---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10−Q

(Mark One)

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

For the quarterly period ended: September 30, 2010

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

For the transition period from ____________to _____________

Commission File Number: 001-34440

CHINA NUTRIFRUIT GROUP
LIMITED(Exact Name of Registrant as Specified in Its
Charter)

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

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

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

______________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)

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

Yes [X]                 No [     ]

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

Yes [   ]                 No [    ]

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

|Large accelerated filer [   ]                                            | Accelerated filer [   ]        
|------------------------------------------------------------------------ | -------------------------------
|                                                                         |                                
|Non-accelerated filer [   ](Do not check if a smaller reporting company) | Smaller reporting company [ X ]

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

Yes [     ]             No [X]

The number of shares outstanding of each of the issuers
classes of common stock, as of November 12, 2010 is as follows:

|Class of Securities            | Shares Outstanding
|------------------------------ | ------------------
|Common Stock, $0.001 par value | 36,794,532        

---



CHINA NUTRIFRUIT GROUP LIMITED

Quarterly Report on FORM 10-QThree
Months Ended September 30, 2010

TABLE OF CONTENTS

|PART I                |                                                                                              | 2 
|--------------------- | -------------------------------------------------------------------------------------------- | --
|FINANCIAL INFORMATION | 2                                                                                           
|ITEM 1.               | FINANCIAL STATEMENTS.                                                                        | 2 
|ITEM 2.               | MANAGEMENTS DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 26
|ITEM 3.               | QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK.                            | 35
|ITEM 4.               | CONTROLS AND PROCEDURES.                                                                     | 35
|PART II               |                                                                                              | 36
|OTHER INFORMATION     | 36                                                                                          
|ITEM 1.               | LEGAL PROCEEDINGS.                                                                           | 36
|ITEM 1A.              | RISK FACTORS.                                                                                | 36
|ITEM 2.               | UNREGISTERED SALES OF EQUITY
      SECURITIES AND USE OF PROCEEDS.                           | 36
|ITEM 3.               | DEFAULTS UPON SENIOR SECURITIES.                                                             | 36
|ITEM 4.               | (REMOVED AND RESERVED).                                                                      | 36
|ITEM 5.               | OTHER INFORMATION.                                                                           | 36
|ITEM 6.               | EXHIBITS.                                                                                    | 36

---

PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES 
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
AS OF SEPTEMBER 30, 2010 AND FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2010

|Contents                                                                                                             | Page
|-------------------------------------------------------------------------------------------------------------------- | ----
|Condensed Consolidated Balance
    Sheets as of September 30, 2010 (unaudited) and March 31, 2010                    | 3   
|Condensed Consolidated Statements of Income for the six
    months ended September 30, 2010 and 2009 (unaudited)     | 4   
|Condensed Consolidated Statements of Cash
    Flows for the six months ended September 30, 2010 and 2009 (unaudited) | 5   
|Notes to the Condensed Consolidated Financial
    Statements (unaudited)                                             | 6   

2

---

CHINA NUTRIFRUIT GROUP LIMITED AND
SUBSIDIARIES

|CONDENSED CONSOLIDATED BALANCE SHEETS
|-------------------------------------
|(Stated in US
      Dollars)         

|                                                             |   | September 30,   |  |   | March 31,  | 
|------------------------------------------------------------ | - | --------------- |  | - | ---------- | 
|                                                             |   | 2010            |  |   | 2010       | 
|                                                             |   | **(unaudited)** |  |   |            | 
|                                                             |   |                 |  |   |            | 
|ASSETS                                                       |   |                 |  |   |            | 
|Current assets:                                              |   |                 |  |   |            | 
|Cash and cash
      equivalents                              | $ | 7,154,181       |  | $ | 35,994,443 | 
|Proceeds from private placement
      held in escrow account |   | -               |  |   | 931,630    | 
|Trade
      receivables, net of allowance                    |   | 17,472,434      |  |   | 11,047,846 | 
|Inventories, net                                             |   | 17,516,314      |  |   | 4,179,910  | 
|Prepayments and
      deposits                               |   | 11,070,120      |  |   | -          | 
|Other current assets                                         |   | 1,493           |  |   | 116,196    | 
|Total current assets                                         |   | 53,214,542      |  |   | 52,270,025 | 
|Property and equipment, net                                  |   | 20,876,113      |  |   | 17,066,907 | 
|Construction in progress                                     |   | 5,084,541       |  |   | -          | 
|Deferred tax assets                                          |   | 989,990         |  |   | 1,068,878  | 
|Land use rights, net                                         |   | 186,789         |  |   | 185,686    | 
|TOTAL ASSETS                                                 | $ | 80,351,975      |  | $ | 70,591,496 | 
|                                                             |   |                 |  |   |            | 
|LIABILITIES AND SHAREHOLDERS EQUITY                         |   |                 |  |   |            | 
|Current liabilities:                                         |   |                 |  |   |            | 
|Other payables and accrued
      expenses                    | $ | 1,314,712       |  | $ | 2,379,246  | 
|Trade payables                                               |   | 927,599         |  |   | 87,954     | 
|Income taxes payable                                         |   | 2,533,890       |  |   | 2,296,513  | 
|Total current liabilities                                    |   | 4,776,201       |  |   | 4,763,713  | 
|TOTAL LIABILITIES                                            |   | 4,776,201       |  |   | 4,763,713  | 

|                                                                                                                                                                                       |   |            |  |   |            | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- |  | - | ---------- | 
|Commitments and
      Contingencies                                                                                                                                                    |   |            |  |   |            | 
|                                                                                                                                                                                       |   |            |  |   |            | 
|Shareholders' equity                                                                                                                                                                   |   |            |  |   |            | 
|Series A Preferred stock Authorized:
      5,000,000 shares, par value $0.001 Issued and outstanding: 350,559
      shares as at September 30, 2010; (365,109 as at March 31, 2010)    |   | 350        |  |   | 365        | 
|Common stock Authorized: 120,000,000 shares, par value $0.001
      Issued and outstanding: 36,718,772 shares as at September 30, 2010;
      (36,573,272 shares as at March 31, 2010) |   | 36,719     |  |   | 36,573     | 
|Additional paid-in-capital                                                                                                                                                             |   | 36,492,744 |  |   | 36,492,875 | 
|Statutory reserves -
      restricted                                                                                                                                                  |   | 4,564,345  |  |   | 4,564,345  | 
|Accumulated other comprehensive income                                                                                                                                                 |   | 2,016,133  |  |   | 440,714    | 
|Retained earnings                                                                                                                                                                      |   | 32,465,483 |  |   | 24,292,911 | 
|TOTAL SHAREHOLDERS EQUITY                                                                                                                                                             |   | 75,575,774 |  |   | 65,827,783 | 
|TOTAL LIABILITIES AND
      SHAREHOLDERS EQUITY                                                                                                                                       | $ | 80,351,975 |  | $ | 70,591,496 | 

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

3



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CHINA NUTRIFRUIT GROUP LIMITED AND
SUBSIDIARIES

|CONDENSED CONSOLIDATED STATEMENTS OF INCOME
      (UNAUDITED)
|-------------------------------------------------------------
|(Stated in US
      Dollars)                                 

|                                          |   | Three months
      ended |   |   | Six months
      ended |  
|----------------------------------------- | - | ------------------------ | - | - | ---------------------- | -
|                                          |   | September 30,            |   |   | September 30,          |  
|                                          |   | 2010                     |   |   | 2009                   |  
|                                          |   |                          |   |   |                        |  
|Net sales                                 | $ | 23,191,125               |   | $ | 19,324,868             |  
|                                          |   |                          |   |   |                        |  
|Cost of sales                             |   | (12,234,966              | ) |   | (9,641,849             | )
|                                          |   |                          |   |   |                        |  
|Gross profit                              |   | 10,956,159               |   |   | 9,683,019              |  
|Selling expenses                          |   | (673,469                 | ) |   | (677,760               | )
|General and administrative
      expenses |   | (590,848                 | ) |   | (501,365               | )
|                                          |   |                          |   |   |                        |  
|Operating earnings                        |   | 9,691,842                |   |   | 8,503,894              |  
|                                          |   |                          |   |   |                        |  
|Other income (expenses)                   |   |                          |   |   |                        |  
|Other income                              |   | 17,550                   |   |   | 31,623                 |  
|Total other income (expenses)             |   | 17,550                   |   |   | 31,623                 |  
|                                          |   |                          |   |   |                        |  
|Earnings before income
      taxes        |   | 9,709,392                |   |   | 8,535,517              |  
|                                          |   |                          |   |   |                        |  
|Provision for income taxes                |   | (2,520,776               | ) |   | (2,184,779             | )
|                                          |   |                          |   |   |                        |  
|Net earnings                              |   | 7,188,616                |   |   | 6,350,738              |  
|Other comprehensive income                |   |                          |   |   |                        |  
|Foreign currency
      translation        |   | 1,644,269                |   |   | 17,500                 |  
|Comprehensive income                      | $ | 8,832,885                |   | $ | 6,368,238              |  
|                                          |   |                          |   |   |                        |  
|Earnings per share                        |   |                          |   |   |                        |  
|Basic                                     | $ | 0.19                     |   | $ | 0.18                   |  

|Diluted                                                   | $ | 0.18       |  | $ | 0.18       |  | $ | 0.22       |  | $ | 0.22       | 
|--------------------------------------------------------- | - | ---------- |  | - | ---------- |  | - | ---------- |  | - | ---------- | 
|                                                          |   |            |  |   |            |  |   |            |  |   |            | 
|Weighted average number of common outstanding
      stock |   |            |  |   |            |  |   |            |  |   |            | 
|Basic                                                     |   | 36,718,772 |  |   | 36,125,754 |  |   | 36,695,054 |  |   | 36,125,754 | 
|Diluted                                                   |   | 40,377,453 |  |   | 36,226,175 |  |   | 40,360,072 |  |   | 36,187,189 | 

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

4

---

CHINA NUTRIFRUIT GROUP LIMITED AND
SUBSIDIARIES

|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
      (UNAUDITED)
|-----------------------------------------------------------------
|(Stated in US
      Dollars)                                     

|                                                                                                                      |   | September 30, |  
|--------------------------------------------------------------------------------------------------------------------- | - | ------------- | -
|                                                                                                                      |   | 2010          |  
|                                                                                                                      |   |               |  
|Operating activities:                                                                                                 |   |               |  
|Net earnings                                                                                                          | $ | 8,982,122     |  
|Adjustments to
      reconcile net earnings to net cash used                                                          |   |               |  
|in operating
      activities                                                                                         |   |               |  
|Depreciation and amortization                                                                                         |   | 936,036       |  
|Benefit for
      deferred income taxes                                                                               |   | 78,054        |  
|Changes in operating assets
      and liabilities:                                                                    |   |               |  
|Trade
      receivables, net                                                                                          |   | (6,424,588    | )
|Inventories                                                                                                           |   | (13,336,404   | )
|Prepayments
      and deposits                                                                                        |   | (11,070,120   | )
|Other current assets                                                                                                  |   | 114,703       |  
|Trade
      payables                                                                                                  |   | 839,645       |  
|Income taxes payable                                                                                                  |   | 237,377       |  
|Other
      payables and accrued expenses                                                                             |   | (1,064,534    | )
|Net cash used in operating
      activities                                                                           |   | (20,707,709   | )
|                                                                                                                      |   |               |  
|Investing activities:                                                                                                 |   |               |  
|Purchase of property and equipment                                                                                    |   | (4,333,519    | )
|Addition to construction in
      progress                                                                            |   | (5,084,541    | )
|Net cash used in investing activities                                                                                 |   | (9,418,060    | )
|                                                                                                                      |   |               |  
|Financing activities:                                                                                                 |   |               |  
|Proceeds from private
      placement                                                                                 |   | -             |  
|Cost of raising capital                                                                                               |   | -             |  
|Dividend paid                                                                                                         |   | (809,550      | )
|Proceeds from private placement held in
      escrow account                                                          |   | 931,630       |  
|Net cash provided by
      financing activities                                                                       |   | 122,080       |  
|                                                                                                                      |   |               |  
|(Decrease) Increase in cash
      and cash equivalents                                                                |   | (30,003,689   | )
|                                                                                                                      |   |               |  
|Effect of exchange rate on
      cash and cash equivalents                                                            |   | 1,163,427     |  
|                                                                                                                      |   |               |  
|Cash and cash equivalents at
      beginning of the period                                                            |   | 35,994,443    |  
|                                                                                                                      |   |               |  
|Cash and cash equivalents and
      proceeds from private placement held in escrow account at end of the
      period | $ | 7,154,181     |  
|                                                                                                                      |   |               |  
|Supplemental disclosure of
      cash flows information:                                                              |   |               |  
|Cash paid for:                                                                                                        |   |               |  
|Income
      taxes                                                                                                    | $ | 2,871,211     |  
|Supplemental disclosure of non-cash
      information:                                                                |   |               |  
|Issuance of warrants                                                                                                  | $ | -             |  

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

5

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

NOTE 1.     NATURE OF BUSINESS AND SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

Nature of Business

China Nutrifruit Group Limited (the “Company”) was originally incorporated in the state of Utah on April 22, 1983 and changed its domicile from Utah to Nevada in April 1999. The Company had no business activities or meaningful
operations, income producing assets or significant operating capital since at least 1989 until it acquired Fezdale Investments Limited (“Fezdale”) on August 14, 2008.

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

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

Also, on August 14, 2008, the Company’s majority shareholder, Yiu Fai Kung (“Mr. Kung”), entered into escrow agreements with the private placement investors and HFG International, Limited (“HFG”). 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:

The after tax net income for the fiscal year ending on March 31, 2009 was less than $13,919,707 and fiscal year ending on March 31, 2010 was 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.

For the year ended March 31, 2010, the earnings target for 2009 of net income of $18,495,315 was met. Accordingly, 2,799,799 shares will be released to Mr. Kung from escrow.

6

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

NOTE 1.     NATURE OF BUSINESS AND SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONT’D)

On September 4, 2009, the Company’s common stock was approved by the NYSE Amex for listing and registration.

On September 30, 2009, the Company entered into a securities purchase agreement (the “Private Placement Transaction”) with certain accredited investors (“Investors”) and effected the initial closing of the purchase and sale
of 359,502 units (the “Unit”) at $33.00 per Unit. Each Unit consisted of one share of the Company’s newly-designated Series A Convertible Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”)
and one warrant (the “Warrant”) to purchase 2.5 shares of the Company’s common stock, par value $.001 per share. The Series A Preferred Stock is convertible into ten shares of the Company’s common stock (subject to
customary adjustments) and the Company is obligated to register the underlying shares of common stock within thirty days of the closing date. In connection with the initial closing of the offering, the Company raised $11.86 million.

On October 8, 2009, the Company effected the second and final closing of the Financing and issued 43,916 units (the “Unit”) for $33.00 per Unit for gross proceeds of $1,449,000.

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

Fezdale Investments Limited

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

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

Solar Sun Holdings Limited

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

Daqing Longheda Food Company Limited

Longheda was incorporated in Heilongjiang province of Peoples’ Republic of China (the “PRC”) in June 2004. Longheda manufactures and sells a variety of food products processed from specialty premium fruits that grow in Northeast
China. Currently, Longheda processes four types of premium specialty fruits, including golden berry, crab apple, blueberry and raspberry, and sells fresh fruits. Longheda currently has four types of fruit based products, including fruit concentrate,
nectar, glazed fruits and concentrate pulp. Longheda sells its products through an extensive sales and distribution network. The fresh fruits are mainly sold to fruit supermarkets and stores while the processed fruit products are mainly sold to
manufacturers for further processing into fruit juice and other fruit related products.

7

---

China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

Jumbo Gloss Limited

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

Daqing Senyang Fruit and Vegetable Food Technology Co., Ltd

Daqing Senyang Fruit and Vegetable Food Technology Co., Ltd (“Senyang”) was incorporated in Heilongjiang province of the PRC in June 2010. Senyang is a dormant company and has no assets or operations.

Basis of presentation

The interim condensed consolidated financial statements include the accounts of China Nutrifruit Group Limited and its subsidiaries (the “Group”). The interim condensed consolidated financial statements were prepared in accordance with
the US GAAP. All significant intercompany transactions and balances were eliminated.

The interim condensed consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair representation of our condensed consolidated balance
sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicatives of the annual results for the year ending March 31, 2011. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with the US GAAP were condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Segment information

The Group identifies and classifies its operating segments based on the nature of 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 sale of food products, which operations are located in the PRC and sales were predominately made to customers located in the PRC.

Construction in progress

Construction in progress represents plant and properties under construction and is stated at cost less accumulated impairment losses. This includes cost of construction, plant and equipment and other direct costs plus borrowing costs which include
interest charges and exchange differences arising from foreign currency borrowings used to finance these projects during the construction period, to the extent these are regarded as an adjustment to interest costs.

Construction in progress is not depreciated until such time as the assets are completed and ready for their intended use.

8

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

Use of estimates

The preparation of the interim condensed 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.

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’s economy.

The Group’s operations in the PRC are subject to special considerations and significant risk not typically associated with companies in North America. These include risks associated with, among others, the political, economic and legal
environmental and foreign currency exchange. The Group’s results may be adversely affected by changes in the political and social conditions in the PRC, and in governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

Earnings per share

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

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.

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 September 30, 2010 was recorded.

Inventories

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

9

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

Fair value of financial instruments

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

Property and equipment, net

Property and equipment are recorded at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. Maintenance and repairs are expensed as incurred. The principal estimated useful lives generally are: buildings
– 20 years; leasehold improvements – 10 years; machinery - 10 years, furniture, fixture and office equipment – 5 years; motor vehicles – 5 years. Depreciation of property and equipment was $506,884, $934,571,
$378,187 and $746,246 for the three and six months ended September 30, 2010 and 2009 respectively.

Revenue recognition

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

Shipping and handling costs

Shipping and handling costs are included in selling expenses. The shipping and handling costs for the three and six months ended September 30, 2010 and 2009 were $477,021, $942,206, $505,889 and $1,217,408 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 periods, 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
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 right agreements on a straight-line basis, which is 50 years and will expire in 2055.

10

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China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S.
Dollars)

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 rate
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.

Other income recognition

Other income is comprised of interest income and others.

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

Advertising costs

Advertising costs are expensed as incurred. The total
advertising costs were $9,864, $15,403, $6,235 and $10,877 for the three and six
months ended September 30, 2010 and 2009 respectively.

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.

|Balance sheet                                      |                     
|-------------------------------------------------- | --------------------
|September 30, 2010                                 | RMB6.7000 to US$1.00
|March 31, 2010                                     | RMB6.8361 to US$1.00
|                                                   |                     
|Statement of income and comprehensive
      income |                     
|For the six months ended September 30, 2010        | RMB6.8430 to US$1.00
|For the six months ended September 30, 2009        | RMB6.8405 to US$1.00

As at September 30, 2010, RMB46,752,696 or US$6,978,014 (March
31, 2010: RMB236,619,999 or US$34,613,303) is not freely convertible into
foreign currency and all foreign exchange transactions must take place through
authorized institutions. No representation is made that the RMB amounts could
have been, or could be, converted into US$ at the rates used in translation.

11

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

Statutory reserves

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

Surplus reserve fund

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

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

Common welfare fund

The Company’s subsidiary in PRC is required to transfer 5 percent to 10 percent of its net income, as determined in accordance with the PRC accounting rules and regulations, to the statutory common welfare fund. This fund can only be utilized
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 Accounting Standards Codification 740 (“ASC 740”), resulting in two components of income tax expense: current and deferred. Current income tax expense approximates taxes to be
paid or refunded for the relevant periods. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred income tax assets and liabilities are computed for differences between the financial
statement carrying amounts and the tax bases of existing assets and liabilities that will result in taxable or deductible amounts in the future, as well as from net operating loss and tax credit carryforwards, and are measured at the enacted tax
laws and rates applicable in the years which the differences are expected to be recovered or settled. A deferred tax asset is recognized if it is more likely than not that a benefit will be realized. The Group’s operations are primarily
located in PRC and subject to PRC profits tax.

12

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

NOTE 2.     RECENT ACCOUNTING PRONOUNCEMENTS

In July 2010, the FASB issued Accounting Standards Update (ASU) 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. This ASU enhances the disclosure requirements about the credit quality and
related allowance for credit losses of financing receivables. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Company’s consolidated results of operations or financial
condition, as its requirements only pertain to financial statement note disclosure.

In August 2010, the FASB issued ASU 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules. This update amends various SEC paragraphs in the FASB Accounting Standards Codification pursuant to the SEC Rule, Technical
Amendments to Rules Forms, Schedules and Codification of Financial Reporting Policies. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Company’s consolidated results of
operations or financial condition.

In August 2010, the FASB issued ASU 2010-22, Accounting for Various Topics. This ASU amends various SEC paragraphs in the FASB Accounting Standards Codification based on external comments received and the issuance of Staff Accounting Bulletin (SAB)
No. 112, which amended or rescinded a portion of certain SAB topics. SAB 112 was issued to bring existing SEC guidance into conformity with ASC 805, Business Combination, and ASC 810, Consolidation. The Company is currently evaluating the impact of
this standard, but would not expect it to have a material impact on the Company’s consolidated results of operations or financial condition.

Other recent accounting pronouncements issued by the FASB (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 financial statements.

13

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S.
Dollars)

NOTE 3.     EARNINGS PER SHARE

The computations of basic and diluted earnings per share for
the three and six months ended September 30 are as follows:

|                                                                        |   | Three months
      ended |   |   | Six months
      ended | 
|----------------------------------------------------------------------- | - | ------------------------ | - | - | ---------------------- | 
|                                                                        |   | September 30,            |   |   | September 30,          | 
|                                                                        |   | 2010                     |   |   | 2009                   | 
|                                                                        |   |                          |   |   |                        | 
|Numerator:                                                              |   |                          |   |   |                        | 
|Net earnings                                                            | $ | 7,188,616                |   | $ | 6,350,738              | 
|Less: dividends
      on preferred stock                                |   | (209,475                 | ) |   | -                      | 
|Net earnings for basic earnings
      per share                         | $ | 6,979,141                |   | $ | 6,350,738              | 
|                                                                        |   |                          |   |   |                        | 
|Net earnings for basic earnings
      per share                         | $ | 6,979,141                |   | $ | 6,350,738              | 
|Add: dividends
      on preferred stock                                 |   | 209,475                  |   |   | -                      | 
|Net earnings for diluted
      earnings per share                       | $ | 7,188,616                |   | $ | 6,350,738              | 
|                                                                        |   |                          |   |   |                        | 
|Denominator:                                                            |   |                          |   |   |                        | 
|Weighted average
      common stock outstanding                         |   | 36,718,772               |   |   | 36,125,754             | 
|Effect of dilutive preferred
      stock                                |   | 3,651,090                |   |   | 39,076                 | 
|Effect of
      dilutive warrant                                        |   | 7,591                    |   |   | 61,345                 | 
|Weighted average common stock
      and dilutive potential common stock |   | 40,377,453               |   |   | 36,226,175             | 
|                                                                        |   |                          |   |   |                        | 
|Basic net earnings per share                                            | $ | 0.19                     |   | $ | 0.18                   | 
|                                                                        |   |                          |   |   |                        | 
|Diluted net earnings per share                                          | $ | 0.18                     |   | $ | 0.18                   | 

14

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S.
Dollars)

NOTE 4.     INVENTORY, NET

At September 30, 2010 and March 31, 2010 (audited) inventory is
comprised of the following:

|               |   | September 30 |  |   | March 31  | 
|-------------- | - | ------------ |  | - | --------- | 
|               |   |              |  |   |           | 
|Finished goods | $ | 17,307,519   |  | $ | 4,101,918 | 
|Raw material   |   | 208,795      |  |   | 77,992    | 
|               | $ | 17,516,314   |  | $ | 4,179,910 | 

NOTE 5.     PROPERTY AND EQUIPMENT, NET

Property and equipment, net, at September 30, 2010 and March
31, 2010 (audited) are summarized as follows:

|                                         |   | September 30 |   |   | March 31   |  
|---------------------------------------- | - | ------------ | - | - | ---------- | -
|                                         |   |              |   |   |            |  
|Buildings                                | $ | 5,460,858    |   | $ | 4,673,420  |  
|Leasehold improvement                    |   | 1,366,754    |   |   | 1,339,544  |  
|Machinery                                |   | 18,514,206   |   |   | 14,616,662 |  
|Furniture, fixtures and office equipment |   | 13,996       |   |   | 13,742     |  
|Motor vehicles                           |   | 39,323       |   |   | 6,194      |  
|                                         |   |              |   |   |            |  
|Total                                    |   | 25,395,137   |   |   | 20,649,562 |  
|Less: accumulated depreciation           |   | (4,519,024   | ) |   | (3,582,655 | )
|                                         | $ | 20,876,113   |   | $ | 17,066,907 |  

As of September 30, 2010, buildings and machinery, of
$7,110,556 (March 31, 2010: $7,297,850) and $326,248 (March 31, 2010: $342,365)
respectively, were pledged to secure the unused banking facilities obtained by
the Group. (Note 13)

NOTE 6.     PREPAYMENTS AND DEPOSITS

Prepayments and deposits mainly comprised the amount paid to
the suppliers of property and equipment as of September 30, 2010.

15

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S.
Dollars)

NOTE 7.     OTHER PAYABLES AND ACCRUED EXPENSES

Other payables and accrued expenses by major categories at
September 30, 2010 and March 31, 2010 (audited) are summarized as follows:

|                         |   | September 30 |  |   | March 31  | 
|------------------------ | - | ------------ |  | - | --------- | 
|                         |   |              |  |   |           | 
|Accruals                 | $ | 564,787      |  | $ | 723,588   | 
|Value added tax payables |   | -            |  |   | 1,104,630 | 
|Other payables           |   | 749,925      |  |   | 551,028   | 
|                         | $ | 1,314,712    |  | $ | 2,379,246 | 

The other payables mainly comprised amounts payable to the
suppliers of property and equipment, amounting to $585,485 and $398,056 as of
September 30, 2010 and March 31, 2010 respectively.

NOTE 8.     PROVISION FOR INCOME TAXES

The provision for income tax is as follows:

|                    |   | Three months ended |  |   | Six months ended | 
|------------------- | - | ------------------ |  | - | ---------------- | 
|                    |   | September 30,      |  |   | September 30,    | 
|                    |   | 2010               |  |   | 2009             | 
|                    |   |                    |  |   |                  | 
|Current:            |   |                    |  |   |                  | 
|PRC                 | $ | 2,481,749          |  | $ | 2,134,607        | 
|Other jurisdictions |   | -                  |  |   | -                | 
|Deferred:           |   |                    |  |   |                  | 
|PRC                 |   | 39,027             |  |   | 50,172           | 
|Other jurisdictions |   | -                  |  |   | -                | 
|                    | $ | 2,520,776          |  | $ | 2,184,779        | 

16

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S.
Dollars)

NOTE 8.     PROVISION FOR INCOME TAXES (CONTD)

Deferred tax assets

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

|                                                                                         |   | September 30, |   |   | March 31, |  
|---------------------------------------------------------------------------------------- | - | ------------- | - | - | --------- | -
|                                                                                         |   | 2010          |   |   | 2010      |  
|                                                                                         |   |               |   |   | (audited) |  
|                                                                                         |   |               |   |   |           |  
|Deferred tax assets:                                                                     |   |               |   |   |           |  
|Difference between book and tax basis of land
      use right and property and equipment | $ | 989,990       |   | $ | 1,068,878 |  
|Tax losses carryforward                                                                  |   | 1,069,785     |   |   | 913,721   |  
|Less: valuation allowance                                                                |   | (1,069,785    | ) |   | (913,721  | )
|Net deferred tax assets                                                                  | $ | 989,990       |   | $ | 1,068,878 |  

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

The Company has provided valuation allowances of $1,069,785 and
$913,721 in respect of federal net operating loss and foreign unused tax loss
carryforwards, respectively, which it does not expect to utilize.

Gross deferred tax assets at September 30, 2010 and March 31,
2010 were reduced by valuation allowances of $1,069,785 and $913,721,
respectively. The total valuation allowance between periods presented increased
by $156,064 (March 31, 2010: $368,853) and such increase was attributable to the
tax effect on foreign tax losses incurred for the six months ended September 30,
2010 of $27,323 (March 31, 2010: $56,757) at enacted foreign profit tax rates
and the tax effect on federal net operating loss incurred for the six months
ended September 30, 2010 of $128,741 (March 31, 2010: $312,096) at the federal
tax rate of 35%.

17

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S.
Dollars)

NOTE 8.     PROVISION FOR INCOME TAXES (CONTD)

Income taxes

A reconciliation of the provision for income tax calculated
using the statutory federal income tax rate and state and local income tax rate
to the Companys provision for income taxes for the six months ended September
30 is as follows:

|                                                                   |   | Three months              |   |   | Six months                |  
|------------------------------------------------------------------ | - | ------------------------- | - | - | ------------------------- | -
|                                                                   |   | ended September
      30, |   |   | ended September
      30, |  
|                                                                   |   | 2010                      |   |   | 2009                      |  
|                                                                   |   |                           |   |   |                           |  
|Provision for income taxes at
      statutory rate of 35%          | $ | 3,398,287                 |   | $ | 2,987,431                 |  
|Chinese tax rate difference                                        |   | (980,023                  | ) |   | (841,863                  | )
|Non-deductible expenses and
      non- assessable profits          |   | (54,638                   | ) |   | (83,293                   | )
|Changes in valuation allowance                                     |   | 118,123                   |   |   | 72,332                    |  
|Tax effect of non-deductible
      temporary difference recognized |   | 39,027                    |   |   | 50,172                    |  
|Income taxes                                                       | $ | 2,520,776                 |   | $ | 2,184,779                 |  

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

NOTE 9.     SHAREHOLDERS EQUITY

General

The Companys total authorized capital at September 30, 2010
and March 31, 2010, is 125,000,000 shares of which 120,000,000 shares are common
stock of par value $0.001 and 5,000,000 shares are preferred stock of par value
$0.001.

18

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

NOTE 9.     SHAREHOLDERS’ EQUITY (CONT’D)

Series A Preferred Stock

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

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

Ranking

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

Voting

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

Conversion

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

Mandatory Conversion

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

19

---

China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

NOTE 9.     SHAREHOLDERS’ EQUITY (CONT’D)

Dividends

Each share of Series A Preferred Stock is entitled to receive cumulative dividends at the annual rate of 7% on the Liquidation Preference Amount thereof. Such dividends are payable annually on September 1 beginning with the first date after December
31, 2009 and any optional conversion date in cash.

Liquidation

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

Redemption

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

Common stock

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

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

20

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China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S.
Dollars)

NOTE 9.     SHAREHOLDERS EQUITY (CONTD)

Warrants

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

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

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

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

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

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

21

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China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S.
Dollars)

NOTE 9.     SHAREHOLDERS EQUITY (CONTD)

In connection with the first closing of Private Placement
Transaction on September 30, 2009, WLT Brothers Capital, Inc. and Euro Pacific
Capital, Inc., the Companys placement agents, received on October 8, 2009, as
partial compensation, 86,281 warrants to purchase 215,703 shares of the
Companys common stock. The warrants have a term of 4 years and are immediately
exercisable at $3.30 per share, subject to customary adjustments.

The Company valued the warrants by Trinomial Option Pricing
Model at $326,705 which was recorded as cost of raising capital against
additional paid-in capital. The Company estimated the fair value of each warrant
award on the date of grant using the Trinomial Option Pricing Model and the
assumption noted in the following table. Expected volatility is based on the
historical and implied volatility of a peer group of publicly traded entities.
The expected term of options gave consideration to historical exercises,
post-vesting cancellations and the options contractual term. The risk-free rate
for the expected term of the option is based on the U.S. Government Bond at the
time of grant. The assumptions used to value options granted were as follows
during fiscal 2010:

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

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

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

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

22

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China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S.
Dollars)

NOTE 9.     SHAREHOLDERS EQUITY (CONTD)

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

The Company valued the warrants by Trinomial Option Pricing
Model at $40,450 which was recorded as cost of raising capital against
additional paid-in capital. The Company estimated the fair value of each warrant
award on the date of grant using the Trinomial Option Pricing Model and the
assumption noted in the following table. Expected volatility is based on the
historical and implied volatility of a peer group of publicly traded entities.
The expected term of options gave consideration to historical exercises,
post-vesting cancellations and the options contractual term. The risk-free rate
for the expected term of the option is based on the U.S. Government Bond at the
time of grant. The assumptions used to value options granted were as follows
during fiscal 2010:

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

The following is the movement of warrants during the six months
ended September 30, 2010:

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


23

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S.
Dollars)

The following is the movement of warrants during the six months
ended September 30, 2009:

Granted
    
    
    Exercised
    
    
    Outstanding atOutstanding at
    
    
    during the
    
    
    during the
    
    
    September 30,
    
    
    ExerciseDate of grant
    
    April 1, 2009
    
    
    period
    
    
    period
    
    
    2009
    
    
    priceOctober 10, 2008
    
    120,228
    
    
    -
    
    
    -
    
    
    120,228
    
    $
    2.78120,228
    
    
    -
    
    
    -
    
    
    120,228Weighted average exercise price
    $
    2.78
    
    
    -
    
    
    -
    
    $
    2.78


NOTE 10.     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 $32,763,
$124,297, $30,536 and $161,489 for the three and six months ended September 30,
2010 and 2009 respectively.

NOTE 11.     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 September 30, 2010, substantially all of the Groups cash and
cash equivalents were held by major financial institutions located in the PRC,
which management believes are of high credit quality.

Groups operations are in China

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

24

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial StatementsSeptember 30, 2010 and 2009 (Unaudited)(Stated in U.S.
Dollars)

NOTE 12.     COMMITMENTS AND CONTINGENT LIABILITIES

Operating Lease Commitments

As of September 30, 2010, the Group did not have any
significant operating lease commitments.

Rent for the three and six months ended September 30, 2010 and
2009 was $5,845, $8,768, $4,386 and $14,754, respectively.

Capital Commitments

As of September 30, 2010, the Group had the followings
outstanding capital expenditure commitments:

|Authorized and contracted, but not provided for: |   |           | 
|------------------------------------------------ | - | --------- | 
|                                                 |   |           | 
|Construction in progress                         | $ | 2,041,301 | 
|Property and equipment                           |   | 1,664,179 | 
|                                                 | $ | 3,705,480 | 

NOTE 13.     UNUSED SECURED CREDIT FACILITIES

As of September 30, 2010, the Group had $2,812,791 (March 31,
2010 (audited): $2,756,791) of unused credit facilities granted by banks. Those
banking facilities were secured by land use rights, buildings and machinery, of
$186,789 (March 31, 2010 (audited): $185,686), $7,110,556 (March 31, 2010
(audited): $7,297,850) and $326,248 (March 31, 2010 (audited): $342,365)
respectively.

NOTE 14.     SUBSEQUENT EVENTS

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

End of condensed consolidated financial statements.

25

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ITEM 2.     MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q 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; potential and
contingent liabilities; managements plans; taxes; as well as all assumptions,
expectations, predictions, intentions or beliefs about future events. You are
cautioned that any such forward-looking statements are not guarantees of future
performance and that a number of risks and uncertainties could cause actual
results of the Company to differ materially from those anticipated, expressed or
implied in the forward-looking statements. The words believe, expect,
anticipate, project, targets, optimistic, intend, aim, will or
similar expressions are intended to identify forward-looking statements. All
statements other than statements of historical fact are statements that could be
deemed forward-looking statements. Risks and uncertainties that could cause
actual results to differ materially from those anticipated include risks related
to our views on the growth of the fruit industry, particularly the specialty
fruit industry; general economic conditions; our ability to overcome competition
in the Chinese fruit processing market; the impact that a downturn or negative
changes in the industries in which our products are sold could have on our
business and profitability; any decrease in the availability, or increase in the
cost, of raw materials and energy; our ability to simultaneously fund the
implementation of our business plan and invest in new projects; economic,
political, regulatory, legal and foreign exchange risks associated with
international expansion; loss of key members of our senior management;
unexpected changes to Chinas political or economic situation and legal
environment; and any of the factors mentioned in the Risk Factors section of
our Annual Report on Form 10-K for the year ended March 31, 2010 and other risks
and uncertainties mentioned in this Form 10-Q or our other reports filed with
the Securities and Exchange Commission.

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

Use of Terms

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

26

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Overview

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

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

On June 29, 2010, we incorporated a wholly owned subsidiary Daqing Senyang Fruit and Vegetable Food Technology Company Limited in China for the purpose of operating new fruit and vegetable powder production. We expect the new fruit and vegetable
power production line will start operation in January 2011 and its annual production capacity will be 10,000 tons.

Second Fiscal Quarter Highlights

Growth in net sales and net income continued during the second fiscal quarter due to strong market demand. Most of the products sold in this quarter were produced after mid-July 2010 when our new production season began. During the second fiscal
quarter, we launched new seabuckthorn and blackcurrant glazed fruit and concentrate juice products. We are building a new fruit and vegetable power production line, which is expected to become operational in January 2011.

The following are some of our financial results for the second fiscal quarter of 2011 in comparison to our financial results for the second fiscal quarter of 2010.

- Net Sales: Net sales increased $3.2 million, or 20.0%, to $23.2 million for the second fiscal quarter of 2011 from $19.3 million for the same period last year.
- Gross Margin: Gross margin was 47.2% for the second fiscal quarter of 2011, as compared to 50.1% for the same period last year.
- Net Income: Net income increased $0.8 million, or 13.2%, to $7.2 million for the second fiscal quarter of 2011 from $6.4 million for the same period last year.
- Fully diluted earnings per share: Fully diluted earnings per share were $0.18 for the second fiscal quarter of 2011 and 2010.

Results of Operations

Comparison of Three Months Ended September 30, 2010 and September 30, 2009

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

27

---

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

|(Unaudited)                                                   |   | Three Months Ended |  |  | Three Months Ended | 
|------------------------------------------------------------- | - | ------------------ |  |  | ------------------ | 
|                                                              |   | September 30, 2010 |  |  | September 30, 2009 | 
|                                                              |   |                    |  |  | As a               | 
|                                                              |   | In                 |  |  | Percentage         | 
|                                                              |   | Thousands          |  |  | of Net Sales       | 
|                                                              |   |                    |  |  |                    | 
|Net Sales                                                     | $ | 23,191             |  |  | 100.0%             | 
|Costs of Sales                                                |   | 12,235             |  |  | 52.8%              | 
|Gross profit                                                  |   | 10,956             |  |  | 47.2%              | 
|Selling expenses                                              |   | 673                |  |  | 2.9%               | 
|General and administrative expenses                           |   | 591                |  |  | 2.5%               | 
|Other income                                                  |   | 17                 |  |  | 0.1%               | 
|Income before noncontrolling interests and
      income taxes |   | 9,709              |  |  | 41.9%              | 
|Income taxes                                                  |   | 2,521              |  |  | 10.9%              | 
|Net income                                                    |   | 7,188              |  |  | 31.0%              | 
|Earnings per share:                                           |   |                    |  |  |                    | 
|Basic                                                         | $ | 0.19               |  |  |                    | 
|Diluted                                                       | $ | 0.18               |  |  |                    | 

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 RMB 6.843 to $1 for the three
months ended September 30, 2010 and the rate of RMB 6.8411 to $1 for the three
months ended September 30, 2009.

Net Sales

Net sales consist of revenue from the sale of our fruit and
fruit based products. Net sales increased $3.9 million, or 20.0%, to $23.2
million for the three months ended September 30, 2010 from $19.3 million for the
three months ended September 30, 2009. Sales of concentrate juice and
concentrate pulp product lines grew from $8.0 million and $1.7 million in the
three months ended September 30, 2009 to $12.5 million and $2.2 million in the
three months ended September 30, 2010, respectively. Sales of glazed fruit and
nectar products increased slightly in this fiscal quarter as compared to the
same quarter last year. Strong market demand drove increased sales volume of our
concentrate juice and concentrate pulp products. Net sales also increased as a
result of an increase in the average sales price of crab apples, blueberry
concentrate juice and pear concentrate pulp which increased approximately 27.6%,
10.7% and 49.0% respectively in this fiscal quarter as compared to the same
quarter last year. Because beverage products usually require large capital for
advertising and other sales and marketing efforts, we made a strategic decision
to cease production of beverage products in March 2010 and to focus on the our
more profitable high-end premium products.

The following table sets forth percentage of net sales
generated by each product for the three months ended September 30, 2010 and
2009:

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

|                  |   | Three Months Ended |  |  | Three Months Ended | 
|----------------- | - | ------------------ |  |  | ------------------ | 
|                  |   | September 30, 2010 |  |  | September 30, 2009 | 
|                  |   |                    |  |  | As a               | 
|                  |   | In                 |  |  | Percentage         | 
|Products          |   | Thousands          |  |  | of Net Sales       | 
|                  |   |                    |  |  |                    | 
|Fresh fruit       | $ | 1,480              |  |  | 6.4%               | 
|Glazed fruit      |   | 3,847              |  |  | 16.6%              | 
|Nectar            |   | 3,202              |  |  | 13.8%              | 
|Concentrate juice |   | 12,464             |  |  | 53.7%              | 

|Concentrate pulp |   | 2,198  |  |  | 9.5%   |  |   | 1,702  |  |  | 8.8%   | 
|---------------- | - | ------ |  |  | ------ |  | - | ------ |  |  | ------ | 
|Beverage         |   | -      |  |  | -      |  |   | 993    |  |  | 5.1%   | 
|Total            | $ | 23,191 |  |  | 100.0% |  | $ | 19,325 |  |  | 100.0% | 

28

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Cost of Sales

Cost of sales is primarily comprised of the costs of our raw
materials, labor, overhead and sales tax. Cost of sales increased $2.6 million,
or 26.9%, to $12.2 million for the three months ended September 30, 2010 from
$9.6 million for the three months ended September 30, 2009. Cost of sales as a
percentage of net sales was 52.8% for the three months ended September 30, 2010
as compared to 49.9% for the same period last year. The amount increase in costs
of sales was mainly attributable to the increased sales volume and higher labor
costs.

Gross Profit

Gross profit is equal to net sales less cost of sales. Gross
profit increased by $1.3 million to $11.0 million for the three months ended
September 30, 2010 from $9.7 million for the three months ended September 30,
2009. Gross profit as a percentage of net sales was 47.2% for the three months
ended September 30, 2010 as compared to 50.1% for the same period last year. The
decrease in gross margin was mainly because we sold more lower margin
concentrate juice products and we launched our new seabuckthorn and blackcurrant
glazed fruit products in this fiscal quarter. As part of our marketing strategy,
we offered our new seabuckthorn and blackcurrant glazed fruit products at
attractive prices to our customers to test the market which resulted in
relatively lower margins than our existing glazed fruit products. We will
continue to monitor the market demand for these new products and may increase
our sales price to improve gross margin in the future when market condition
permits. In addition, we ceased beverage production in March 2010, as a result,
the portion of the factory overhead costs previously applied to the beverage
production line was allocated to other production lines in this production
season. Furthermore, we increased workers salary in this fiscal quarter. The
gross margins for our glazed fruit, nectar, concentrate juice and concentrate
pulp products for the three months ended September 30, 2010 were 53.2%, 68.0%,
42.1% and 36.5%, as compared to 63.0%, 67.8%, 45.6% and 33.2% for the same
period last year, respectively.

Selling and General and Administrative
Expenses

Selling and general and administrative expenses increased
$85,192, or 7.2%, to $1.3 million for the three months ended September 30, 2010
from $1.2 million for the three months ended September 30, 2009.

Selling expenses include sales commissions, the cost of
advertising and promotional materials, salaries and fringe benefits of sales
personnel and other sales related costs. Selling expenses decreased $4,291, or
0.6%, to $673,469 for the three months ended September 30, 2010 from $677,760
for the three months ended September 30, 2009. As a percentage of net sales,
selling expenses decreased 0.6% from 3.5% for three months ended September 30,
2009 to 2.9% for the three months ended September 30, 2010. Due to well
established relationships with our existing customers, we received repeat orders
with higher volume from our existing clients, which led to lower sales related
expenses in this quarter. In addition, we incurred less selling expenses due to
the cessation of production and sale of beverage products in this fiscal
quarter. We plan to continue to spend more efforts on identifying new
distributors in regions where we have no or limited sales to further expand our
customer base and market share.

General and administrative expenses include the costs
associated with staff and support personnel who manage our business activities,
depreciation charge for fixed assets, including idle production line, and
professional fees paid to third parties. Our general and administrative expenses
increased $89,483, or 17.8%, to $590,848 for the three months ended September
30, 2010 from $501,365 for the three months ended September 30, 2009. As a
percentage of net sales, general and administrative expenses for the three
months ended September 30, 2010 decreased by 0.1% to 2.5%, as compared to 2.6%
for the three months ended September 30, 2009. The increase in general and
administrative expenses was mainly attributable to the increase in staff
compensation and benefits.

29

---

Income before Noncontrolling Interests and Income
Taxes

Income before noncontrolling interests and income taxes
increased $1.2 million, or 13.8%, to $9.7 million for the three months ended
September 30, 2010 from $8.5 million for the three months ended September 30,
2009. Income before noncontrolling interests and income taxes as a percentage of
net sales decreased from 44.2% for the three months ended September 30, 2009 to
41.9% for the three months ended September 30, 2010. The percentage decrease was
primarily attributable to the decrease in gross margin as discussed above.

Provision for Income Taxes

The provision for income taxes increased $335,997, or 15.4%, to
$2.5 million for the three months ended September 30, 2010 from $2.2 million for
the three months ended September 30, 2009. The increase in the provision for
income taxes is mainly attributed to the increase in net income before 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 our PRC
operating subsidiary Longheda is 25% in calendar year 2010.

Net Income

Net income increased $0.8 million, or 13.2%, to $7.2 million
for the three months ended September 30, 2010 from $6.4 million for the three
months ended September 30, 2009, mainly as a result of the increase in sales
revenue as discuss above.

Comparison of Six Months Ended September 30, 2010 and
September 30, 2009

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

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

|(Unaudited)                                                   |   | Six Months Ended   |  |  | Six Months Ended   | 
|------------------------------------------------------------- | - | ------------------ |  |  | ------------------ | 
|                                                              |   | September 30, 2010 |  |  | September 30, 2009 | 
|                                                              |   |                    |  |  | As a               | 
|                                                              |   | In                 |  |  | Percentage         | 
|                                                              |   | Thousands          |  |  | of Net Sales       | 
|                                                              |   |                    |  |  |                    | 
|Net Sales                                                     | $ | 32,819             |  |  | 100.0%             | 
|Costs of Sales                                                |   | 17,744             |  |  | 54.1%              | 
|Gross profit                                                  |   | 15,075             |  |  | 45.9%              | 
|Selling expenses                                              |   | 1,258              |  |  | 3.8%               | 
|General and administrative expenses                           |   | 1,696              |  |  | 5.2%               | 
|Other income                                                  |   | 48                 |  |  | 0.1%               | 
|Income before noncontrolling interests and
      income taxes |   | 12,170             |  |  | 37.1%              | 
|Income taxes                                                  |   | 3,187              |  |  | 9.7%               | 
|Net income                                                    |   | 8,983              |  |  | 27.4%              | 
|Earnings per share:                                           |   |                    |  |  |                    | 
|Basic                                                         | $ | 0.23               |  |  |                    | 
|Diluted                                                       | $ | 0.22               |  |  |                    | 

The results of operations reported in the table above is based
on the exchange rate of RMB 6.843 to $1 for the six months ended September 30,
2010 and the rate of RMB 6.84051 to $1 for the six months ended September 30,
2009.

30

---

Net Sales

Net sales increased $4.1 million, or 14.4%, to $32.8 million
for the six months ended September 30, 2010 from $28.7 million for the six
months ended September 30, 2009. The increase was mainly attributable to
increased sales volume of glazed fruit and concentrate juice products due to
market demand. With the new glazed fruit production line and the upgrade of the
concentrate juice production line, the sales of glazed fruit and concentration
juice grew from $4.8 million and $11.7 million in the six months ended September
30, 2009 to $5.6 million and $17.5 million in the six months ended September 30,
2010, respectively. The increase in sales of glazed fruit was due to increased
sales of our new seabuckthorn and blackcurrant glazed fruit products which were
launched in July this year. The increase in sales of concentrate juice products
was mainly due to the increase of sales price of crab apple and raspberry
concentrate juice. In addition, our new launched seabuckthorn and blackcurrant
concentrate juice products contributed approximately $0.7 million. Sales of
nectar and concentrate pulp slightly decreased. The following table sets forth
percentage of net sales generated by each product for the six months ended
September 30, 2010 and 2009:

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

|                  |   | Six Months Ended   |  |  | Six Months Ended   | 
|----------------- | - | ------------------ |  |  | ------------------ | 
|                  |   | September 30, 2010 |  |  | September 30, 2009 | 
|                  |   |                    |  |  | As a               | 
|                  |   | In                 |  |  | Percentage         | 
|Products          |   | Thousands          |  |  | of Net Sales       | 
|                  |   |                    |  |  |                    | 
|Fresh fruit       | $ | 1,480              |  |  | 4.5%               | 
|Glazed fruit      |   | 5,595              |  |  | 17.0%              | 
|Nectar            |   | 3,759              |  |  | 11.5%              | 
|Concentrate juice |   | 17,499             |  |  | 53.3%              | 
|Concentrate pulp  |   | 4,486              |  |  | 13.7%              | 
|Beverage          |   | -                  |  |  | -                  | 
|Total             | $ | 32,819             |  |  | 100.0%             | 

Cost of Sales

Cost of sales increased $2.7 million, or 17.9%, to $17.7
million for the six months ended September 30, 2010 from $15.1 million for the
six months ended September 30, 2009. Cost of sales as a percentage of net sales
was 54.1% for the six months ended September 30, 2010 as compared to 52.5% for
the same period last year. The dollar increase was mainly due to increased sales
volume and higher labor cost.

31

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Gross Profit

Gross profit increased by $1.4 million to $15.1 million for the six months ended September 30, 2010 from $13.6 million for the six months ended September 30, 2009. Gross profit as a percentage of net sales was 45.9% for the six months
ended September 30, 2010 as compared to 47.5% for the same period last year. The decrease in gross margin was mainly because we sold more lower margin concentrate juice products in the six months ended September 30, 2010 and we launched our new
seabuckthorn and blackcurrant glazed fruit products in July 2010. As part of our marketing strategy, we offered our new seabuckthorn and blackcurrant glazed fruit products at attractive prices to our customers to test the market which resulted in
relatively lower margins than our existing glazed fruit products. We will continue to monitor the market demand for these new products and may increase our sales price to improve gross margin in the future when market condition permits. In addition,
we ceased beverage production in March 2010, as a result, the portion of the factory overhead costs previously applied to the beverage production line was allocated to other production lines in this production season. Furthermore, we increased
workers’ salary in the three months ended September 30, 2010. The gross margins for glazed fruit, nectar, concentrate juice and concentrate pulp products for the six months period ended September 30, 2010 were 52.1%, 68.3%, 43.0% and 30.8%, as
compared to 63.7%, 67.8%, 42.7% and 36.1% for the same period last year, respectively.

Selling and General and Administrative Expenses

Selling and general and administrative expenses decreased $58,662, or 1.9%, to $3.0 million for the six months ended September 30, 2010 from $3.0 million for the six months ended September 30, 2009.

Selling expenses decreased $240,162, or 16.0%, to $1.3 million for the six months ended September 30, 2010 from $1.5 million for the six months ended September 30, 2009. As a percentage of net sales, selling expenses decreased 1.4% from
5.2% for six months ended September 30, 2009 to 3.8% for the six months ended September 30, 2010. Due to well established relationships with our existing customers, we received repeat orders with higher volume from our existing clients, which led to
lower sales related expenses in the first half of fiscal year 2011. In addition, we incurred less selling expenses due to the cessation of production and sale of beverage products in the six months ended September 30. 2010.

Our general and administrative expenses increased $181,500, or 12.0%, to $1.7 million for the six months ended September 30, 2010 from $1.5 million for the six months ended September 30, 2009. As a percentage of net sales, general and
administrative expenses for the six months ended September 30, 2010 decreased by 0.1% to 5.2%, as compared to 5.3% for the six months ended September 30, 2009. The increase in general and administrative expenses was mainly attributable to the
increase in staff salary and benefit, and depreciation expenses incurred in connection with our new glazed fruit production line launched in December 2009.

Income before Noncontrolling Interests and Income Taxes

Income before noncontrolling interests and income taxes increased $1.5 million, or 14.2%, to $12.2 million for the six months ended September 30, 2010 from $10.7 million for the six months ended September 30, 2009. Income before
noncontrolling interests and income taxes as a percentage of net sales remained stable at 37.1% .

Provision for Income Taxes

The provision for income taxes increased $416,582, or 15.0%, to $3.2 million for the six months ended September 30, 2010 from $2.8 million for the six months ended September 30, 2009. The increase in the provision for income taxes is
mainly attributed to the increase in net income before income taxes.

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Net Income

Net income increased $1.1 million, or 13.9%, to $9.0 million
for the six months ended September 30, 2010 from $7.9 million for the six months
ended September 30, 2009, mainly as a result of the increase in sales revenue as
discuss above.

Liquidity and Capital Resources

As of September 30, 2010, we had cash and cash equivalents of
$7.2 million. The following table sets forth a summary of our cash flows for the
periods indicated.

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

|                                                           |   | Six months Ended September
      30 |  
|---------------------------------------------------------- | - | ----------------------------------- | -
|                                                           |   | (in thousands)                      |  
|                                                           |   | 2010                                |  
|                                                           |   |                                     |  
|Net cash used in operating activities                      | $ | (20,708                             | )
|Net cash used in investing activities                      |   | (9,418                              | )
|Net provided by financing activities                       |   | 122                                 |  
|Effect of exchange rate on cash and cash equivalents       |   | 1,163                               |  
|Cash and cash equivalents at beginning of
      the period |   | 35,994                              |  
|Cash and cash equivalents at end of period                 |   | 7,154                               |  

Operating Activities

Net cash used in operating activities was $20.7 million for the
six months ended September 30, 2010 as compared to $162,199 used in operating
activities for the six months ended September 30, 2009. Net cash used in
operating activities for the six months ended September 30, 2010 was mainly
attributable to approximately $9.8 million in advance payment for the
construction of the fruit and vegetable powder factory and production line and a
$13.3 million increase in inventories. The significant increase in inventories
was mainly because our new production season started in July and we manufactured
more products in this fiscal quarter as compared to the same period last year in
anticipation of the increased market demand.

Investing Activities

During the six months ended September 30, 2010, we used
approximately $4.3 million in the upgrade of concentrate juice production lines
in our Daqing and Mudanjiang facilities and approximately $5.1 million in the
construction of the new fruit and vegetable powder factory. We had no investing
activities for the six months ended September 30, 2009.

Financing Activities

In connection with our 2009 private placement of Series A
Convertible Preferred Stock, we set up an escrow account for the payment of
dividends to holders of Series A Convertible Preferred Stock due on September 1,
2010, $809,550 of the escrow amount was paid as dividends to holders of our
Series A Convertible Preferred Stock on September 1, 2010 and the remaining
$122,080 was returned to us due to conversion of some shares of the Series A
Convertible Preferred Stock before the dividend payment date. The net cash
provided by financing activities for the six months ended September 30, 2009 was
the net proceeds from our private placement of the Series A Convertible
Preferred Stock closed in September, 2009.

On February 23, 2010, we entered into a $1.17 million revolving
credit facility with the Heilongjiang Rural Credit Union with a term of three
years. This facility is secured by land use rights, buildings and machinery
located in Daqing City. On February 25, 2010, we entered into another $1.59 million revolving credit facility with the Longjiang Bank with a term of two years. This facility was secured by our land use rights, buildings and machinery in Mu Dan
Jiang City. Both facilities are for working capital needs during our production season. As of the date of this report, we did not draw down on either of the facilities and did not have any outstanding bank loans.

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

Critical Accounting Policies

Critical accounting policies are those we believe are most important to portraying our financial conditions and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties
regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting policies previously
disclosed in our Annual Report on Form 10-K for the fiscal yearended March 31, 2010.

Recently Issued Accounting Pronouncements

In July 2010, the FASB issued Accounting Standards Update (ASU) 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. This ASU enhances the disclosure requirements about the credit quality and
related allowance for credit losses of financing receivables. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Company’s consolidated results of operations or financial
condition, as its requirements only pertain to financial statement note disclosure.

In August 2010, the FASB issued ASU 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules. This update amends various SEC paragraphs in the FASB Accounting Standards Codification pursuant to the SEC Rule, Technical
Amendments to Rules Forms, Schedules and Codification of Financial Reporting Policies. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Company’s consolidated results of
operations or financial condition.

In August 2010, the FASB issued ASU 2010-22, Accounting for Various Topics. This ASU amends various SEC paragraphs in the FASB Accounting Standards Codification based on external comments received and the issuance of Staff Accounting Bulletin (SAB)
No. 112, which amended or rescinded a portion of certain SAB topics. SAB 112 was issued to bring existing SEC guidance into conformity with ASC 805, Business Combination, and ASC 810, Consolidation. The Company is currently evaluating the impact of
this standard, but would not expect it to have a material impact on the Company’s consolidated results of operations or financial condition.

Other recent accounting pronouncements issued by the FASB (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 financial statements.

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Off-Balance Sheet Arrangements

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

Seasonality

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

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

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4.     CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

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

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer, Mr. Changjun Yu, and Chief Financial Officer, Mr. Colman Cheng, evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of September 30, 2010. Based on our assessment, Mr. Yu and Mr. Cheng determined that, as of September 30, 2010, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was
completed, our disclosure controls and procedures were effective to satisfy the objectives for which they are intended.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2010, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.

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PART IIOTHER INFORMATION

ITEM 1.     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 1A.  RISK FACTORS.

Not Applicable.

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

None.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.     (REMOVED AND RESERVED).

ITEM 5.     OTHER INFORMATION.

We have no information to disclose that was required to be in a
report on Form 8-K during the period covered by this report, but was not
reported. There have been no material changes to the procedures by which
security holders may recommend nominees to our board of directors.

ITEM 6.     EXHIBITS.

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

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

36

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|Date: November 15, 2010 | CHINA NUTRIFRUIT GROUP LIMITED
|----------------------- | ------------------------------

By: /s/ Changjun Yu       Changjun Yu, Chief Executive
Officer (Principal Executive
Officer)

By: /s/ Colman Cheng       Colman Cheng, Chief Financial
Officer (Principal Financial Officer
and PrincipalAccounting
Officer)

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EXHIBIT INDEX

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

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