UNITED STATESSECURITIES 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, 2009

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. 2-93231-NY

CHINA NUTRIFRUIT GROUP LIMITED

|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
|------------------- | -----------------------------------------
|None                | None                                     

Securities registered pursuant to Section 12(g) of
the Exchange Act: Common Stock, par value $0.01 per share

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, 2008 (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 quoted on the Electronic Bulletin Board maintained by the Financial Industry Regulatory Authority) was approximately $11.7 million.  Shares of the Registrants common stock held by each executive officer and director
and each by each person who owns 10 percent or more of the outstanding common stock have been excluded 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 36,125,754 shares of the registrants common stock outstanding as of June 25, 2009.

Documents Incorporated by Reference:

None.

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|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, including the following Item 1- Business, Item 1A  Risk Factors, Item 3 Legal Proceedings,  Item 7 - Managements Discussion and Analysis of Financial
Condition and Results of Operations, Item 10- Director, Executive Officer and Corporate Governance and Item 11  Executive Compensation, 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 crisis, 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 where the context otherwise requires and for the purposes of this report only: We, us, our company, our, and China Nutrifruit refer to the combined business of China Nutrifruit Group
Limited and its consolidated subsidiaries, but do not include the stockholders of China Nutrifruit Group Limited; Fezdale refers to Fezdale Investments Limited, our direct, wholly-owned subsidiary, a BVI corporation; Solar
Sun refers to Solar Sun Holding Limited, our indirect, wholly-owned subsidiary, a Hong Kong corporation; Longheda refers to Daqing Longheda Food Company Limited, our indirect, wholly-owned subsidiary, a Chinese corporation;
China, Chinese and PRC, refer to the Peoples Republic of China; Renminbi and RMB refer to the legal currency of China; and U.S. dollars, dollars and
$ refer to the legal currency of the United States.

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PART I

ITEM 1.

BUSINESS.

Overview of Our Business

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 primary product offering includes fruit concentrate, nectar, glazed fruits, beverage as
well as fresh fruits.  We sell our products through an extensive nationwide sales and distribution network covering 19 provinces and 43 cities in China.  As of March 31, 2009, this network was comprised of 70 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. We currently operate from our manufacturing facility located in Daqing City
and Mu Dan Jiang City, Heilongjiang province, China where abundant supply of a variety of premium specialty fruits is available. We have four fruit processing lines with an aggregate capacity of 15,960 tons and one beverage production lines with a
capacity of 10,800 tons.

Our sales revenue grew by 63.5% in the fiscal year ended March 31, 2009 to $56.4 million, from $34.5 million in the fiscal year ended March 31, 2008. Net income decrease by 64.4% in the fiscal year ended March 31, 2009 to $4.1 million
from $11.6 million in the fiscal year ended March 31, 2008. Our gross margin for the fiscal year ended March 31, 2009 was 43.7% .

For a better comparative of the result of our operations, we have prepared unaudited consolidated pro forma financial statements and cash flow for the fiscal year ended March 31, 2008. The unaudited pro forma consolidated financial statements give
effect to the acquisition of 100% equity interest of Fezdale as a reverse acquisition in the form of a recapitalization and the acquisition of 100% equity interest of Longheda. The unaudited pro forma consolidated financial statements present the
results of operations of China Nutrifruit Group Limited (China Nutrifruit) and Longheda as they would have appeared had the recapitalization and acquisition occurred consummated on April 1, 2007 for the purposes of the unaudited pro
forma statements of income and cash flows.

Our Corporate 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.

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

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Our Corporate History

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

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 a 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.

In connection with these transactions, Fezdales major stockholder Yiu Fai Kung entered into an escrow agreement in which he agreed to a make good obligation with the investors in the aforementioned private placement financing
transaction. Under the make good obligation, Yiu Fai Kung agreed to place into escrow 3,085,840 shares of our common stock. The escrowed shares were beneficially owned by Yiu Fai Kung at the time they were placed in escrow. The escrowed
shares will become subject to disbursement either to Yiu Fai Kung or the private placement investors based upon our financial performance in the fiscal years ended 2009 and 2010.

In addition, in connection with these transactions, Fezdales major stockholder Yiu Fai Kung entered into another escrow agreement in which he agreed to a make good obligation with HFG International, Limited or HFG. Under the
make good obligation, Yiu Fai Kung agreed to place into escrow 2,513,758 shares of our common stock. The escrowed shares were beneficially owned by Yiu Fai Kung at the time they were placed in escrow. The escrowed shares will become subject to disbursement to Yiu Fai Kung or
to HFG based upon our financial performance in the fiscal years ended 2009 and
2010.

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Under the make good arrangement, minimum net income
thresholds of $13,919,707 and $18,495,315 were established for the 2009 and 2010
fiscal years, respectively. If, in a given fiscal year, the applicable minimum
net income threshold is exceeded, 50% of the escrow shares is required to be
disbursed to Yiu Fai Kung. If, in a given fiscal year, the applicable minimum
net income threshold is not met, 50% escrowed shares is required to be disbursed
to HFG according to the make good arrangement.

Under the make good arrangement, minimum net income
thresholds of $13,919,707 and $18,495,315 were established for the 2009 and 2010
fiscal years, respectively. If, in a given fiscal year, the applicable minimum
net income threshold is exceeded, 50% of the escrow shares is required to be
disbursed to Yiu Fai Kung. If, in a given fiscal year, the applicable minimum
net income threshold is not met, 50% escrowed shares is required to be disbursed
to the private placement investors according to the make good arrangement.

The return to Mr. Kung of any of the make good shares placed in
escrow by him is considered to be a separate compensatory arrangement because
Mr. Kung is a director of the Companys subsidiary Fezdale. Accordingly, if any
of the required earnings targets are met and shares are returned to Mr. Kung,
the Company will recognize a non-cash compensation cost at that time equal to
the then fair value of the shares returned (up to a total of 5,599,598 shares).
For the year ended March 31, 2009, the earnings target for 2009 of net income of
$13,919,707 (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.

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 fruit processed products in China
grew from $16.8 billion in 2005 to $27.5 billion in 2007, representing a
compound annual growth rate (CAGR) of 27.94% . The sales value of fruit
processed products in China grew from $17.0 billion in 2005 to $26.1 billion in
2007, representing a CAGR of 27.72% . Among the fruit processed products, glazed
fruits and fruit juice and beverage experienced the highest growth rate since
2005. The following table sets forth the output and CAGR of four categories of
fruit processed products.

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

|                                                                                |  | 2005 |  |  | 2006 |  |  | 2007 |  |  | CAGR   | 
|------------------------------------------------------------------------------- |  | ---- |  |  | ---- |  |  | ---- |  |  | ------ | 
|Canned
      Fruit                                                              |  | 3.0  |  |  | 3.7  |  |  | 4.3  |  |  | 19.72% | 
|Deep Processed Fruit*                                                           |  | 9.7  |  |  | 13.1 |  |  | 16.1 |  |  | 28.83% | 
|Fruit Juice
      and Beverage                                                  |  | 3.3  |  |  | 4.4  |  |  | 5.7  |  |  | 31.43% | 
|Glazed Fruits                                                                   |  | 0.7  |  |  | 1.0  |  |  | 1.4  |  |  | 41.42% | 
|* Deep processed
      fruits includes nectar, dried fruit and fruit wine, etc. |  |      |  |  |      |  | 

Source: 2006-2008 Fruit processing industry research report,
Beijing Business & Intelligence Consulting Co. Ltd.

BBIC projected that the total sales value and net income of
fruit processed products in China will reach $37.2 billion and $2.5 billion in
2010, or a growth of 42.52% and 66.67%, respectively, during the four-year
period from 2007 to 2010. The table below sets forth the sales and net income of
fruit processing industry in China from 2005 to 2010 and projected sales and net
income of fruit processing industry in China from 2008 to 2010.

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Sales and Projected Sales and Net Income of Fruit Processing
Industry in China, 2005-2010

|(in Billions of U.S. $) |  | 2005 |  |  | 2006 |  |  | 2007 |  |  | 2008 |  |  | 2009 |  |  | 2010 | 
|----------------------- |  | ---- |  |  | ---- |  |  | ---- |  |  | ---- |  |  | ---- |  |  | ---- | 
|Sales                   |  | 16.0 |  |  | 21.0 |  |  | 26.1 |  |  | 28.5 |  |  | 32.9 |  |  | 37.2 | 
|Net Income              |  | 0.9  |  |  | 1.2  |  |  | 1.5  |  |  | 1.8  |  |  | 2.2  |  |  | 2.5  | 

Source: 2006-2008 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. According to
Euromonitor, an independent research firm, although 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.

Growing affluence fosters increased consummation of fruit
processed 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 RMB25.0 trillion ($3.4 trillion) in 2007.
The International Monetary Fund also estimated that Chinas real GDP should grow
at an annual growth rate of 10.0% in 2008. Chinas economic growth has resulted
in a significant increase in household disposable income in China. According to
the NBS, between 2002 and 2007, urban household disposable income per capita
increased from RMB7,703 ($1,055) to RMB13,786 ($1,887), or a CAGR of 17.4%, and
rural household disposable income per capita increased from RMB2,476 ($339) to
RMB4,140 ($557), or a CAGR of 12.1% . We believe that as GDP and disposable
income increase, fruit processed 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.

Greater health awareness is expected to affect
consumption of fruit and fruit processed 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 healthy and nutritional
products, like our products, will increase. For example, according to the BBIC
Report, non-carbonated beverages are gradually taking more market shares from
carbonated beverages. The market share of carbonated beverages has decreased
from 34% of the total beverage market in 2003 to 26% in 2007, and fruit juice
and purified water are the main contributors for the market share increase of
non-carbonated beverages. The juice beverage market in China continued growing
steadily in 2008 as the growth in urban population and disposable income
continued to drive demand for natural and healthy beverage products.

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 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 Competitive Strengths

We believe that our success to date and potential for future
growth can be attributed to a combination of our strengths, including the
following:

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- High-end niche products.We process premium specialty fruits that have high nutrient concentration, potential health benefits and high value. Our products are positioned in the high-end market as premium healthy food and are
distinguished from the common fruit based products in the market.
- Leading market position and rapid growth.We believe we are the largest processor of golden berry in China and a leading producer of premium specialty fruit based products. In the past three fiscal years, our revenue has grown at a
compound annual growth rate of approximately 51% from $11.0 million in fiscal year 2006 to $56.4 million in fiscal year 2009. Our net income has grown at a compound annual growth rate of approximately 38% from $3.9 million in fiscal year
2006 to $14.0 million in fiscal year 2009.
- Established raw material procurement network.Our facilities are strategically located in close proximity to major premium specialty fruit orchards in Northeastern China which allows us to have easy access to the supply of the source
fruits, enjoy sourcing stability and maintain a competitive cost structure. We have employed different strategies to secure the supply of source fruits to support our rapid growth. For example, we have entered into cooperative agreements with local
government where major premium specialty fruit orchards are based to coordinate with individual farmers to supply us with golden berries. We have also secured the supply of other source fruits by developing a group of effective and loyal agents who
collect source fruits from individual farmers. We believe these supply arrangements provide us with an important competitive advantage in terms of quality, stability and reliability of supply.
- Emphasis on quality control and food safety.We emphasis quality and safety and have quality control and food safety management systems for all stages of our business, including raw materials sourcing, production, packaging, storage
and transportation of our products. We apply and adhere to internal quality standards that we believe are stricter than the PRC national standards. Our processing facility possesses ISO9001 and HACCP series qualifications.
- Extensive nationwide sales and distribution network.Our extensive sales and distribution network allows us to reach a wide range of customers all over the nation. As of March 31, 2009, we had 70 regional distributors in 19 provinces
and 43 cities. Our distributors sell our products through their own network in the region to fruit super markets or fruit based food producers for further processing. We have a group of distributors that are instrumental in our sales efforts.
- Experienced management team with a strong track record.Our management team has extensive operating experience and industry knowledge. Changjun Yu, our founder and chairman, has over 13 years of experience in the fruit based product
industry. Jinglin Shi, our chief executive officer, has over ten years of experience in managerial positions. This extensive local industry experience is combined with international experience. For example, Colman Cheng, our chief financial officer,
has over 14 years of auditing, accounting and financial management experience in international companies. We believe that our management teams experience and capabilities have contributed greatly to our significant growth in the past three
years.

Our Growth Strategy

As a leading premium specialty fruit based product company in China, we believe we are well positioned to capitalize on future industry growth in China. We are dedicated to providing healthy and high nutritional premium specialty fruit based
products. We will implement the following strategic plans to take advantage of industry opportunities and our competitive strengths:

- Increase production capacity.Our existing production lines have been running at close to full capacity while the market demand for our existing products keeps increasing. We also have abundant supply of source fruits to support
the expansion of our business. In 2007, Heilongjiang provinces total estimated output of golden berry, crab apple, blueberry and raspberry was approximately 200,000 tons,
700,000 tons, 200,000 tons and 100,000 tons, respectively. Our current
processing capacity only allows us to process a small percentage of the total
output. We plan to add three new production lines to expand our fruit processing
capacity from 15,960 tons to 29,840 tons by July 2010.

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- Further strengthen our raw materials procurement network.We
believe that a secure supply of principal raw materials is crucial to our future
success. Hence, we intend to further strengthen our existing cooperative
relationship with two suppliers of golden berries and to develop new
relationship with other golden berry farms when necessary. We will keep
developing new quality agents in orchards of other fresh fruits to secure
sufficient supply to support our rapid growth. In addition, if we have
sufficient capital in the future, we will integrate upsteam by developing our
own orchards to secure the supply of fresh premium specialty fruits for our
production.
- Further expand our distribution network to increase the prevalence of our
products nationwide.Our current sales depend heavily on
our regional distributors and their network. To support our rapid growth in
sales, we plan to further expand our distribution network by adding five to ten
new distributors annually in the next few years.
- Continue to diversify our product portfolio to satisfy different customer
preferences.We currently offer fresh golden berries and four series of
products processed from four types of source fruits. We constantly evaluate our
products and seek to adapt to changing market conditions by updating our
products to reflect new trends in consumer preferences. We have finished
research and development for our new products glazed blueberry, sea buckthorn
concentrate and blackcurrant concentrate. Currently another new product golden
berry extracts is under development and we expect to finish its development in
fiscal 2010. We will analyze the market trends and customer preference to decide
which products to be launched.

Our Products

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

The following table sets forth our products categorized by both products and source fruits type in terms of revenue for the fiscal years 2009 and 2008:

Product Mix  By Product



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Fruit Concentrate

Fruit concentrate is our primary product line, accounting for approximately 51.2% and 46.8% of our total revenue in fiscal year 2009 and 2008 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. 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 2010.

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Among the four types of concentrate, golden berry concentrate enjoys the highest gross margin and crab apple concentrate has a relatively lower gross margin, but occupies most of our production capacity.  We produce more crab apple concentrate
despite its relatively lower gross margin mainly because of the high demand for such 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 contributed approximately 13.2% and 15.4% to our total revenue in fiscal year 2009 and 2008, 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 from golden berry only.  Our nectar products are commonly used for further processing into a wide variety of products, including fruit concentrate, fruit ice cream, nectar beverage, biscuits, fruit jam and fruit
yogurt. Our nectar products have been certified as green food by China Green Food Development Center in May 2006.

Glazed Fruits

Our glazed fruits product line contributed approximately 10.9% and 13.2% to our total revenue in fiscal year 2009 and 2008, respectively. Glazed fruit is preserved fruit with high sugar content, a traditional Chinese food that enjoys great
popularity in China. Glazed fruits have a long shelf life and are commonly consumed as snacks.

We currently produce and sell glazed fruits from golden berry only. Glazed golden berry is mainly sold as a high-end snack. Due to the special taste of golden berry, our products are also commonly used in a wide variety of foods such as baked foods.
Our glazed fruits products have been certified as green food by China Green Food Development Center in May 2006.

Fresh Fruit

Sales from fresh golden berries contributed approximately 4.3% and 6.0% to our total revenue in fiscal year 2009 and 2008 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 carry the best color, shape and aroma are sold as fresh
fruit. The rest of the fresh golden berries are further processed into glazed fruits, nectar or concentrate.

Golden berries are especially difficult to preserve in the hot season after they are picked 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.

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Beverage and others

Beverage

Beverages are not our principal products and accounted for approximately 8.2% and 12.3% of our total revenue in fiscal year 2009 and 2008, respectively.  Beverage products usually require large capital for advertising and other sales and marketing
efforts. We believe we can generate more profits by focusing on our primary high-end premium products.

We have a beverage production line with a capacity of 10,800 tons and produce two brands of beverage.

- Beverage Fu: Fu means good luck in Chinese. Beverage Fu is a fruit juice beverage produced from our golden berry concentrate. Beverage Fu is mainly sold to the wholesale market through our
distributors and is commonly consumed in wedding and festival banquets as a lucky drink.
- Beverage The Legend of Network: Beverage The Legend of Network is a fruit juice beverage produced from apple juice that we purchase from third party vendors. It is our own branded product and started production of it in May
2008. We use the distribution network for beverage The World of Legend to distribute this new beverage The Legend of Network to the internet bars. Beverage The World of Legend was cease production in May 2008 and
its license agreement with Shanghai Shanda Xin Hua Interactive Entertainment Co., Ltd. was expired on December 14, 2008.

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 others product contributed approximately 12.2% and 6.3% of our total revenue in fiscal years 2009 and 2008, respectively.

New products under development

We plan to further diversify our product mix to cater to different customer tastes and preferences. Currently golden berry extract products are under development and we expect to finish development of these new products in 2010.

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 new 6,000 tons concentrate juice production line is located.

We currently own and operate four fruit processing lines with an aggregate processing capacity of 15,960 tons and one beverage production line with a processing capacity of 10,800 tons. The average utilization rate of our fruit processing lines was
approximately 79.3% in fiscal year 2009.  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, expect
the new fruit concentrate production in Mu Dan Jiang, is the highest rate we can achieve while maintaining no inventory. The utilization rate of our beverage production line was approximately 36.2% in fiscal year 2009 and still has surplus capacity
for future growth.

Other than our beverage production line, 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.

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Our beverage production line runs the entire year since the raw material of beverages are mainly fruit juices that are available all seasons.

To meet the expected growth of our business and to broaden our product portfolio, we plan to add one glazed fruits production line in our Daqing facility and acquire a concentrate pulp production factory in fiscal year 2010. Furthermore, we target
to add one more fruit concentrate lines in Mu Dan Jiang facility in fiscal year 2011. Our expansion plan will be subject to future capital finance.

The concentrate pulp production line to be acquired is expected to have an annual processing capacity of approximate 6,680 tons.  With the expansion of the production lines, the aggregate processing capacity of glazed fruits and fruit concentrate is
expected to increase to 2,400 tons and 15,960 tons respectively by fiscal year 2011.

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 17-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.

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Raw Materials and Suppliers

Raw Materials

Our business depends on maintaining a regular, timely and adequate supply of high-quality raw material. The principal raw materials for our production are fresh fruits, which accounted for approximately 85.5% of our total costs of sales in fiscal
year 2009. Our facility is strategically located in Heilongjiang province, where abundant supply of source fruits is available.  In 2007, the total estimated output of golden berry, crab apple, blueberry and raspberry in Heilongjiang province was
approximately 200,000 tons, 700,000 tons, 200,000 tons and 100,000 tons, respectively, representing approximately 98%, 61%, 90% and 70% of its respective total output in China.  The close proximity of our facility to the orchards enables us to
acquire sufficient fresh fruits with lower logistics costs.  Our other raw materials mainly include packing materials (e.g. aseptic bags) and auxiliary materials (e.g. sugar and additives) that are widely available.

Suppliers and Supply Arrangements

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

Golden berries in Heilongjiang are mainly grown in four fruit farms. Our estimate of the annual output of golden berries at these four fruit farms is approximately 100,000 tons, accounting for approximately 50% of the total output of golden berries
in Heilongjiang province. Our processing volume of golden berry (including those sold as fresh fruits) in fiscal year 2009 was approximately 28,268 tons. We currently purchase a majority of our golden berries from two of these fruit farm bases,
namely Hailun Base and Nehe Base. Since it is too costly to purchase fresh fruits from each individual farmer, we coordinate with the local governments who play a critical role in planning and coordinating the overall fruit planting activities of
individual farmers.

We normally sign written agreements with the local governments of Hailun Base and Nehe Base 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 coordinates corresponding planting 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, but no lower than the predetermined minimum price. This arrangement cuts down our
procurement costs significantly and allows the local governments to protect and maximize individual farmers interest.

We purchase other source fruits, including blueberry, crab apple and raspberry, primarily from vendors. Since there is no centralized farm base for these fruits, their supply is scattered which makes it costly and infeasible to source them directly
from individual farmers. As an alternative, we have developed a large group of agents who purchase fruits from the local farmers, then sell them to us.  Our sourcing staffs maintain 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 rapid annual growth.

Marketing, Sales and Distribution

Sales and Distribution

We currently sell all our products directly to 70 regional distributors across 19 provinces and 43 cities in China who then sell the products to various customers, including food processors, supermarkets and wholesale stores.  As of March 31, 2009,
our sales team consisted of 17 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 56.0% of our total revenue in fiscal year 2009.

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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 0 to 45 days in fiscal year 2009. We utilize different pricing policies based on the type of source fruit.  For golden berry based products, we price our products 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 with reference to
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 53.9% and 63.8% of our total revenue in fiscal years 2009
and 2008, respectively.  The biggest distributor was accounted for 9.2% and 13.8% for the fiscal years 2009 and 2008 respectively. No distributor in fiscal year 2009 accounted for over 10% of the Companys revenue.

Marketing

As of March 31, 2009, we have five marketing individuals 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), one of the earliest agriculture universities in China.  Since 2004, our company and HLAU have cooperatively completed the development of 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. 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.

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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 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 has registered the trademark for 农珍之冠 in class 32 with the Trademark Office of
the State Administration for Industry and Commerce of China, or the Trademark Office.  He has applied the trademark for 农珍之冠 in class 29 which application has been accepted by the Trademark Office. In May 2008, Mr. Yu
agreed

to transfer the trademarks for 农珍之冠  in both class 29 and class 32 to our company for a consideration of RMB 1 for each trademark and granted us the exclusive right to use such trademarks before the transfer was approved
by the Trademark Office. We have filed the application for such transfer with the Trademark Office.  If the approval is granted, we will have all the legal rights for such trademark, the term of which expires in 2018.

We also filed an application for the trademark The Legend of Network with the Trademark Office in May 2008. The application has been accepted by the Trademark Office.

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 Risk factorsRisks Related to Our BusinessFailure to adequately protect our intellectual property
rights may undermine our competitive position, and litigation to protect our intellectual property rights may be costly.

Regulation

The food industry, of which fruit based products form a part, is subject to extensive regulation in China. This following summarizes the most significant PRC regulations governing our business in China.

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;

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- 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 operation, product
recalls, revocation of licenses, and, in extreme cases, criminal liability.

Environmental Regulations

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

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

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

Environmental Matters

Our manufacturing facilities are subject to various pollution control regulations with respect to noise, water and air pollution and the disposal of waste and hazardous materials. We are also subject to periodic inspections by local environmental
protection authorities. Our operating subsidiary has received certifications from the relevant PRC government agencies in charge of environmental protection indicating that their business operations are in material compliance with the relevant PRC
environmental laws and regulations. We are not currently subject to any pending actions alleging any violations of applicable PRC environmental laws.

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Our Employees

As of March 31, 2009, we employed a total of 571 full-time
employees. The following table sets forth the number of our employees by
function as of March 31, 2009.

|Department                       | Number of Employees
|-------------------------------- | -------------------
|Senior Management                | 9                  
|Human resource & Administration. | 55                 
|Production                       | 407                
|Procurement                      | 5                  
|Marketing                        | 5                  
|Sales                            | 17                 
|Logistic                         | 37                 
|Research & Development           | 5                  
|Quality Control                  | 20                 
|Accounting                       | 11                 
|TOTAL                            | 571                

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. Except for the beverage production line which runs
for the full year, 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. In fiscal year
2009, sales during the second and third fiscal quarters accounted for
approximately 54% of our total sales revenue. As a result of seasonality, our
personnel, working capital requirements, cash flow and inventories vary
substantially throughout the year.

Insurance

We have property insurance for our facility located in Daqing.
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 Risk Factors  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.

RISKS RELATED TO OUR BUSINESS

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. 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. Fresh fruits accounted for approximately 68% of our total cost of sales in fiscal year 2009.
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.

Our business and financial results depend on maintaining a consistent and cost-effective supply of source fruits. Any interruption in our supply of source fruits could materially and adversely affect our results of operations, financial
condition and business prospects.

The availability, size, quality and cost of source fruits for the production of our products are subject to 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.  Because the cost of source fruits currently represents approximately 53% of our total cost of revenue in fiscal year 2009, we are particularly vulnerable to crop diseases or other events that 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.

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Currently, we source our fresh golden berry primarily from two fruit farms pursuant to cooperation agreements with local governments and other source fruits from agents who collect fruits 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 our end customers. Instead, we primarily 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 19 provinces and 43 cities in China. As of March 31, 2009, this network comprised 70 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.

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.

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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 plan to add four new fruit processing lines by 2010 to meet an expected increase in demand for our products. 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 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.

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

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

Our business is highly seasonal, 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 and third fiscal quarters. We
generally experience lowest revenues during our first fiscal quarter. Sales in the second and third fiscal quarters accounted for approximately 54% of our revenues for fiscal year ended March 31, 2009. 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, 2009 to $56.4 million, from $34.5 million for 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 83.5% 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.

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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.

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.  Since we just completed the
acquisition of Fezdale on August 14, 2008, we have not evaluated Fezdale and its consolidated subsidiary internal control systems in order to allow our management to report on, and our independent auditors to attest to, our internal controls
on a consolidated basis as required by these requirements of SOX 404.  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 is not
required until our annual report for the fiscal year ending March 31, 2010 assuming our filing status remains as a smaller reporting company.  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.

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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.

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.

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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.

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.

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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.

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 U.S. dollars and RMB and between those currencies and other currencies in which our sales may be denominated. Because substantially all of our earnings
and cash assets are denominated in RMB and the net proceeds from the PIPE transaction will be denominated in U.S. dollars, fluctuations in the exchange rate between the U.S. dollar and the RMB will affect the relative purchasing power of these
proceeds, our balance sheet and our earnings per share in U.S. dollars following the PIPE transaction. In addition, 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 after the PIPE transaction 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.

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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.

Currently, some of our raw materials and major equipment are imported.  In the event that the U.S. dollars appreciate against RMB, our costs will increase.  If we cannot pass the resulting cost increases on to our customers, our profitability and
operating results will suffer.  In addition, if our sales to international customers grow, we will be increasingly subject to the risk of foreign currency depreciation.

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.

Under the New EIT Law, China Nutrifruit Group Limited and its subsidiaries Fezdale and Solar Sun may be classified as resident enterprises 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 New EIT Law, and its implementing rules, both of which became effective on January 1, 2008. Under the New 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 New 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. Because the New EIT Law and its implementing rules are new, no official
interpretation or application of this new resident enterprise classification is available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

Our operating subsidiary Longheda is already designated as a resident enterprise for PRC enterprise income tax purposes. However, if the PRC tax authorities determine that China Nutrifruit Group Limited and its subsidiaries Fezdale and
Solar Sun are also resident enterprises 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 proceeds from the PIPE transaction and non-China source income would be subject to PRC enterprise income tax at a rate of
25%. Second, although under the New 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 2008 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.

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 the PRC Ministry of
Commerce be notified in advance of any change-of-control transaction and in some situations, require approval of the PRC Ministry of Commerce 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 PRC Ministry of Commerce 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 the PRC Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

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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.

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.

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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.

Our common stock is quoted on the OTC Bulletin Board which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTC Bulletin Board.  The OTC Bulletin Board is a significantly more limited market than the New York Stock Exchange or Nasdaq system.  The quotation of our shares on the OTC Bulletin Board may result in a less
liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.

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 19 May, 2055 and 28 February, 2058 respectively.

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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.

SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted during the fourth quarter of our 2009
fiscal year to a vote of security holders, through the solicitation of proxies
or otherwise.

**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 OTC Bulletin Board trades
under the symbol CNGL.OB. The following table sets forth, for the periods
indicated, the high and low bid 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. The high and low quotations for the first
quarter of fiscal year 2009 have been adjusted for the 10-for-1 reverse stock
split that became effective on June 19, 2008.

|                          | Closing Bid Prices(1 ) |     
|------------------------- | ---------------------- | ----
|                          |                        | High
|Year Ended March 31, 2009 |                        |     
|First Quarter             | $                      | 3.00
|Second Quarter            | $                      | 3.00
|Third Quarter             | $                      | 5.00
|Fourth Quarter            | $                      | 4.10
|                          |                        |     
|Year Ended March 31, 2008 |                        |     
|First Quarter             |                        | N/A 
|Second Quarter            | $                      | 0.65
|Third Quarter             | $                      | 0.70
|Fourth Quarter            | $                      | 0.30
|                          |                        |     
|Year Ended March 31, 2007 |                        |     
|First Quarter             | $                      | 1.50
|Second Quarter            | $                      | 2.75
|Third Quarter             | $                      | 1.50
|                          |                        |     
|Fourth Quarter            | $                      | 1.50

_________________________________
(1) The above tables set forth the range of high and low
closing bid prices per share of our common stock as reported by
www.quotemedia.com for the periods indicated.

29

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Holders

As of June 25, 2009, there were approximately 510 stockholders
of record of our common stock. The number of record holders does not include
persons who held our common stock in nominee or "street name" accounts through
brokers. The last reported sale price of our common stock on June 25, 2009 was
$3.13 per share.

Dividend Policy

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.

ITEM 6.

SELECTED FINANCIAL DATA.

Not Applicable.

**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. Our financial statements are prepared in U.S. dollars and in
accordance with U.S. GAAP.

Overview

We are a holding company and conduct all our operations through
our indirect, wholly owned subsidiary Longheda. Longheda is a leading producer
of premium specialty fruit based products in China. 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. We currently operate from our manufacturing facility located in
Daqing City and Mu Dan Jiang City, Heilongjiang province, China. We have four
fruit processing lines with an aggregate capacity of 15,960 tons and one
beverage production lines with a capacity of 10,800 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 fruit processed products in China will
  reach $37.2 billion and $2.5 billion in 2010, or a growth of 42.52% and
  66.67%, respectively, since 2007. We believe that the recent growth in fruit
  processed product consumption in China is largely attributable the increased
  affordability of fruit processed products in
China due to Chinas economic growth and increased health and wellness consciousness. We expect these factors to continue to drive industry growth, especially in our primary markets  premium specialty fruit processed products. Such growth
will not only increase the overall market size for fruit processed products, but will also benefit companies that are well positioned to sell in these markets.

30

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- Product Offering and Pricing.Fruit processed products including fruit concentrate, glazed fruit and nectar have been, and are expected to remain, our primary product. Our fruit processing products accounted for approximately 75.3% and
75.5% of our total net sales for years ended March 31, 2009 and 2008, respectively. The gross margin for our fruit processed products was approximately 46.0% for the fiscal year ended March 31, 2009 as compared to 36.7% for our beverage and other
products. We plan to continue to focus on our higher margin fruit processed products in the future. Because we have a strong bargaining power on golden berry based products, we generally price our gold berry based products based on 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 pest that are beyond our control. Fresh fruits accounted for approximately 68% of our total cost of sales in fiscal year 2009. Historically, we have been able to meet our fresh fruit supply needs by building our processing facilities
in close proximity to orchards and by collaborating with local government and establishing an effective group of vendors. Increases in the price of fresh fruits would negatively impact our gross margins if we are not able to offset such price
increases through increases in our selling price or change in product mix.
- PRC Government Policy Promoting the Development of the Fruit Processing Industry.In the PRC central governments eleventh five-year guideline, the central government emphasized its determination to solve the problems of farmers,
boost modern agriculture and increase rural affluence. After the onset of the economic crisis in late 2008, the PRC Ministry of Agriculture, or MOA, 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 MOA 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 four fruit processing production lines was approximately 79.3% in fiscal year
2009. 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

Fiscal Year Ended March 31, 2009 Compared to Fiscal Year Ended March 31, 2008

For presentation purposes, we have consolidated 75% of Longhedas results into our condensed consolidated financial statements from April 1, 2007 to May 20, 2008 and 100% of Longhedas results into our condensed consolidated financial
statements from May 21, 2008 to March 31, 2009 and have prepared unaudited consolidated pro forma financial statements and cash flow for the fiscal year ended March 31, 2008. The unaudited pro forma consolidated financial statements give effect to
the acquisition of 100% equity interest of Fezdale as a reverse acquisition in the form of a recapitalization and the acquisition of 100% equity interest of Longheda. The unaudited pro forma consolidated financial statements present the results of
operations of China Nutrifruit and Longheda as they would have appeared if the recapitalization and acquisition occurred consummated on April 1, 2007.

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.

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(All amounts, other than percentage, in thousands of US dollars)

|                                                      |   | For the fiscal year |            | For the fiscal year  
|----------------------------------------------------- | - | ------------------- | ---------- | ---------------------
|                                                      |   | ended               |            | ended                
|                                                      |   | March 31, 2009      |            | March 31, 2008       
|                                                      |   | (Audited)           |            | (Unaduited Pro Forma)
|                                                      |   | In                  | As a       |                      
|                                                      |   | Thousands           | Percentage |                      
|                                                      |   |                     | of         |                      
|                                                      |   |                     | Net Sales  |                      
|Net Sales                                             | $ | 56,419              | 100.0 %    | $                    
|Costs of
    Sales                                    |   | 31,778              | 56.3%      |                      
|Gross profit                                          |   | 24,641              | 43.7%      |                      
|Selling,
    general and administrative               |   |                     |            |                      
|expenses
    (including non-cash stock                |   |                     |            |                      
|compensation expenses of $9,519,316.6 in 2009)        |   | 15,339              | 27.2%      |                      
|Operating income                                      |   | 9,302               | 16.5%      |                      
|Other
    income                                      |   | 32                  | 0.1%       |                      
|Interest expenses                                     |   | 480                 | 0.9%       |                      
|Income
    before minority interests and income taxes |   | 8,854               | 15.7%      |                      
|Income taxes                                          |   | 4,128               | 7.3%       |                      
|Minority
    interest                                 |   | 209                 | 0.4%       |                      
|Net income                                            |   | 4,517               | 8.0%       |                      
|Earnings
    per share                                |   |                     |            |                      
|- Basic                                               |   | 0.1351              |            |                      
|- Diluted                                             |   | 0.1350              |            |                      

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 RMB6.88 to $1 for the fiscal
year ended March 31, 2009 and the rate of RMB7.47 to $1 for the fiscal year
ended March 31, 2008.

Net Sales. Our net sales consist of revenue
derived from the sale of our fruit and fruit based products. Net sales increased
$21.9 million, or 63.5% to $56.4 million in fiscal year 2009 from $34.5 million
in fiscal year 2008. This increase was mainly due to the significant increase of
sales of our fruit concentrate products. Our sales of fruit concentrate products
reached approximately $28.9 million in fiscal year 2009, a $12.7 million, or
78.8% increase from $16.2 million in fiscal year 2008. Our new concentrate juice
production line started production in August 2008 and our high quality fruit
concentrate products experienced strong demand by our customers in the fiscal
year 2009. We also benefited from growth in the fruit processing product market
in China, increased health awareness and disposable income and our increased
brand recognition and customer base. We maintained 70 distributors as of March
31, 2009 after reassign our distributor network and eliminating our weaker
distributors.

Cost of Sales. Our cost of sales is primarily
comprised of the costs of our raw materials, labor, overhead and sales tax. Our
cost of sales increased $13.6 million, or 74.9%, to $31.8 million in fiscal year
2009 from $18.2 million in fiscal year 2008. This increase was mainly due to the
increase of our sales revenue. As a percentage of net sales, the cost of sales
increased to 56.3% in fiscal year 2009 from 52.7% in fiscal year 2008. The
percentage increase was mainly due to the increased sales of our fruit
concentrate products and start up costs for our new fruit concentrate production
line start operation in 2008.

Gross Profit and Gross Margin. Our gross profit
increased $8.3 million to $24.6 million in fiscal year 2009 from $16.3 million
in fiscal year 2008. Gross profit as a percentage of net revenues was 43.7% and
47.3% for fiscal years 2009 and 2008, respectively. The decrease in the gross
margin was primarily driven by the increased sales of fruit concentrate products
with the new fruit concentrate production line which started operation in fiscal
year 2009. The average gross margin for our fruit concentrate products were
36.0% for fiscal year 2009 as compared to 40.3% for fiscal year 2008. As our new
fruit concentrate production line in our new factory becomes operative in August
2009,
the utilization rate for such production was well below our other fruit processing production lines. Thus, the unit cost for this production line was higher than the production costs of our existing fruit concentrate production line in Daqing. We
believe that when this new fruit concentrate production line commence its operation at the beginning of the next production season, we expect the whole year utilization rate will increase with the cost per unit will decrease. There were not
significant change in gross margin for our nectar and glazed fruit. In fiscal year 2008 and 2009, the average gross margin of our nectar and glazed fruits products were approximately 70.6% and 65.0% and 69.0% and 64.9%, respectively.

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Selling and General and Administrative Expenses. Our selling and general and administrative expenses increased $12.1 million, or 375.3%, to $15.3 million in fiscal year 2009 from $3.2 million in fiscal year 2008. Included
in these expenses in 2008 is a non-cash stock compensation charge of $9,519,316.6, as discussed below. Our selling expenses increased $852,805, or 41.1%, to $2.9 million in fiscal year 2009 from $2.1 million in fiscal year 2008. We
believe the increase of our selling expenses is generally in line with the increase of our net sales. As a percentage of net sales, our selling expenses slightly decreased to 5.2% in fiscal year 2009 from 6.0% in fiscal year 2008. This percentage
decrease was primarily a result of our tight control over the expenses and the end of royalty payment for The World of Legend during the year.

Our general and administrative expenses increased $11.4 million, or 1,051.2%, to $12.5 million in fiscal year 2009 from $1.1 million in fiscal year 2008. As a percentage of net sales, general and administrative expenses increased to
22.0% in fiscal year 2009, as compared to 3.3% in fiscal year 2008. This percentage increase was primarily attributable to the increase of listing compliance and related expenses after the reverse acquisition transaction in August 2008 and increase
in depreciation expenses.

As described in Note 15 to the Companys March 31, 2009 consolidated financial statements, 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 is net income of $18,495,315. In
the event that shares are required to be released from escrow to the Investors or Halter, such shares will be recorded as a contribution to capital and a simultaneous issuance of common shares to the Investors. The return to Mr. Kung of any of the
shares placed in escrow by him is considered to be a separate compensatory arrangement because Mr. Kung is a director of the Companys subsidiary Fezdale. Accordingly, if any of the required earnings targets are met and shares are returned to
Mr. Kung, the Company will recognize a non-cash compensation cost at that time equal to the then fair value of the shares returned. For 2009, the earnings target of net income of $13,919,707 (before any charges related to the release of any
shares from escrow) was met and accordingly, the Company recorded a non-cash charge to compensation cost of $9,519,316.6 in the fourth quarter of 2009 related to the release from escrow to Mr. Kung of 2,799,799 shares.

Interest Expenses. Our interest expenses increased $77,349 to $480,201 in fiscal year 2009 from $402,852 in fiscal year 2008. As a percentage of net sales, our interest expenses and other financial costs decreased to 0.9%
in fiscal year 2009 from 1.2% in fiscal year 2008. This increase in interest expenses in fiscal year 2009 was primarily attributable to the increase in outstanding balances of bank loans for working capital as compared to fiscal year 2008.

Income before Minority Interest and Income Taxes. Income before income taxes decreased $3.9 million, or 30.5%, to $8.9 million in 2009 from $12.7 million in 2008. The $3.9 million decrease is related entirely to a
$9.5 million non-cash compensation expense incurred as a result of the release of shares pledged as part of our August 2008 financing. More specifically, when the Company achieved earnings targets established in the make good provision in the
financing transaction documents and 2,799,799 shares were released to Mr. Kung who placed these shares in escrow, we had to recognize a compensation expense under US GAAP equal to the fair market value of the returned shares which was $9.5
million . Excluding the $9.5 million non-cash charge, income before minority interest and 
income taxes increased $5.6 million, or 44.2%, to $18.4 million in fiscal year 2009 from $12.7 million in fiscal year 2008. As a percentage of net sales, the income before minority interest and income tax decreased from 36.9% in fiscal
year 2008 to 15.7% in fiscal year 2009. The decrease was primarily attributable to the decrease in gross margin of our fruit concentrate products and increase of general and administrative expenses as stated above.

33

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Minority Interests. Our financial statements reflect an adjustment to our consolidated group net income equal to $209,308 for the fiscal year ended March 31, 2009, reflecting the fact that we had only 75% ownership in
Longheda from April 1, 2008 to May 20, 2008.

Provision for Income Taxes.  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%.

A company registered in China is subject to national and local income taxes within China at the applicable tax rate on the taxable income as reported in its PRC statutory financial statements in accordance with relevant income tax laws. Under the
Provisional Taxation Regulation of the Peoples Republic of China effective before January 1, 2008, income tax was generally payable by enterprises at a rate of 33% of their taxable income. Newly established high-technology enterprises, such as
our subsidiary Longheda, is entitled to a two-year 50% tax reduction. The tax holiday of Longheda commenced in 2006 and expired in 2007. Longheda was subject to a tax rate of 25% in 2008 and 2009.

In 2007, China passed the New EIT Law and its implementing rules, both of which became effective on January 1, 2008. The New EIT Law significantly curtails tax incentives granted to foreign-invested enterprises under the previous law. The New EIT
Law, however, (i) reduces the statutory rate of enterprise income tax from 33% to 25%, (ii) permits companies to continue to enjoy their existing tax incentives, adjusted by certain transitional phase-out rules, and (iii) introduces new tax
incentives, subject to various qualification criteria.

Substantially all of our income was derived from dividends we receive from our PRC operating subsidiary described above. The New EIT Law and its implementing rules generally provide that a 10% withholding tax applies to China-sourced income derived
by non-resident enterprises for PRC enterprise income tax purposes. We expect that such 10% withholding tax will apply to dividends paid to us by our PRC subsidiaries but this treatment will depend on our status as a non-resident enterprise. For
detailed discussion of PRC tax issues related to resident enterprise status, see Risk Factors  Risks Associated with Doing Business in China  Under the New EIT 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.

We incurred income tax expenses of $4.1 million in fiscal year 2009, an increase
of 255.9% against $1.2 million in fiscal year 2008. The increase was primarily
attributable to the 50% tax reduction the Company enjoyed in fiscal year 2009
and the increase of sales revenue and profits.

Net Income. Net income decreased $7.5 million, or 64.3%, to $4.1 million in 2009 from $11.6 million in 2008 due to the noncash compensation charge of $9.5 million incurred in 2009, which is not deductible for tax
purposes. Excluding the non-cash compensation charge related to the make good provision of $9.5 million, our net income increased $2.4 million, or 21.2%, to $14.0 million in fiscal year 2009 from $11.6 million in fiscal year 2008,
which is the result from our increase in sales from our concentrate juice products during the year. Although the fruit concentrate products have a lower gross profit margin in comparison with other products, the demand for fruit concentrate grew
significantly from fiscal year 2008 to fiscal year 2009. We also experienced strong demand for our glazed fruits products in fiscal year 2008 and 2009.

Liquidity and Capital Resources

As of March 31, 2009, we had cash and cash equivalents of approximately $4.8 million. The following table provides detailed information about our net cash flow for all financial statements periods presented in this report.

34

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|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/(used in) financing activities                       |  
|Effect of foreign currency translation on cash and cash
      equivalents |  
|Cash and cash equivalents at beginning of
      the period                |  
|Cash and cash equivalents at end of period                                |  

Cash Flows from Operating Activities.

Net cash provided by operating activities was $6.3 million in
fiscal year 2009, a decrease of $10.8 million, or 63.2% from $17.1 million net
cash provided by operating activities in fiscal year 2008. Such decrease of net
cash provided by operating activities was primarily attributable to an
approximately $9.4 million increase in accounts receivable. The sales trend for
the Company was different when compared with prior years as our distributors
decreased their demand in our fiscal third quarter due to the effects of the
global economic crisis in late 2008. However, demand revived in the fourth
quarter. As a result, we have a significant increase in accounts receivable as
at March 31, 2009 in compare with March 31, 2008. All of the accounts receivable
outstanding as at March 31, 2009 were collected subsequently.

Cash Flows from Investing Activities.

Net cash used in investing activities in fiscal year 2009 was
$20.0 million, as compared to $6.6 million in fiscal year 2008. Such increase
was primarily attributable to the $13.1 million construction and purchase of a
new fruit concentrate production line and the new factory in Mu Dan Jiang and
6.8 million in acquisition of the PRC subsidiary.

Cash Flows from Financing Activities.

Net cash provided by financing activities totaled $11.8 million
in fiscal year 2009 in compare with $8.0 million used in financing activities in
fiscal year 2008. The net cash provided by financing activities in fiscal year
2009 was primarily result of proceeds from private placement of $7.3 million,
loans from shareholders of $7.4 million, proceeds from bank borrowing of $7.3
million minus the repayment of bank borrowing of $10.2 million.

On October 10, 2008, we completed a private placement of our
common shares to certain investors for approximately $8.6 million in gross
proceeds, resulting in approximately $6.8 million in net proceeds after payment
of approximately $0.5million restructuring expenses and $1.3 million in offering
expenses.

During the year, we have drawdown 2 bank loans. $2.9 million
and $4.4 million on August 13 and August 18 2008 respectively. We repaid $2.9
million, $2.9 million and $4.4 million on August 16, 2008, February 10, 2009 and
March 26, 2009 respectively. As of March 31, 2009, we do not have any
outstanding of bank loan.

Capital Expenditures

Our capital expenditures were $13.1 million and $0 for the
fiscal years ended March 31, 2009 and 2008, respectively. Our capital
expenditures were mainly used to expand our production capacity. Our material
capital expenditure for fiscal year 2009 was $13.1 million, which was used for
constructing a new factory and production line in Mu Dan Jiang.

35

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We believe that our cash on hand, cash flow from operations, together with the net proceeds from the private offering referenced above and anticipated additional cash resources will meet our expected capital expenditure and working capital for the
next 12 months. In addition, we may, in the future, require additional cash resources due to changed business conditions, implementation of our strategy to expand our production capacity or other investments or acquisitions we may decide to pursue.
If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. 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

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, including the notes
thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an
understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management's difficult, subjective,
or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their
significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following critical accounting policies involve the most
significant estimates and judgments used in the preparation of our financial statements:

Use of estimates. The preparation of the financial statements requires our 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 receivables. In the normal course of business, we extend credit to customers. Trade accounts receivable, less allowance for doubtful accounts, reflect the net realizable value of receivables, and approximate fair value. On a
regular basis, we evaluate our trade accounts receivable and establish 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. Trade accounts receivable is charged off against the allowance after management determines the potential for recovery is remote.

Inventories. The cost of finished products inventories includes raw materials, director labor and indirect production costs. Inventories are stated at the lower of cost or market value. We use first-in, first-out methods to value our
inventories. During the idle production period, overhead costs, including depreciation, are treated as current-period charges, which charge directly to the general and administrative expense instead of costs of inventories.

Impairment of long-lived assets. Long-lived assets, except goodwill and 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 our management 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.

36

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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 our land purchases in the PRC are considered to be
leasehold land and are 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.

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 improvement  10 years; machinery - 10 years; furniture, fixtures and office equipment  5 years; motor vehicle  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 products unless damaged or defective. Net sales are comprised of gross sales reduced by customer returns,
trade promotions and discounts.

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 in fruit products and continually maintain effective cost control in operations.

Off Balance Sheet Arrangements

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

Seasonality

The harvest season for our source fruits are 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 from mid July to mid November every year. Our fruit beverage production lasts throughout the year since the raw materials we use are not subject to seasonal effect.

Due to the nature of our business, we will generally experience higher sales in the second and third fiscal quarter mainly due to distributors (i) efforts to obtain adequate supply of our fruit processing products before the supply diminishes
after production ceases in November; and (ii) anticipation of higher demand for fruit processed products as a result of festive seasons at the end of the year and beginning of the following year such as Christmas and the Chinese spring festival.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS 157, Fair Value Measurements (SFAS 157), which provides guidance about how to measure assets and liabilities that use fair value. SFAS 157
will 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 will require additional disclosures in both
annual and quarterly reports. SFAS 157 will be effective for financial statements issued for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff Position (FSP) 157-1, Application of FASB
Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13(FSP 157-1), which states that SFAS 157 does not address fair value measurements for purposes of
lease classification or measurement. In February 2008, the FASB issued FSP 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), which delays 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 SFAS 157 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. As provided by FSP 157-2, the Company has
elected to defer the adoption of SFAS 157 for certain of its non-financial assets and liabilities and is currently evaluating the impact of adopting SFAS 157 on its non-financial assets and liabilities.

37

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In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115 (SFAS 159), which became effective for the Company beginning
January 1, 2008. This standard permits entities to choose to measure many financial instruments and certain other items at fair value and consequently report unrealized gains and losses on such items in earnings. The Company elected not to adopt the
fair value provisions of SFAS 159 and the adoption of SFAS159 did not have a significant impact of its financial position, cash flows and results of operations.

In December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations (SFAS 141(R)).  SFAS 141(R) 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.  SFAS 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the
business combination.  SFAS 141(R) will be effective for financial statements issued for fiscal years beginning after March 15, 2008, and will be adopted by the Company beginning in the first quarter of 2009.  The Company does not expect there to be
any significant impact of adopting SFAS 141(R) on its financial position, cash flows and results of operations.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements  an amendment of Accounting Research Bulletin No.51(SFAS 160).  SFAS 160 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.  SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the
noncontrolling owners.  SFAS 160 will be effective for financial statements issued for fiscal years beginning after March 15, 2008, and will be adopted by the Company beginning in the first quarter of 2009.  The Company does not expect there to be
any significant impact of adopting SFAS 160 on its financial position, cash flows and results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities(SFAS 161). SFAS 161 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. SFAS 161 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. SFAS 161 will be effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 and, will be adopted by the Company beginning in the first quarter of 2009. The Company does not expect
there to be any significant impact of adopting SFAS 161 on its financial position, cash flows and results of operations.

In April 2008, FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets.This Staff Position is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. Application of this FSP is not currently applicable to the Company as the Companys intangible assets consist of land used rights which has a fixed
useful life of 50 years

38

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In May 2008, FASB issued Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles. This Statement identifies the sources of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement is effective 60 days
following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not expect there to be any
significant impact of adopting SFAS 162 on its financial position, cash flows and results of operations.

In May 2008, FASB issued Financial Accounting Standards No. 163, Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60. Diversity exists in practice in accounting for financial guarantee insurance
contracts by insurance enterprises under FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises. That diversity results in inconsistencies in the recognition and measurement of claim liabilities because of differing views about
when a loss has been incurred under FASB Statement No. 5, Accounting for Contingencies. This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and
claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance
contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. This Statement is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and all interim periods within those fiscal years. The Company does not expect there to be any significant impact of adopting SFAS 163 on its financial position, cash flows and results of operations.

In June 2008, FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted Share-Based Payment Transactions are Participating Securities. This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. This FSP is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to
conform with the provisions of this FSP. Early application is not permitted. The Company is currently evaluating the impact of adopting EITF 03-6-1 on its consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events. SFAS No. 165 establishes principles and standards related to the accounting for and disclosure of events that occur after the balance sheet date but before the financial statements
are issued. SFAS 165 requires an entity to recognize, in the financial statements, subsequent events that provide additional information regarding conditions that existed at the balance sheet date. Subsequent events that provide information about
conditions that did not exist at the balance sheet date shall not be recognized in the financial statements under SFAS 165. SFAS 165 is effective for the Companys fiscal year ending February 28, 2010. The Company does not expect SFAS 165 to
have a material effect on its consolidated financial position, results of operations, cash flows or notes to the financial statements.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R). SFAS No. 167 was issued to amend FASB Interpretation No. 46(R) to require an enterprise to perform an analysis to determine whether the enterprises variable interest or interests give it a
controlling financial interest in a variable interest entity. SFAS No. 167 shall
be effective as of the Companys first annual reporting period and interim
reporting periods beginning after November 15, 2009. Earlier application is
prohibited. The first such reporting period for the Company will be the fiscal
year beginning December 1, 2009. The Company does not expect SFAS 167 to have a
material effect on its consolidated financial position, results of operations,
cash flows or notes to the financial statements.

39

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Other recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force (EITF), the American Institute of
Certified Public Accountants (AICPA), and the SEC did not or are not believed
by management to have a material impact on our present or future financial
statements.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements required by this item begin on page
F-1 hereof.

**ITEM 9.**

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. None.

ITEM 9A.

CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act) that are designed to ensure that
information 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, Mr. Jinglin Shi, and Chief
Financial Officer, Mr. Colman Cheng, evaluated the effectiveness of the design
and operation of our disclosure controls and procedures as of March 31, 2009.
Based on our assessment, Mr. Shi and Mr. Cheng determined that, as of March 31,
2009, 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.

Internal Controls Over Financial Reporting

Managements Annual Report on Internal Control over
Financial Reporting.

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting for the Company. Internal
control over financial reporting refers to the process designed by, or under the
supervision of, our Chief Executive Officer and Chief Financial Officer, and
effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of our financial reporting and
the preparation of financial statements for external purposes in accordance with
U.S. GAAP, and includes those policies and procedures that:

| | (1) | pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      our assets;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

40

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| | (2) | provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with U.S. GAAP, and that our receipts and expenditures are
      being made only in accordance with the authorization of our management and
      directors; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                  
| | (3) | provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of our
      assets that could have a material effect on the financial
    statements.                                                                                               

Our management assessed the effectiveness of our internal
control over financial reporting as of March 31, 2009. 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. Based on that evaluation, our
management concluded that our internal control over financial reporting is
effective, as of March 31, 2009.

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.

Auditor Attestation

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 Securities and
Exchange Commission that permit us to provide only managements report in this
annual report.

Changes in Internal Controls over Financial
Reporting.

During the fiscal year ended March 31, 2009, there were no
changes in our internal control over financial reporting identified in
connection with the evaluation performed during the fiscal year covered by this
report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

ITEM 9B.

OTHER
INFORMATION.

None.

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  | 35  | Chairman                                              
|Jinglin Shi  | 34  | Chief Executive Officer, President and director       
|Jingfu Li    | 66  | Director                                              
|Tony Chan    | 37  | Director                                              
|William Haus | 45  | Director                                              
|Colman Cheng | 40  | Chief Financial Officer, Treasurer and
      Secretary
|Manjiang Yu  | 36  | Vice President of Sales                               

41

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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.

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.

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.

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 10 years of 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 and Australia. Since 2004, Mr. Chan has been working as a director in Yeung, Chan and Associates CPA Limited. He has a Bachelors degree in
accounting and information system from University of New South Wales and holds a Masters degree in business administration from University of Manchester. Mr. Chan is the independent non-executive director of three public companies listed on
the Hong Kong Stock Exchange: Hans Energy Company Limited; Honbridge 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.

William Haus. Mr. Haus has extensive experience in business and finance for public companies as well as China-based companies. Since August 2008, Mr. Haus is the CEO and director of CS China Acquisition Corporation, a special purpose
acquisition corporation focused on effecting a business combination with a China-based private company. Over the past 8 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 the Analyst for The Pinnacle Fund & The Pinnacle China Fund, both of which are hedge funds focused on investment opportunities in the United States and China. Between April 2005 and September 2005, he was
the S.V.P. and Equity Research Analyst for Healthcare Information Technology and Pharmaceutical Outsourcing, Stanford Group Company, a securities brokerage firm. From March 2000 to March 2005, Mr. Haus was the Senior Equity Research Analyst for
Healthcare Information Technology and Pharmaceutical Outsourcing, Advest, Inc., a securities brokerage firm. 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 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 OTCBB. Mr. Haus was
appointed as our independent director on June 11, 2009 and he is the chairman of our Compensation Committee.

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 over 14 years of 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.

42

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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.

Board Composition and Committees

The Board of Directors is currently composed of five members: Jinglin Shi, Changjun Yu, William Haus, Chun Wai Chan and Jingfu Li.

We currently have standing audit, corporate governance and nominating, and compensation committees.

Our audit committee comprises Chun Wai Chan, William Haus and Jingfu Li. Chun Wai Chan serves as the chairman of the audit committee. The audit committee is primarily responsible for reviewing the services performed by our independent auditors,
evaluating our accounting policies and our system of internal controls. Mr. Chan serves as our audit committee financial expert as that term is defined by the applicable SEC rules.

The corporate governance and nominating committee comprises Chun Wai Chan, William Haus and Jingfu Li with Mr. Chan as the chairman. The committee is primarily responsible for nominating directors and setting policies and procedures for the
nomination of directors. The committee is also responsible for overseeing the creation and implementation of our corporate governance policies and procedures.

The compensation committee comprises Chun Wai Chan, William Haus and Jingfu Li with William Haus as the chairman. The compensation committee is primarily responsible for reviewing and approving our compensation and benefit policies, including
compensation of executive officers.

Independent Directors

Our Board is currently composed of five members, three of which, Chun Wai Chan, William Haus and Jingfu Li, are independent as that term is defined by Rule 4200(a)(15) of the NASDAQ listing standards.

Policy Regarding Board Attendance

Our directors are expected to attend Board meetings as frequently as necessary to properly discharge their responsibilities and to spend the time needed to prepare for each such meeting. Our directors are expected to attend annual meetings of
stockholders, but we do not have a formal policy requiring them to do so.

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 been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that
resulted in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state securities
laws, or a finding of any violation of federal or state securities laws, except
for matters that were dismissed without sanction or settlement. Except as set
forth in our discussion below in Transactions with Related Persons; Promoters
and Certain Control Persons; Director Independence, 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.

43

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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. In 2009, we
were late in filing Form 3 for Jinglin Shi, Changjun Yu and Colman Cheng due to
an administrative oversight.

Code of Ethics

We have adopted a Code of Ethics that applies to the Companys
officers, directors and employees.

Material Changes to Director Nomination
Procedures

There have been no material changes to the procedures by which
stockholders may recommend nominees to our board of directors since such
procedures were last disclosed.

ITEM 11.

EXECUTIVE
COMPENSATION.

Summary Compensation Table Fiscal Years Ended March 31,
2009 and 2008

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

|Name and Principal Position                                     |  | Year |  |   | Salary ($) |  |  | Bonus ($) |  |  | Stock Awards ($) |  |  | Option Awards ($) |  |  | Non-Equity Incentive Plan Compensation Earnings ($) |  |  | Non- Qualified Deferred **Compensation** Earnings ($) |  |  | All Other Compensation ($) |  |   | Total ($) | 
|--------------------------------------------------------------- |  | ---- |  | - | ---------- |  |  | --------- |  |  | ---------------- |  |  | ----------------- |  |  | --------------------------------------------------- |  |  | ----------------------------------------------------- |  |  | -------------------------- |  | - | --------- | 
|Jinglin Shi, CEO and President (1)                              |  | 2009 |  | $ | 55,617     |  |  | -         |  |  | -                |  |  | -                 |  |  | -                                                   |  |  | -                                                     |  |  | -                          |  | $ | 55,617    | 
|                                                                |  | 2008 |  | $ | 4,040      |  |  | -         |  |  | -                |  |  | -                 |  |  | -                                                   |  |  | -                                                     |  |  | -                          |  | $ | 4,040     | 
|Richard Crimmins, former President, Treasurer and Secretary (2) |  | 2009 |  |   | -          |  |  | -         |  |  | -                |  |  | -                 |  |  | -                                                   |  |  | -                                                     |  |  | -                          |  |   | -         | 
|                                                                |  | 2008 |  |   | -          |  |  | -         |  |  | -                |  |  | -                 |  |  | -                                                   |  |  | -                                                     |  |  | -                          |  |   | -         | 

(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

44

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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.

(2) Richard Crimmins resigned from all offices he held with us
and his position as our director upon the closing of the reverse acquisition of
Fezdale on August 14, 2008.

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 (approximately $87,209). 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.

Outstanding Equity Awards at Fiscal Year End

None of our executive officers received any equity awards,
including, options, restricted stock or other equity incentives during the
fiscal year ended March 31, 2009.

|OUTSTANDING EQUITY AWARDS AT FISCAL
      YEAR-END
|--------------------------------------------------
|                                                  
|Name                                              
|Jinglin Shi                                       
|Richard Crimmins                                  

Director Compensation

Chun Wai 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 Chun Wai 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.

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Mr. Jinglin Shi and Mr. Changjun Yu are paid in their capacity
as executive officers of the Company and they do not receive any additional
compensation for their service as directors.

**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 March 2, 2009 (i) by each person who is
known by us to beneficially own more than 5% of our common stock; (ii) by each
of our 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 Daqing Longheda Food Company Limited, 5th Floor,
Chuangye Building, Chuangye Plaza, Industrial Zone 3, Daqing Hi-Tech Industrial
Development Zone, Daqing, Heilongjiang, China 163316.

|Name & Address of
      BeneficialOwner                                     | Office,
      If Any    | Title of Class                      | Amount and Nature of Beneficial Ownership(1) | Percent
      of Class(2)
|--------------------------------------------------------------------------- | ----------------------- | ----------------------------------- | -------------------------------------------- | -------------------------
|Officers and Directors                                                     
|Changjun Yu                                                                 | Chairman                | Common stock $0.001par
      value  | 0                                            | *                        
|Jinglin Shi                                                                 | President and CEO       | Common stock $0.001par value        | 0                                            | *                        
|Colman Cheng                                                                | CFO and Secretary       | Common stock $0.001par
      value  | 0                                            | *                        
|Manjiang Yu                                                                 | Vice President of Sales | Common stock $0.001par value        | 0                                            | *                        
|All officers and directors as a group
    
    (4 persons named above)      |                         | Common stock $0.001par
      value  | 0                                            | *                        
|5% Securities Holders                                                      
|Halter Financial Investments, L.P.12890 Hilltop Road Argyle,
      TX 76226 |                         | Common stock $0.001par value        | 2,513,758                                    | 6.96%                    
|Yiu Fai Kung (3)                                                            |                         | Common stock $0.001 par
      value | 5,599,598 (3)                                | 15.50%                   
|Honouryear Limited (4)                                                      |                         | Common stock $0.001 par
      value | 15,517,217                                   | 42.95%                   
|Bestsucceed Limited (5)                                                     |                         | Common stock $0.001par
      value  | 9,050,063                                    | 25.0%                    

* Less than 1%

1 Beneficial ownership is determined in accordance with the
rules of the SEC and generally includes voting or investment power with respect
to securities.

2 A total of 36,125,754 shares of our common stock are
considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of June 25,
2009. For each beneficial owner above, any options exercisable within 60 days
have been included in the denominator.

3 Pursuant to the make good escrow agreements with HFG and the
private placement investors described elsewhere in this report , Mr. Kung
pledged 2,513,758 and 3,085,840 shares of our common stock owned by him along
with
blank stock powers, to be held in escrow for the benefit of HFG and investors, respectively. Those escrowed shares will be subject to disbursement to Mr. Kung or to the investors/HFG based on the Companys financial performance in fiscal years
2009 and 2010.

4 Yiu Fai Kung is the director and sole owner of Honouryear Limited.

5 Kwan Mo Ng is the director and sole owner of Bestsucceed Limited.

46

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ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Related Party Transactions

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 three completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under Executive
Compensation).  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 Our Business  Intellectual Property.
- On April 28, 2008, our subsidiary Longheda entered into a financial advisory agreement (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 is entitled to $450,000 which will be paid within 45 days after the closing of the going public transaction. 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. A copy of the Financial Advisory Agreement is filed as Exhibit 10.22 to this Amendment.
- 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 along with blank stock powers, 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.

Promoters and Certain Control Persons

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

47

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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 Rule 4200(a)(15) of the NASDAQ Listing Standards. 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
HLB Hodgson Impey Cheng for professional services rendered for the fiscal years
ended March 31, 2009 and 2008:

|           |   | Year Ended March 31, | 
|---------- | - | -------------------- | 
|           |   | 2009                 | 
|Audit Fees | $ | 476,754              | 
|TOTAL      | $ | 476,754              | 

Audit Fees consisted of fees billed for professional services
rendered by the principal accountant for the audit of our annual financial
statements and review of the financial statements included in our Form 10-Q or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements.

Audit-Related Fees consisted of fees billed for assurance and
related services by the principal accountant that were reasonably related to the
performance of the audit or review of the our financial statements and are not
reported under the paragraph captioned Audit Fees above.

Tax Fees consisted of fees billed for professional services
rendered by the principal accountant for tax compliance, tax advice, and tax
planning.

All Other Fees consisted of fees billed for products and
services provided by the principal accountant, other than the services reported
above under other captions of this Item 14.

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, 2010.

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.



48

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Exhibit List

The following exhibits are filed as part of this report or
incorporated by reference:

|Exhibit No. | Description                                                                                                                                                                                                                                                                                                      
|----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                                                                                                                                                                                  
|2.1         | Share Exchange Agreement, dated
      August 14, 2008, among the registrant, Fezdale and its stockholders
      (herein incorporated by reference to Exhibit 2.1 to the Companys current
      report on Form 8-K filed on August 14, 2008).                                                                    
|            |                                                                                                                                                                                                                                                                                                                  
|3.1         | Amended and Restated Articles
      of Incorporation of the registrant as filed with the Secretary of State of
      Nevada on August 14, 2008 (herein incorporated by reference to Exhibit 3.1
      to the Companys current report on Form 8-K filed on August 20, 2008).                                     
|            |                                                                                                                                                                                                                                                                                                                  
|3.2         | Amended and Restated Bylaws of
      the registrant adopted on June 19, 2008 (herein incorporated by reference
      to Exhibit 3.2 to the Companys current report on Form 8-K filed on June
      20, 2008).                                                                                                   
|            |                                                                                                                                                                                                                                                                                                                  
|4.1* *      | Form of Placement Agent
      Warrants                                                                                                                                                                                                                                                                           
|            |                                                                                                                                                                                                                                                                                                                  
|5*          | Opinion of Holland & Hart
      LLP as to the legality of the shares.                                                                                                                                                                                                                                            
|            |                                                                                                                                                                                                                                                                                                                  
|10.1        | Securities Purchase Agreement,
      dated August 14, 2008, by and among the registrant, Fezdale, Daqing
      Longheda and the investors listed therein (herein incorporated by
      reference to Exhibit 10.1 to the Companys current report on Form 8-K
      filed on August 14, 2008).                    
|            |                                                                                                                                                                                                                                                                                                                  
|10.2        | Make Good Escrow Agreement,
      dated August 14, 2008, by and among the registrant, WLT Brothers Capital,
      Inc., Mr. Yiu Fai Kung and Securities Transfer Corporation (herein
      incorporated by reference to Exhibit 10.2 to the Companys current report
      on Form 8-K filed on August 14, 2008).
|            |                                                                                                                                                                                                                                                                                                                  
|10.3        | Make Good Escrow Agreement,
      dated August 14, 2008, by and among the registrant, HFG International,
      Limited, Mr. Yiu Fai Kung and Securities Transfer Corporation (herein
      incorporated by reference to Exhibit 10.3 to the Companys current report
      on Form 8-K filed on August 14, 2008).
|            |                                                                                                                                                                                                                                                                                                                  
|10.4        | Holdback Escrow Agreement,
      dated August 14, 2008, by and among the registrant, WLT Brothers Capital,
      Inc. and Securities Transfer Corporation (herein incorporated by reference
      to Exhibit 4.1 to the Companys current report on Form 8-K filed on August
      14, 2008).                    
|            |                                                                                                                                                                                                                                                                                                                  
|10.5        | Form of Lock-up Agreement,
      dated August 14, 2008 (herein incorporated by reference to Exhibit 10.4 to
      the Companys current report on Form 8-K filed on August 14, 2008).                                                                                                                            
|            |                                                                                                                                                                                                                                                                                                                  
|10.6        | Form of Escrow Agreement, dated
      August 14, 2008. (herein incorporated by reference to Exhibit 10.5 to the
      Companys current report on Form 8-K filed on August 14, 2008).                                                                                                                            
|            |                                                                                                                                                                                                                                                                                                                  
|10.7        | English Summary of Form of
      Memorandum of Understanding by and between the registrant and the local
      governments (herein incorporated by reference to Exhibit 10.6 to the
      Companys current report on Form 8-K filed on August 14, 2008).                                                        
|            |                                                                                                                                                                                                                                                                                                                  
|10.8        | English Summary of Form of
      Distribution Contract (herein incorporated by reference to Exhibit 10.7 to
      the Companys current report on Form 8-K filed on August 14, 2008).                                                                                                                            
|            |                                                                                                                                                                                                                                                                                                                  
|10.9        | English Summary of Trademark
      License Agreement, by and between Daqing Longheda Food Company Limited and
      Changjun Yu, dated May 16, 2008 (herein incorporated by reference as
      Exhibit 10.8 to the Companys report on Form 8-K filed on August 14,
      2008).                                 

49

---

|10.10 | English Summary of Trademark License
    Agreement, by and between Daqing Longheda Food Company Limited and Changjun
    Yu, dated May 16, 2008 (herein incorporated by reference to Exhibit 10.9 to
    the Companys current report on Form 8-K filed on August 14, 2008).                                                                  
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                               
|10.11 | 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 (herein incorporated by reference to Exhibit 10.10 to
    the Companys current report on Form 8-K filed on August 14, 2008).
|      |                                                                                                                                                                                                                                                                                                                                               
|10.12 | English Summary of Counter-Guarantee
    Agreement, by and between Daqing Longheda Food Company Limited and Daqing
    Industrial and Commercial Guarantee Co., Ltd., dated August 27, 2007 (herein
    incorporated by reference to Exhibit 10.11 to the Companys current report
    on Form 8-K filed on August 14, 2008).                 
|      |                                                                                                                                                                                                                                                                                                                                               
|10.13 | English Summary of Renminbi Loan
    Agreement, by and between Daqing Longheda Food Company Limited and Daqing
    Industrial and Commercial Bank, dated August 24, 2007 (herein incorporated
    by reference to Exhibit 10.12 to the Companys current report on Form 8-K
    filed on August 14, 2008).                                    
|      |                                                                                                                                                                                                                                                                                                                                               
|10.14 | English Summary of Guarantee
    Agreement, by and between Daqing Industrial and Commercial Guarantee Co.,
    Ltd. and Daqing Industrial and Commercial Bank, dated August 24, 2007
    (herein incorporated by reference to Exhibit 10.13 to the Companys current
    report on Form 8-K filed on August 14, 2008).                        
|      |                                                                                                                                                                                                                                                                                                                                               
|10.15 | English Summary of License Agreement,
    by and between Daqing Longheda Food Company Limited and Shanda Xin Hua
    Interactive Entertainment Co., Ltd., dated September 15, 2005 (herein
    incorporated by reference to Exhibit 10.14 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 (herein 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 (herein 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 (herein 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 (herein incorporated
    by reference to Exhibit 10.18 to the Companys current report on Form 8-K
    filed on August 14, 2008).                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                               
|10.20 | Amendment to the Securities Purchase
    Agreement, by and among the Company and the Purchasers identified therein
    (herein incorporated by reference to Exhibit 10.1 to the Companys current
    report on Form 8-K filed on September 30, 2008).                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                               
|10.21 | Amendment to the Make Good Escrow
    Agreement, by and among the Company, KUNG Yiu Fai, WLT Brothers Capital,
    Inc. and Securities Transfer Corporation (herein incorporated by reference
    to Exhibit 10.1 to the Companys current report on Form 8-K filed on
    September 30,2008).                                                

50

---

|10.22 **         | Financial Advisory Agreement,
      by and between the Company and HFG International, Limited, dated April 28,
      2008.                           
|---------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|                 |                                                                                                                                                      
|21               | List of Subsidiary (herein
      incorporated by reference to Exhibit 21 to the Companys current report on
      Form 8-K filed on August 14, 2008).
|                 |                                                                                                                                                      
|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                                       
|                 |                                                                                                                                                      
|*Filed herewith.

51

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CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS FASHION TECH INTERNATIONAL LIMITED)

CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2009 AND 2008FOR THE YEARS ENDED
MARCH 31, 2009 AND 2008



52

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of China Nutrifruit
Group Limited (Formerly known as Fashion Tech International Limited)

We have audited the accompanying consolidated balance sheets of
China Nutrifruit Group Limited (formerly known as Fashion Tech International
Limited) and subsidiaries (the Company) as of March 31, 2009 and 2008, 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, 2009. 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, 2009 and 2008, and the results of their operations and
their cash flows for each of the years in the two-year period ended March 31,
2009, 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 30, 2009



53

---

CHINA NUTRIFRUIT GROUP LIMITED AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AS OF MARCH 31,

|                                                                   |   |            |  |   |            |  
|------------------------------------------------------------------ | - | ---------- |  | - | ---------- | -
|                                                                   |   | 2009       |  |   | 2008       |  
|                                                                   |   |            |  |   |            |  
|ASSETS                                                             |   |            |  |   |            |  
|Current assets:                                                    |   |            |  |   |            |  
|Cash and cash equivalents                                          | $ | 4,768,542  |  | $ | 7,104,849  |  
|Trade receivables, net of allowance                                |   | 11,423,996 |  |   | 1,921,457  |  
|Inventory, net                                                     |   | 3,692,892  |  |   | 1,955,725  |  
|Other current assets                                               |   | 481,679    |  |   | 114,865    |  
|Total current assets                                               |   | 20,367,109 |  |   | 11,096,896 |  
|Property and equipment, net                                        |   | 16,614,930 |  |   | 7,173,523  |  
|Deferred tax assets                                                |   | 1,406,814  |  |   | 875,555    |  
|Land use rights, net                                               |   | 189,303    |  |   | 318,120    |  
|TOTAL ASSETS                                                       | $ | 38,578,156 |  | $ | 19,464,094 |  
|                                                                   |   |            |  |   |            |  
|LIABILITIES AND SHAREHOLDERS EQUITY                               |   |            |  |   |            |  
|Current liabilities:                                               |   |            |  |   |            |  
|Short-term borrowings                                              | $ | -          |  | $ | 2,848,110  |  
|Other payables and accrued expenses                                |   | 2,675,983  |  |   | 494,278    |  
|Consideration payable                                              |   | -          |  |   | 5,353,755  |  
|Trade payables                                                     |   | 260,322    |  |   | 159,078    |  
|Income taxes payable                                               |   | 1,416,835  |  |   | 607,680    |  
|Amount due to an affiliate                                         |   | -          |  |   | 57,219     |  
|Total current liabilities                                          |   | 4,353,140  |  |   | 9,520,120  |  
|Non-current liabilities:                                           |   |            |  |   |            |  
|Amounts due to shareholders                                        |   | 7,407,748  |  |   | -          |  
|TOTAL LIABILITIES                                                  |   | 11,760,888 |  |   | 9,520,120  |  
|                                                                   |   |            |  |   |            |  
|Minority interests                                                 |   | -          |  |   | 4,039,286  |  
|                                                                   |   |            |  |   |            |  
|Commitments and Contingencies                                      |   |            |  |   |            |  
|                                                                   |   |            |  |   |            |  
|Shareholders' equity                                               |   |            |  |   |            |  
|Preferred stock                                                    |   |            |  |   |            |  
|Authorized: 5,000,000 shares, par value $0.001                     |   |            |  |   |            |  
|None issued and outstanding                                        |   | -          |  |   | -          |  
|Common stock                                                       |   |            |  |   |            |  
|Authorized: 120,000,000 shares, par value
      $0.001             |   |            |  |   |            |  
|Issued and outstanding: 36,125,754 shares at
      March 31, 2009; |   |            |  |   |            |  
|(30,166,878 shares at March 31, 2008)                              |   | 36,126     |  |   | 30,167     |  
|Additional paid-in-capital (deficit)                               |   | 16,746,971 |  |   | (29,167    | )
|Statutory reserves  restricted                                    |   | 2,873,880  |  |   | 1,713,065  |  
|Accumulated other comprehensive income                             |   | 425,675    |  |   | 812,312    |  
|Retained earnings                                                  |   | 6,734,616  |  |   | 3,378,311  |  
|TOTAL SHAREHOLDERS EQUITY                                         |   | 26,817,268 |  |   | 5,904,688  |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                         | $ | 38,578,156 |  | $ | 19,464,094 |  

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

54

---

CHINA NUTRIFRUIT GROUP LIMITED AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED
MARCH 31,

|                                                                                                                |   |             |   |   |            |  
|--------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ---------- | -
|                                                                                                                |   | 2009        |   |   | 2008       |  
|Net sales                                                                                                       | $ | 56,418,837  |   | $ | 13,527,015 |  
|Cost of sales                                                                                                   |   | (31,777,733 | ) |   | (7,499,879 | )
|Gross profit                                                                                                    |   | 24,641,104  |   |   | 6,027,136  |  
|Selling expenses                                                                                                |   | (2,929,881  | ) |   | (859,995   | )
|General and administrative expenses
      (including non-cash stock compensation expense of $9,519,317 in 2009) |   | (12,408,747 | ) |   | (535,105   | )
|Operating earnings                                                                                              |   | 9,302,476   |   |   | 4,632,036  |  
|Other income (expenses)                                                                                         |   |             |   |   |            |  
|Interest expense                                                                                                |   | (480,201    | ) |   | (250,985   | )
|Other income                                                                                                    |   | 31,730      |   |   | 30,569     |  
|Total other income (expenses)                                                                                   |   | (448,471    | ) |   | (220,416   | )
|Earnings before minority interests and
      income taxes                                                       |   | 8,854,005   |   |   | 4,411,620  |  
|Provision for income taxes                                                                                      |   | (4,127,577  | ) |   | (7,384     | )
|Earnings before minority interests                                                                              |   | 4,726,428   |   |   | 4,404,236  |  
|Minority interests                                                                                              |   | (209,308    | ) |   | (895,780   | )
|Net earnings                                                                                                    |   | 4,517,120   |   |   | 3,508,456  |  
|Other comprehensive income                                                                                      |   |             |   |   |            |  
|Foreign currency translation                                                                                    |   | (386,637    | ) |   | 697,712    |  
|Comprehensive income                                                                                            | $ | 4,130,483   |   | $ | 4,206,168  |  
|Earnings per share                                                                                              |   |             |   |   |            |  
|Basic                                                                                                           | $ | 0.1351      |   | $ | 0.1163     |  
|Diluted                                                                                                         | $ | 0.1350      |   | $ | 0.1163     |  
|Weighted average number of common stock outstanding                                                             |   |             |   |   |            |  
|Basic                                                                                                           |   | 33,431,434  |   |   | 30,166,878 |  
|Diluted                                                                                                         |   | 33,451,676  |   |   | 30,166,878 |  

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

55

---

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    |   |   | -          |  |   | Retained   |   |   | comprehensive |   |   | shareholders |  
|                                                                  |  | **Shares**          |  |   | Amount       |  |  | Shares     |  |   | Amount   |  |   | capital    |   |   | restricted |  |   | earnings   |   |   | income        |   |   | equity        |  
|                                                                  |  |                     |  |   |              |  |  |            |  |   |          |  |   |            |   |   |            |  |   |            |   |   |               |   |   |               |  
|Balance at April 1, 2007                                          |  | -                   |  | $ | -            |  |  | 30,166,878 |  | $ | 30,167   |  | $ | (29,167    | ) | $ | -          |  | $ | -          |   | $ | -             |   | $ | 1,000         |  
|Acquisition of a subsidiary                                       |  | -                   |  |   | -            |  |  | -          |  |   | -        |  |   | -          |   |   | 1,539,538  |  |   | -          |   |   | 114,600       |   |   | 1,654,138     |  
|Minority interests share
      of statutory reserves             |  | -                   |  |   | -            |  |  | -          |  |   | -        |  |   | -          |   |   | 43,382     |  |   | -          |   |   | -             |   |   | 43,382        |  
|Transfer to reserve                                               |  | -                   |  |   | -            |  |  | -          |  |   | -        |  |   | -          |   |   | 130,145    |  |   | (130,145   | ) |   | -             |   |   | -             |  
|Net earnings                                                      |  | -                   |  |   | -            |  |  | -          |  |   | -        |  |   | -          |   |   | -          |  |   | 3,508,456  |   |   | -             |   |   | 3,508,456     |  
|Other comprehensive income:                                       |  |                     |  |   |              |  |  |            |  |   |          |  |   |            |   |   |            |  |   |            |   |   |               |   |   |               |  
|Translation adjustments                                           |  | -                   |  |   | -            |  |  | -          |  |   | -        |  |   | -          |   |   | -          |  |   | -          |   |   | 697,712       |   |   | 697,712       |  
|                                                                  |  |                     |  |   |              |  |  |            |  |   |          |  |   |            |   |   |            |  |   |            |   |   |               |   |   |               |  
|Balance at March 31, 2008                                         |  | -                   |  |   | -            |  |  | 30,166,878 |  |   | 30,167   |  |   | (29,167    | ) |   | 1,713,065  |  |   | 3,378,311  |   |   | 812,312       |   |   | 5,904,688     |  
|Effect of reverse acquisition                                     |  |                     |  |   |              |  |  |            |  |   |          |  |   |            |   |   |            |  |   |            |   |   |               |   |   |               |  
|                                                                  |  |                     |  |   |              |  |  |            |  |   |          |  |   |            |   |   |            |  |   |            |   |   |               |   |   |               |  
|Recapitalization                                                  |  | -                   |  |   | -            |  |  | 2,873,036  |  |   | 2,873    |  |   | (24,378    | ) |   | -          |  |   | -          |   |   | -             |   |   | (21,505       | )
|Share issued in private
      placement at $2.78 per share        |  | -                   |  |   | -            |  |  | 3,085,840  |  |   | 3,086    |  |   | 8,575,620  |   |   | -          |  |   | -          |   |   | -             |   |   | 8,578,706     |  
|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 | ) |   | -             |   |   | -             |  
|Net earnings                                                      |  | -                   |  |   | -            |  |  | -          |  |   | -        |  |   | -          |   |   | -          |  |   | 4,517,120  |   |   | -             |   |   | 4,517,120     |  
|Other comprehensive income:                                       |  |                     |  |   |              |  |  |            |  |   |          |  |   |            |   |   |            |  |   |            |   |   |               |   |   |               |  
|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    |  

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

56

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CHINA NUTRIFRUIT GROUP LIMITED AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED
MARCH 31,


|                                                                                         |   |             |   |   |            |  
|---------------------------------------------------------------------------------------- | - | ----------- | - | - | ---------- | -
|                                                                                         |   | 2009        |   |   | 2008       |  
|Cash flows from operating
      activities:                                              |   |             |   |   |            |  
|Net earnings                                                                             | $ | 4,517,120   |   | $ | 3,508,456  |  
|Adjustments to reconcile net earnings to
      net cash provided by operating activities |   |             |   |   |            |  
|Minority interests                                                                       |   | 209,308     |   |   | 927,493    |  
|Depreciation and amortization                                                            |   | 1,049,739   |   |   | 207,836    |  
|Loss on disposal of
      property and equipment                                         |   | 289         |   |   | -          |  
|Benefit
      for deferred income taxes                                                  |   | (531,259    | ) |   | (875,555   | )
|Stock compensation cost                                                                  |   | 9,519,317   |   |   | -          |  
|Changes in operating assets and
      liabilities:                                       |   |             |   |   |            |  
|Trade receivables                                                                        |   | (9,404,994  | ) |   | 5,271,640  |  
|Inventories                                                                              |   | (1,678,154  | ) |   | 4,088,234  |  
|Other current assets                                                                     |   | (364,374    | ) |   | 624,997    |  
|Trade
      payables                                                                     |   | 94,590      |   |   | (603,475   | )
|Amount due to an
      affiliate                                                         |   | (59,169     | ) |   | -          |  
|Other
      payables and accrued expenses                                                |   | 2,159,113   |   |   | (4,437,157 | )
|Income taxes payable                                                                     |   | 789,452     |   |   | 388,569    |  
|Net cash provided by operating activities                                                |   | 6,300,978   |   |   | 9,101,038  |  
|                                                                                         |   |             |   |   |            |  
|Cash flows from investing
      activities:                                              |   |             |   |   |            |  
|Cash (outflow)/inflow from acquisition of subsidiaries                                   |   | (6,836,284  | ) |   | 423,566    |  
|Purchases of property and equipment                                                      |   | (13,123,980 | ) |   | -          |  
|Proceeds from disposal of property and equipment                                         |   | 3,924       |   |   | -          |  
|Net cash (used in)/provided by investing
      activities                                |   | (19,956,340 | ) |   | 423,566    |  
|                                                                                         |   |             |   |   |            |  
|Cash flows from financing
      activities:                                              |   |             |   |   |            |  
|Proceeds from borrowings                                                                 |   | 7,266,893   |   |   | -          |  
|Repayment of borrowings                                                                  |   | (10,173,650 | ) |   | (3,232,067 | )
|Amounts due to shareholders                                                              |   | 7,370,153   |   |   | -          |  
|Proceeds from private placement                                                          |   | 8,578,706   |   |   | -          |  
|Cost of raising capital                                                                  |   | (1,294,421  | ) |   | -          |  
|Net cash provided by (used in) financing
      activities                                |   | 11,747,681  |   |   | (3,232,067 | )
|                                                                                         |   |             |   |   |            |  
|Effect of exchange rate on cash and cash
      equivalents                               |   | (428,626    | ) |   | 812,312    |  
|                                                                                         |   |             |   |   |            |  
|(Decrease) increase in cash and cash
      equivalents                                   |   | (2,336,307  | ) |   | 7,104,849  |  
|                                                                                         |   |             |   |   |            |  
|Cash and cash equivalents at beginning of
      year                                     |   | 7,104,849   |   |   | -          |  
|                                                                                         |   |             |   |   |            |  
|Cash and cash equivalents at end of year                                                 | $ | 4,768,542   |   | $ | 7,104,849  |  
|                                                                                         |   |             |   |   |            |  
|Supplemental disclosure of cash flows
      information:                                 |   |             |   |   |            |  
|Cash paid for:                                                                           |   |             |   |   |            |  
|Interest                                                                                 | $ | 450,236     |   | $ | 250,985    |  
|Income taxes                                                                             | $ | 3,893,159   |   | $ | 275,259    |  
|                                                                                         |   |             |   |   |            |  
|Supplemental disclosure of non-cash information:                                         |   |             |   |   |            |  
|Issuance of warrant                                                                      | $ | 331,357     |   | $ | -          |  
|Stock compensation cost                                                                  | $ | 9,519,317   |   | $ | -          |  

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

57

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CHINA NUTRIFRUIT GROUP LIMITED AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1. NATURE OF BUSINESS

Nature of Business

China Nutrifruit Group Limited, formerly known as Fashion Tech
International, Inc., (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 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 have been
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 for accounting
purpose. Accordingly, the Share Exchange Transaction has been accounted for a
recapitalization of the Company. The equity section of the accompanying
financial statements have been 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 is considered to be a separate compensatory arrangement because
Mr. Kung is a director of the Companys subsidiary Fezdale. Accordingly, if any
of the required earnings targets are met and shares are returned to Mr. Kung,
the Company will recognize a non-cash compensation cost at that time equal to
the then fair value of the shares returned (up to a total of 5,599,598 shares).
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.

The Company amended its articles of incorporation on August 14,
2008 and changed its name into China Nutrifruit Group Limited.

On October 10, 2008, the Company completed a private placement
financing with certain investors (the Financing). Pursuant to the terms of the
securities purchase agreement, the Company sold 3,085,840 shares of the
Companys common stock at the price of $2.78 per share and received a gross
proceed of $8,578,705.73.

58

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Fezdale Investments Limited

Fezdale is a private limited liability company incorporated in
British Virgin Island 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 agreed to transfer an aggregate of 75% equity interests in Longheda to
Solar Sun for a total consideration of RMB40,000,000. In May 2008, the six
founders of Longheda transferred the remaining 25% equity interests in Longheda
to Solar Sun. After the transfer, Longheda became the wholly owned subsidiary of
Solar Sun (note 4).

Solar Sun Holdings Limited

Solar Sun is a private limited liability company 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 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 4 types of premium specialty fruits,
including golden berry, crab apple, blueberry and raspberry, and sells fresh
fruits. Longheda currently has four types of fruit based products, including
fruit concentrate, nectar, glazed fruits and fruit beverage. Longheda sells its
products through an extensive sales and distribution network covering 19
provinces and 43 cities. 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.

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 have been 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 and Daqing Longheda Food Company Limited after the date of acquisition.
All significant intercompany transactions and balances have been eliminated.

Use of estimates

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

Segment information

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

59

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Economic and political risks

The Groups operations are conducted in the PRC. According the
Groups business, financial position maybe influenced by the political, economic
and legal environment in the PRC, and by the general state of the PRC 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 by changes in governmental policies with respect to
laws and regulations, anti-inflationary measures, currency conversion,
remittances abroad, and rates and methods of taxation, among other things.

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 stocks 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,
reflect the net realizable value of receivables, and 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, 2009
was recorded. Trade accounts receivable is charged off against the allowance
after management determines the potential for recovery is remote.

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 charge directly to
general and administrative expense instead of costs of inventories.

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 the 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
improvement  10 years; machinery - 10 years; furniture, fixtures and office
equipment  5 years; motor vehicles  5 years. Depreciation of property, plant
and equipment was $1,041,111 and $207,836 for the years ended March 31, 2009 and
2008 respectively. During the idle period of the plant, depreciation is treated
as current-period charges, which charge directly to general and administrative
expense.

Negative goodwill

Negative goodwill represents the excess fair value of the net
tangible and identifiable intangible assets acquired in a business combination
over the purchase price. The negative goodwill is allocated as a pro rata
reduction of the amounts assigned to the assets acquired excluding financial assets,
deferred taxes and other current assets. If negative goodwill exceeds the amount
of those assets, the remaining excess shall be recognized as an extraordinary
gain in the period which the business combination is completed. (note 4)

60

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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.

Comprehensive income

Comprehensive income is comprised of net income and other
comprehensive income.

Shipping and handling costs

Shipping and handling costs are included in selling expenses.
The shipping and handling costs for the year ended March 31, 2009 and 2008 was
$2,103,838 and $438,831 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 $22,596 and $86,008 for the years ended March 31, 2009
and 2008 respectively.

Other income recognition

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

61

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|March 31, 2008                               |                     
|-------------------------------------------- | --------------------
|Balance sheet                                | RMB7.0222 to US$1.00
|Statement of income and comprehensive income | RMB7.4695 to US$1.00

As at March 31, 2009, RMB32,611,383 equivalents to US$4,763,846
(March 31, 2008: RMB49,882,630 equivalents to US$7,103,562) is not freely
convertible into foreign currency and all foreign exchange transactions must
take place through authorized institutions. No representation is made that the
RMB amounts could have been, or could be, converted into US$ 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, as necessary, 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, as necessary, 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 on 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.

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
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 (Fin 48), 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.

Stock based compensation

The Company applies Statement of Financial Accounting Standards
No. 123R Accounting for Stock-Based Compensation (SFAS 123R), which defines
a fair-value-based method of accounting for stock based employee compensation and transactions in which an entity issues its
equity instruments to acquire goods and services from non-employees. Stock
compensation for stock granted to non-employees has been determined in
accordance with SFAS 123R and the Emerging Issues Task Force consensus in Issue
No. 96-18, Accounting for Equity Instruments that are issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods or Services
(EITF 96-18), as the fair value of the consideration received or the fair
value of equity instruments issued, whichever is more reliably measured. SFAS
123R allows the simplified method to determine the term of employee options
when other information is not available.

62

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NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the Financial Accounting Standards Board
(FASB) issued SFAS 157, Fair Value Measurements (SFAS 157), which
provides guidance about how to measure assets and liabilities that use fair
value. SFAS 157 will 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 will require
additional disclosures in both annual and quarterly reports. SFAS 157 will be
effective for financial statements issued for fiscal years beginning after
November 15, 2007. In February 2008, the FASB issued FASB Staff Position (FSP)
157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and
Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement under Statement 13(FSP
157-1), which states that SFAS 157 does not address fair value measurements for
purposes of lease classification or measurement. In February 2008, the FASB
issued FSP 157-2, Effective Date of FASB Statement No. 157 (FSP
157-2), which delays 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
SFAS 157 for its financial assets and liabilities and those items for which it
has measured on a recurring basis effective March 31, 2008, and the adoption did
not have a material impact on its financial position and results of operations.
As provided by FSP 157-2, the Company has elected to defer the adoption of SFAS
157 for certain of its non-financial assets and liabilities and is currently
evaluating the impact of adopting SFAS 157 on its non-financial assets and
liabilities.

In February 2007, the FASB issued SFAS 159, The Fair Value
Option for Financial Assets and Financial Liabilities  Including an amendment
of FASB Statement No. 115 (SFAS 159), which became effective for the
Company beginning January 1, 2008. This standard permits entities to choose to
measure many financial instruments and certain other items at fair value and
consequently report unrealized gains and losses on such items in earnings. The
Company elected not to adopt the fair value provisions of SFAS 159 and the
adoption of SFAS159 did not have a significant impact of its financial position,
cash flows and results of operations.

In December 2007, the FASB issued SFAS 141 (revised 2007),
Business Combinations (SFAS 141(R)). SFAS 141(R) 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. SFAS 141(R)
also establishes disclosure requirements to enable the evaluation of the nature
and financial effects of the business combination. SFAS 141(R) will be effective
for financial statements issued for fiscal years beginning after March 15, 2008,
and will be adopted by the Company beginning in the first quarter of fiscal
2010. The Company does not expect there to be any significant impact of adopting
SFAS 141(R) on its financial position, cash flows and results of operations.

In December 2007, the FASB issued SFAS 160, Noncontrolling
Interests in Consolidated Financial Statements  an amendment of Accounting
Research Bulletin No.51(SFAS 160). SFAS 160 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. SFAS 160 also establishes disclosure requirements
that clearly identify and distinguish between the interests of the parent and
the interests of the noncontrolling owners. SFAS 160 will be effective for
financial statements issued for fiscal years beginning after March 15, 2008, and
will be adopted by the Company beginning in the first quarter of fiscal 2010.
The Company does not expect there to be any significant impact of adopting SFAS
160 on its financial position, cash flows and results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures
about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161
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. SFAS 161 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. SFAS 161 will be effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008 and, will be adopted by the Company beginning in the first
quarter of fiscal 2010. The Company does not expect there to be any significant
impact of adopting SFAS 161 on its financial position, cash flows and results of
operations.

63

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In April 2008, FASB issued FASB Staff Position (FSP) FAS 142-3,
Determination of the Useful Life of Intangible Assets, which amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, Goodwill and Other Intangible Assets.This Staff
Position is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. Early
adoption is prohibited. Application of this FSP is not currently applicable to
the Company as the Companys intangible assets consist of land used rights which
has a fixed useful life of 50 years

In May 2008, FASB issued SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles. This Statement identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting
principles (GAAP) in the United States (the GAAP hierarchy). This Statement is
effective 60 days following the SEC's approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The Company does not
expect there to be any significant impact of adopting SFAS 162 on its financial
position, cash flows and results of operations.

In May 2008, FASB issued SFAS No. 163, Accounting for
Financial Guarantee Insurance Contracts - an interpretation of FASB Statement
No. 60. Diversity exists in practice in accounting for financial guarantee
insurance contracts by insurance enterprises under FASB Statement No. 60,
Accounting and Reporting by Insurance Enterprises. That diversity results in
inconsistencies in the recognition and measurement of claim liabilities because
of differing views about when a loss has been incurred under FASB Statement No.
5, Accounting for Contingencies. This Statement requires that an insurance
enterprise recognize a claim liability prior to an event of default (insured
event) when there is evidence that credit deterioration has occurred in an
insured financial obligation. This Statement also clarifies how Statement 60
applies to financial guarantee insurance contracts, including the recognition
and measurement to be used to account for premium revenue and claim liabilities.
Those clarifications will increase comparability in financial reporting of
financial guarantee insurance contracts by insurance enterprises. This Statement
requires expanded disclosures about financial guarantee insurance contracts. The
accounting and disclosure requirements of the Statement will improve the quality
of information provided to users of financial statements. This Statement is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and all interim periods within those fiscal years. The
Company does not expect there to be any significant impact of adopting SFAS 163
on its financial position, cash flows and results of operations.

In June 2008, FASB issued FSP EITF 03-6-1, Determining
Whether Instruments Granted Share-Based Payment Transactions are Participating
Securities. This FSP provides that unvested share-based payment awards that
contain nonforfeitable rights to dividends or dividend equivalents (whether paid
or unpaid) are participating securities and shall be included in the computation
of earnings per share pursuant to the two-class method. This FSP is effective
for financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those years. All prior-period EPS data
presented shall be adjusted retrospectively (including interim financial
statements, summaries of earnings, and selected financial data) to conform with
the provisions of this FSP. Early application is not permitted. The Company is
currently evaluating the impact of adopting EITF 03-6-1 on its consolidated
financial statements.

In May 2009, the FASB issued SFAS No. 165, Subsequent
Events. SFAS No. 165 establishes principles and standards related to the
accounting for and disclosure of events that occur after the balance sheet date
but before the financial statements are issued. SFAS 165 requires an entity to
recognize, in the financial statements, subsequent events that provide
additional information regarding conditions that existed at the balance sheet
date. Subsequent events that provide information about conditions that did not
exist at the balance sheet date shall not be recognized in the financial
statements under SFAS 165. SFAS 165 is effective for the Companys fiscal year
ending February 28, 2010. The Company does not expect SFAS 165 to have a
material effect on its consolidated financial position, results of operations,
cash flows or notes to the financial statements.

64

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In June 2009, the FASB issued SFAS No. 167, Amendments to
FASB Interpretation No. 46(R). SFAS No. 167 was issued to amend FASB
Interpretation No. 46(R) to require an enterprise to perform an analysis to
determine whether the enterprises variable interest or interests give it a
controlling financial interest in a variable interest entity. SFAS No. 167 shall
be effective as of the Companys first annual reporting period and interim
reporting periods beginning after November 15, 2009. Earlier application is
prohibited. The first such reporting period for the Company will be the fiscal
year beginning December 1, 2009. The Company does not expect SFAS 167 to have a
material effect on its consolidated financial position, results of operations,
cash flows or notes to the financial statements.

Other recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force (EITF)), the American Institute of
Certified Public Accountants (AICPA), and the SEC did not or are not believed
by management to have a material impact on the Company's present or future
consolidated financial statements.

NOTE 4. ACQUISITION OF A SUBSIDIARY

In November 2007, Solar Sun entered into a share purchase
agreement with six owners of Longheda to acquire the 75% interest in Longheda
with a total consideration of RMB40,000,000. Since the beneficial owners of the
Company were third parties independent of Longheda and the Group has obtained
the controlling interests in Longheda, the acquisition was accounted for using
the purchase method of accounting. As of the acquisition date, the Group
recorded the fair values of Longheda assets acquired and liabilities assumed.
The allocation of the purchase price to assets acquired and liabilities assumed
as at the date of acquisition is as follows:

|                                    |  | $          |  
|----------------------------------- |  | ---------- | -
|                                    |  |            |  
|Cash and cash equivalents           |  | 829,317    |  
|Trade accounts receivable           |  | 7,193,097  |  
|Inventories                         |  | 6,043,959  |  
|Other current assets                |  | 738,862    |  
|Property and equipment, net         |  | 11,115,278 |  
|Land use right, net                 |  | 474,453    |  
|Borrowings                          |  | (6,080,177 | )
|Accounts payable                    |  | (762,553   | )
|Other payables and accrued expenses |  | (4,931,435 | )
|Tax payable                         |  | (219,111   | )
|                                    |  |            |  
|Net assets acquired                 |  | 14,401,690 |  
|Minority interests                  |  | (3,186,888 | )
|Statutory reserves                  |  | (1,539,538 | )
|Translation adjustment              |  | (114,600   | )
|Negative goodwill                   |  | (4,156,062 | )
|                                    |  |            |  
|Total purchase price                |  | 5,404,602  |  

The allocation of the purchase price to assets acquired and
liabilities assumed as at the date of acquisition resulted in negative goodwill
of $4,156,062. In accordance with SFAS No. 141, Business Combinations, the
negative goodwill was allocated as a pro rata reduction of the amounts assigned
to the assets acquired excluding financial assets, deferred taxes and other
current assets. This resulted in the following allocation of negative goodwill:

|                            |  | $         | 
|--------------------------- |  | --------- | 
|Property and equipment, net |  | 3,985,924 | 
|Land use right, net         |  | 170,138   | 
|Negative goodwill           |  | 4,156,062 | 

65

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In May 2008, Solar Sun entered into another share purchase
agreement with six owners of Longheda to acquire the remaining 25% interests in
Longheda with a total consideration of RMB10,000,000. Since the beneficial
owners of the Company were third parties independent of Longheda and the
Group has obtained the controlling interests in Longheda, the acquisition was
accounted for using the purchase method of accounting. As of the acquisition
date, the Group recorded the fair values of Longheda assets acquired and
liabilities assumed. The allocation of the purchase price to assets acquired and
liabilities assumed as at the date of acquisition is as follows:

|                                    |  | $           |  
|----------------------------------- |  | ----------- | -
|                                    |  |             |  
|Cash and cash equivalents           |  | 5,666,951   |  
|Trade accounts receivable           |  | 2,389,049   |  
|Inventories                         |  | 1,126,973   |  
|Other current assets                |  | 2,477,178   |  
|Property and equipment, net         |  | 11,107,547  |  
|Land use right, net                 |  | 502,735     |  
|Borrowings                          |  | (2,863,365  | )
|Accounts payable                    |  | (111,771    | )
|Other payables and accrued expenses |  | (478,984    | )
|Tax payable                         |  | (166,764    | )
|                                    |  |             |  
|Net assets acquired                 |  | 19,649,549  |  
|Minority interests                  |  | (13,452,363 | )
|Statutory reserves                  |  | (1,713,065  | )
|Negative goodwill                   |  | (3,052,439  | )
|                                    |  |             |  
|Total purchase price                |  | 1,431,682   |  

The allocation of the purchase price to assets acquired and
liabilities assumed as at the date of acquisition resulted in negative goodwill
of $3,052,439. In accordance with SFAS No. 141, Business Combinations, the
negative goodwill was allocated as a pro rata reduction of the amounts assigned
to the assets acquired excluding financial assets, deferred taxes and other
current assets. This resulted in the following allocation of negative goodwill:

|                            |  | $         | 
|--------------------------- |  | --------- | 
|Property and equipment, net |  | 2,920,266 | 
|Land use right, net         |  | 132,173   | 
|Negative goodwill           |  | 3,052,439 | 

The following table represents the unaudited results of
operations of the Company as if the acquisition of Longheda had been consummated
as of April 1, 2008 and 2007 and the results are shown for the years ended March
31, 2009 and 2008 includes certain pro forma adjustments, including depreciation
and amortization on the assets acquired, and other adjustments.

|                                                           |   | For the year ended March 31, | 
|---------------------------------------------------------- | - | ---------------------------- | 
|                                                           |   | 2009                         | 
|Pro forma Information:                                     |   |                              | 
|Revenues                                                   | $ | 56,418,837                   | 
|Net earnings                                               |   | 4,726,428                    | 
|Net earnings per share  basic                             | $ | 0.1414                       | 
|Net earnings per share  diluted                           | $ | 0.1413                       | 
|Shares used for computing basic earnings per share         |   | 33,431,434                   | 
|Shares used for computing diluted earnings
      per share |   | 33,451,676                   | 

66

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NOTE 5. 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, 2009, 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 6. EARNINGS PER SHARE

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

|                                                                       |   | 2009       |  |   | 2008       | 
|---------------------------------------------------------------------- | - | ---------- |  | - | ---------- | 
|Numerator:                                                             |   |            |  |   |            | 
|Net earnings                                                           | $ | 4,517,120  |  | $ | 3,508,456  | 
|                                                                       |   |            |  |   |            | 
|Denominator:                                                           |   |            |  |   |            | 
|Weighted average common stock
      outstanding                        |   | 33,431,434 |  |   | 30,166,878 | 
|Effect of dilutive warrant                                             |   | 20,242     |  |   | -          | 
|Weighed average common stock
      and dilutive potential common stock |   | 33,451,676 |  |   | 30,166,878 | 
|                                                                       |   |            |  |   |            | 
|                                                                       |   |            |  |   |            | 
|Basic net earnings per share                                           | $ | 0.1351     |  | $ | 0.1163     | 
|                                                                       |   |            |  |   |            | 
|Diluted net earnings per share                                         | $ | 0.1350     |  | $ | 0.1163     | 

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.

As of March 31, 2009, the Company had 216,009 warrants
outstanding and each warrant is convertible into 1 share of the Companys common
stock. The potential dilutive effect of such warrant is 20,242 shares of
Companys common stock.

NOTE 7. INVENTORY

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

|               |   | 2009      |  |   | 2008      | 
|-------------- | - | --------- |  | - | --------- | 
|Finished goods | $ | 3,578,680 |  | $ | 1,888,650 | 
|Raw material   |   | 114,212   |  |   | 67,075    | 
|               |   |           |  |   |           | 
|               | $ | 3,692,892 |  | $ | 1,955,725 | 

67

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NOTE 8. LAND USE RIGHTS, NET

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

|                               |   | 2009    |   |   | 2008    |  
|------------------------------ | - | ------- | - | - | ------- | -
|Land use rights, at cost       | $ | 199,988 |   | $ | 334,250 |  
|Less: accumulated amortization |   | (10,685 | ) |   | (16,130 | )
|                               |   |         |   |   |         |  
|                               | $ | 189,303 |   | $ | 318,120 |  

For each of the upcoming five years, estimated amortization is
expected to be approximately $2,669 per year.

NOTE 9. PROPERTY AND EQUIPMENT, NET

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

|                                         |   | 2009       |   |   | 2008       |  
|---------------------------------------- | - | ---------- | - | - | ---------- | -
|Buildings                                | $ | 5,038,316  |   | $ | 1,846,936  |  
|Leasehold improvement                    |   | 1,337,685  |   |   | -          |  
|Machinery                                |   | 12,361,774 |   |   | 7,254,044  |  
|Furniture, fixtures and office equipment |   | 13,690     |   |   | 28,016     |  
|Motor vehicles                           |   | 6,144      |   |   | 22,304     |  
|Total                                    |   | 18,757,609 |   |   | 9,151,300  |  
|Less: accumulated depreciation           |   | (2,142,679 | ) |   | (1,977,777 | )
|                                         |   |            |   |   |            |  
|                                         | $ | 16,614,930 |   | $ | 7,173,523  |  

At March 31, 2009 and 2008, certain of the Groups plant and
machinery with an aggregate net book value of nil and approximately $2,559,000
were pledged to secure the bank borrowings respectively.

NOTE 10. PROVISION FOR INCOME TAXES

The provision for income tax is as follows:

|                    |   | For the year ended March 31, |  
|------------------- | - | ---------------------------- | -
|                    |   | 2009                         |  
|                    |   |                              |  
|Current:            |   |                              |  
|PRC                 | $ | 4,658,836                    |  
|US                  |   | -                            |  
|Other jurisdictions |   | -                            |  
|Deferred:           |   |                              |  
|PRC                 |   | -                            |  
|US                  |   | (531,259                     | )
|Other jurisdictions |   | -                            |  
|                    | $ | 4,127,577                    |  

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, | 
|---------------------------------------------------------------------------------------- | - | ---------------------------- | 
|                                                                                         |   | 2009                         | 
|Deferred tax assets:                                                                     |   |                              | 
|Difference between book and tax basis of land
      use right and property and equipment | $ | 1,406,814                    | 
|Less: valuation allowance                                                                |   | -                            | 
|Net deferred tax assets                                                                  | $ | 1,406,814                    | 

68

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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.

With regard to the US deferred tax assets, the Company believes
that it is more likely than not that results of future operations will generate
sufficient taxable income to realize the deferred tax assets, and therefore no
valuation allowance has been provided for these assets.

Income taxes

The Groups operations are conducted in the PRC and are subject
to PRCs enterprise income tax. Pursuant to the PRC Income Tax Law prior to
January 1, 2008, enterprise income taxes were generally imposed at a statutory
rate of 33%, which comprised 30% national income tax and 3% local income tax.
However, the Group has been granted a preferential tax treatment by the State
Tax Bureau of the PRC as the Group was considered as a hi-tech enterprise in the
Heilongjiang province. According to the PRC Income Tax Law and various approval
documents issued by the Tax Bureau, the Groups profits for the period prior to
2008 were taxed at a rate of 15%.

On March 16, 2007, the Fifth Plenary Session of the Tenth
National Peoples Congress passed the Corporate Income Tax Law of the PRC which
will take effect on January 1, 2008. According to the new tax law, the
applicable corporate income tax rate for domestically-owned enterprises and
foreign-invested enterprises are subject to a uniform tax rate of 25%. While the
new tax law equalizes the tax rates for domestically-owned and foreign-invested
companies, preferential tax treatment would continue to be given to companies in
certain encouraged sectors and to enterprises classified as high and new
technology companies, whether domestically-owned or foreign-invested
enterprises. The new tax law also provides a five-year transition period
starting from its effective date for those enterprises which were established
before the promulgation date of the new tax law and which were entitled to a
preferential tax treatment. The tax rate of such enterprises will transition to
the uniform tax of 25% within a five-year transition period.

In July 2006, the FASB issued FIN 48, which clarifies the
accounting and disclosure for uncertainty in tax positions, as defined in SFAS
No. 109. FIN 48 prescribes a more-likely-than-not threshold for financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. This interpretation also provides guidance on
de-recognition of income tax assets and liabilities, classification of current
and deferred income tax assets and liabilities, accounting for interest and
penalties associated with tax positions, accounting for income taxes in interim
periods and income tax disclosures.

The Group adopted the provisions of FIN 48 effective March 31,
2007. Based on its FIN 48 analysis, the Group concluded that the adoption of FIN
48 did not have any impact on the Groups total liabilities or owners equity.
The Groups classifies interests and/or penalties related to income tax matters
in income tax expenses. As of March 31, 2009, the Group did not have interests
and penalties related to uncertain tax positions. The Group does not anticipate
any significant increases or decrease to its liabilities for unrecognized tax
benefits within the next twelve months.

The provision for income taxes appearing in the consolidated
statement of income represents the current tax expenses. 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:

|                                                                                          |   | 2009       |   |   | 2008      |  
|----------------------------------------------------------------------------------------- | - | ---------- | - | - | --------- | -
|Provision for income taxes at statutory
      rate of 35%                                 | $ | 3,098,902  |   | $ | 1,544,067 |  
|Chinese tax rate difference                                                               |   | (1,815,417 | ) |   | (266,690  | )
|Non-deductible expenses and non-assessable
      profits                                  |   | (3,605,932 | ) |   | (11,402   | )
|Tax losses not yet recognized                                                             |   | 6,981,283  |   |   | 9,527     |  
|Tax effect of non-deductible temporary
      difference recognized                        |   | (531,259   | ) |   | (875,555  | )
|Tax effect of preferential tax treatment granted by the
      State Tax Bureau of the PRC |   | -          |   |   | (392,563  | )
|Income taxes                                                                              | $ | 4,127,577  |   | $ | 7,384     |  

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.

69

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Foreign pretax earnings approximated $18,331,000 and $4,299,000
for the year ended March 31, 2009 and 2008 respectively. Pretax earnings of a
foreign subsidiary are subject to U.S. taxation when effectively repatriated.
The Company provides income taxes on the undistributed earnings of non-U.S.
subsidiaries except to the extent that such earnings are indefinitely invested
outside the United States. At March 31, 2009, $15,014,000 of accumulated
undistributed earnings of non-U.S. subsidiaries were indefinitely invested. At
the existing U.S. federal income tax rate, additional taxes of $1,201,000 would
have to be provided if such earnings were remitted currently.

NOTE 11. BORROWINGS

The Group's borrowings are summarized as follows:

|                |   | **March 31,** |  |   | March 31, | 
|--------------- | - | ------------- |  | - | --------- | 
|                |   | **2009**      |  |   | 2008      | 
|                |   |               |  |   |           | 
|Bank borrowings | $ | -             |  | $ | 2,848,110 | 

The interest rates are based on the banks best lending rate
plus a certain percentage and the credit lines are normally subject to periodic
review. The range of effective interest rates (which are also equal to
contracted interest rates) on the Groups borrowings for the year ended March
31, 2008 was 8.42% per annum. Plant and machinery with an aggregate net book
value of approximately $2,559,000 as of March 31, 2008 were pledged to secure
such bank borrowings.

NOTE 12. OTHER PAYABLES AND ACCRUED EXPENSES

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

|                         |   | March 31, |  |   | March 31, | 
|------------------------ | - | --------- |  | - | --------- | 
|                         |   | 2009      |  |   | 2008      | 
|                         |   |           |  |   |           | 
|Accruals                 | $ | 586,782   |  | $ | 206,910   | 
|Value added tax payables |   | 1,034,195 |  |   | 229,838   | 
|Other payables           |   | 1,055,006 |  |   | 57,530    | 
|                         | $ | 2,675,983 |  | $ | 494,278   | 

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

70

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NOTE 13. AMOUNTS DUE TO SHAREHOLDERS

|                 |   | March 31, |  |   | March 31, | 
|---------------- | - | --------- |  | - | --------- | 
|                 |   | 2009      |  |   | 2008      | 
|                 |   |           |  |   |           | 
|Mr. Yiu Fai Kung | $ | 5,185,423 |  | $ | -         | 
|Mr. Kwan Mo Ng   |   | 2,222,325 |  |   | -         | 
|                 | $ | 7,407,748 |  | $ | -         | 

The amounts due to shareholders are unsecured, interest free
and no fixed terms of repayment.

NOTE 14. AMOUNT DUE TO AN AFFILIATE

The amount due to an affiliate is unsecured, interest free and
repayable on demand.

NOTE 15. SHAREHOLDERS EQUITY

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 a price of $2.78 per share for aggregate
proceeds of $4,706,467.

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 a price of $2.78 per share for aggregate proceeds of
$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 9 investors at a price of $2.78 per share for
aggregate proceeds of $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 is net income of
$18,495,315. In the event that shares are required to be released from escrow to
the Investors or Halter, such shares will be recorded as a contribution to
capital and a simultaneous issuance of common shares to the Investors. The
return to Mr. Kung of any of the shares placed in escrow by him is considered to
be a separate compensatory arrangement because Mr. Kung is a director of the
Companys subsidiary Fezdale. Accordingly, if any of the required earnings
targets are met and shares are returned to Mr. Kung, the Company will recognize
a non-cash compensation cost at that time equal to the then fair value of the
shares returned. For 2009, the earnings target of net income of $13,919,707
(before any charges related to the release of any shares from escrow) was met
and accordingly, the Company recorded a non-cash charge to compensation cost of
$9,519,316.6 in the fourth quarter of 2009 related to the release from escrow to
Mr. Kung of 2,799,799 shares.

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. As at March 31, 2009, all the warrants are
outstanding.

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:

71

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|                        |  |                | 
|----------------------- |  | -------------- | 
|                        |  | Year ended     | 
|                        |  | March 31, 2009 | 
|Risk free interest rate |  | 3.479%         | 
|Expected volatility     |  | 59.92%         | 
|Expected dividend rate  |  | -%             | 
|Expected life (years)   |  | 3              | 

NOTE 16. 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
approximately $292,986 and $16,836 for the year ended March 31, 2009 and 2008
respectively.

NOTE 17. COMMITMENTS AND CONTINGENT LIABILITIES

Operating Lease Commitments

The Company leases its office space under non-cancellable
operating leases in PRC. Minimum future rental payments required under
non-cancellable operating leases in effect as of March 31, 2009 are as follows
by year:

|2009 | $ | 742 | 
|---- | - | --- | 
|     | $ | 742 | 

Rent expense for the years ended March 31, 2009 and 2008 was
$34,773 and $12,515 respectively.

NOTE 18. RELATED PARTY BALANCES AND TRANSACTIONS

On May 16, 2008, Chairman Changjun Yu (Mr. Yu) entered into a
Trademark Transfer Agreement with the Company pursuant to which Mr. Yu
transferred his rights to the trademark 农珍之冠 to the Company for RMB 1. In
connection with the trademark transfer, Mr. Yu also entered into a Trademark
License Agreement with the Company pursuant to which Mr. Yu granted the Company
the exclusive rights to use such trademark before the Trademark Office approves
the transfer of such trademark.

On April 28, 2008, Longheda entered into a financial advisory
agreement (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 is entitled to $450,000 which will be paid within 45 days
after the closing of the going public transaction. HFG International, Limited is
an affiliate of Halter Financial Investments, L.P., which was an 87.5%
shareholder of the Company before the closing of the reverse acquisition of
Fezdale.

72

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NOTE 19. SUBSEQUENT EVENTS

On June 8, 2009, Longheda, the indirect, wholly-owned
subsidiary of China Nutrifruit Group Limited, entered into a lease agreement
(the "Lease Agreement") with Daqing Chuangye Plaza Co. Ltd. for its headquarters
on the fifth floor of Daqing Chuangye Building in Daqing, China (the "Lease").
The Lease is for a one-year from June 8, 2009 to June 7, 2010 and covers space
totaling approximately 966.13 square meters. The total cash obligation over the
term is RMB 71,694 (approximately $10,481). Longheda has the option to extend
the lease and the option to terminate the Lease upon written notice to Daqing
Chuangye Plaza Co. Ltd. at least three months prior to the end of the lease
term. The
facility will be used for headquarters functions, as well as general administrative office uses and activities such as sales and training.

On June 11, 2009, Messrs. Chun Wai Chan, William Haus and Jingfu Li were elected as independent directors of the Company.

End of consolidated financial statements.

73

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CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS FASHION TECH INTERNATIONAL, INC.) UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31,
2008



74

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CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS FASHION TECH INTERNATIONAL, INC.) UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma consolidated financial
statements give effect to the acquisition of 100% equity interest of Fezdale as
a reverse acquisition in the form of a recapitalization and the acquisition of
100% equity interest of Longheda..

The unaudited pro forma consolidated financial statements
present the results of operations of China Nutrifruit Group Limited (China
Nutrifruit) and Longheda as they would have appeared had the recapitalization
and acquisition consummated on April 1, 2007 for the purposes of the unaudited
pro forma statements of income and cash flows.

A pro forma balance sheet has not been provided since the
historical consolidated balance sheet of China Nutrifruit Group Limited and its
subsidiaries as of March 31, 2008 provided in this financial statement includes
the effects of the recapitalization.

These unaudited pro forma consolidated financial statements are
for informational purposes only. They do not purport to indicate the results
that would have actually been obtained had the acquisition been completed on the
assumed date, nor do they purport to represent results of operations for any
future period or financial position for any future date. These statements do not
reflect any cost savings or other benefits that may be obtained through
synergies among the operations of China Nutrifruit and Longheda.



75

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CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES
(FORMERLY KNOWN AS FASHION TECH INTERNATIONAL, INC.)UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Stated in US Dollars) FOR THE YEAR ENDED MARCH
31, 2008

|                                                    |   | China      |   |   | Fezdale    |   |   | Solar Sun            |   |   | **Longheda**         |   |  |               |  |   |             |  
|--------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | -------------------- | - | - | -------------------- | - |  | ------------- |  | - | ----------- | -
|                                                    |   | Nutrifruit |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|                                                    |   | Year ended |   |   | Year ended |   |   | **Year
      ended** |   |   | **Year
      ended** |   |  |               |  |   |             |  
|                                                    |   | March      |   |   | March      |   |   | March                |   |   | March                |   |  | Pro Forma     |  |   | Pro Forma   |  
|                                                    |   | 31, 2008   |   |   | 31, 2008   |   |   | 31, 2008             |   |   | 31, 2008             |   |  | Adjustments   |  |   | Combined    |  
|                                                    |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Net sales                                           | $ | -          |   | $ | -          |   | $ | -                    |   | $ | 34,510,140           |   |  |               |  | $ | 34,510,140  |  
|Cost of sales                                       |   | -          |   |   | -          |   |   | -                    |   |   | (18,947,091          | ) |  | (B) 779,118   |  |   | (18,167,973 | )
|                                                    |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Gross profit                                        |   | -          |   |   | -          |   |   | -                    |   |   | 15,563,049           |   |  |               |  |   | 16,342,167  |  
|                                                    |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Selling, general and administrative expenses        |   | (17,672    | ) |   | (54,404    | ) |   | (51                  | ) |   | (3,155,007           | ) |  |               |  |   | (3,227,134  | )
|                                                    |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Operating earnings                                  |   | (17,672    | ) |   | (54,404    | ) |   | (51                  | ) |   | 12,408,042           |   |  |               |  |   | 13,115,033  |  
|                                                    |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Other income (expenses)                             |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Interest expenses                                   |   | (132       | ) |   | -          |   |   | (43                  | ) |   | (402,677             | ) |  |               |  |   | (402,852    | )
|Other income                                        |   | -          |   |   | -          |   |   | 60                   |   |   | 30,509               |   |  |               |  |   | 30,569      |  
|Total other income (expenses)                       |   | (132       | ) |   | -          |   |   | 17                   |   |   | (372,168             | ) |  |               |  |   | (372,283    | )
|                                                    |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Earnings before income taxes                        |   | (17,804    | ) |   | (54,404    | ) |   | (34                  | ) |   | 12,035,874           |   |  |               |  |   | 12,742,750  |  
|                                                    |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Provision for income taxes                          |   | -          |   |   | -          |   |   | -                    |   |   | (2,035,305           | ) |  | (C) 875,555   |  |   | (1,159,750  | )
|                                                    |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Net earnings                                        | $ | (17,804    | ) | $ | (54,404    | ) | $ | (34                  | ) | $ | 10,000,569           |   |  |               |  | $ | 11,583,000  |  
|                                                    |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Earnings per share                                  |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Basic and diluted                                   | $ | (0.0013    | ) |   |            |   |   |                      |   |   |                      |   |  |               |  | $ | 0.3840      |  
|                                                    |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Weighted average number of common stock outstanding |   |            |   |   |            |   |   |                      |   |   |                      |   |  |               |  |   |             |  
|Basic and diluted                                   |   | 14,030,730 |   |   |            |   |   |                      |   |   |                      |   |  | (A)16,136,148 |  |   | 30,166,878  |  



76

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CHINA NUTRIFRUIT GROUP LIMITED AND
SUBSIDIARIES (FORMERLY KNOWN AS FASHION TECH
INTERNATIONAL, INC.) UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF CASH FLOWS

(Stated in US Dollars) FOR THE YEAR ENDED MARCH 31, 2008

|                                                                                         |   | Year ended     |  
|---------------------------------------------------------------------------------------- | - | -------------- | -
|                                                                                         |   | March 31, 2008 |  
|Operating activities:                                                                    |   |                |  
|Net earnings                                                                             | $ | 11,583,000     |  
|Adjustments to reconcile net earnings to
      net cash provided by operating activities |   |                |  
|Depreciation and amortization                                                            |   | 351,213        |  
|Benefit for
      deferred income taxes                                                  |   | (875,555       | )
|Changes in operating assets and liabilities:                                             |   |                |  
|Trade
      receivables, net                                                             |   | 207,462        |  
|Inventory                                                                                |   | (478,237       | )
|Other current
      assets                                                               |   | (95,264        | )
|Amount due to an affiliate                                                               |   | 30,088         |  
|Trade payables                                                                           |   | 15,087         |  
|Consideration payable                                                                    |   | 6,615,101      |  
|Income taxes
      payable                                                               |   | 281,232        |  
|Other payables and accrued
      expenses                                                |   | (498,893       | )
|Net cash provided by operating activities                                                |   | 17,135,234     |  
|                                                                                         |   |                |  
|Investing activities:                                                                    |   |                |  
|Cash outflow from acquisition of subsidiaries                                            |   | (6,614,085     | )
|Net cash used in investing activities                                                    |   | (6,614,085     | )
|                                                                                         |   |                |  
|Financing activities:                                                                    |   |                |  
|Proceeds from borrowings                                                                 |   | 5,355,096      |  
|Repayment of borrowings                                                                  |   | (6,023,468     | )
|Contribution from shareholders                                                           |   | 36,707         |  
|Dividend paid                                                                            |   | (7,758,278     | )
|Proceeds from private placement                                                          |   | 400,000        |  
|Net cash used in financing activities                                                    |   | (7,989,943     | )
|                                                                                         |   |                |  
|Increase in cash and cash equivalents                                                    |   | 2,531,206      |  
|                                                                                         |   |                |  
|Effect of exchange rate on cash and cash
      equivalents                               |   | 569,928        |  
|                                                                                         |   |                |  
|Cash and cash equivalents at beginning of
      the period                               |   | 4,003,715      |  
|                                                                                         |   |                |  
|Cash and cash equivalents at end of the
      period                                     | $ | 7,104,849      |  
|                                                                                         |   |                |  
|Supplemental disclosure of cash flows
      information:                                 |   |                |  
|Cash paid for:                                                                           |   |                |  
|Interest                                                                                 | $ | 402,677        |  
|Income tax                                                                               | $ | 1,754,073      |  



77

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NOTES TO UNAUDITED PROFORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

NOTE 1  PRO FORMA ADJUSTMENTS

On August 14, 2008, China Nutrifruit Group Limited acquired all
of the equity interests of Fezdale Investments Limited ("Fezdale"), a British
Virgin Islands corporation, through a share exchange transaction (the "Share
Exchange Transaction"), with the result that the stockholders 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 have been restated to reflect the equivalent numbers
of the common stock of China Nutrifruit Group Limited.

China Nutrifruit Group Limited completed the acquisition of
Fezdale, pursuant to the share exchange agreement, in August 2008. The
acquisition would be accounted for as a recapitalization effected by a share
exchange, wherein Fedzale is considered as the acquirer for accounting and
financial reporting purposes.

Pro forma adjustments on the attached financial statements
include the following:

|(A) | To record the issuance of 30,166,878 shares of China
      Nutrifruit Group Limiteds common stock in connection with the
      recapitalization.                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                   
|(B) | To record the adjustment of depreciation of property and
      equipment and amortization of land use rights due to the effect of
      negative goodwill arising from the acquisition of Longheda.                                               
|    |                                                                                                                                                                                                                                                   
|(C) | To record the deferred tax expenses due to the effect of
      negative goodwill arising from the acquisition of Longheda, as it
      generated a temporary difference between tax base and accounting base of
      the property, and equipment.

78

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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 30, 2009

CHINA NUTRIFRUIT GROUP LIMITEDBy:       
    /s/ Jinglin Shi
              Jinglin Shi
    
             Chief Executive Officer and President


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.

|Signature           |  | Title                                                                     
|------------------- |  | --------------------------------------------------------------------------
|/s/ Jinglin Shi     |  | Chief Executive Officer and President
      (Principal Executive Officer) 
|                    |  |                                                                           
|/s/ Colman Cheng    |  | Chief Financial Officer (Principal Financial
      and Accounting Officer)
|                    |  |                                                                           
|/s/ Changjun Yu     |  | Chairman of the board                                                     
|                    |  |                                                                           
|/s/ Chun Wai Chan   |  | Director                                                                  
|                    |  |                                                                           
|/s/ William Haus    |  | Director                                                                  
|                    |  |                                                                           
|/s/ Jingfu Li       |  | Director                                                                  
|                    |  |                                                                           
|Date: June 30, 2009 |  |                                                                           

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