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UNITED STATES 
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)

xANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the fiscal year ended: March 31, 2010

o

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 organization) |  | (I.R.S. Employer Identification
    Number)

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

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

Securities registered pursuant to Section 12(b) of the Exchange 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 o  
 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 o  
 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.

Yesx 
Noo

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
      Filero
      Accelerated FileroNon-Accelerated
      Filer
      (Do not check if a smaller reporting company)























      o
      Smaller reporting companyx


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

Yes o    No
x

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As of September 30, 2009 (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 $20.3 million. Shares of the registrants common stock held by each executive officer and director and each by 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 36,718,772 shares of the registrants common stock outstanding as of June 25, 2010.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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|CHINA NUTRIFRUIT GROUP
      LIMITED          
|----------------------------------------------
|                                              
|Annual Report on FORM
      10-K              
|For the Fiscal Year Ended March 31,
      2010
|                                              
|TABLE OF CONTENTS                             
|                                              
|PART I                                        
|                                              
|Item 1.                                       
|Item 1A.                                      
|Item 1B.                                      
|Item 2.                                       
|Item 3.                                       
|Item 4.                                       
|                                              
|PART II                                       
|                                              
|Item 5.                                       
|                                              
|Item 6.                                       
|Item 7.                                       
|Item 7A.                                      
|Item 8.                                       
|Item 9.                                       
|Item 9A.                                      
|Item 9B.                                      
|                                              
|PART III                                      
|                                              
|Item 10.                                      
|Item 11.                                      
|Item 12.                                      
|Item 13.                                      
|Item 14.                                      
|                                              
|PART IV                                       
|                                              
|Item 15.                                      

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Special Note Regarding Forward Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include, among
others, those concerning our expected financial performance; strategic and operational plans; management forecast; economies of scales; litigation; potential and contingent liabilities; managements plans; taxes; 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 that a number of risks and uncertainties could cause actual results of the
Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. The words believe, expect, anticipate, project, targets, optimistic,
intend, aim, will or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements.
Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to our views on the growth of the fruit industry, particularly the specialty fruit industry; general economic conditions, our
ability to overcome competition in the Chinese fruit processing market; the impact that a downturn or negative changes in the industries in which our products are sold could have on our business and profitability; any decrease in the availability,
or increase in the cost, of raw materials and energy; our ability to simultaneously fund the implementation of our business plan and invest in new projects; economic, political, regulatory, legal and foreign exchange risks associated with
international expansion; loss of key members of our senior management; and unexpected changes to Chinas political or economic situation and legal environment. Additional disclosures regarding factors that could cause our results and
performance to differ from results or performance anticipated by this Report are discussed in Item 1A. Risk Factors.

Readers are urged to carefully review and consider the various disclosures made by us in this Report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business,
financial condition and results of operations and prospects. The forward-looking statements made in this Report speak only as of the date hereof and we disclaim any obligation to provide updates, revisions or amendments to any forward-looking
statements to reflect changes in our expectations or future events.

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) Solar Sun are to Solar Sun
Holdings Limited, a Hong Kong corporation, our indirect, wholly-owned subsidiary; (iv) Jumbo Gloss are to Jumbo Gloss Limited, a British Virgin Islands corporation, our direct wholly-owned subsidiary; (v) Longheda are to
Daqing Longheda Food Company Limited, a Chinese corporation, our indirect, wholly-owned subsidiary; (vi) Securities Act are to the Securities Act of 1933, as amended; (vii) Exchange Act are to the Securities Exchange Act of
1934, as amended; (viii) RMB are to Renminbi, the legal currency of China; (ix) U.S. dollar, $ and US$ are to the legal currency of the United States; (x) China, Chinese
and PRC are to the Peoples Republic of China; and (xi) BVI are to the British Virgin Islands.

PART I

ITEM 1.

BUSINESS.

Business Overview

We are a holding company and conduct all our operations through our indirect, wholly-owned subsidiary, Longheda, which is a leading producer of premium specialty fruit-based products in China. We develop, process, market and distribute a variety of
food products processed primarily from premium specialty fruits grown in Northeast China, including golden berries, crab apple, blueberries and raspberries. Our products include fruit concentrate, nectar, and glazed fruits as well as fresh fruits.

We sell our products through an extensive nationwide sales and distribution network covering 20 provinces and 47 cities in China. As of March 31, 2010, this network was comprised of 75 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.

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

Our sales revenue grew by 29.2% in the fiscal year ended March 31, 2010 to $72.9 million from $56.4 million in the fiscal year ended March 31, 2009. Net income increase by 326.1% in the fiscal year ended March 31, 2010 to $19.3 million
from $4.1 million in the fiscal year ended March 31, 2009. Our gross margin for the fiscal year ended March 31, 2010 was 45.6% .

Corporate History and Structure

We are a Nevada holding company and conduct substantially all of our business in China through our operating subsidiary, Longheda. 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. Both Fezdale and Solar Sun 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 acquired 100% ownership of Longheda. Jumbo Gloss is a private limited liability company that was established on October 13, 2009 under the laws of the British Virgin Islands. As of the date of this Report, Jumbo Gloss has no
business operations.

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.

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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.

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 $8.58 million.

Our Industry

According to a report on Chinas fruit processing industry
issued by Beijing Business & Intelligence Consulting Co. Ltd. (BBIC, and
such report is hereinafter referred to as the BBIC Report), an independent
market research firm, Chinas fruit processing industry has grown significantly
in the past several years. The total output of processed fruit products in China
grew from $16.8 billion in 2005 to $49.7 billion in 2009, representing a
compound annual growth rate (CAGR) of 31.15% . The sales value of processed
fruit products in China grew from $17.0 billion in 2005 to $47.0 billion in
2009, representing a CAGR of 28.95% . 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)

|                                                                               | 2005 | 2006 | 2007 | 2008 | 2009 | CAGR  
|------------------------------------------------------------------------------ | ---- | ---- | ---- | ---- | ---- | ------
|Canned Fruit                                                                   | 3.0  | 3.7  | 4.3  | 6.3  | 7.8  | 26.98%
|Deep Processed Fruit*                                                          | 9.7  | 13.1 | 16.1 | 23.6 | 29.1 | 31.61%
|Fruit Juice and Beverage                                                       | 3.3  | 4.4  | 5.7  | 7.6  | 10.2 | 32.59%
|Glazed Fruits                                                                  | 0.7  | 1.0  | 1.4  | 2.0  | 2.6  | 38.83%
|* Deep processed fruits include
      nectar, dried fruit and fruit wine, etc. |      |      |     

Source: 2006-2009 Fruit processing industry research report,
Beijing Business & Intelligence Consulting Co. Ltd.

BBIC projected that the total sales value of processed fruit
products in China will reach $68.7 billion in 2012 which equates to growth of
46.2% during the four-year period from 2009 to 2012. The table below sets forth
the sales of fruit processing industry in China from 2005 to 2009 and estimated
sales of fruit processing industry in China from 2010 to 2012.

Sales and Estimated Sales of Fruit Processing Industry in
China, 2005-2012

|(in Billions of
      U.S. $)                                                                                          | 2005 | 2006 | 2007 | 2008 | 2009 | 2010E | 2011E | 2012E
|---------------------------------------------------------------------------------------------------------------------- | ---- | ---- | ---- | ---- | ---- | ----- | ----- | -----
|Sales                                                                                                                  | 16.0 | 21.0 | 26.1 | 37.9 | 47.0 | 53.2  | 61.0  | 68.7 
|Source: 2006-2009 Fruit processing industry
      research report, Beijing Business & Intelligence Consulting Co. Ltd. |     

We anticipate that growth in Chinas fruit processing industry,
especially, the 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. Even though
China is the largest producer of apples, third largest producer of oranges, and
one of the top producers of pears and peaches in the world, per capita fruit
juice consumption in China is currently well below that of major developed
countries according to Euromonitor.

Growing affluence fosters increased consummation 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 RMB33.5 trillion ($4.9 trillion) in 2007.
According to a report issued by the World Bank in March 2010, it is estimated
that Chinas GDP will grow at an annual growth rate of 9.5% in 2010. 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 12.1%, and rural per capita cash income increased from RMB2,476 ($339) to RMB5,153 ($754), or a CAGR of 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.

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Greater health awareness is expected to affect consumption of fruit and processed fruit products. We believe that 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 2009 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 liter 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). The MOA aims to increase the fruit processing ratio to 10%-15% and the fruit commercialization ratio to above 60%, and to reduce the lost fruit ratio to 10%-15% by
2010. We believe the governments five year plan will further facilitate the growth of the fruit processing industry in China.

Our Products

Our primary product offering includes fruit concentrate, nectar, glazed fruits
and beverages as well as fresh fruits. We are also in the process of developing several new products.

The following charts set forth our products categorized by both products and source fruits type in terms of revenue for the fiscal years 2010 and 2009:

Product Mix  By Product



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Product Mix  By Fruit Type



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Fruit Concentrate

Fruit concentrate is our primary product line, accounting for approximately 47.5% and 51.2% of our total revenue in fiscal years 2010 and 2009, respectively. We currently produce four types of fruit concentrate: golden berry, crab apple, blueberry
and raspberry. We currently have two concentrate production lines which are allocated for the production of all of four types of concentrates with an annual total production capacity of 9,960 tons. We plan to continue to focus on fruit concentrate
which is our fastest growing product line with greatest market demand. To achieve this end, we plan to add one more fruit concentrate juice production line with a production capacity of 6,000 tons in fiscal year 2011.

Among the four types of concentrate, raspberry concentrate has the highest gross margin and crab apple concentrate occupies most of our production capacity even though it has a 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 three source fruits.

Crab apple is a special species of apple which has much higher acidity than 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 the apple concentrates that are exported from China to overseas market are usually required to have an acidity of no less 2.0, the
local producers of apple concentrate need large quantity of high acidity apple concentrate to add to its low acidity apple concentrate. Therefore, crab apple concentrate is in high demand in the market.

Nectar

Our nectar product line accounted for approximately 9.5% and 13.2% to our total revenue in fiscal years 2010 and 2009, 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 nutrition and flavor of the fresh fruit to the greatest extent and has a long shelf life. Nectar is easy to store and transport,
and thus providing the producers of fresh fruit based products a much better alternative material than fresh fruit.

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 fruit concentrate, fruit ice cream, nectar beverage, biscuits, fruit jam and fruit
yogurt. Our nectar products were certified as green food by China Green Food Development Center in May 2006.

Glazed Fruits

Our glazed fruits product line accounted for approximately 22.8% and 10.9% to our total revenue in fiscal years 2010 and 2009, 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 and blueberries. We launched our glazed blueberry products in the second quarter of fiscal year 2010 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. Our glazed fruits are mainly sold as a premium
snack. Due to the special taste of our 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.

Fresh Fruit

Sales from fresh golden berries accounted for approximately 3.0% and 4.3% to our total revenue in fiscal years 2010 and 2009, 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.

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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.

Beverage and others

Beverage

Beverages accounted for approximately 4.2% and 8.2% of our total revenue in fiscal years 2010 and 2009, respectively. 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.

Others

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 other products contributed approximately 12.9% and 12.2% of our total revenue in fiscal years 2010 and 2009, respectively.

New products under development

We plan to further diversify our product mix to cater to different customer tastes and preferences. We are currently developing glazed blackcurrant and seabuckthorn which are expected to be completed in fiscal year 2011.

Production Production Facility

Our primary production facility is located in Daqing, Heilongjiang province, which started production in 2004. The facility is located on a 24,217-square-meter tract where we have land use rights until May 2055 and encompasses approximately 5,998
square meters of plant and warehouse space. We built another processing facility in Mu Dan Jiang, Helongjiang province in August 2008 where a 6,000 tons 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 94.7% in fiscal year 2010. Since fresh fruits are difficult
to preserve 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 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 portfolio, we are currently building a new fruit and vegetable powder manufacturing facility with an expected annual production capacity of 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 approximately September 2010. 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 leverage our established supplier relationship and distributor network to cross sell our
new fruit and vegetable powder products.

We are also currently upgrading all fruit concentrate production lines at our facilities in Daqing and Mu Dan Jiang, which have a total fruit concentrate annual production capacity of 9,960 tons. The upgrades include purchase of additional
equipments and implementation of more advanced production techniques. We expect the upgrading will result in more efficient use of raw materials and have a favorable impact on gross margin. We expect the upgrading to be completed before July 2010.

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Production Process

The processing of our fruit concentrate, 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. Clean 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.
- Fruit concentrate: 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.
- 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

We place primary importance on quality. Our production facility has ISO 9001 and HACCP series qualifications. We have established 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. We have a 16-person quality control team to closely monitor and test 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 74% of our cost of sales in fiscal year 2010. Our facility is strategically located in Heilongjiang province,
where 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.

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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 2010 was approximately 33,000 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 purchase other source fruits, including blueberries, crab apples and raspberries, 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 to keep 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.

Marketing, Sales and DistributionSales and Distribution

We currently sell our products directly to 75 regional distributors across 20 provinces and 47 cities in China who then sell the products to various customers, including food processors, supermarkets and wholesale stores. As of March 31, 2010, 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 52% of our total revenue in fiscal year 2010.

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 long-term business relationships and excellent credit records.
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 the largest 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 64.6% and 53.9% of our total revenue in fiscal year 2010
and 2009, respectively. The biggest distributor accounted for approximately 13.5% and 9.2% for fiscal years 2010 and 2009, respectively. In fiscal year 2010, our two biggest distributors Laiyang Yitian Fruit Juice Company Limited and Beijing
Huanpenyuan Food Company Limited accounted for approximately 13.5% and 11.3% of our total revenue, respectively.

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Marketing

As of March 31, 2010, we have seven marketing personnel in our department who are responsible for market research, promotion and advertisement. We strengthen our market presence through various types of market 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. We currently have five employees dedicated to research and development. We also cooperate with Heilongjiang Ba Yi Land
Reclamation University (HLAU), an agriculture university in China. Since 2004, our company and HLAU have jointly developed six new products, four of which are now our principal products. On March 7, 2008, we entered into a technology
cooperation agreement with HLAU to develop several new products, including glazed blueberry, blackcurrant concentrate, seabuckthorn concentrate and golden berry extracts. Under the agreement, we will provide a total amount of approximately
$25,670 (RMB 180,000) to HLAU for the development of the new products and all intellectual property rights of the new products belong to our company. During the year, we have successfully developed the glazed blueberry, blackcurrant concentrate
and seabuckthorn concentrate. We are currently developing glazed blackcurrant and seabuckthorn which is expected to be completed in fiscal year 2011.

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

All of our product formulations are proprietary. 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 fruit concentrate, 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.

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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 Hygiene Law;
- the Implementation Rules on the Administration and Supervision of Quality and Safety in Food Producing and Processing Enterprises (trail implementation);
- the Regulation on the Administration of Production Licenses for Industrial Products;
- the General Measure on Food Quality Safety Market Access Examination;
- the General Standards for the Labeling of Prepackaged Foods;
- the Standardization Law;
- the Regulation on Hygiene Administration of Food Additive;
- 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.

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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, 2010, we employed a total of 575 full-time
employees. The following table sets forth the number of our employees by
function.

|Department                       |  | Number of Employees
|-------------------------------- |  | -------------------
|Senior Management                |  | 12                 
|Human Resources & Administration |  | 63                 
|Production                       |  | 407                
|Procurement                      |  | 3                  
|Marketing                        |  | 7                  
|Sales                            |  | 18                 
|Logistic                         |  | 36                 
|Research & Development           |  | 5                  
|Quality Control                  |  | 16                 
|Accounting                       |  | 8                  
|TOTAL                            |  | 575                

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

We are required under PRC law to make contributions to the
employee benefit plans at specified percentages of the after-tax profit. In
addition, we are required by the 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 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 2010, sales during the second, third and forth fiscal quarters
accounted for approximately 26.5%, 24.4% and 36.2% of our total sales revenue
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 Mu Dan Jiang 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.

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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.

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.  You should 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.

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 have recently deteriorated
significantly and 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 a product liability judgment, 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 74% of our cost of sales in fiscal year 2010. 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 condition and pest 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.

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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.

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.

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. We sell our products through an extensive nationwide sales and distribution network covering 20
provinces and 47 cities in China. As of March 31, 2010, this network comprised 75 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 distracted 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.

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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, 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.

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 which is expected to start production in fiscal year 2011.Our decision to increase our production capacity was based in part on our projections of 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.

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.

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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 26.5%, 24.4% and 36.3% of our total revenues for the fiscal year ended March
31, 2010, 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, 2010 to $72.9 million from $56.4 million during the prior fiscal year. 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.

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, Jinglin Shi, our Chief Executive Officer, Colman
Cheng, our Chief Financial Officer, and Manjiang Yu, our Vice President of Sales. 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 negative 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.

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 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, patent, 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.

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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. Under current law,
we were subject to these requirements beginning with our annual report for the fiscal year ending March 31, 2008, although the auditor attestation was not required until our annual report for the fiscal year ending March 31, 2011.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. 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.

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 any determination that we violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.

We are subject to the Foreign Corrupt Practice Act, or the 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 make sales in China, which may experience corruption. Our activities in China create the risk of unauthorized payments or offers
of payments by one of the employees, consultants, sales agents or distributors of our company, because these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees.
Also, 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 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 government may seek to hold our Company
liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

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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 subsidiary in the PRC. Our operating subsidiary is 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 all 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.

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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. All of our current operations are conducted in the PRC. In addition, all 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.

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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. During the past ten years, the rate of inflation in China has been as high as 5.9% and as low as -0.8% . 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.

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.

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Restrictions under PRC law on our PRC subsidiarys 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 subsidiary. However, PRC regulations restrict the ability of our PRC subsidiary to make dividends and other payments to its offshore parent company. PRC legal restrictions permit payments of
dividend by our PRC subsidiary only out of its accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiary is also required under PRC laws and regulations to allocate at least 10%
of our 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 our 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 subsidiary 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.

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 PRC subsidiaries, limit our PRC subsidiary's ability to distribute profits to us or otherwise materially adversely affect us.

In October 2005, SAFE issued the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China, generally referred to as Circular 75, which required PRC
residents to register with the competent local SAFE branch before establishing or acquiring control over an offshore special purpose company, or SPV, for the purpose of engaging in an equity financing outside of China on the strength of domestic PRC
assets originally held by those residents. Internal implementing guidelines issued by SAFE, which became public in June 2007 (known as Notice 106), expanded the reach of Circular 75 by (1) purporting to cover the establishment or acquisition of
control by PRC residents of offshore entities which merely acquire control over domestic companies or assets, even in the absence of legal ownership; (2) adding requirements relating to the source of the PRC residents funds used to
establish or acquire the offshore entity; (3) covering the use of existing offshore entities for offshore financings; (4) purporting to cover situations in which an offshore SPV establishes a new subsidiary in China or acquires an unrelated company
or unrelated assets in China; and (5) making the domestic affiliate of the SPV responsible for the accuracy of certain documents which must be filed in connection with any such registration, notably, the business plan which describes the overseas
financing and the use of proceeds. Amendments to registrations made under Circular 75 are required in connection with any increase or decrease of capital, transfer of shares, mergers and acquisitions, equity investment or creation of any security
interest in any assets located in China to guarantee offshore obligations, and Notice 106 makes the offshore SPV jointly responsible for these filings. In the case of an SPV which was established, and which acquired a related domestic company or
assets, before the implementation date of Circular 75, a retroactive SAFE registration was required to have been completed before March 31, 2006.  This date was subsequently extended indefinitely by Notice 106, which also required that the
registrant establish that all foreign exchange transactions undertaken by the SPV and its affiliates were in compliance with applicable laws and regulations. Failure to comply with the requirements of Circular 75, as applied by SAFE in accordance
with Notice 106, may result in fines and other penalties under PRC laws for evasion of applicable foreign exchange restrictions. Any such failure could also result in the SPVs affiliates being impeded or prevented from distributing their
profits and the proceeds from any reduction in capital, share transfer or liquidation to the SPV, or from engaging in other transfers of funds into or out of China.

We have asked our stockholders, 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
subsidiary. However, we cannot provide any assurances that they can obtain the above SAFE registrations required by Circular 75 and Notice 106. 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 subsidiarys 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 and Notice 106 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 and Notice 106. We also have little control over either our present or prospective direct or indirect stockholders or
the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident stockholders to comply with Circular 75 and Notice 106, 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 subsidiarys ability
to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

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If the China Securities Regulatory Commission, or CSRC, or another PRC regulatory agency determines that CSRC approval is required in connection with the reverse acquisition of Fezdale or challenges the delayed payment of acquisition
consideration by Solar Sun, the reverse acquisition may be unwound, or we may become subject to penalties.

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. The M&A Rule, among other things, requires that an offshore company controlled by PRC companies or individuals that have acquired a PRC domestic company for the purpose of listing the PRC domestic companys equity interest on an
overseas stock exchange must obtain the approval of the CSRC prior to the listing and trading of such offshore companys securities on an overseas stock exchange. In addition, when an offshore company acquires a PRC domestic company, the
offshore company is generally required to pay the acquisition consideration within three months after the issuance of the foreign-invested company license unless certain ratification from the relevant PRC regulatory agency is obtained. On September
21, 2006, the CSRC, pursuant to the M&A Rule, published on its official web site procedures specifying documents and materials required to be submitted to it by offshore companies seeking CSRC approval of their overseas listings.

In the opinion of our PRC counsel, Grandall Legal Group, the M&A Rule concerning the CSRC approval for acquisition of a PRC domestic company by an offshore company controlled by PRC companies or individuals does not apply to our reverse
acquisition of Fezdale because none of China Nutrifruit, Fezdale and Solar Sun is a Special Purpose Vehicle or an offshore company controlled by PRC companies or individuals as defined in the M&A Rule. Our PRC counsel,
Grandall Legal Group, is also in the opinion that, even though Solar Sun did not pay the consideration for acquiring 75% interest in Longheda within three months after the issuance of the foreign-invested company license, since the relevant
provincial agency has issued document indicating the authoritys awareness of such delayed payment and Solar Sun has obtained the approval from local foreign exchange administrative department for the remittance of such payment into the PRC and
made such payment, based on its experience, in practice, the chance that such delayed payment being challenged by PRC regulatory agencies is minimal. If the CSRC or another PRC governmental agency subsequently determines that we must obtain CSRC
approval prior to the completion of the reverse acquisition or challenges the delayed payment by Solar Sun, the reverse acquisition may be unwound and we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies.
These regulatory agencies may impose fines and penalties on our operations in China and limit our operating privileges in China, or take other actions that could have a material adverse effect on our business, financial condition, results of
operations, reputation and prospects, as well as the trading price of our shares.

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.

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 anti-trust 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.

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 her residents is not taxable, the foreign investor shall provide the tax authority in charge of that Chinese resident enterprise with the relevant information within 30 days of the transfers.

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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 such that the corporate income tax liability is avoided, the
tax authority shall have the power to re-assess the nature of the equity transfer in accordance with the substance-over-form principle and deny the existence of the 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 non-resident enterprises from direct or indirect transfers of equity interest in China resident enterprises, excluding share 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
authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the very country (jurisdiction) and to what extent and the process of the disclosure to the 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 balance 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, it remains unclear as to whether the Notice is applicable to an offshore enterprise incorporated by a Chinese natural person. Nor are detailed measures on imposition of tax from non-domestically incorporated
resident enterprises are available. 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. 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 for the 2010 tax year and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible.

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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.

We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

The SEC has adopted regulations which generally define so-called penny stocks to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain
exemptions. If our common stock becomes a penny stock, we may become subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell
such securities to persons other than established customers and accredited investors (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their
spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchasers written consent to the transaction prior to sale. As a result, this rule may
affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made
about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny stock.

There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act,
which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

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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.

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 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 both land will expire on May 19, 2055 and February 28, 2058,
respectively.

We are currently in the process of acquiring the land use right for 40,000 square meters of land located in Daqing to build our new fruit and vegetable powder manufacturing facility with an annual production capacity of 10,000 tons. The new facility
is expected to begin production in September 2010 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.

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.

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|                          |   | **Closing Bid Prices(1)** | 
|------------------------- | - | ------------------------- | 
|                          |   | High                      | 
|Year Ended March 31, 2010 |   |                           | 
|1stQuarter                | $ | 4.00                      | 
|2ndQuarter                |   | 4.50                      | 
|3rdQuarter                |   | 4.26                      | 
|4thQuarter                |   | 4.67                      | 
|                          |   |                           | 
|Year Ended March 31, 2009 |   |                           | 
|1stQuarter                | $ | 3.00                      | 
|2ndQuarter                |   | 3.00                      | 
|3rdQuarter                |   | 5.00                      | 
|                          |   |                           | 
|4thQuarter                |   | 4.10                      | 

_________________________________________
(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.com for the periods indicated.

Approximate Number of Holders of Our Common Stock

As of June 25, 2010, there were approximately 486 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 reverse 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

We presently do not have any equity based or other long-term
incentive programs. In the future, we may adopt and establish an equity-based or
other long-term incentive plan if it is in the best interest of the Company and
our stockholders to do so.

Recent Sales of Unregistered Securities

We have not sold any equity securities during the fiscal year
ended March 31, 2010 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 2010 fiscal
year.

Purchases of Equity Securities

No repurchases of our common stock were made during the fourth
quarter of 2010.

ITEM 6.

SELECTED
FINANCIAL DATA.

Not Applicable.

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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 holding company and conduct all of our operations
through our indirect, wholly-owned subsidiary, Longheda, which is a leading
producer of premium specialty fruit-based products in China. We develop,
process, market and distribute a variety of food products processed primarily
from premium specialty fruits grown in Northeast China, including golden
berries, crab apple, blueberries and raspberries. Our current products include
fruit concentrate, nectar and glazed fruits as well as fresh fruits.

We sell our products through an extensive nationwide sales and
distribution network covering 20 provinces and 47 cities in China. As of March
31, 2010, this network was comprised of 75 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 facility is located in Daqing City and Mu Dan
Jiang City, Heilongjiang Province, China where abundant supply of various
premium specialty fruits is readily available. We 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.BBIC projects
  that the total sales and net income of processed fruit products in China will
  reach $37.2 billion and $2.5 billion in 2010, representing growth of 42.52%
  and 66.67%, respectively, since 2007. 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 fruit concentrate, glazed fruit and nectar have been, and are
  expected to remain, our primary product offering. Our processed fruit products
  accounted for approximately 75.3% and 79.9% of our total net sales for fiscal
  years ended March 31, 2009 and 2010, respectively. The gross margin for our
  processed fruit products was approximately 49.0% for the fiscal year ended
  March 31, 2010 as compared to 32.2% for our beverage and other products. We
  plan to continue to focus on our higher margin processed fruit products in the
  future. Because we have a strong bargaining power on golden berry products, we
  generally closely tie the pricing of gold berry products to the raw material
  prices to ensure 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 condition and pests that are beyond our control. Fresh
  fruits accounted for approximately 74% of our total cost of sales in fiscal
  year 2010. 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.

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- 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 the 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.
- Expansion of our production capacity.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 94.7% in fiscal year 2010. In order to increase our production
  capacity, we must make capital investment to build additional production lines
  to satisfy the projected demand of our products.

Results of Operations

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

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, 2010    |  |  | March 31, 2009    | 
|                                                        |   | In                |  |  | As a              | 
|                                                        |   | Thousands         |  |  | Percentage        | 
|                                                        |   | (audited)         |  |  | of Net Sales      | 
|Net Sales                                               | $ | 72,917            |  |  | 100.0%            | 
|Costs of Sales                                          |   | 39,656            |  |  | 54.4%             | 
|Gross profit                                            |   | 33,261            |  |  | 45.6%             | 
|Selling expenses                                        |   | 3,547             |  |  | 4.9%              | 
|General and administrative expenses                     |   | 3,977             |  |  | 5.5%              | 
|Interest expenses                                       |   | -                 |  |  | -                 | 
|Other income                                            |   | 361               |  |  | 0.5%              | 
|Income before noncontrolling interests and income taxes |   | 26,098            |  |  | 35.8%             | 
|Income taxes                                            |   | 6,849             |  |  | 9.4%              | 
|Noncontrolling interests                                |   | -                 |  |  | -                 | 
|Net income                                              |   | 19,249            |  |  | 26.4%             | 
|Earnings per share:                                     |   |                   |  |  |                   | 
|Basic                                                   | $ | 0.5451            |  |  |                   | 
|Diluted                                                 | $ | 0.5059            |  |  |                   | 

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 the exchange rate of RMB6.84 to $1 for the fiscal
year ended March 31, 2010 and the rate of RMB6.88 to $1 for the fiscal year
ended March 31, 2009.

Net Sales

Net sales increased $16.5 million, or 29.2%, to $72.9 million
in fiscal year 2010 from $56.4 million in fiscal year 2009. The increase was
mainly attributable to the increased sales volume of our products, especially
our glazed fruit, concentrated juice and concentrated pulp products. Sales of
glazed fruit grew significantly from $6.2 million in fiscal year 2009 to $16.6
million in fiscal year 2010, sales of concentrate juice and concentrate pulp
grew from $28.9 million to $34.7 million and from $6.9 million to $9.4 million
during those periods, respectively. Market demand for our products was strong in
the fiscal year 2010, due, in part, to the Chinese governments economic
stimulus program, growth in a health conscious urban population and a rise in
per capita disposable income in China. We launched new glazed blueberry products
in September 2009, which were well received by our customers and our new
glazed fruit production line started production in December 2009, both of which
increased our glazed fruit production and sales in fiscal year 2010.

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The following table sets forth percentage of net sales
generated by each product for the fiscal years ended March 31, 2010 and 2009:

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

|                  |   | Fiscal Year Ended |  |  | Fiscal Year Ended | 
|----------------- | - | ----------------- |  |  | ----------------- | 
|                  |   | March 31, 2010    |  |  | March 31, 2009    | 
|                  |   |                   |  |  | As a              | 
|                  |   | In                |  |  | Percentage        | 
|Product           |   | Thousands         |  |  | of Net Sales      | 
|Fresh fruit       | $ | 2,221             |  |  | 3.0%              | 
|Glazed fruit      |   | 16,622            |  |  | 22.8%             | 
|Nectar            |   | 6,961             |  |  | 9.6%              | 
|Concentrate juice |   | 34,671            |  |  | 47.5%             | 
|Concentrate pulp  |   | 9,377             |  |  | 12.9%             | 
|Beverage          |   | 3,065             |  |  | 4.2%              | 
|Total             | $ | 72,917            |  |  | 100.0%            | 

Cost of Sales

Cost of sales increased $7.9 million, or 24.8%, to $39.7
million in fiscal year 2010 from $31.8 million in fiscal year 2009. This
increase was primarily due to, and consistent with, the increase in our sales
volume. In fiscal year 2010, we sold a higher percentage of glazed fruit
products, which generally have a lower per unit cost as compared to fruit
concentrate juice and concentrated pulp products. Therefore, the overall
percentage increase in cost of sales is lower than the overall percentage
increase in sales.

Gross Profit and Gross Margin

Gross profit increased $8.6 million to $33.3 million in fiscal
year 2010 from $24.6 million in fiscal year 2009. Gross profit as a percentage
of net revenues was 45.6% and 43.7% for fiscal years 2010 and 2009,
respectively. The modest increase in gross margin was mainly due to the change
in product mix. In fiscal year 2010, a bigger percentage of our net sales were
generated from sales of higher margin, glazed fruit products.

The gross margins for fruit concentrate, glazed fruit, nectar
and concentrate pulp products for fiscal year 2010 were 43.4%, 52.6%, 68.3% and
31.8%, as compared to 36.0%, 64.9%, 69.0% and 37.9% for the same period last
year, respectively. We were able to increase the gross margin for fruit
concentrate products during the 2010 fiscal year because the average sales price
of raspberry concentrate products increased approximately 100% as compared to
last fiscal year. The gross margin for glazed fruit dropped in fiscal year 2010
because we used frozen fresh fruit to process glazed golden berries and glazed
blueberries during the non-harvest season. The cost of frozen fresh fruit is
usually higher than fresh fruit. 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 decreased in fiscal year 2010, mainly because sales price for apple
concentrate pulp in the international market decreased significantly during the
2010 fiscal year as compared to last fiscal year due to the general economic
climate. However, the price of apple, the main raw material for apple
concentrate pulp, in the international market was stable, increased moderately.

Selling and General and Administrative
Expenses

Selling and general and administrative expenses decreased $7.8
million, or 50.9%, to $7.5 million in fiscal year 2010 from $15.3 million in
fiscal year 2009 mainly due to the decrease of general and administration
expenses as discussed below.

Selling expenses increased $617,355, or 21.1%, to $3.5 million
in fiscal year 2010 from $2.9 million in fiscal year 2009. As a percentage of
net sales, our selling expenses slightly decreased to 4.9% in fiscal year 2010
from 5.2% in fiscal year 2009. The increase in our selling expenses was
generally in line with the increase in sales volume.

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General and administrative expenses decreased $8.4 million, or 68.0%, to $4.0 million in fiscal year 2010 from $12.4 million in fiscal year 2009. As a percentage of net sales, general and administrative expenses decreased to 5.5% in
fiscal year 2010, as compared to 22.0% in fiscal year 2009. The dollar and percentage decrease was mainly attributable to a $9.5 million non-cash compensation expense resulting from the release of certain escrow shares to our shareholder Yiu Fai
Kung as discussed below. In connection with the Companys private placement on August 14, 2008, the Company entered into two make good escrow agreements, under which a total of 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 2009 and 2010, 2,799,799 shares will be transferred to investors and other parties or returned to Mr. Kung, depending on whether the specified earnings targets were
achieved. The specified earnings targets for fiscal years 2009 and 2010 were net income of $13,919,707 and $18,495,315, respectively. We met the fiscal year 2009 earnings target and recorded a non-cash charge to compensation cost of $9.5
million in the fourth quarter of fiscal year 2009 related to the release from escrow to Mr. Kung of 2,799,799 shares as Mr. Kung was a director of Fezdale. Although we met the fiscal year 2010 earnings target, because Mr. Kung resigned from his
position as Fezdales director in July 2009 and the release of the escrowed shares are not contingent on his continuing employment with the Company, in accordance with FASB ASC 718-10-S99-2 2010, the Company did not recognize any compensation
expense relating to the release of make good shares for the fiscal year ended March 31, 2010.

Other than the non-cash compensation expenses incurred in fiscal year 2009 in connection with the make good arrangement, our general and administrative expenses increased $1.1 million, or 37.6% in fiscal year 2010. As a percentage of net sales,
our general and administrative expenses increased slightly from 5.1% for fiscal year 2009 to 5.5% for fiscal year 2010. The modest increase was mainly attributable to costs associated with the transfer from the Over-the-Counter Bulletin Board to the
NYSE AMEX in August 2009.

Interest Expenses

We did not have any interest expenses for the fiscal year ended March 31, 2010 because we repaid all outstanding bank loans on March 26, 2009.

Income before Noncontrolling Interests and Income Taxes

Income before noncontrolling interests and income taxes increased $17.2 million, or 194.8%, to $26.1 million in fiscal year 2010 from $8.9 million in fiscal year 2009. Income before noncontrolling interests and income taxes as a
percentage of net sales increased from 15.7% in fiscal year 2009 to 35.8% in fiscal year 2010. The percentage increase was primarily attributed to the increase in sales volume and gross margin and decrease in general and administrative expenses as
discussed above.

Provision for Income Taxes

Our provision for income taxes was $6.9 million and $4.1 million during the fiscal years ended March 31, 2010 and 2009, respectively. The increase was mainly due to increase in net income before income tax. As a percentage of net sales,
provision for income taxes increased from 7.3% for the 2009 fiscal year to 9.4% for the 2010 fiscal year. We had a lower percentage of provision for income tax to net sales for fiscal year 2009 mainly because of the deferred tax of $0.5 million
arising from the temporary difference recognized from the 25% of equity interest of Longheda acquired by Solar Sun in May 2008.

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%.

Substantially all of our income was derived from dividends we receive from our PRC operating subsidiary. 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 subsidiary, but this treatment will depend on our status as a non-resident enterprise. For 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.

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Net Income

Net income increased $14.8 million, or 326.1%, to $19.3 million
in 2010 from $4.5 million in 2009. Other than the non-cash compensation charge
of $9.5 million in fiscal year 2009 due to the make good arrangement, our net
income increased $5.3 million, or 37.1%, to $19.3 million in fiscal year 2010
from $14.0 million in fiscal year 2009. The increase was mainly a result of the
increase in sales revenue as discussed above.

Liquidity and Capital Resources

As of March 31, 2010, we had cash and cash equivalents of
approximately $36.0 million. The following table provides detailed information
about our net cash flow for all financial statements periods presented in this
report.

|Cash Flow                                                  |  
|---------------------------------------------------------- | -
|(All amounts in thousands of U.S.
      dollars)           |  
|                                                           |  
|                                                           |  
|                                                           |  
|Net cash provided by operating activities                  | $
|Net cash used in investing activities                      |  
|Net cash provided by financing activities                  |  
|Effect of exchange rate on cash and cash equivalents       |  
|Cash and cash equivalents at beginning of
      the period |  
|Cash and cash equivalents at end of period                 |  

Operating Activities

Net cash provided by operating activities was $21.7 million in
fiscal year 2010, an increase of $15.4 million, or 243.9% from $6.3 million net
cash provided by operating activities in fiscal year 2009. Net cash provided by
operating activities for the 2010 fiscal year was mainly attributable to the net
earning of $19.3 million.

Investing Activities

Net cash used in investing activities was $1.7 million in
fiscal year 2010, as compared to $20.0 million in fiscal year 2009. 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. Our cash
used in investing activities during fiscal year 2009 primarily related to our
acquisition of the 25% of minority interest in Longheda for $6.8 million and the
purchase of property, plant and equipment for the new concentrated fruit juice
production line in Mu Dan Jiang for $13 million.

Financing Activities.

Net cash provided by financing activities was $11.3 million in
fiscal year 2010, as compared to $11.8 million in fiscal year 2009. During the
2010 fiscal year, the cash provided by financing activities was mainly
attributable to the receipt of $12.2 million in net proceeds from a private
placement financing transaction closed in October 2009. The net cash provided by
financing activities in fiscal year 2009 was primarily attributable to $7.3
million proceeds from a private placement financing, loans from shareholders of
$7.4 million, and proceeds from bank borrowing of $7.3 million which was
partially offset by the repayment of bank loans of $10.2 million.

On October 8, 2009, we completed a private placement 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. The total net proceeds from the private placement
were approximately $12.2 million.

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Capital ExpendituresOur capital expenditures were $2.7 million and $13.1 million for the fiscal years ended March 31, 2010 and 2009, respectively. Our capital expenditures were mainly used to expand our production capacity. Our most material capital expenditure
for fiscal year 2010 was the purchase of a glazed fruit production line.

On February 23, 2010, we entered into a $1.17 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,
we entered into another $1.59 million revolving credit facility with the Longjiang Bank with a term of two years. This facility was secured by our land and buildings in Mu Dan Jiang City. Both facilities are for the working capital need during
our production season. As of the date of this report, we did not draw down on either
of the facilities 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 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. 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 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, 2010 (2009: 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 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.

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Property, plant and equipment, net
Property, plant 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. During the idle period of the plant, depreciation is treated as
current-period charges, which charge directly to general and administrative expense.

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 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.

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 and will expire in 2055.

Recent Accounting Pronouncements
(a) Recent accounting pronouncement Adopted

In June 2009, the FASB issued a standard that established the FASB ASC and amended the hierarchy of generally accepted accounting principles (GAAP) such that the ASC became the single source of authoritative nongovernmental U.S. GAAP. The ASC did
not change current U.S. GAAP, but was intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All previously existing accounting standard documents
were superseded and all other accounting literature not included in the ASC is considered non-authoritative. New accounting standards issued subsequent to June 30, 2009 are communicated by the FASB through Accounting Standards Updates
(ASUs). For the Company, the ASC was effective July 1, 2009. This standard did not have an impact on the Companys consolidated results of operations or financial condition. However, throughout the notes to the consolidated
financial statements references that were previously made to various former authoritative U.S. GAAP pronouncements were changed to coincide with the appropriate section of the ASC.

In September 2006, the FASB issued an accounting standard codified in ASC 820, which provides guidance about how to measure assets and liabilities that use fair value. ASC 820 apply whenever another US GAAP standard requires (or permits) assets or
liabilities to be measured at fair value but does not expand the use of fair value to any new circumstances. This standard also requires additional disclosures in both annual and quarterly reports. ASC 820 is effective for financial statements
issued for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued amendments which state that ASC 820 does not address fair value measurements for purposes of lease classification or measurement and delay the effective
date for non-financial assets and non-financial liabilities to fiscal years beginning after November 15, 2008, except for items that are measured at fair value in the financial statements on a recurring basis (at least annually). The Company adopted
the provisions of ASC 820 for its financial assets and liabilities and those items for which it has measured on a recurring basis effective January 1, 2008, and the adoption did not have a material impact on its financial position and results of
operations. The Company adopted ASC 820 for certain of its non-financial assets and liabilities on April 1, 2009 and the adoption did not have a material impact on its financial position, cash flows and results of operations.

33

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In December 2007, the FASB issued a new business combinations standard codified within ASC 805 Business Combinations (ASC 805). ASC 805 establishes principles and requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. ASC 805 also establishes disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. The Company adopted ASC 805 on April 1, 2009 and the adoption did not have a material impact on its financial position, cash flows and results of operations.

In December 2007, the FASB issued a new standard which established the accounting for and reporting of noncontrolling interests in partially owned consolidated subsidiaries and the loss of control of subsidiaries codified within ASC 810
Consolidation (ASC 810). ASC 810 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parents ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. ASC 810 also establishes disclosure requirements that clearly identify and
distinguish between the interests of the parent and the interests of the noncontrolling owners. Upon adoption of ASC 810 on April 1, 2009, the Company reclassified its noncontrolling interest from minority interest to equity in the accompanying
March 31, 2010 and March 31, 2009 consolidated balance sheets. The Company expects the adoption did not have a material impact on its financial position, cash flows and results of operations.

In March 2008, the FASB issued an accounting standard related to disclosures about derivative instruments and hedging activities, codified in ASC 815 Derivatives and Hedging (ASC 815). ASC 815 is intended to improve financial reporting
about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entitys financial position, financial performance, and cash flows. ASC 815 achieves these
improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entitys liquidity by requiring disclosure of derivative features that
are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. The Company adopted ASC 815 on April 1, 2009 and the adoption did not
have a material impact on its financial position, cash flows and results of operations.

In April 2009, the FASB issued an accounting standard which provides guidelines for making fair value measurements more consistent with the principles presented in ASC 820. The standard provides additional authoritative guidance in determining
whether a market is active or inactive, and whether a transaction is distressed, is applicable to all assets and liabilities (i.e., financial and nonfinancial) and will require enhanced disclosures. The Company adopted the standard during the
interim period ended June 30, 2009 and the adoption did not have a material impact on its financial position, cash flows and results of operations.

In May 2009, the FASB issued a new accounting standard regarding subsequent events codified in ASC 855 Subsequent Events (ASC 855). ASC 855 is intended to establish general standards of accounting for and disclosure of events that occur
after the balance sheet date but before financial statements are issued or are available to be issued. It requires disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting that date, that is, whether
that date represents the date the financial statements were issued or were available to be issued. ASC 855 was effective for the Companys first quarter ended June 30, 2009.

In January 2010, the FASB issued Accounting Standards Update 2010-05 (ASU 2010-05), Compensation  Stock Compensation (Topic 718). This standard codifies EITF Topic D-110 Escrowed Share Arrangements and the Presumption of Compensation.

(b) Recent accounting pronouncements not yet effective

In August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair Value, which provides additional guidance on how companies should measure liabilities at fair value under ASC 820. The ASU clarifies that the quoted price for an
identical liability should be used. However, if such information is not available, an entity may use, the quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities traded as assets,
or another valuation technique (such as the market or income approach). The ASU also indicates that the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer and indicates circumstances
in which quoted prices for an identical liability or quoted price for an identical liability traded as an asset may be considered level 1 fair value measurements. For the Company, this ASU is effective October 1, 2009. 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.

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In September 2009, the FASB issued ASU No. 2009-12, Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), that amends ASC 820 to provide guidance on measuring the fair value of certain alternative investments
such as hedge funds, private equity funds and venture capital funds. The ASU indicates that, under certain circumstances, the fair value of such investments may be determined using net asset value (NAV) as a practical expedient, unless it is
probable the investment will be sold at something other than NAV.  In those situations, the practical expedient cannot be used and disclosure of the remaining actions necessary to complete the sale is required.  The ASU also requires additional
disclosures of the attributes of all investments within the scope of the new guidance, regardless of whether an entity used the practical expedient to measure the fair value of any of its investments.  The disclosure provisions of this ASU are not
applicable to an employers disclosures about pension and other postretirement benefit plan assets. For the Company, this ASU was effective October 1, 2009.  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.

In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangementsa consensus of the FASB Emerging Issues Task Force, that provides amendments to the criteria for separating consideration in multiple-deliverable
arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling
price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither
vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a
standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which
allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue
arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. For the Company,
ASU No. 2009-13 is effective beginning April 1, 2011. The Company may elect to adopt the provisions prospectively to new or materially modified arrangements beginning on the effective date or retrospectively for all periods presented. 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.

In January 2010, the FASB issued ASU No. 2010-6, Improving Disclosures About Fair Value Measurements, that amends existing disclosure requirements under ASC 820 by adding required disclosures about items transferring into and out of levels 1 and 2
in the fair value hierarchy; adding separate disclosures about purchase, sales, issuances, and settlements relative to level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation.
For the Company, this ASU is effective for the first quarter of 2010, except for the requirement to provide level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which is effective beginning the first quarter of 2011.
Since this standard impacts disclosure requirements only, its adoption will not 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 the price
change and continually maintain effective cost control in operations.

35

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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.

We will generally experience higher sales in the second, third and forth 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 Middle Autumn festival, Christmas and the Chinese New Year which were in the second, third and forth 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, 2010 and 2009 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,
2010. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2010, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our
disclosure controls and procedures were effective to satisfy the objectives for which they are intended.

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;

36

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- 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.

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, 2010. 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, 2010, our internal control over financial reporting is
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 2010 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 2010, 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  | 37  | Chairman                                              
|Jinglin Shi  | 36  | Chief Executive Officer, President and Director       
|Jingfu Li    | 67  | Director                                              
|Tony Chan    | 38  | Director                                              
|William Haus | 46  | Director                                              
|Colman Cheng | 41  | Chief Financial Officer, Treasurer and
      Secretary
|Manjiang Yu  | 38  | Vice President of Sales                               

Changjun Yu. Mr. Yu is the founder of our company and
has served as the chairman of our board of directors since the completion of the
reverse acquisition of Fezdale on August 14, 2008. 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 13 years of experience in the food industry. Mr. Yu was selected to serve as a director on our 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.

37

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Jinglin Shi. Mr. Shi is one of our founders. He has been our Chief Executive Officer, President and director since the completion of the reverse acquisition of Fezdale on August 14, 2008. Mr. Shi has served as the Chief Executive Officer of
our subsidiary Longheda since its formation in 2004. From 2001 to 2003, Mr. Shi worked as the sales manager and then the vice president of sales of Daqing Yuehaitian Economic and Trade Co. Ltd. Mr. Shi was selected to serve as a director on our
board in connection with his leadership, business management experience and knowledge of the fruit processing industry which he acquired as the management of Longheda, as well as his understanding of the Companys vision and strategy. Mr. Shi
has not held any other public company directorship during the past five years.

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 over 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 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 he 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. 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. (listed on the NASDAQ) and THT Heat Transfer Technology, Inc. (listed on OTCBB). 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 our independent director on June 11, 2009 and he is the chairman of our Compensation Committee. Other than noted above, Mr. Haus has not held any other public company directorship during the past five years.

38

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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. Mr. Cheng has extensive auditing, accounting and financial management experience in big four accounting firms and other sizable corporations. 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. 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 other public
company directorship during the past five years.

Manjiang Yu. Mr. Yu has been our Vice President of Sales since the completion of the reverse acquisition of Fezdale on August 14, 2008. Mr. Yu worked as the assistant to the Chief Executive Officer, then the Chief Market Officer of our
subsidiary Longheda since its formation in 2004. Before joining Longheda, he served as the president of Daqing High-tech Zone Ruinuo Economic & Trade Co. Ltd. from 2002 to 2004. Mr. Yu has not held any other public company directorship during
the past five years.

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

39

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- 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.

Board Composition and Committees

The Company is governed by the Board that currently consists of five members: Jinglin Shi, Changjun Yu, William Haus, Chun Wai 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 our three independent directors, William Haus, Tony Chan and Jingfu Li. 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 of 1933, as amended;
- 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.

Section 16(A) Beneficial Ownership Reporting Compliance

Under U.S. securities laws, directors, certain executive officers and persons holding more than 10% of our common stock must report their initial ownership of the common stock, and any changes in that ownership, to the SEC. The SEC has designated
specific due dates for these reports. Based solely on our review of copies of such reports filed with the SEC by and written representations of our directors and executive offers, we believe that our directors and executive offers filed the required
reports on time in the 2010 fiscal year.

Code of Ethics

Our board of directors has adopted a code of ethics that applies to Chief Executive Officer, President, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Controller and 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.
Thereafter, any amendments or waivers to the code of ethics will be posted on
our website within four business days of such amendment or waiver. Until such
time, however, any amendments or waivers to our code of ethics will be filed
with the SEC in a Current Report on Form 8-K.

40

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ITEM 11.

EXECUTIVE COMPENSATION.

Summary
Compensation Table  2010 and 2009

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 executive
officer received total annual salary and bonus compensation in excess of
$100,000.

|                            |  |      |  |  |        |  |  |       |  |  | Stock  |  |  | Option |  |  | All Other    |  |  |        | 
|--------------------------- |  | ---- |  |  | ------ |  |  | ----- |  |  | ------ |  |  | ------ |  |  | ------------ |  |  | ------ | 
|                            |  |      |  |  | Salary |  |  | Bonus |  |  | Awards |  |  | Awards |  |  | Compensation |  |  | Total  | 
|Name and Principal Position |  | Year |  |  | ($)    |  |  | ($)   |  |  | ($)    |  |  | ($)    |  |  | ($)          |  |  | ($)    | 
|Jinglin Shi,                |  | 2010 |  |  | 83,586 |  |  | -     |  |  | -      |  |  | -      |  |  | -            |  |  | 83,586 | 
|CEO
      and President (1) |  | 2009 |  |  | 55,617 |  |  | -     |  |  | -      |  |  | -      |  |  | -            |  |  | 55,617 | 

|(1) | On August 14, 2008, we acquired Fezdale in a reverse
      acquisition transaction that was structured as a share exchange and in
      connection with that transaction, Mr. Shi became our Chief Executive
      Officer, President and director. Prior to the effective date of the
      reverse acquisition, Mr. Shi served at Fezdales wholly owned subsidiary
      Longheda as its chief executive officer. The annual, long term and other
      compensation shown in this table include the amount Mr. Shi received from
      Longheda prior to the consummation of the reverse
  acquisition.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Employment Agreements

On July 30, 2008, our subsidiary Fezdale entered into an
employment agreement with Jinglin Shi, our Chief Executive Officer and
President. Under the employment agreements, Mr. Shi will receive an annual
salary of RMB 600,000. Mr. Shi is subject to customary confidentiality and
non-competition covenants as provided in the employment agreement.

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, 2010:

|             |  | Fees Earned or |  |  | Stock      |  |  | Option |  |  | Non-Equity     |  |  |              |  |  |         | 
|------------ |  | -------------- |  |  | ---------- |  |  | ------ |  |  | -------------- |  |  | ------------ |  |  | ------- | 
|             |  | Paid in Cash   |  |  | Awards     |  |  | Awards |  |  | Incentive Plan |  |  | All Other    |  |  | Total   | 
|             |  |                |  |  |            |  |  |        |  |  | Compensation   |  |  | Compensation |  |  |         | 
|Name         |  | ($)            |  |  | ($)        |  |  | ($)    |  |  | ($)            |  |  | ($)          |  |  | ($)     | 
|             |  |                |  |  |            |  |  |        |  |  |                |  |  |              |  |  |         | 
|Tony Chan    |  | 16,167         |  |  | -          |  |  | -      |  |  | -              |  |  | -            |  |  | 16,167  | 
|             |  |                |  |  |            |  |  |        |  |  |                |  |  |              |  |  |         | 
|William Haus |  | 19,350         |  |  | 117,000(1) |  |  | -      |  |  | -              |  |  | -            |  |  | 136,350 | 
|             |  |                |  |  |            |  |  |        |  |  |                |  |  |              |  |  |         | 
|Jingfu Li    |  | 6,576          |  |  | -          |  |  | -      |  |  | -              |  |  | -            |  |  | 6,576   | 

(1) On July 31, 2009, the Company granted 30,000 shares of
common stock to William Haus. The shares will vest in full on July 31, 2010.

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Tony Chan, William Haus and Jingfu Li were appointed directors
effective as of June 11, 2009. We entered into separate indemnification
agreements with each director. 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 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 $8,721, 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 25, 2010 (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.

|                                      |                         |                  | Amount and   |           
|------------------------------------- | ----------------------- | ---------------- | ------------ | ----------
|                                      |                         |                  | Nature of    |           
|Name and Address of Beneficial        |                         |                  | Beneficial   | Percent of
|Owner                                 | Office, If Any          | Title of Class   | Ownership(1) | Class(2)  
|Officers and Directors               
|Changjun Yu                           | Chairman                | Common stock,    | 0            | *         
|                                      |                         | $0.001 par value |              |           
|Jinglin Shi                           | CEO, President and      | Common stock,    | 0            | *         
|                                      | Director                | $0.001 par value |              |           
|Jingfu Li                             | Director                | Common stock,    | 0            | *         
|                                      |                         | $0.001 par value |              |           
|Tony Chan                             | Director                | Common stock,    | 0            | *         
|                                      |                         | $0.001 par value |              |           
|William Haus                          | Director                | Common stock,    | 30,000 (3)   | *         
|                                      |                         | $0.001 par value |              |           
|Colman Cheng                          | Chief Financial Officer | Common stock,    | 0            | *         
|                                      |                         | $0.001 par value |              |           
|Manjiang Yu                           | Vice President of Sales | Common stock,    | 0            | *         
|                                      |                         | $0.001 par value |              |           
|All officers and directors as a group |                         | Common stock,    | 30,000 (3)   | *         
|(7 persons named above)               |                         | $0.001 par value |              |           
|5% Security Holders                  
|Yiu Fai Kung (4)                      |                         | Common stock,    | 21,116,815   | 57.5%     
|                                      |                         | $0.001 par value |              |           
|Honouryear Limited (5)                |                         | Common stock,    | 15,517,217   | 42.3%     
|                                      |                         | $0.001 par value |              |           
|Bestsucceed Limited (6)               |                         | Common stock,    | 7,892,063    | 21.5%     
|                                      |                         | $0.001 par value |              |           
|* Less than 1%                        |                         |                  |              |           

42

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|(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 36,718,772 shares of Common Stock as of June 25, 2010 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 will vest 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.

Securities Authorized for Issuance Under Equity Compensation Plans

We presently do not have any equity based or other long-term incentive programs. In the future, we may adopt and establish an equity-based or other long-term incentive plan if it is in the best interest of the Company and our stockholders to do
so.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Transactions with Related Persons

The following includes a summary of transactions since the beginning of the 2009 fiscal year, or 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 Item 11,
Executive Compensation). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or
received, as applicable, in arms-length transactions.

- On May 16, 2008, our Chairman Changjun Yu entered into a Trademark Transfer Agreement with our company pursuant to which Mr. Yu transferred his rights to the trademark 农珍之冠  to our company for a nominal consideration of RMB
1. In connection with the trademark transfer, Mr. Yu also entered into a Trademark License Agreement with our company pursuant to which Mr. Yu granted us the exclusive rights to use such trademark before the Trademark Office approves the transfer of
such trademark. See Item 1, Our Business  Intellectual Property.
- On April 28, 2008, our subsidiary Longheda entered into a financial advisory agreement, or the Financial Advisory Agreement, with HFG International, Limited. The Financial Advisory Agreement was amended on August 12, 2008. Under the Financial
Advisory Agreement, as amended, HFG International, Limited agreed to provide Longheda with financial advisory and consulting services in facilitating Longhedas going public transaction. In consideration for these services, HFG International,
Limited was entitled to $450,000 which was paid within 45 days after the closing of our reverse acquisition of Fezdale. HFG International, Limited is an affiliate of Halter Financial Investments, L.P., which was an
  87.5% shareholder of our company before the closing of the reverse acquisition
  of Fezdale and a 6.96% shareholder as of the date of this report.

43

---

- On August 14, 2008, Mr. Kung, the former shareholder of Fezdale, entered
  into a make good escrow agreement with HFG International, Limited. Pursuant to
  the agreement, Mr. Kung established an escrow account and delivered to the
  escrow agent certificates evidencing 2,513,758 shares of our common stock
  beneficially owned by him, to be held for the benefit of HFG International,
  Limited. Mr. Kung agreed that if the after tax net income (after the exclusion
  of certain items from the calculation), or ATNI, for the Companys 2009 fiscal
  year is less than $13,919,707 or the ATNI for the Companys 2010 fiscal year
  is less than $18,495,315, then, in each case, Mr. Kung will transfer to HFG
  International, Limited 1,256,879 shares. If the ATNI for the Companys 2009
  fiscal year is no less than $13,919,707 or the ATNI for the Companys 2010
  fiscal year is no less than $18,495,315, then, in each case, 1,256,879 shares
  will be returned to Mr. Kung.

Except as set forth in our discussion above, none of our
directors, director nominees or executive officers has been involved in any
transactions with us or any of our directors, executive officers, affiliates or
associates which are required to be disclosed pursuant to the rules and
regulations of the SEC.

Promoters and Certain Control Persons

We did not have any promoters at any time during the past five
fiscal years.

Director Independence

Our Board is currently composed of 5 members, of which Chun Wai
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, 2010 and 2009:

|                   |   | Fiscal Year Ended March 31, | 
|------------------ | - | --------------------------- | 
|                   |   | 2010                        | 
|Audit Fees         | $ | 241,268                     | 
|Audit-Related Fees |   | -                           | 
|Tax Fees           |   | -                           | 
|All Other Fees     |   | -                           | 
|TOTAL              | $ | 241,268                     | 

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.

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.

44

---

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 financial statements are set forth under Item 8 of this annual report on Form 10-K. 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.

45

---

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 29, 2010

CHINA NUTRIFRUIT GROUP LIMITED

By: /s/ Jinglin
ShiJinglin Shi Chief Executive Officer and President

By: /s/Colman
ChengColman
Cheng Chief Financial Officer

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
Jinglin Shi 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/Jinglin
      Shi   | Chief Executive Officer and President        | June 29, 2010
|Jinglin Shi            | (Principal Executive Officer)                |              
|                       |                                              |              
|/s/Colman
      Cheng  | Chief Financial Officer                      | June 29, 2010
|Colman Cheng           | (Principal Financial and Accounting Officer) |              
|                       |                                              |              
|/s/Changjun
      Yu   | Chairman of the board                        | June 29, 2010
|Changjun Yu            |                                              |              
|                       |                                              |              
|/s/Chun Wai
      Chan | Director                                     | June 29, 2010
|Chun Wai Chan          |                                              |              
|                       |                                              |              
|/s/William
      Haus  | Director                                     | June 29, 2010
|William Haus           |                                              |              
|                       |                                              |              
|/s/Jingfu
      Li     | Director                                     | June 29, 2010
|Jingfu Li              |                                              |              

46

---

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,
2010 and 2009, 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, 2010. 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, 2010 and 2009, and the results of their operations and
their cash flows for each of the years in the two-year period ended March 31,
2010, 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 29, 2010

F-1

---



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



|                                                                                       |   | 2010       |  |   | 2009       | 
|-------------------------------------------------------------------------------------- | - | ---------- |  | - | ---------- | 
|                                                                                       |   |            |  |   |            | 
|ASSETS                                                                                 |   |            |  |   |            | 
|Current assets:                                                                        |   |            |  |   |            | 
|Cash and cash equivalents                                                              | $ | 35,994,443 |  | $ | 4,768,542  | 
|Proceeds from private placement held in escrow
      account                           |   | 931,630    |  |   | -          | 
|Trade receivables, net of
      allowance                                              |   | 11,047,846 |  |   | 11,423,996 | 
|Inventory, net                                                                         |   | 4,179,910  |  |   | 3,692,892  | 
|Other current assets                                                                   |   | 116,196    |  |   | 481,679    | 
|Total current assets                                                                   |   | 52,270,025 |  |   | 20,367,109 | 
|Property and equipment, net                                                            |   | 17,066,907 |  |   | 16,614,930 | 
|Deferred tax assets                                                                    |   | 1,068,878  |  |   | 1,406,814  | 
|Land use rights, net                                                                   |   | 185,686    |  |   | 189,303    | 
|TOTAL ASSETS                                                                           | $ | 70,591,496 |  | $ | 38,578,156 | 
|                                                                                       |   |            |  |   |            | 
|LIABILITIES AND SHAREHOLDERS EQUITY                                                   |   |            |  |   |            | 
|Current liabilities:                                                                   |   |            |  |   |            | 
|Other payables and accrued expenses                                                    | $ | 2,379,246  |  | $ | 2,675,983  | 
|Trade payables                                                                         |   | 87,954     |  |   | 260,322    | 
|Income taxes payable                                                                   |   | 2,296,513  |  |   | 1,416,835  | 
|Total current liabilities                                                              |   | 4,763,713  |  |   | 4,353,140  | 
|Non-current liabilities:                                                               |   |            |  |   |            | 
|Due to shareholders                                                                    |   | -          |  |   | 7,407,748  | 
|TOTAL LIABILITIES                                                                      |   | 4,763,713  |  |   | 11,760,888 | 
|                                                                                       |   |            |  |   |            | 
|                                                                                       |   |            |  |   |            | 
|Commitments and Contingencies                                                          |   |            |  |   |            | 
|                                                                                       |   |            |  |   |            | 
|Shareholders' equity                                                                   |   |            |  |   |            | 
|Preferred stock                                                                        |   |            |  |   |            | 
|Authorized: 5,000,000 shares,
      par value $0.001                                   |   |            |  |   |            | 
|Issued and outstanding: 365,109 shares at
      March 31, 2010 (Nil at March 31, 2009) |   | 365        |  |   | -          | 
|Common stock                                                                           |   |            |  |   |            | 
|Authorized: 120,000,000 shares, par value
      $0.001                                 |   |            |  |   |            | 
|Issued and outstanding:
      36,573,272 shares at March 31, 2010;                     |   |            |  |   |            | 
|(36,125,754 shares at March 31, 2009)                                                  |   | 36,573     |  |   | 36,126     | 
|Additional paid-in-capital                                                             |   | 36,492,875 |  |   | 16,746,971 | 
|Statutory reserves  restricted                                                        |   | 4,564,345  |  |   | 2,873,880  | 
|Accumulated other comprehensive income                                                 |   | 440,714    |  |   | 425,675    | 
|Retained earnings                                                                      |   | 24,292,911 |  |   | 6,734,616  | 
|TOTAL SHAREHOLDERS EQUITY                                                             |   | 65,827,783 |  |   | 26,817,268 | 
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                             | $ | 70,591,496 |  | $ | 38,578,156 | 

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
|FOR THE YEARS
      ENDED MARCH 31,                             



|                                                                                                                             |   | 2010        |   |   | 2009        |  
|---------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|Net sales                                                                                                                    | $ | 72,916,955  |   | $ | 56,418,837  |  
|Cost of sales                                                                                                                |   | (39,655,534 | ) |   | (31,777,733 | )
|Gross profit                                                                                                                 |   | 33,261,421  |   |   | 24,641,104  |  
|Selling expenses                                                                                                             |   | (3,547,236  | ) |   | (2,929,881  | )
|General and administrative expenses
      (including non-cash stock compensation expense of $9,519,317 in fiscal
      2009) |   | (3,976,627  | ) |   | (12,408,747 | )
|Operating earnings                                                                                                           |   | 25,737,558  |   |   | 9,302,476   |  
|Other income (expenses)                                                                                                      |   |             |   |   |             |  
|Interest expense                                                                                                             |   | -           |   |   | (480,201    | )
|Other income                                                                                                                 |   | 70,233      |   |   | 31,730      |  
|Gain on disposal of property and equipment                                                                                   |   | 290,407     |   |   | -           |  
|Total other income (expenses)                                                                                                |   | 360,640     |   |   | (448,471    | )
|Earnings before noncontrolling interests and income                                                                          |   |             |   |   |             |  
|taxes                                                                                                                        |   | 26,098,198  |   |   | 8,854,005   |  
|Provision for income taxes                                                                                                   |   | (6,849,438  | ) |   | (4,127,577  | )
|Earnings before noncontrolling
      interests                                                                               |   | 19,248,760  |   |   | 4,726,428   |  
|Noncontrolling interests                                                                                                     |   | -           |   |   | (209,308    | )
|Net earnings                                                                                                                 |   | 19,248,760  |   |   | 4,517,120   |  
|Other comprehensive income (loss)                                                                                            |   |             |   |   |             |  
|Foreign currency translation                                                                                                 |   | 15,039      |   |   | (386,637    | )
|Total comprehensive income                                                                                                   | $ | 19,263,799  |   | $ | 4,130,483   |  
|Earnings per share                                                                                                           |   |             |   |   |             |  
|Basic                                                                                                                        | $ | 0.5451      |   | $ | 0.1351      |  
|Diluted                                                                                                                      | $ | 0.5059      |   | $ | 0.1350      |  
|Weighted average number of common stock outstanding                                                                          |   |             |   |   |             |  
|Basic                                                                                                                        |   | 36,153,554  |   |   | 33,431,434  |  
|Diluted                                                                                                                      |   | 38,050,549  |   |   | 33,451,676  |  

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 (LOSS)



|                                                                        |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   |                |   |   | Statutory  |  |   |            |   |   | Accumulated   |   |   |               |  
|----------------------------------------------------------------------- |  | --------------- | - | - | ------------ | - |  | ---------- |  | - | ------ |  | - | ---------- | - | - | -------------- | - | - | ---------- |  | - | ---------- | - | - | ------------- | - | - | ------------- | -
|                                                                        |  | Preferred stock |   |   | Common stock |   |  | Additional |  |   |        |  |   | Reserves   |   |   |                |   |   | other      |  |   | Total      |  
|                                                                        |  |                 |   |   |              |   |  |            |  |   |        |  |   | paid-in    |   |   | Noncontrolling |   |   | -          |  |   | Retained   |   |   | comprehensive |   |   | shareholders |  
|                                                                        |  | Shares          |   |   | Amount       |   |  | Shares     |  |   | Amount |  |   | capital    |   |   | interests      |   |   | restricted |  |   | earnings   |   |   | income        |   |   | equity        |  
|                                                                        |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   |                |   |   |            |  |   |            |   |   |               |   |   |               |  
|Balance at April 1, 2008                                                |  | -               |   | $ | -            |   |  | 30,166,878 |  | $ | 30,167 |  | $ | (29,167    | ) | $ | 4,039,286      |   | $ | 1,713,065  |  | $ | 3,378,311  |   | $ | 812,312       |   | $ | 9,943,974     |  
|Effect   of reverse acquisition -                                       |  |                 |   |   |              |   |  |            |  |   | -      |  |   |            |   |   |                |   |   |            |  |   |            |   |   |               |   |   |               |  
|Recapitalization                                                        |  | -               |   |   | -            |   |  | 2,873,036  |  |   | 2,873  |  |   | (24,378    | ) |   | -              |   |   | -          |  |   | -          |   |   | -             |   |   | (21,505       | )
|Share issued in private placement                                       |  | -               |   |   | -            |   |  | 3,085,840  |  |   | 3,086  |  |   | 8,575,620  |   |   | -              |   |   | -          |  |   | -          |   |   | -             |   |   | 8,578,706     |  
|Acquisition of subsidiary                                               |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | (4,248,594     | ) |   | -          |  |   | -          |   |   | -             |   |   | (4,248,594    | )
|Cost of raising capital                                                 |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | (1,294,421 | ) |   | -              |   |   | -          |  |   | -          |   |   | -             |   |   | (1,294,421    | )
|Stock compensation expenses related to
      Make Good Escrow Agreement |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | 9,519,317  |   |   | -              |   |   | -          |  |   | -          |   |   | -             |   |   | 9,519,317     |  
|Transfer to reserve                                                     |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | -              |   |   | 1,160,815  |  |   | (1,160,815 | ) |   | -             |   |   | -             |  
|Comprehensive income:                                                   |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   |                |   |   |            |  |   |            |   |   |               |   |   |               |  
|Net earnings                                                            |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | 209,308        |   |   | -          |  |   | 4,517,120  |   |   | -             |   |   | 4,726,428     |  
|Translation adjustments                                                 |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | -              |   |   | -          |  |   | -          |   |   | (386,637      | ) |   | (386,637      | )
|Balance at March 31, 2009                                               |  | -               |   | $ | -            |   |  | 36,125,754 |  | $ | 36,126 |  | $ | 16,746,971 |   | $ | -              |   | $ | 2,873,880  |  | $ | 6,734,616  |   | $ | 425,675       |   | $ | 26,817,268    |  
|Share-based payment                                                     |  | -               |   |   | -            |   |  | 30,000     |  |   | 30     |  |   | 116,970    |   |   | -              |   |   | -          |  |   | -          |   |   | -             |   |   | 117,000       |  
|Capital contribution                                                    |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | 7,414,995  |   |   | -              |   |   | -          |  |   | -          |   |   | -             |   |   | 7,414,995     |  
|Preferred stocks issued in private
      placement                      |  | 403,418         |   |   | 403          |   |  | -          |  |   | -      |  |   | 12,006,243 |   |   | -              |   |   | -          |  |   | -          |   |   | -             |   |   | 12,006,646    |  
|Warrants issued in private placement                                    |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | 1,302,354  |   |   | -              |   |   | -          |  |   | -          |   |   | -             |   |   | 1,302,354     |  
|Cost of raising capital                                                 |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | (1,094,279 | ) |   | -              |   |   | -          |  |   | -          |   |   | -             |   |   | (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 |   |   | -             |   |   | 19,248,760    |  
|Translation adjustments                                                 |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | -              |   |   | -          |  |   | -          |   |   | 15,039        |   |   | 15,039        |  
|Balance at March 31, 2010                                               |  | 365,109         |   | $ | 365          |   |  | 36,573,272 |  | $ | 36,573 |  | $ | 36,492,875 |   | $ | -              |   | $ | 4,564,345  |  | $ | 24,292,911 |   | $ | 440,714       |   | $ | 65,827,783    |  

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                
|FOR THE YEARS
      ENDED MARCH 31,                  



|                                                                                         |   | 2010       |   |   | 2009        |  
|---------------------------------------------------------------------------------------- | - | ---------- | - | - | ----------- | -
|Cash flows from operating
      activities:                                              |   |            |   |   |             |  
|Net earnings                                                                             | $ | 19,248,760 |   | $ | 4,517,120   |  
|Adjustments to reconcile
      net earnings to net cash provided by operating activities |   |            |   |   |             |  
|Noncontrolling interests                                                                 |   | -          |   |   | 209,308     |  
|Depreciation and amortization                                                            |   | 1,593,811  |   |   | 1,049,739   |  
|(Gain)/loss on disposal
      of property and equipment                                  |   | (290,407   | ) |   | 289         |  
|Deferred
      income taxes                                                              |   | 337,936    |   |   | (531,259    | )
|Share-based payments                                                                     |   | 117,000    |   |   | -           |  
|Stock
      compensation cost                                                            |   | -          |   |   | 9,519,317   |  
|Changes in operating assets and liabilities:                                             |   |            |   |   |             |  
|Trade
      receivables                                                                  |   | 391,901    |   |   | (9,404,994  | )
|Inventories                                                                              |   | (481,732   | ) |   | (1,678,154  | )
|Other
      current assets                                                               |   | 365,509    |   |   | (364,374    | )
|Trade payables                                                                           |   | (172,675   | ) |   | 94,590      |  
|Amount
      due to an affiliate                                                         |   | -          |   |   | (59,169     | )
|Other payables and
      accrued expenses                                                |   | (319,909   | ) |   | 2,159,113   |  
|Income
      taxes payable                                                               |   | 877,429    |   |   | 789,452     |  
|Net cash provided by operating activities                                                |   | 21,667,623 |   |   | 6,300,978   |  
|                                                                                         |   |            |   |   |             |  
|Cash flows from investing activities:                                                    |   |            |   |   |             |  
|Cash outflow from acquisition of
      subsidiaries                                      |   | -          |   |   | (6,836,284  | )
|Purchases of property and equipment                                                      |   | (2,738,855 | ) |   | (13,123,980 | )
|Proceeds from disposal of property and
      equipment                                   |   | 1,038,273  |   |   | 3,924       |  
|Net cash used in investing activities                                                    |   | (1,700,582 | ) |   | (19,956,340 | )
|                                                                                         |   |            |   |   |             |  
|Cash flows from financing activities:                                                    |   |            |   |   |             |  
|Proceeds from private placement held in
      escrow account                             |   | (931,630   | ) |   | -           |  
|Proceeds from borrowings                                                                 |   | -          |   |   | 7,266,893   |  
|Repayment of borrowings                                                                  |   | -          |   |   | (10,173,650 | )
|Amounts due to shareholders                                                              |   | -          |   |   | 7,370,153   |  
|Proceeds from private placement                                                          |   | 13,309,000 |   |   | 8,578,706   |  
|Cost of raising capital                                                                  |   | (1,094,279 | ) |   | (1,294,421  | )
|Net cash provided by (used in) financing
      activities                                |   | 11,283,091 |   |   | 11,747,681  |  
|                                                                                         |   |            |   |   |             |  
|Effect of exchange rate on cash and cash
      equivalents                               |   | (24,231    | ) |   | (428,626    | )
|                                                                                         |   |            |   |   |             |  
|Increase (decrease) in cash and cash
      equivalents                                   |   | 31,225,901 |   |   | (2,336,307  | )
|                                                                                         |   |            |   |   |             |  
|Cash and cash equivalents at beginning of
      year                                     |   | 4,768,542  |   |   | 7,104,849   |  
|                                                                                         |   |            |   |   |             |  
|Cash and cash equivalents at end of year                                                 | $ | 35,994,443 |   | $ | 4,768,542   |  
|                                                                                         |   |            |   |   |             |  
|                                                                                         |   |            |   |   |             |  
|Supplemental disclosure of cash flows information:                                       |   |            |   |   |             |  
|Cash paid for:                                                                           |   |            |   |   |             |  
|Interest                                                                                 | $ | -          |   | $ | 450,236     |  
|Income taxes                                                                             | $ | 5,634,883  |   | $ | 3,893,159   |  
|                                                                                         |   |            |   |   |             |  
|Supplemental disclosure of non-cash
      information:                                   |   |            |   |   |             |  
|Issuance of common stock                                                                 | $ | 117,000    |   | $ | -           |  
|Issuance of warrant                                                                      | $ | 326,705    |   | $ | 331,357     |  
|Capital contribution                                                                     | $ | 7,414,995  |   | $ | -           |  
|Stock compensation                                                                       | $ | -          |   | $ | 9,519,317   |  

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 FOR THE YEARS ENDED MARCH 31, 2010
      AND 2009

NOTE 1. NATURE OF BUSINESS

Nature of Business

China Nutrifruit Group Limited (the Company) was originally
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
activities 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 (the BVI) corporation, through
a share exchange transaction (the Share Exchange Transaction), with the result
that the shareholders of Fezdale became the beneficial owners of approximately
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 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 has been 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). Mr. Kung will
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:

|(i) | The after tax net income for the fiscal year ending on
      March 31, 2009 is less than $13,919,707 and fiscal year ending on March
      31, 2010 is less than $18,495,315; and
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 for the
fiscal year ended March 31, 2009 because Mr. Kung was a director of the
Companys subsidiary Fezdale. For the year ended March 31, 2009, the earnings
target for 2009 of net income of $13,955,178 (before any charges related to the
release of any shares from escrow) was met. Accordingly, the Company has
recorded a non-cash charge to compensation cost of $9,519,316.6 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 earnings target for 2010
of net income of $18,495,315 was met. Accordingly, 2,799,799 shares will be
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 was approved
by the NYSE Amex for listing and registration.

F- 6

---

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, par value $.001
per share. 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
of 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 Financing and issued 43,916 units (the Unit) at a purchase
price of $33.00 per Unit for gross proceeds of $1,449,000.

Fezdale Investments Limited

Fezdale is a private limited liability company incorporated in
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 or $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 manufactures and sells a
variety of food products processed from specialty premium fruits that grow in
Northeast China. Currently, Longheda processes four types of premium specialty
fruits, including golden berry, crab apple, blueberry and raspberry, and sells
fresh fruits. Longheda currently has five types of fruit based products,
including fruit concentrate, nectar, glazed fruits, concentrate pulp and fruit
beverage. Longheda sells its products through an extensive sales and
distribution network covering 20 provinces in China. 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 dormant company and has no assets or
operations.

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 China
Nutrifruit Group Limited, Fezdale Investments Limited, Solar Sun Holdings
Limited, Jumbo Gloss Limited and Daqing Longheda Food Company Limited. 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.

F- 7

---

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, 2010
(2009: nil) was recorded.

Cash and cash equivalents

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

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, plant and equipment, net

Property, plant 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, plant
and equipment was $1,590,023 and $1,041,111 for the years ended March 31, 2010
and 2009 respectively. During the idle period of the plant, depreciation is
treated as current-period charges, which charge directly to general and
administrative expense.

F - 8

---

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, 2010 and 2009 was
$2,872,277 and $2,103,838 respectively.

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 and will expire in 2055.

Advertising costs

Advertising costs are expensed as incurred. The total
advertising costs were $38,053 and $22,596 for the years ended March 31, 2010
and 2009 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 exactly 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.

|March 31, 2010                               |                     
|-------------------------------------------- | --------------------
|Balance sheet                                | RMB6.8361 to US$1.00
|Statement of income and comprehensive income | RMB6.8383 to US$1.00

F- 9

---



|March 31, 2009                               |                     
|-------------------------------------------- | --------------------
|Balance sheet                                | RMB6.8456 to US$1.00
|Statement of income and comprehensive income | RMB6.8805 to US$1.00

As at March 31, 2010, RMB236,619,999 equivalents to
US$34,613,303 (March 31, 2009: RMB32,611,383 equivalents to US$4,736,846) is not
freely convertible into foreign currency and all foreign exchange transactions
must take place through authorized institutions. No representation is made that
the RMB amounts could have been, or could be, converted into US$ at the rates
used in translation.

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 subsidiary in PRC is required to transfer 10
percent of its 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 from existing owners in proportion to their equity holdings.

Common welfare fund

The Companys subsidiary in PRC is required to transfer 5
percent to 10 percent of its 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) (formerly Statement of Financial Accounting Standards (SFAS) SFAS
No. 123®, Share-Based Payment), 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) (formerly Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes
(SFAS 109) and related interpretations and guidance including FIN 48,
Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement
No. 109), 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 - 10

---

Reclassifications

Certain financial statements line items have been 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

(a) Recent accounting pronouncements adopted

In June 2009, the FASB issued a standard that established the
FASB ASC and amended the hierarchy of generally accepted accounting principles
(GAAP) such that the ASC became the single source of authoritative
nongovernmental U.S. GAAP. The ASC did not change current U.S. GAAP, but was
intended to simplify user access to all authoritative U.S. GAAP by providing all
the authoritative literature related to a particular topic in one place. All
previously existing accounting standard documents were superseded and all other
accounting literature not included in the ASC is considered non-authoritative.
New accounting standards issued subsequent to June 30, 2009 are communicated by
the FASB through Accounting Standards Updates (ASUs). For the Company, the ASC
was effective July 1, 2009. This standard did not have an impact on the
Companys consolidated results of operations or financial condition. However,
throughout the notes to the consolidated financial statements references that
were previously made to various former authoritative U.S. GAAP pronouncements
were changed to coincide with the appropriate section of the ASC.

In September 2006, the FASB issued an accounting standard
codified in ASC 820, which provides guidance about how to measure assets and
liabilities that use fair value. ASC 820 apply whenever another US GAAP standard
requires (or permits) assets or liabilities to be measured at fair value but
does not expand the use of fair value to any new circumstances. This standard
also requires additional disclosures in both annual and quarterly reports. ASC
820 is effective for financial statements issued for fiscal years beginning
after November 15, 2007. In February 2008, the FASB issued amendments which
state that ASC 820 does not address fair value measurements for purposes of
lease classification or measurement and delay the effective date for
non-financial assets and non-financial liabilities to fiscal years beginning
after November 15, 2008, except for items that are measured at fair value in the
financial statements on a recurring basis (at least annually). The Company
adopted the provisions of ASC 820 for its financial assets and liabilities and
those items for which it has measured on a recurring basis effective January 1,
2008, and the adoption did not have a material impact on its financial position
and results of operations. The Company adopted ASC 820 for certain of its
non-financial assets and liabilities on April 1, 2009 and the adoption did not
have a material impact on its financial position, cash flows and results of
operations.

In December 2007, the FASB issued a new business combinations
standard codified within ASC 805 Business Combinations (ASC 805). ASC 805
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired. ASC 805 also establishes disclosure requirements to enable
the evaluation of the nature and financial effects of the business combination.
The Company adopted ASC 805 on April 1, 2009 and the adoption did not have a
material impact on its financial position, cash flows and results of operations.

In December 2007, the FASB issued a new standard which
established the accounting for and reporting of noncontrolling interests in
partially owned consolidated subsidiaries and the loss of control of
subsidiaries codified within ASC 810 Consolidation (ASC 810). ASC 810
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable to the parent and to the noncontrolling interest,
changes in a parents ownership interest, and the valuation of retained
noncontrolling equity investments when a subsidiary is deconsolidated. ASC 810
also establishes disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners. Upon adoption of ASC 810 on April 1, 2009, the Company reclassified its
noncontrolling interest from minority interest to equity in the accompanying
March 31, 2010 and March 31, 2009 consolidated balance sheets. The Company
expects the adoption did not have a material impact on its financial position,
cash flows and results of operations.

In March 2008, the FASB issued an accounting standard related
to disclosures about derivative instruments and hedging activities, codified in
ASC 815 Derivatives and Hedging (ASC 815). ASC 815 is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entitys financial position, financial performance, and cash
flows. ASC 815 achieves these improvements by requiring disclosure of the
fair values of derivative instruments and their gains and losses in a tabular
format. It also provides more information about an entitys liquidity by
requiring disclosure of derivative features that are credit risk-related.
Finally, it requires cross-referencing within footnotes to enable financial
statement users to locate important information about derivative instruments.
The Company adopted ASC 815 on April 1, 2009 and the adoption did not have a
material impact on its financial position, cash flows and results of operations.

F-11

---

In April 2009, the FASB issued an accounting standard which
provides guidelines for making fair value measurements more consistent with the
principles presented in ASC 820. The standard provides additional authoritative
guidance in determining whether a market is active or inactive, and whether a
transaction is distressed, is applicable to all assets and liabilities (i.e.,
financial and nonfinancial) and will require enhanced disclosures. The Company
adopted the standard during the interim period ended June 30, 2009 and the
adoption did not have a material impact on its financial position, cash flows
and results of operations.

In May 2009, the FASB issued a new accounting standard
regarding subsequent events codified in ASC 855 Subsequent Events (ASC 855).
ASC 855 is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. It requires
disclosure of the date through which an entity has evaluated subsequent events
and the basis for selecting that date, that is, whether that date represents the
date the financial statements were issued or were available to be issued. ASC
855 was effective for the Companys first quarter ended June 30, 2009.

In January 2010, the FASB issued Accounting Standards Update
2010-05 (ASU 2010-05), Compensation  Stock Compensation (Topic 718). This
standard codifies EITF Topic D-110 Escrowed Share Arrangements and the
Presumption of Compensation.

(b) Recent accounting pronouncements not yet effective

In August 2009, the FASB issued ASU No. 2009-05, Measuring
Liabilities at Fair Value, which provides additional guidance on how companies
should measure liabilities at fair value under ASC 820. The ASU clarifies that
the quoted price for an identical liability should be used. However, if such
information is not available, an entity may use, the quoted price of an
identical liability when traded as an asset, quoted prices for similar
liabilities or similar liabilities traded as assets, or another valuation
technique (such as the market or income approach). The ASU also indicates that
the fair value of a liability is not adjusted to reflect the impact of
contractual restrictions that prevent its transfer and indicates circumstances
in which quoted prices for an identical liability or quoted price for an
identical liability traded as an asset may be considered level 1 fair value
measurements. For the Company, this ASU is effective October 1, 2009. 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.

In September 2009, the FASB issued ASU No. 2009-12, Investments
in Certain Entities That Calculate Net Asset Value per Share (or Its
Equivalent), that amends ASC 820 to provide guidance on measuring the fair value
of certain alternative investments such as hedge funds, private equity funds and
venture capital funds. The ASU indicates that, under certain circumstances, the
fair value of such investments may be determined using net asset value (NAV) as
a practical expedient, unless it is probable the investment will be sold at
something other than NAV. In those situations, the practical expedient cannot be
used and disclosure of the remaining actions necessary to complete the sale is
required. The ASU also requires additional disclosures of the attributes of all
investments within the scope of the new guidance, regardless of whether an
entity used the practical expedient to measure the fair value of any of its
investments. The disclosure provisions of this ASU are not applicable to an
employers disclosures about pension and other postretirement benefit plan
assets. For the Company, this ASU was effective October 1, 2009. 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.

In October 2009, the FASB issued ASU No. 2009-13,
Multiple-Deliverable Revenue Arrangementsa consensus of the FASB Emerging
Issues Task Force, that provides amendments to the criteria for separating
consideration in multiple-deliverable arrangements. As a result of these
amendments, multiple-deliverable revenue arrangements will be separated in more
circumstances than under existing U.S. GAAP. The ASU does this by establishing a
selling price hierarchy for determining the selling price of a deliverable. The
selling price used for each deliverable will be based on vendor-specific
objective evidence if available, third-party evidence if vendor-specific
objective evidence is not available, or estimated selling price if neither
vendor-specific objective evidence nor third-party evidence is available. A
vendor will be required to determine its best estimate of selling price in a
manner that is consistent with that used to determine the price to sell the
deliverable on a standalone basis. This ASU also eliminates the residual method
of allocation and will require that arrangement consideration be allocated at
the inception of the arrangement to all deliverables using the relative selling
price method, which allocates any discount in the overall arrangement
proportionally to each deliverable based on its relative selling price. Expanded
disclosures of qualitative and quantitative information regarding application of the
multiple-deliverable revenue arrangement guidance are also required under the
ASU. The ASU does not apply to arrangements for which industry specific
allocation and measurement guidance exists, such as long-term construction
contracts and software transactions. For the Company, ASU No. 2009-13 is
effective beginning April 1, 2011. The Company may elect to adopt the provisions
prospectively to new or materially modified arrangements beginning on the
effective date or retrospectively for all periods presented. 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.

F- 12

---

In January 2010, the FASB issued ASU No. 2010-6, Improving
Disclosures About Fair Value Measurements, that amends existing disclosure
requirements under ASC 820 by adding required disclosures about items
transferring into and out of levels 1 and 2 in the fair value hierarchy; adding
separate disclosures about purchase, sales, issuances, and settlements relative
to level 3 measurements; and clarifying, among other things, the existing fair
value disclosures about the level of disaggregation. For the Company, this ASU
is effective for the first quarter of 2010, except for the requirement to
provide level 3 activity of purchases, sales, issuances, and settlements on a
gross basis, which is effective beginning the first quarter of 2011. Since this
standard impacts disclosure requirements only, its adoption will not 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 cash
equivalents. As of March 31, 2010, substantially all of the Groups cash and
cash 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.

NOTE 5. EARNINGS PER SHARE

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

|                                                                 |   | 2010       |  |   | 2009       | 
|---------------------------------------------------------------- | - | ---------- |  | - | ---------- | 
|Numerator:                                                       |   |            |  |   |            | 
|Net earnings                                                     | $ | 19,248,760 |  | $ | 4,517,120  | 
|Add: dividends on preferred
      stock                          |   | 457,073    |  |   | -          | 
|                                                                 | $ | 19,705,833 |  | $ | 4,517,120  | 
|                                                                 |   |            |  |   |            | 
|Denominator:                                                     |   |            |  |   |            | 
|Weighted average common stock
      outstanding                  |   | 36,153,554 |  |   | 33,431,434 | 
|Effect of dilutive preferred stock                               |   | 1,815,893  |  |   | -          | 
|Effect of dilutive warrant                                       |   | 81,102     |  |   | 20,242     | 
|Weighed average common stock and dilutive
      potential common |   |            |  |   |            | 
|stock                                                            |   | 38,050,549 |  |   | 33,451,676 | 
|                                                                 |   |            |  |   |            | 
|                                                                 |   |            |  |   |            | 
|Basic net earnings per share                                     | $ | 0.5451     |  | $ | 0.1351     | 
|                                                                 |   |            |  |   |            | 
|Diluted net earnings per share                                   | $ | 0.5059     |  | $ | 0.1350     | 

On June 19, 2008, the Company effected a reverse stock split
pursuant to which each ten outstanding shares of common stock, par value $0.001,
were automatically converted into one share of common stock, par value $0.001
(the Reverse Stock Split). All of the share number, share prices and
per-share amounts have been adjusted, on a retroactive basis, to reflect the
effect of the Reverse Stock Split.

F- 13

---

As of March 31, 2010, the Company had warrants outstanding
which are convertible into 1,344,498 (2009: 216,009) shares of the Companys
common stock. The potential dilutive effect of such warrant is 81,102 (2009:
20,242) shares of Companys common stock.

NOTE 6. INVENTORY

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

|               |   | 2010      |  |   | 2009      | 
|-------------- | - | --------- |  | - | --------- | 
|Finished goods | $ | 4,101,918 |  | $ | 3,578,680 | 
|Raw material   |   | 77,992    |  |   | 114,212   | 
|               |   |           |  |   |           | 
|               | $ | 4,179,910 |  | $ | 3,692,892 | 

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 will be deposited in an escrow
account and be distributed to the Investors for the payment of dividend on
September 1, 2010, subject to terms in the closing escrow agreement.

NOTE 8. LAND USE RIGHTS, NET

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

|                               |   | 2010    |   |   | 2009    |  
|------------------------------ | - | ------- | - | - | ------- | -
|Land use rights, at cost       | $ | 200,175 |   | $ | 199,988 |  
|Less: accumulated amortization |   | (14,489 | ) |   | (10,685 | )
|                               |   |         |   |   |         |  
|                               | $ | 185,686 |   | $ | 189,303 |  

For each of the upcoming five years, estimated amortization is
expected to be approximately $3,788 per year.

As of March 31, 2010, land use rights, of $185,686, were
pledged to secure the unused banking facilities obtained by the Group. (Note
16)

NOTE 9. PROPERTY AND EQUIPMENT, NET

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

|                                         |   | 2010       |   |   | 2009       |  
|---------------------------------------- | - | ---------- | - | - | ---------- | -
|Buildings                                | $ | 4,673,420  |   | $ | 5,038,316  |  
|Leasehold improvements                   |   | 1,339,544  |   |   | 1,337,685  |  
|Machinery                                |   | 14,616,662 |   |   | 12,361,774 |  
|Furniture, fixtures and office equipment |   | 13,742     |   |   | 13,690     |  
|Motor vehicles                           |   | 6,194      |   |   | 6,144      |  
|Total                                    |   | 20,649,562 |   |   | 18,757,609 |  
|Less: accumulated depreciation           |   | (3,582,655 | ) |   | (2,142,679 | )
|                                         |   |            |   |   |            |  
|                                         | $ | 17,066,907 |   | $ | 16,614,930 |  

As of March 31, 2010, buildings and machinery, of $7,297,850
and $342,365 respectively, were pledged to secure the unused banking facilities
obtained by the Group. (Note 16)

F- 14

---

NOTE 10. PROVISION FOR INCOME TAXES

The provision for income tax is as follows:

|          |   | For the year ended March 31, | 
|--------- | - | ---------------------------- | 
|          |   | 2010                         | 
|          |   |                              | 
|Current:  |   |                              | 
|PRC       | $ | 6,511,502                    | 
|Deferred: |   |                              | 
|PRC       |   | 337,936                      | 
|          | $ | 6,849,438                    | 

Deferred tax assets

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

|                                                                  |   | For the year ended March 31, |  
|----------------------------------------------------------------- | - | ---------------------------- | -
|                                                                  |   | 2010                         |  
|Deferred tax assets:                                              |   |                              |  
|Difference between book and tax basis of land
      use right and | $ | 1,068,878                    |  
|property and equipment                                            |   |                              |  
|Tax losses carryforwards                                          |   | 913,721                      |  
|Less: valuation allowance                                         |   | (913,721                     | )
|Net deferred tax assets                                           | $ | 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.

The Company has provided valuation allowances of $913,721 and
$544,868 in respect of federal net operating loss and foreign unused tax loss
carryforwards, respectively, which it does not expect to utilize.

Gross deferred tax assets at March 31, 2010 and 2009 were
reduced by valuation allowance of $913,721 and $544,868, respectively. The total
valuation allowance between periods presented increased by $368,853 (2009:
$317,761) and such increase was attributable to the tax effect on foreign tax
losses incurred for the year ended March 31, 2010 of $56,757 (2009: $34,274) at
enacted foreign profit tax rates and the tax effect on federal net operating
loss incurred for the year ended March 31, 2010 of $312,096 (2009: $283,487) 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:

|                                                                   |   | 2010       |   |   | 2009       |  
|------------------------------------------------------------------ | - | ---------- | - | - | ---------- | -
|Provision for income taxes at statutory
      rate of 35%          | $ | 9,134,370  |   | $ | 3,098,902  |  
|Chinese tax rate difference                                        |   | (2,536,390 | ) |   | (1,815,417 | )
|Non-deductible expenses and non-assessable
      profits           |   | (455,331   | ) |   | 3,057,590  |  
|Changes in valuation allowance                                     |   | 368,853    |   |   | 317,761    |  
|Tax effect of non-deductible temporary
      difference recognized |   | 337,936    |   |   | (531,259   | )
|Income taxes                                                       | $ | 6,849,438  |   | $ | 4,127,577  |  

For the year ended March 31, 2009, the Company incurred a
non-cash charge for stock compensation expense of $9,519,317, which is not
deductible for tax purposes.

F - 15

---

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. 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.

NOTE 11. OTHER PAYABLES AND ACCRUED EXPENSES

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

|                         |   | 2010      |  |   | 2009      | 
|------------------------ | - | --------- |  | - | --------- | 
|                         |   |           |  |   |           | 
|Accruals                 | $ | 723,588   |  | $ | 586,782   | 
|Value added tax payables |   | 1,104,630 |  |   | 1,034,195 | 
|Other payables           |   | 551,028   |  |   | 1,055,006 | 
|                         | $ | 2,379,246 |  | $ | 2,675,983 | 

The other payables mainly comprised the amount payable to the
suppliers of property and equipment, amounting to $398,056 (2009: $960,544) as
of March 31, 2010.

NOTE 12. DUE TO SHAREHOLDERS

|                 |   | **2010** |  |   | 2009      | 
|---------------- | - | -------- |  | - | --------- | 
|                 |   |          |  |   |           | 
|Mr. Yiu Fai Kung | $ | -        |  | $ | 5,185,423 | 
|Mr. Kwan Mo Ng   |   | -        |  |   | 2,222,325 | 
|                 | $ | -        |  | $ | 7,407,748 | 

The amounts due to shareholders were unsecured, interest free
and had no fixed terms of repayment. During the year, the amount had been
capitalized into additional paid-in capital. (Note 13)

NOTE 13. SHAREHOLDERS EQUITY

General

The Companys total authorized capital at March 31, 2010 and
2009, is 125,000,000 shares of which 120,000,000 shares are common stock of par
value $0.001 and 5,000,000 shares are preferred stock of par value $0.001.

Additional paid-in capital

On September 7, 2009, Mr. Kung agreed to capitalize his loan,
of HK$40,109,986, equivalents to US$5,190,497, by issuing 7 fully paid shares of
par value US$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, equivalents to US$2,224,498, by issuing 3 fully paid
shares of par value US$1.00 in Fezdale to the Company.

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

F - 16

---

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 optionally
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 the first date after December 31, 2009 and any optional conversion date in
cash.

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 shall 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 then 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

On August 14, 2008, the Company effected an initial closing of
a private placement transaction and issued 1,692,960 shares of the Companys
common stock to certain investors at $2.78 per share for $4,706,467.

F - 17

---

On October 3, 2008, the Company effected a second closing of a
private placement transaction and issued 955,244 shares of the Companys common
stock to 21 investors at $2.78 per share for $2,655,600.

On October 10, 2008, the Company effected a third and final
closing of a private placement transaction and issued 437,636 shares of the
Companys common stock to nine investors at a price of $2.78 per share for
$1,216,637.

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. Because
Mr. Kung was a director of Fezdale, the Company recorded a non-cash
charge to compensation cost of $9,519,316.6 in the fourth quarter of 2009
related to the release from escrow to Mr. Kung of 2,799,799 shares. For fiscal
year 2010, because Mr. Kung resigned from his position as Fezdales
director in July 2009 and the release of the escrow shares was not contingent
upon his continuing employment with the Company, even though the earnings target
of net income of $18,495,315 was met and 2,799,799 shares will be released to
Mr. Kung from escrow, the Company did not recognize any compensation cost
relating to the release of such shares.

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

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 with the amount of $331,357 which 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     

F- 18

---

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 with the amount of $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     

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 with the amount of $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. 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     

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 with the amount of $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     

F - 19

---



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
    
    -
    
    
    445,783
    
    
    -
    
    
    445,783
    
    $
    3.30October 8, 2009
    
    -
    
    
    43,916
    
    
    -
    
    
    43,916
    
    $
    3.30216,009
    
    
    489,699
    
    
    (95,781
    )
    
    609,927Weighted average exercise price
    $
    2.78
    
    $
    3.30
    
    $
    2.78
    
    $
    3.20


NOTE 14. 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 $350,628
and $292,986 for the years ended March 31, 2010 and 2009 respectively.

NOTE 15. COMMITMENTS AND CONTINGENT LIABILITIES

Operating Lease Commitments

As of March 31, 2010, the Group did not have any significant
operating lease commitment.

Rent expense for the years ended March 31, 2010 and 2009 was
$23,533 and $34,773 respectively.

NOTE 16. UNUSED SECURED CREDIT FACILITIES

As of March 31, 2010, the Group had $2,756,791 of unused credit
facilities granted by banks. Those banking facilities were secured by land use
rights, buildings and machinery, of $185,686, $7,297,850 and $342,365
respectively.

NOTE 17. 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- 20

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|EXHIBIT INDEX
|-------------
|             
|Exhibit No.  
|2.1          
|3.1          
|             
|3.2          
|3.2          
|4.1          
|10.1         
|             
|10.2         
|10.3         
|             
|10.4         
|10.5         
|10.6         
|10.7         
|10.8         
|10.9         
|10.10        
|10.11        
|10.12        

---

|Exhibit No. | Description                                                                                                                                                                                                                                                                                                                                   
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13       | English Summary of Trademark
      License Agreement, by and between Daqing Longheda Food Company Limited and
      Changjun Yu, dated May 16, 2008 [incorporated by reference to Exhibit 10.8
      to the Companys Current Report on Form 8-K filed on August 14, 2008]                                                                    
|10.14       | English Summary of Trademark License Agreement, by and
      between Daqing Longheda Food Company Limited and Changjun Yu, dated May
      16, 2008 [incorporated by reference to Exhibit 10.9 to the Companys
      Current Report on Form 8-K filed on August 14, 2008]                                                                    
|10.15       | English Summary of Technology
      Cooperation Agreement, by and between Daqing Longheda Food Company Limited
      and College of Food of Heilongjiang Bai Yi Land Reclamation University,
      dated March 7, 2008 [incorporated by reference to Exhibit 10.10 to the
      Companys Current Report on Form 8-K filed on August 14, 2008]
|10.16       | 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]                                                                                                               
|10.17       | Employment Agreement, by and
      between the registrant and Jinglin Shi, dated August 14, 2008
      [incorporated by reference to Exhibit 10.16 to the Companys Current
      Report on Form 8-K filed on August 14, 2008]                                                                                                                
|10.18       | Employment Agreement, by and between the registrant and
      Manjiang Yu, dated August 14, 2008 [incorporated by reference to Exhibit
      10.17 to the Companys Current Report on Form 8-K filed on August 14,
      2008]                                                                                                                
|10.19       | Employment Agreement, by and
      between the registrant and Changjun Yu, dated August 14, 2008
      [incorporated by reference to Exhibit 10.18 to the Companys Current
      Report on Form 8-K filed on August 14, 2008]                                                                                                                
|10.20       | 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]                                                                                                     
|10.21       | 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]                                                                                                      
|10.22       | 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]                                                                                                         
|10.23       | 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]                                                                                                           
|10.24       | 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]                                                                                                            
|10.25       | 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]                                                                                                               
|10.26       | 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]                                            
|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. *                                                                                                                                                                                                                                                                                                   

---

|Exhibit No. | Description                                                                                                                                                                                                                       
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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. *                                                                                                                       
|99.1        | China Nutrifruit Group Limited
      Audit Committee Charter, adopted June 11, 2009 [incorporated by reference
      to Exhibit 99.1 to the Companys Current Report on Form 8-K filed on June
      15, 2009]                    
|99.2        | China Nutrifruit Group Limited Compensation
      Committee Charter, adopted June 11, 2009 [incorporated by reference to
      Exhibit 99.2 to the Companys Current Report on Form 8-K filed on June 15,
      2009]             
|99.3        | China Nutrifruit Group Limited
      Governance and Nominating Committee Charter, adopted June 11, 2009
      [incorporated by reference to Exhibit 99.3 to the Companys Current Report
      on Form 8-K filed on June 15, 2009]

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