blueberry, raspberry, blackcurrant
and seabuckthorn. Its primary product offering includes concentrate juice,
nectar, glazed fruits, concentrate pulp as well as fresh fruits. Longheda sells
its products through an extensive sales and distribution network. The fresh
fruits are mainly sold to fruit supermarkets and stores while the processed
fruit products are mainly sold to manufacturers for further processing into
fruit juice and other fruit related products.

Jumbo Gloss Limited

Jumbo Gloss Limited (Jumbo Gloss) is a PLLC incorporated in
BVI on October 13, 2009. Jumbo Gloss is a holding company and has no assets or
operations other than its ownership of Daqing Senyang Fruit and Vegetable Food
Technology Company Limited (Senyang).

Daqing Senyang Fruit and Vegetable Food Technology Company
Limited

Senyang was incorporated in PRC in June 2010. Senyang has not
generated any revenue and will engage in operating the new fruit and vegetable
powder production.

F-7

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

Basis of presentation

The consolidated financial statements include the accounts of
China Nutrifruit Group Limited and its subsidiaries (the Group). The
consolidated financial statements were prepared in accordance with the US GAAP.
The consolidated financial statements of the Group include the accounts of CNGL,
Fezdale, Solar Sun, Jumbo Gloss, Longheda and Senyang. All significant
intercompany transactions and balances were eliminated in consolidation.

Use of estimates

The preparation of the consolidated financial statements in
conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent liabilities at the date of the financial statements, and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from these estimates.

Segment information

The Group identifies and classifies its operating segment based
on the nature of the products with similar economic characteristics. No segment
information is provided as the Group only has one business and geographical
segment. The Groups reportable segment is the manufacture and sell of food
products, which operations are located in the PRC and sales were predominately
made to customers located in the PRC.

Economic and political risks

The Groups operations are conducted in the PRC. Accordingly
the Groups business, financial position may be influenced by the political,
economic and legal environment in the PRC, and by the general state of the PRCs
economy.

The Groups operations in the PRC are subject to special
considerations and significant risk not typically associated with companies in
North America. These include risks associated with, among others, the political,
economic and legal environmental and foreign currency exchange. The Groups
results may be adversely affected by changes in the political and social
conditions in the PRC, and 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.

Earnings per share

Basic earnings per share is computed by dividing net operating
results for the reporting period attributable to common shareholders by the
weighted average number of common stocks outstanding during the period. Diluted
earnings per share is calculated by dividing net operating results for the
reporting period attributable to common shareholders by the weighted average
number of common shares outstanding and the dilutive effect of common stock
equivalents.

Trade accounts receivable

In the normal course of business the Group extends credit to
customers. Trade accounts receivable, less allowance for doubtful accounts,
reflects the net realizable value of receivables, and their approximate fair
value. On a regular basis, the Group evaluates its trade accounts receivable and
establishes an allowance for doubtful accounts based on a combination of
specific customer circumstances, credit conditions, and payment history. A
receivable is considered past due if payments have not been received within the
agreed upon invoice terms. No allowance for doubtful accounts at March 31, 2011
(2010: nil) was recorded.

Cash and equivalents

The Group considers all highly liquid investments with an
original maturity date of three months or less to be cash equivalents.

F-8

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Inventories

The cost of finished products inventories includes raw
materials, direct labor and indirect production costs. Inventories are stated at
the lower of cost or market. The Group uses first-in, first-out methods to value
its inventories. During the idle production period, overhead costs include
depreciation are treated as current-period charges, which are expensed to
general and administrative expense instead of cost of sales.

Fair value of financial instruments

The carrying amount of certain of the Groups financial
instruments, including cash and cash equivalents, trade accounts receivable,
accounts payable, other current assets, other payables and accrued expenses,
approximates fair value due to their relatively short maturity.

Property and equipment, net

Property and equipment are recorded at cost and are depreciated
on a straight-line basis over the estimated useful lives of the assets.
Maintenance and repairs are expensed as incurred. The principal estimated useful
lives generally are: buildings  20 years; leasehold improvements  10 years;
machinery  10 years; furniture, fixtures and office equipment  5 years; motor
vehicles  5 years. Depreciation of property and equipment was $2,372,023 and
$1,590,023 for the years ended March 31, 2011 and 2010 respectively. During the
idle period of the plant, depreciation is treated as current-period charges,
which charge directly to general and administrative expense.

Negative goodwill

Negative goodwill represents the excess fair value of the net
tangible and identifiable intangible assets acquired in a business combination
over the purchase price. The negative goodwill is allocated as a pro rata
reduction of the amounts assigned to the assets acquired excluding financial
assets, deferred taxes and other current assets. If negative goodwill exceeds
the amount of those assets, the remaining excess shall be recognized as an
extraordinary gain in the period which the business combination is
completed.

Revenue recognition

The Group recognizes revenue from sales of products, where
persuasive evidence of an arrangement exists, delivery has occurred, the
sellers price is fixed or determinable and collectibility is reasonably
assured. This generally occurs when the customer receives the product or at the
time title passes to the customer. Customers generally do not have the right to
return product unless damaged or defective. Net sales are comprised of gross
sales reduced by customer returns, trade promotions and discounts.

Shipping and handling costs

Shipping and handling costs are included in selling expenses.
The shipping and handling costs for the years ended March 31, 2011 and 2010 were
$2,301,126 and $2,872,277, respectively.

F-9

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Impairment of long-lived assets

Long-lived assets, except indefinite-lived intangible assets,
are reviewed for impairment when circumstances indicate the carrying value of an
asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of the assets to future net cash
flows estimated by the Group to be generated by such assets. If such assets are
considered to be impaired, the impairment to be recognized is the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of by sale are recorded as held for sale at the lower of
carrying value or estimated net realizable value. During the period, no
impairment on long-lived assets was recorded by the Group.

All land in the PRC is owned by the PRC government. The
government in the PRC, according to the relevant PRC law, may sell the right to
use the land for a specific period of time. Thus, all of the Groups land
located in the PRC is considered to be leasehold land and is stated at cost less
accumulated amortization and any recognized impairment loss. Amortization is
provided over the term of the land use agreements on a straight-line basis,
which is 50 years.

Advertising costs

Advertising costs are expensed as incurred. The total
advertising costs were $63,581 and $38,053 for the years ended March 31, 2011
and 2010, respectively.

Other income recognition

Other income is comprised of interest income and others.

Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable, which is
the rate that discounts the estimated future cash receipts through the expected
life of the loan to the loans net carrying amount.

Foreign currency translation

The accompanying financial statements are presented in United
States dollars. The functional currency of the Group is 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. The rates used were as
follows:

|March 31, 2011                               |                   
|-------------------------------------------- | ------------------
|Balance sheet                                | RMB6.55 to US$1.00
|Statement of income and comprehensive income | RMB6.73 to US$1.00

|March 31, 2010                               |                   
|-------------------------------------------- | ------------------
|Balance sheet                                | RMB6.84 to US$1.00
|Statement of income and comprehensive income | RMB6.84 to US$1.00

As at March 31, 2011, RMB284,742,770 equalled to $43,471,515
(March 31, 2010: RMB236,619,999 equalled to $34,613,303) 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 $ at the rates used in
translation.

F-10

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Statutory reserves

The laws and regulations of the PRC require before an
enterprise distributes profits to its owners, it must first satisfy all tax
liabilities, provide for losses in previous years, and make allocations. The
statutory reserves include a surplus reserve fund and a common welfare fund.
These statutory reserves represent restricted retained earnings. The details of
surplus reserve fund and common welfare fund are as follows:

Surplus reserve fund

The Companys subsidiaries in PRC are required to transfer 10
percent of their respective net income, as determined in accordance with the PRC
accounting rules and regulations, to a statutory surplus reserve fund until such
reserve balance reaches 50 percent of that subsidiarys paid-in capital.

The transfer to this reserve must be made before distribution
of any dividends to owners. The surplus reserve fund is non-distributable other
than during liquidation and can be used to fund previous years losses, if any,
and may be utilized for business expansion or converted into equity by raising
equity in proportion to their equity holdings.

Common welfare fund

The Companys subsidiaries in PRC are required to transfer 5
percent to 10 percent of their respective net income, as determined in
accordance with the PRC accounting rules and regulations, to the statutory
common welfare fund. This fund can only be utilized for capital items for the
collective benefit of that subsidiarys employees, such as construction of
dormitories, cafeteria facilities, and other staff welfare facilities. This fund
is non-distributable other than upon liquidation. The transfer to this fund must
be made before distribution of any dividends to owners.

Share-based payment

The Company has adopted Accounting Standards Codification 718
(ASC 718), as amended and interpreted, for its share-based compensation which
required the Company to record compensation expense for all awards based on
their grant date fair value. The Company utilized the modified prospective
method approach, pursuant to which the Company has recorded compensation for all
awards granted based on their fair value.

Related party transactions

A related party is generally defined as (i) any person that
holds 10% or more of the Groups securities and their immediate families, (ii)
the Groups management, (iii) someone that directly or indirectly controls, is
controlled by or is under common control with the Group, or (iv) anyone who can
significantly influence the management or operating decisions of the Group. A
transaction is considered to be a related party transaction when there is a
transfer of resources or obligations between related parties.

Income taxes

The Group accounts for income taxes under the provision of
Accounting Standards Codification 740 (ASC 740) resulting in two components of
income tax expense: current and deferred. Current income tax expense
approximates taxes to be paid or refunded for the relevant periods. Deferred
income tax expense results from changes in deferred tax assets and liabilities
between periods. Deferred income tax assets and liabilities are computed for
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities that will result in taxable or deductible
amounts in the future, as well as from net operating loss and tax credit
carryforwards, and are measured at the enacted tax laws and rates applicable in
the years which the differences are expected to be recovered or settled. A
deferred tax asset is recognized if it is more likely than not that a benefit
will be realized. The Groups operations are primarily located in PRC and
subject to PRC profits tax.

F-11

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Reclassifications

Certain financial statements line items were reclassified to
conform to the current year presentation and have no impact on the previously
reported consolidated net sales, operating earnings or financial position.

NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS

In April 2011, the FASB issued Accounting Standards Update
(ASU) 2011-02  Receivables (Topic 310): A Creditors Determination of Whether
a Restructuring Is a Troubled Debt Restructuring. This update to Receivables
(Topic 310) clarifies the guidance for a creditors evaluation of whether a
restructuring constitutes a troubled debt restructuring. This update clarifies,
when evaluating a restructuring as a troubled debt restructuring, whether a
creditor has granted a concession to a debtor and whether the debtor is
experiencing financial difficulties. The objective of this amendment is to
promote greater consistency in the application of US GAAP for debt
restructurings from the creditors perspective. The effective date of this
update is for the first interim period beginning after June 15, 2011, and should
be applied retrospectively to the beginning of the current year. The Company is
currently evaluating the impact of this standard, but would not expect it to
have a material impact on the Companys consolidated results of operations or
financial condition.

Other recent accounting pronouncements issued by the FASB, and
the SEC did not or are not believed by management to have a material impact on
the Company's present or future financial statements.

NOTE 4. CONCENTRATION OF RISK

Credit Risk

Financial instruments that potentially subject the Group to
significant concentration of credit risk consist primarily of cash and
equivalents. As of March 31, 2011, substantially all of the Groups cash and
equivalents were held by major financial institutions located in the PRC, which
management believes are of high credit quality.

Groups operations are in China

All of the Groups products are produced in China. The Groups
operations are subject to various political, economic, and other risks and
uncertainties inherent in China. Among other risks, the Groups operations are
subject to the risks of transfer of funds; domestic and international customs
and tariffs; changing taxation policies; foreign exchange restrictions; and
political conditions and governmental regulations.

F-12

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 5. EARNINGS PER SHARE

The computation of basic and diluted earnings per share is as
follows for the years ended March 31:

|                                                                        |   | 2011       |   |   | 2010       |  
|----------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|Numerator:                                                              |   |            |   |   |            |  
|Net earnings                                                            | $ | 24,743,234 |   | $ | 19,248,760 |  
|Less: dividends on preferred
      stock                                |   | (446,008   | ) |   | (457,073   | )
|Net earnings for basic earnings per share                               | $ | 24,297,226 |   | $ | 18,791,687 |  
|                                                                        |   |            |   |   |            |  
|Net earnings for basic earnings per share                               | $ | 24,297,226 |   | $ | 18,791,687 |  
|Add: dividends on preferred
      stock                                 |   | 446,008    |   |   | 457,073    |  
|Net earnings for diluted earnings per share                             | $ | 24,743,234 |   | $ | 19,248,760 |  
|                                                                        |   |            |   |   |            |  
|                                                                        |   |            |   |   |            |  
|Denominator:                                                            |   |            |   |   |            |  
|Weighted average common stock outstanding                               |   | 36,736,834 |   |   | 36,153,554 |  
|Effect of dilutive preferred
      stock                                |   | 3,308,600  |   |   | 1,815,893  |  
|Effect of dilutive warrant                                              |   | 11,165     |   |   | 82,302     |  
|Weighted average common
      stock and dilutive potential common stock |   | 40,056,599 |   |   | 38,051,749 |  
|                                                                        |   |            |   |   |            |  
|                                                                        |   |            |   |   |            |  
|Basic net earnings per share                                            | $ | 0.66       |   | $ | 0.52       |  
|                                                                        |   |            |   |   |            |  
|Diluted net earnings per share                                          | $ | 0.62       |   | $ | 0.51       |  

As of March 31, 2011, the Company had warrants outstanding
which are convertible into 1,344,498 (2010: 1,344,498) shares of the Companys
common stock. The potential dilutive effect of such warrant is 11,165 (2010:
82,302) shares of Companys common stock.

NOTE 6. INVENTORY

Inventory by major categories at March 31 are summarized as
follows:

|               |   | 2011      |  |   | 2010      | 
|-------------- | - | --------- |  | - | --------- | 
|Finished goods | $ | 6,324,862 |  | $ | 4,101,918 | 
|Raw material   |   | 94,290    |  |   | 77,992    | 
|               |   |           |  |   |           | 
|               | $ | 6,419,152 |  | $ | 4,179,910 | 

NOTE 7. PROCEEDS FROM PRIVATE PLACEMENT HELD IN ESCROW
ACCOUNT

The balance represents the 7% of net proceeds raised in the
Private Placement Transaction (Note 1), which was deposited in an escrow account
and distributed to the Investors for the payment of dividend on September 1,
2010, subject to terms in the closing escrow agreement.

F-13

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 8. LAND USE RIGHTS, NET

Land use rights, net, at March 31 are summarized as follows:

|                               |   | 2011    |   |   | 2010    |  
|------------------------------ | - | ------- | - | - | ------- | -
|Land use rights, at cost       | $ | 206,039 |   | $ | 200,175 |  
|Less: accumulated amortization |   | (17,840 | ) |   | (14,489 | )
|                               |   |         |   |   |         |  
|                               | $ | 188,199 |   | $ | 185,686 |  

For each of the upcoming five years, estimated amortization is
expected to be $2,728 per year.

As of March 31, 2011, land use rights, of $188,199 (2010:
$185,686), were pledged to secure the unused banking facilities obtained by the
Group (Note 17).

NOTE 9. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, at March 31 are summarized as
follows:

|                                         |   | 2011       |   |   | 2010       |  
|---------------------------------------- | - | ---------- | - | - | ---------- | -
|Buildings                                | $ | 5,652,084  |   | $ | 4,673,420  |  
|Leasehold improvements                   |   | 1,398,033  |   |   | 1,339,544  |  
|Machinery                                |   | 19,190,848 |   |   | 14,616,662 |  
|Furniture, fixtures and office equipment |   | 15,378     |   |   | 13,742     |  
|Motor vehicles                           |   | 41,556     |   |   | 6,194      |  
|Total                                    |   | 26,297,899 |   |   | 20,649,562 |  
|Less: accumulated depreciation           |   | (5,985,894 | ) |   | (3,582,655 | )
|                                         |   |            |   |   |            |  
|                                         | $ | 20,312,005 |   | $ | 17,066,907 |  

As of March 31, 2011, buildings, leasehold improvement and
machinery, of $4,289,330 (2010: $3,781,058), $1,054,948 (2010: $1,137,405) and
$942,218 (2010: $1,015,863) respectively, were pledged to secure the unused
banking facilities obtained by the Group (Note 17).

NOTE 10. PROVISION FOR INCOME TAXES

The provision for income tax is as follows:

|          |   | For the year ended March
      31, | 
|--------- | - | ---------------------------------- | 
|          |   | 2011                               | 
|          |   |                                    | 
|Current:  |   |                                    | 
|PRC       | $ | 8,541,368                          | 
|Deferred: |   |                                    | 
|PRC       |   | 158,998                            | 
|          | $ | 8,700,366                          | 

F-14

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 10. PROVISION FOR INCOME TAXES (CONTINUED)

Deferred tax assets

The source of significant temporary difference that gives rise
to the deferred tax asset is as follows:

|                                                                                         |   | 2011       |   |   | 2010      |  
|---------------------------------------------------------------------------------------- | - | ---------- | - | - | --------- | -
|Deferred tax assets:                                                                     |   |            |   |   |           |  
|Difference between book and tax basis of
      land use right and property and equipment | $ | 909,879    |   | $ | 1,068,878 |  
|Tax losses carryforwards                                                                 |   | 1,315,626  |   |   | 913,721   |  
|Less: valuation allowance                                                                |   | (1,315,626 | ) |   | (913,721  | )
|Net deferred tax assets                                                                  | $ | 909,879    |   | $ | 1,068,878 |  

In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that all of the assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income in each tax jurisdiction
during the periods in which temporary differences in those jurisdictions become
deductible. Management considers the projected future taxable income and tax
planning strategies in making this assessment.

As of March 31, 2011 and 2010, the Company has valuation
allowances of $1,315,626 and $913,721 for federal net operating loss and foreign
unused tax loss carryforwards, respectively, which it does not expect to
utilize. As of March 31, 2011, the Company has net operating loss of $2,699,300
(2010: $1,719,473).

The total valuation allowance between periods presented
increased by $401,905 (2010: $368,853) and such increase was attributable to the
tax effect on foreign tax losses incurred for the year ended March 31, 2011 of
$52,734 (2010: $56,757) at enacted foreign profit tax rates and the tax effect
on federal net operating loss incurred for the year ended March 31, 2011 of
$349,171 (2010: $312,096) at the federal tax rate of 35%.

Income taxes

A reconciliation of the provision for income tax calculated
using the statutory federal income tax rate and state and local income tax rate
to the Companys provision for income taxes for the years ended March 31 is as
follows:

|                                                                   |   | 2011       |   |   | 2010       |  
|------------------------------------------------------------------ | - | ---------- | - | - | ---------- | -
|Provision for income taxes at statutory
      rate of 35%          | $ | 11,705,260 |   | $ | 9,134,370  |  
|Chinese tax rate difference                                        |   | (3,356,804 | ) |   | (2,536,390 | )
|Non-deductible expenses and non-assessable
      profits           |   | (208,993   | ) |   | (455,331   | )
|Changes in valuation allowance                                     |   | 401,905    |   |   | 368,853    |  
|Tax effect of non-deductible temporary
      difference recognized |   | 158,998    |   |   | 337,936    |  
|Income taxes                                                       | $ | 8,700,366  |   | $ | 6,849,438  |  

Pretax earnings of a foreign subsidiary are subject to U.S.
taxation when effectively repatriated. U.S. income taxes and foreign withholding
taxes were not provided on undistributed earnings of foreign subsidiaries. As of
March 31, 2011, the undistributed earnings of foreign subsidiaries were
$59,867,240 (2010: $36,105,710). The Company intends to reinvest these earnings
indefinitely in its foreign subsidiaries. It is not practical to determine the
amount of undistributed earnings or income tax payable in the event the Company
repatriated all undistributed foreign earnings. However, if these earnings were
distributed to the U.S. in the form of dividends or otherwise, the Company would
be subject to additional U.S. income taxes and foreign withholding taxes, offset
by an adjustment for foreign tax credits.

F-15

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 11. PREPAYMENTS AND DEPOSITS

Prepayments and deposits by major categories are summarized as
follows at March 31:

|                                                   |   | 2011       |  |   | 2010    | 
|-------------------------------------------------- | - | ---------- |  | - | ------- | 
|                                                   |   |            |  |   |         | 
|Classified as current assets:                      |   |            |  |   |         | 
|Prepaid expenses                                   | $ | 264,878    |  | $ | 114,732 | 
|                                                   |   |            |  |   |         | 
|Classified as non-current assets:                  |   |            |  |   |         | 
|Prepayment to acquire property
      and equipment |   | 10,205,951 |  |   | -       | 
|Prepayment to acquire land use rights              |   | 777,453    |  |   | -       | 
|                                                   |   | 10,983,404 |  |   | -       | 
|                                                   | $ | 11,248,282 |  | $ | 114,732 | 

NOTE 12. OTHER PAYABLES AND ACCRUED EXPENSES

Other payables and accrued expenses by major categories are
summarized as follows at March 31:

|                         |   | 2011      |  |   | 2010      | 
|------------------------ | - | --------- |  | - | --------- | 
|                         |   |           |  |   |           | 
|Accruals                 | $ | 968,822   |  | $ | 723,588   | 
|Value added tax payables |   | 1,545,707 |  |   | 1,104,630 | 
|Other payables           |   | 797,996   |  |   | 551,028   | 
|                         | $ | 3,312,525 |  | $ | 2,379,246 | 

The other payables mainly comprised the amount payable to the
suppliers of property and equipment, amounting to $431,612 (2010: $398,056) as
of March 31, 2011.

NOTE 13. DUE TO A DIRECTOR

|                |   | 2011    |  |   | 2010 | 
|--------------- | - | ------- |  | - | ---- | 
|Mr. Changjun Yu | $ | 946,550 |  | $ | -    | 

The amount due to a director was unsecured, interest free and
repayable on demand.

NOTE 14. SHAREHOLDERS EQUITY

General

The Companys total authorized capital at March 31, 2011 and
2010, is 125,000,000 shares of which 120,000,000 shares are common stock, par
value $0.001 and 5,000,000 shares are preferred stock, par value $0.001.

Additional paid-in capital

On September 7, 2009, Mr. Kung agreed to capitalize his loan,
of HK$40,109,986, equivalent to $5,190,497, by issuing 7 fully paid shares of
par value $1.00 in Fezdale to the Company.

On September 7, 2009, Mr. Kwan Ho Ng agreed to capitalize his
loan, of HK$17,189,994, equivalent to $2,224,498, by issuing 3 fully paid shares
of par value $1.00 in Fezdale to the Company.

F-16

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 14. SHAREHOLDERS EQUITY (CONTINUED)

Series A Preferred Stock

In connection with the first closing of Private Placement
Transaction on September 30, 2009, certain investors received 359,502 shares of
Series A Preferred Stock.

In connection with the second and final closing of Private
Placement Transaction on October 8, 2009, certain investors received 43,916
shares of Series A Preferred Stock. A summary of terms of Series A Preferred
Stock as follows:

Ranking

With respect to rights upon liquidation, winding-up or
dissolution, the Series A Preferred Stock ranks senior to the Companys common
stock and any other classes or series of stock of the Company not designated as
ranking senior to or pari passu with the Series A Preferred Stock.

Voting

The holders of the Series A Preferred Stock will vote on an as
converted basis, together with the common stock, as a single class, in
connection with any proposal submitted to the Companys shareholders, except as
required by Nevada law.

Conversion

Shares of the Series A Preferred Stock are convertible into
fully paid and non-assessable shares of common stock at a conversion rate
calculated by dividing (A) $33.00 per share (the Liquidation Preference
Amount) by (B) the conversion price, which is initially $3.30 per share,
subject to adjustment as provided in the Certificate of Designation. Initially,
each share of Series A Preferred Stock is convertible into 10 shares of common
stock.

Mandatory Conversion

The Company may convert outstanding Series A Preferred Stock
into shares of common stock upon (i) the closing of a sale by the Company of
shares of common stock in a registered public offering in which the Company
sells shares of its stock for at least $10 million in gross proceeds and the
holders of the Series A Convertible Preferred Stock are able to offer and sell
at least 50% of the common stock that would be received upon such mandatory
conversion ("Qualified Sale") or (ii) when the average of the daily closing
price of the common stock for at least 30 consecutive trading days is not less
than $4.25 and the daily trading volume during each of those 30 trading days
exceeds 75,000 shares (a "Market Forced Conversion," and collectively with a
Qualified Sale, a "Forced Conversion"). The conversion rate to be applied in
effecting a Forced Conversion is calculated by dividing the Liquidation
Preference Amount per share by $2.75 (in the event of a Qualified Sale) or $3.30
(in the event of a Market Forced Conversion), as the case may be, subject to
adjustment as provided in the Certificate of Designation. In addition, in
connection with a Qualified Sale Forced Conversion, the Company will pay to the
holder for each share of Series A Preferred Stock so converted a per share
amount equal to seven percent (7%) of the original issue price plus all accrued
and unpaid dividends.

Dividends

Each share of Series A Preferred Stock is entitled to receive
cumulative dividends at the annual rate of 7% on the Liquidation Preference
Amount thereof. Such dividends are payable annually on September 1 beginning
with September 1, 2010 and any optional conversion date in cash.

F-17

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 14. SHAREHOLDERS EQUITY (CONTINUED)

Liquidation

In the event of the liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, the holders of the
Series A Preferred Stock then outstanding will be entitled to receive, out of
the assets of the Company available for distribution to its shareholders, $33.00
per share plus accrued but unpaid dividends, before any payment shall be made or
any assets distributed to the holders of the Common Stock or any other class or
series of stock issued by the Company not designated as ranking senior to or
pari passu with the Series A Preferred Stock in respect of the right to
participate in distributions or payments upon a liquidation event.

Redemption

At any time on or after less than 10% of the originally issued
shares of Series A Preferred Stock remain outstanding and subject to the
satisfaction of certain conditions, the Company may redeem all shares of Series
A Preferred Stock then outstanding at one hundred and one percent (101%) of the
Liquidation Preference Amount, plus any accrued and unpaid dividends. A holder
of the outstanding Series A Preferred Stock may also, upon the satisfaction of
the foregoing conditions and at the option of such holder, request the Company
to redeem all or any of its shares of Series A Preferred Stock at the same
price.

Common stock

In connection with the Companys private placement on August
14, 2008, the Company entered into two make good escrow agreements, under which
5,599,598 shares of the Companys common stock held by Yiu Fai Kung, the
Companys major shareholder, were placed in escrow. For each of the calendar
years 2009 and 2010, 2,799,799 shares will be released to the investors or
Halter or returned to the shareholder, depending on the fulfillment of specified
earnings targets. The specified earnings target for fiscal year 2009 was net
income of $13,919,707 and for fiscal year 2010 the target was net income of
$18,495,315. For 2009, the earnings target of net income of $13,919,707 (before
any charges related to the release of any shares from escrow) was met and
accordingly, the Company recorded a non-cash charge to compensation cost of
$9,519,317 in the fourth quarter of 2009 related to the release from escrow to
Mr. Kung of 2,799,799 shares. For 2010, the earnings target of net income of
$18,495,315 was met and accordingly, 2,799,799 shares were released to Mr. Kung
from escrow.

The following is the movement of common stock during fiscal
2011:

The Companys Series A preferred shareholders converted 14,550
shares into 145,500 shares of the Companys common stock at a conversion ratio
of 1 Series A Preferred Stock to 10 shares of common stock. On April 7, 2010,
April 21, 2010, May 5, 2010 and May 21, 2010, 33,340 shares, 30,310 shares,
36,380 shares and 45,470 shares of common stock in connection to such Series A
Preferred Stock conversion were issued.

The Companys Series A preferred shareholders converted 7,576
shares into 75,760 shares of the Companys common stock at a conversion ratio of
1 Series A Preferred Stock to 10 shares of common stock. On November 8, 2010,
75,760 shares of common stock in connection to such Series A Preferred Stock
conversion were issued.

The Companys Series A preferred shareholders converted 12,123
shares into 121,230 shares of the Companys common stock at a conversion ratio
of 1 Series A Preferred Stock to 10 shares of common stock. On January 3, 2011,
March 14, 2011 and March 24, 2011, 15,160 and 90,910, 15,160 shares of common
stock in connection to such Series A Preferred Stock conversion were issued.

The following is the movement of common stock during fiscal
2010:

The Companys warrants holder, Wentworth Securities, Inc.,
converted its warrants into 34,428 shares of the Companys common stock. On
January 13, 2010, 34,428 shares of common stock in connection to such warrant
conversion were issued.

F-18

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 14. SHAREHOLDERS EQUITY (CONTINUED)

On January 28, 2010, the Company issued 30,000 shares of common
stock to a director, William Haus, under a restricted stock grant agreement.

The Companys Series A preferred stockholders converted 38,309
shares into 383,090 shares of the Companys common stock at a conversion ratio
of 1 Series A Preferred Stock to 10 shares of common stock. On March 12, 2010,
March 15, 2010, March 17, 2010, March 19, 2010 and March 26, 2010, 42,440
shares, 180,000 shares, 103,060 shares, 27,280 shares and 30,310 shares of
common stock in connection to such Series A Preferred Stock conversion were
issued.

Warrants

In connection with the private placement which closed on
October 10, 2008, WLT Brothers Capital, Inc., Wentworth Securities, Inc. and
Euro Pacific Capital, Inc., the Companys placement agents, received, as partial
compensation, warrants to purchase 66,171, 95,781 and 54,057 shares of the
Companys common stock, respectively. The warrants have a term of 3 years and
are immediately exercisable at $2.78 per share, subject to the usual adjustments
for certain corporate events.

The following is the movement of warrants during fiscal 2010:

The Companys warrants holder, Wentworth Securities, Inc.,
converted 95,781 warrants into 34,428 shares of the Companys common stock by
using the cashless exercise.

The Company valued the warrants by Trinomial option pricing
model at $331,357 which was recorded as cost of raising capital against
additional paid-in capital. The Company estimated the fair value of each warrant
award on the date of grant using the Trinomial option pricing model and the
assumption noted in the following table. Expected volatility is based on the
historical and implied volatility of a peer group of publicly traded entities.
The expected term of options gave consideration to historical exercises,
post-vesting cancellations and the options contractual term. The risk-free rate
for the expected term of the option is based on the U.S. Treasury Constant
Maturity at the time of grant. The assumptions used to value options granted
during the year ended March 31, 2009 were as follows:

|Risk free interest rate | 3.479%
|----------------------- | ------
|Expected volatility     | 59.92%
|Expected dividend rate  | -%    
|Expected life (years)   | 3     

In connection with the first closing of Private Placement
Transaction which closed on September 30, 2009, certain investors received
359,502 warrants to purchase 898,777 shares of the Companys common stock. The
warrants have a term of 4 years and are immediately exercisable at $3.30 per
share, subject to customary adjustments.

The Company valued the warrants by Trinomial Option Pricing
Model at $1,361,295 which was used to calculate the portion of proceeds from
private placement transaction arising from warrants to record as additional
paid-in capital. The Company estimated the fair value of each warrant award on
the date of grant using the Trinomial Option Pricing Model and the assumption
noted in the following table. Expected volatility is based on the historical and
implied volatility of a peer group of publicly traded entities. The expected
term of options gave consideration to historical exercises, post-vesting
cancellations and the options contractual term. The risk-free rate for the
expected term of the option is based on the U.S. Government Bond at the time of
grant. The assumptions used to value options granted were as follows during
fiscal 2010:

|Risk free interest rate | 2.264%
|----------------------- | ------
|Expected volatility     | 56.03%
|Expected dividend rate  | -%    
|Expected life (years)   | 4     

F-19

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 14. SHAREHOLDERS EQUITY (CONTINUED)

In connection with the first closing of Private Placement
Transaction on September 30, 2009, WLT Brothers Capital, Inc. and Euro Pacific
Capital, Inc., the Companys placement agents received, as partial compensation,
86,281 warrants to purchase 215,703 shares of the Companys common stock. The
warrants have a term of 4 years and are immediately exercisable at $3.30 per
share, subject to customary adjustments.

The Company valued the warrants by Trinomial Option Pricing
Model at $326,705 which was recorded as cost of raising capital against
additional paid-in capital. The Company estimated the fair value of each warrant
award on the date of grant using the Trinomial Option Pricing Model and the
assumption noted in the following table. Expected volatility is based on the
historical and implied volatility of a peer group of publicly traded entities.
The expected term of options gave consideration to historical exercises,
post-vesting cancellations and the options contractual term. The risk-free rate
for the expected term of the option is based on the U.S. Government Bond at the
time of grant.

In connection with the second and final closing of Private
Placement Transaction which closed on October 8, 2009, certain investors
received 43,916 warrants to purchase 109,790 shares of the Companys common
stock. The warrants have a term of 4 years and are immediately exercisable at
$3.30 per share, subject to customary adjustments.

The Company valued the warrants by Trinomial Option Pricing
Model at $168,549 which was used to calculate the portion of proceeds from
private placement transaction arising from warrants to record as additional
paid-in capital. The Company estimated the fair value of each warrant award on
the date of grant using the Trinomial Option Pricing Model and the assumption
noted in the following table. Expected volatility is based on the historical and
implied volatility of a peer group of publicly traded entities. The expected
term of options gave consideration to historical exercises, post-vesting
cancellations and the options contractual term. The risk-free rate for the
expected term of the option is based on the U.S. Government Bond at the time of
grant. The assumptions used to value options granted were as follows during
fiscal 2010:

|Risk free interest rate | 2.324%
|----------------------- | ------
|Expected volatility     | 51.62%
|Expected dividend rate  | -%    
|Expected life (years)   | 4     

In connection with the second and final closing of Private
Placement Transaction which closed on October 8, 2009, certain placement agents
received 10,540 warrants to purchase 26,349 shares of the Companys common
stock. The warrants have a term of 4 years and are immediately exercisable at
$3.30 per share, subject to customary adjustments.

The Company valued the warrants by Trinomial Option Pricing
Model at $40,450 which was recorded as cost of raising capital against
additional paid-in capital. The Company estimated the fair value of each warrant
award on the date of grant using the Trinomial Option Pricing Model and the
assumption noted in the following table. Expected volatility is based on the
historical and implied volatility of a peer group of publicly traded entities.
The expected term of options gave consideration to historical exercises,
post-vesting cancellations and the options contractual term. The risk-free rate
for the expected term of the option is based on the U.S. Government Bond at the
time of grant.

The following is the movement of warrants during fiscal 2011:

Outstanding at
    
    
    Granted during
    
    
    Exercised during
    
    
    Outstanding atDate of grant
    
    April 1, 2010
    
    
    the year
    
    
    the year
    
    
    March 31, 2011
    
    
    Exercise priceOctober 10, 2008
    
    120,228
    
    
    -
    
    
    -
    
    
    120,228
    
    $
    2.78September 30, 2009
    
    359,502
    
    
    -
    
    
    -
    
    
    359,502
    
    $
    3.30October 8, 2009
    
    140,737
    
    
    -
    
    
    -
    
    
    140,737
    
    $
    3.30620,467
    
    
    -
    
    
    -
    
    
    620,467Weighted average exercise price
    $
    3.20
    
    $
    -
    
    $
    -
    
    $
    3.20


F-20

---

|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES
|-----------------------------------------------------
|                                                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|MARCH 31,
      2011 AND 2010                        

NOTE 14. SHAREHOLDERS EQUITY (CONTINUED)

The following is the movement of warrants during fiscal 2010:

Outstanding at
    
    
    Granted during
    
    
    Exercised during
    
    
    Outstanding atDate of grant
    
    April 1, 2009
    
    
    the year
    
    
    the year
    
    
    March 31, 2010
    
    
    Exercise priceOctober 10, 2008
    
    216,009
    
    
    -
    
    
    (95,781
    )
    
    120,228
    
    $
    2.78September 30, 2009
    
    -
    
    
    359,502
    
    
    -
    
    
    359,502
    
    $
    3.30October 8, 2009
    
    -
    
    
    140,737
    
    
    -
    
    
    140,737
    
    $
    3.30216,009
    
    
    500,239
    
    
    (95,781
    )
    
    620,467Weighted average exercise price
    $
    2.78
    
    $
    3.30
    
    $
    2.78
    
    $
    3.20


NOTE 15. PRC CONTRIBUTION PLAN

Employees of the Group are entitled to retirement benefits
calculated with reference to their salaries basis upon retirement and their
length of service in accordance with a PRC government-managed retirement plan.
The PRC government is directly responsible for the payments of the benefits to
these retired employees. The Group is required to make contributions to the
government-managed retirement plan based on certain percentages of the
employees monthly salaries. The amounts contributed by the Group were $352,885
and $350,628 for the years ended March 31, 2011 and 2010 respectively.

NOTE 16. COMMITMENTS AND CONTINGENT LIABILITIES

Capital Commitments

As of March 31, 2011, the Group have the followings outstanding
capital expenditure commitments.

Authorized and contracted, but not provide for:

|Purchase of property and equipment | $ | 3,075,787 | 
|---------------------------------- | - | --------- | 

Operating Lease Commitments

As of March 31, 2011, the Group did not have any significant
operating lease commitment.

Rent expense for the years ended March 31, 2011 and 2010 was
$17,828 and $23,533 respectively.

NOTE 17. UNUSED SECURED CREDIT FACILITIES

As of March 31, 2011, the Group had $2,266,484 (2010:
$2,756,791) of unused credit facilities granted by banks. Those banking
facilities were secured by land use rights, buildings, leasehold improvement and
machinery, of $188,199 (2010: $185,686), $4,289,330 (2010: $3,781,058),
$1,054,948 (2010: $1,137,405) and $942,218 (2010: $1,015,863) respectively.

NOTE 18. SUBSEQUENT EVENTS

The Company evaluated all events or transactions through the
date of this filing, which is the date the financial statements were issued.
During this period, other than those disclosed above, the Company did not have
any material subsequent events that impacted the consolidated financial
statements.

End of consolidated financial statements.

F-21

---

EXHIBIT INDEX

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                 
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Amended and Restated Articles of Incorporation of the
      registrant as filed with the Secretary of State of Nevada on August 14,
      2008 [incorporated by reference to Exhibit 3.1 to the Companys Current
      Report on Form 8-K filed on August 20, 2008]                        
|3.2         |  | Certificate of Designation of Series A Convertible
      Preferred Stock [incorporated by reference to Exhibit 3.1 to the Companys
      Current Report on Form 8-K filed on October 1, 2009]                                                                                              
|3.2         |  | Amended and Restated Bylaws of the registrant adopted on
      June 19, 2008 [incorporated by reference to Exhibit 3.2 to the Companys
      Current Report on Form 8-K filed on June 20, 2008]                                                                                            
|4.1         |  | Form of Warrant [incorporated by reference to Exhibit 4.1
      to the Companys Current Report on Form 8-K filed on October 1, 2009]                                                                                                                                                       
|10.1        |  | Form of Securities Purchase Agreement, dated September
      30, 2009, by and among the Company and the investors named therein
      [incorporated by reference to Exhibit 10.1 to the Companys Current Report
      on Form 8-K filed on October 1, 2009]                                
|10.2        |  | Form of Closing Escrow Agreement, dated September 30,
      2009, by and among the Company, Securities Transfer Corporation and
      investors named therein [incorporated by reference to Exhibit 10.2 to the
      Companys Current Report on Form 8-K filed on October 1, 2009]        
|10.3        |  | Employment Agreement, by and between the registrant and
      Aijun Wang, dated October 19, 2010 [incorporated by reference to Exhibit
      10.1 to the Companys Current Report on Form 8-K filed on October 20,
      2010]                                                              
|10.4        |  | Employment Agreement, by and between the registrant and
      Changjun Yu, dated July 3, 2010 [incorporated by reference to Exhibit 10.1
      to the Companys Current Report on Form 8-K filed on July 6, 2010]                                                                           
|10.5        |  | Employment Agreement, by and between the registrant and
      Colman Cheng, dated August 14, 2008 [incorporated by reference to Exhibit
      10.15 to the Companys Current Report on Form 8-K filed on August 14,
      2008]                                                             
|10.6        |  | Independent Directors Contract, dated as of June 11,
      2009, by and between the Company and Chun Wai Chan [incorporated by
      reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
      filed on June 15, 2009]                                                   
|10.7        |  | Independent Directors Contract, dated as of June 11,
      2009, by and between the Company and William Haus [incorporated by
      reference to Exhibit 10.2 to the Companys Current Report on Form 8-K
      filed on June 15, 2009]                                                    
|10.8        |  | Independent Directors Contract, dated as of June 11,
      2009, by and between the Company and Jingfu Li [incorporated by reference
      to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on June
      15, 2009]                                                       
|10.9        |  | Indemnification Agreement, dated as of June 11, 2009, by
      and between the Company and Chun Wai Chan [incorporated by reference to
      Exhibit 10.4 to the Companys Current Report on Form 8-K filed on June 15,
      2009]                                                         
|10.10       |  | Indemnification Agreement, dated as of June 11, 2009, by
      and between the Company and William Haus [incorporated by reference to
      Exhibit 10.5 to the Companys Current Report on Form 8-K filed on June 15,
      2009]                                                          
|10.11       |  | Indemnification Agreement, dated as of June 11, 2009, by
      and between the Company and Jingfu Li [incorporated by reference to
      Exhibit 10.6 to the Companys Current Report on Form 8-K filed on June 15,
      2009]                                                             
|10.12       |  | English translation of Premises Lease Agreement, dated
      June 8, 2009, by and between Daqing Longheda Food Company Limited and
      Daqing Chuangye Plaza Co. Ltd. [incorporated by reference to Exhibit 10.1
      to the Companys Current Report on Form 8-K filed on June 11, 2009]

---

|Exhibit No. |  | Description                                                                                                                                                                                                
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13       |  | China Nutrifruit Group Limited,
      2010 Equity Incentive Plan, as amended [incorporated by reference to
      Exhibit 10.1 to the Companys Current Report on Form 8-K filed on December
      16, 2009]
|14          |  | China Nutrifruit Group Limited Code of Ethics
      [incorporated by reference to Exhibit 14.1 to the Companys Current Report
      on Form 8-K filed on June 15, 2009]                                   
|21          |  | Subsidiaries of the Company.*                                                                                                                                                                              
|23.1        |  | Consent of HLB Hodgson Impey Cheng. *                                                                                                                                                                      
|31.1        |  | Certifications of Chief
      Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002. *                                                                                         
|31.2        |  | Certifications of Chief Financial Officer
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *                                                                                               
|32.1        |  | Certification of Chief
      Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002. *                                                                                          
|32.2        |  | Certification of Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *                                                                                                      

---