---

UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: June 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 incorporation | (I.R.S. Employer Identification No.)
|or organization)                              |                                     

5th Floor, Chuangye Building, Chuangye Plaza 
Industrial Zone 3, Daqing Hi-Tech Industrial Development Zone 
Daqing, Heilongjiang 163316 
Peoples Republic of China (Address of principal executive offices, 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 [    ]                  | Smaller reporting company [ X ]
|(Do not check if a smaller reporting company) |                                

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

Yes [    ]            
No [ X ]

The number of shares outstanding of each of the issuers classes of common stock, as of August 16, 2010 is as follows:

|Class of Securities            |  | Shares Outstanding
|------------------------------ |  | ------------------
|Common Stock, $0.001 par value |  | 36,718,772        

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CHINA NUTRIFRUIT GROUP LIMITED

Quarterly Report on FORM 10-Q 
Three Months Ended June 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. | 27
|ITEM 3.               | QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK.                            | 33
|ITEM 4.               | CONTROLS AND PROCEDURES.                                                                     | 33
|PART II               |                                                                                              | 34
|OTHER INFORMATION     | 34                                                                                          
|ITEM 1.               | LEGAL
      PROCEEDINGS.                                                                     | 34
|ITEM 1A.              | RISK FACTORS.                                                                                | 34
|ITEM 2.               | UNREGISTERED SALES OF
      EQUITY SECURITIES AND USE OF PROCEEDS.                           | 34
|ITEM 3.               | DEFAULTS UPON SENIOR SECURITIES.                                                             | 34
|ITEM 4.               | (REMOVED AND
      RESERVED).                                                                | 34
|ITEM 5.               | OTHER INFORMATION.                                                                           | 34
|ITEM 6.               | EXHIBITS.                                                                                    | 34

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PART I FINANCIAL
INFORMATION

ITEM 1.     FINANCIAL STATEMENTS.

CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES 
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 
AS OF JUNE 20, 2010 AND FOR THE THREE MONTHS ENDED JUNE 20,
2010

|Contents                                                                                                             | Page
|-------------------------------------------------------------------------------------------------------------------- | ----
|Condensed Consolidated Balance
      Sheets as of June 30, 2010 (unaudited) and March 31, 2010                       | 3   
|Condensed Consolidated Statements of Income for the three
      months ended June 30, 2010 and 2009 (unaudited)      | 4   
|Condensed Consolidated Statements of Cash
      Flows for the three months ended June 30, 2010 and 2009 (unaudited)  | 5   
|Condensed Consolidated Statements of Shareholders Equity
      for the three months ended June 30, 2010 (unaudited) | 6   
|Notes to the Condensed Consolidated
      Financial Statements (unaudited)                                           | 7   

2

---

CHINA NUTRIFRUIT GROUP LIMITED AND
SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Stated in
US Dollars)


|                                                                                                      |   |            |  |   |            | 
|----------------------------------------------------------------------------------------------------- | - | ---------- |  | - | ---------- | 
|                                                                                                      |   | June 30,   |  |   | March 31,  | 
|                                                                                                      |   | 2010       |  |   | 2010       | 
|ASSETS                                                                                                |   |            |  |   |            | 
|Current assets:                                                                                       |   |            |  |   |            | 
|Cash and cash
      equivalents                                                                       | $ | 26,660,974 |  | $ | 35,994,443 | 
|Proceeds from private placement held in
      escrow account                                          |   | 931,630    |  |   | 931,630    | 
|Trade receivables, net
      of allowance                                                             |   | 7,063,910  |  |   | 11,047,846 | 
|Inventories, net                                                                                      |   | 271,888    |  |   | 4,179,910  | 
|Prepayment and deposits                                                                               |   | 13,701,308 |  |   | -          | 
|Other current assets                                                                                  |   | 69,176     |  |   | 116,196    | 
|Total current assets                                                                                  |   | 48,698,886 |  |   | 52,270,025 | 
|Property and equipment, net                                                                           |   | 16,617,700 |  |   | 17,066,907 | 
|Construction in progress                                                                              |   | 3,503,536  |  |   | -          | 
|Deferred tax assets                                                                                   |   | 1,029,851  |  |   | 1,068,878  | 
|Land use rights, net                                                                                  |   | 184,892    |  |   | 185,686    | 
|TOTAL ASSETS                                                                                          | $ | 70,034,865 |  | $ | 70,591,496 | 
|                                                                                                      |   |            |  |   |            | 
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                  |   |            |  |   |            | 
|Current liabilities:                                                                                  |   |            |  |   |            | 
|Other payables and accrued expenses                                                                   | $ | 1,925,373  |  | $ | 2,379,246  | 
|Trade payables                                                                                        |   | 58,309     |  |   | 87,954     | 
|Income taxes payable                                                                                  |   | 498,744    |  |   | 2,296,513  | 
|Total current liabilities                                                                             |   | 2,482,426  |  |   | 4,763,713  | 
|TOTAL LIABILITIES                                                                                     |   | 2,482,426  |  |   | 4,763,713  | 
|                                                                                                      |   |            |  |   |            | 
|Commitments and Contingencies                                                                         |   |            |  |   |            | 
|                                                                                                      |   |            |  |   |            | 
|Shareholders' equity                                                                                  |   |            |  |   |            | 
|Preferred stock                                                                                       |   |            |  |   |            | 
|Authorized: 5,000,000 shares, par value $0.001                                                        |   |            |  |   |            | 
|Issued and outstanding: 350,559
      shares as of June 30, 2010; 
    (365,109 as of March 31, 2010) |   | 350        |  |   | 365        | 

|Common stock                                                         |   |            |  |   |            | 
|-------------------------------------------------------------------- | - | ---------- |  | - | ---------- | 
|Authorized: 120,000,000 shares, par value $0.001                     |   |            |  |   |            | 
|Issued and outstanding: 36,718,772
      shares as of June 30, 2010; |   |            |  |   |            | 
|(36,573,272 shares as of 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                         |   | 371,864    |  |   | 440,714    | 
|Retained earnings                                                    |   | 26,086,417 |  |   | 24,292,911 | 
|TOTAL SHAREHOLDERS EQUITY                                           |   | 67,552,439 |  |   | 65,827,783 | 
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                           | $ | 70,034,865 |  | $ | 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 |  
|                                                                |   | June 30,           |  
|                                                                |   | 2010               |  
|                                                                |   |                    |  
|Net sales                                                       | $ | 9,628,256          |  
|                                                                |   |                    |  
|Cost of sales                                                   |   | (5,509,124         | )
|                                                                |   |                    |  
|Gross profit                                                    |   | 4,119,132          |  
|                                                                |   |                    |  
|Selling expenses                                                |   | (584,508           | )
|General and administrative expenses                             |   | (1,105,724         | )
|                                                                |   |                    |  
|Operating earnings                                              |   | 2,428,900          |  
|                                                                |   |                    |  
|Other income (expenses)                                         |   |                    |  
|Interest expense                                                |   | -                  |  
|Other income                                                    |   | 30,472             |  
|Total other income (expenses)                                   |   | 30,472             |  
|                                                                |   |                    |  
|Earnings before noncontrolling
      interests and income taxes |   | 2,459,372          |  
|                                                                |   |                    |  
|Provision for income taxes                                      |   | (665,866           | )
|                                                                |   |                    |  
|Earnings before noncontrolling interests                        |   | 1,793,506          |  
|                                                                |   |                    |  
|Net earnings                                                    |   | 1,793,506          |  
|Other comprehensive income                                      |   |                    |  
|Foreign currency translation                                    |   | (68,850            | )
|Comprehensive income                                            | $ | 1,724,656          |  
|                                                                |   |                    |  

|Earnings per
      share                                  |   |            |  |   |            | 
|--------------------------------------------------------- | - | ---------- |  | - | ---------- | 
|Basic                                                     | $ | 0.04       |  | $ | 0.04       | 
|                                                          |   |            |  |   |            | 
|Diluted                                                   | $ | 0.04       |  | $ | 0.04       | 
|                                                          |   |            |  |   |            | 
|Weighted average number of common stock
      outstanding |   |            |  |   |            | 
|Basic                                                     |   | 36,670,809 |  |   | 36,125,754 | 
|Diluted                                                   |   | 36,774,433 |  |   | 36,125,754 | 

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

4

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CHINA NUTRIFRUIT GROUP LIMITED AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Stated in US Dollars)


|                                                                                                                |   |                    |  
|--------------------------------------------------------------------------------------------------------------- | - | ------------------ | -
|                                                                                                                |   | Three months ended |  
|                                                                                                                |   | June 30,           |  
|                                                                                                                |   | 2010               |  
|Operating activities:                                                                                           |   |                    |  
|Net earnings                                                                                                    | $ | 1,793,506          |  
|Adjustments to reconcile net earnings to net cash used in
      operating activities                            |   |                    |  
|Depreciation and amortization                                                                                   |   | 428,358            |  
|Benefit for
      deferred income taxes                                                                         |   | 39,027             |  
|Changes in operating assets and
      liabilities:                                                              |   |                    |  
|Trade receivables,
      net                                                                                    |   | 3,972,796          |  
|Inventories                                                                                                     |   | 3,903,808          |  
|Prepayment and
      deposits                                                                                   |   | (13,699,845        | )
|Other current assets                                                                                            |   | 45,527             |  
|Trade payables                                                                                                  |   | (29,557            | )
|Income taxes payable                                                                                            |   | (1,795,453         | )
|Other payables and
      accrued expenses                                                                       |   | (451,846           | )
|Net cash (used in) provided by
      operating activities                                                       |   | (5,793,679         | )
|                                                                                                                |   |                    |  
|Investing activities:                                                                                           |   |                    |  
|Addition of construction in progress                                                                            |   | (3,503,536         | )
|Net cash used in investing
      activities                                                                     |   | (3,503,536         | )
|                                                                                                                |   |                    |  
|                                                                                                                |   |                    |  
|(Decrease) Increase in cash and cash equivalents                                                                |   | (9,297,215         | )
|                                                                                                                |   |                    |  
|Effect of exchange rate on cash and cash equivalents                                                            |   | (36,254            | )
|                                                                                                                |   |                    |  
|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 | $ | 26,660,974         |  
|                                                                                                                |   |                    |  
|Supplemental disclosure of cash flows
      information:                                                        |   |                    |  
|Cash paid for:                                                                                                  |   |                    |  
|Income taxes                                                                                                    | $ | 2,422,292          |  

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

5

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CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (UNAUDITED)

(Stated in US Dollars)


|                               |  | Preferred stock |   |   | Common stock |   |  |            |  |   |        |  |   |            |   |   |               |   |   |            | 
|------------------------------ |  | --------------- | - | - | ------------ | - |  | ---------- |  | - | ------ |  | - | ---------- | - | - | ------------- | - | - | ---------- | 
|                               |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   | Accumulated   |   |   |            | 
|                               |  |                 |   |   |              |   |  |            |  |   |        |  |   | Additional |   |   | other         |   |   | Statutory  | 
|                               |  |                 |   |   |              |   |  |            |  |   |        |  |   | paid-in    |   |   | comprehensive |   |   | reserves  | 
|                               |  | Shares          |   |   | Amount       |   |  | Shares     |  |   | Amount |  |   | capital    |   |   | income        |   |   | restricted | 
|Balance at March 31, 2010      |  | 365,109         |   | $ | 365          |   |  | 36,573,272 |  | $ | 36,573 |  | $ | 36,492,875 |   | $ | 440,714       |   | $ | 4,564,345  | 
|Conversion of preferred shares |  | (14,550         | ) |   | (15          | ) |  | 145,500    |  |   | 145    |  |   | (130       | ) |   | -             |   |   | -          | 
|Comprehensive income           |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   |               |   |   |            | 
|Net earnings                   |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | -             |   |   | -          | 
|Translation adjustments        |  | -               |   |   | -            |   |  | -          |  |   | -      |  |   | -          |   |   | (68,850       | ) |   | -          | 
|Balance at June 30, 2010       |  |                 |   |   |              |   |  |            |  |   |        |  |   |            |   |   |               |   |   |            | 
|                               |  | 350,559         |   | $ | 350          |   |  | 36,718,772 |  | $ | 36,718 |  | $ | 36,492,745 |   | $ | 371,864       |   | $ | 4,564,345  | 

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

6

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China Nutrifruit Group Limited and Subsidiaries 
Notes to Condensed Consolidated Financial Statements 
For the three months ended June 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 was not engaged in any business activities and had no
meaningful operations, income producing assets or significant operating capital since at least 1989 until it acquired Fezdale
Investments Limited ("Fezdale") on August 14, 2008.

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

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

Also, on August 14, 2008, the Companys majority shareholder, Yiu Fai Kung ("Mr. Kung"), entered into escrow agreements with the private placement investors and HFG
International, Limited ("HFG"). Mr. Kung will deliver a
certain number of shares of the Companys common stock owned by him to the investors and HFG pro-rata in accordance with their respective investment amount for no additional consideration if:

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

The return to Mr. Kung of any of the make good shares placed in escrow by him is considered to be a separate compensatory arrangement because Mr. Kung is a director of the Companys subsidiary Fezdale. Accordingly, if any of the required
earnings targets are met and shares are returned to Mr. Kung, the Company will recognize a non-cash compensation cost at that time equal to the then fair value of the shares returned (up to a total of 5,599,598 shares). For the year ended March 31,
2009, the earnings target for 2009 of net income of $13,955,178 (before any charges related to the release of any shares from escrow) was met. Accordingly, the Company has recorded a non-cash charge to compensation cost of $9,519,316.6 in
the fourth quarter of 2009 related to the release from escrow to Mr. Kung of 2,799,799 shares.

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.

7

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China Nutrifruit Group Limited and Subsidiaries 
Notes to Condensed Consolidated Financial Statements 
For the three months ended June 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 consists of one share of the Companys newly-designated Series A Convertible Preferred Stock, par value $0.001 per share ("Series A Preferred Stock") and one
warrant (the "Warrant") to purchase 2.5 shares of the Companys common stock, par value $.001 per share. The Series A Preferred Stock is convertible into ten shares of the Companys common stock (subject to customary
adjustments) and the Company is obligated to register the underlying shares of common stock within thirty days of the closing date. In connection with the initial closing of the offering, the Company raised approximately $11.86 million.

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

Fezdale Investments Limited

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

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

Solar Sun Holdings Limited

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

Daqing Longheda Food Company Limited

Longheda was incorporated in Heilongjiang province of Peoples Republic of China
(the "PRC") in June 2004. Longheda manufactures and sells a variety of food products processed from specialty premium fruits that grow in Northeast
China. Currently, Longheda processes four types of premium specialty fruits, including golden berry, crab apple, blueberry and raspberry, and sells fresh fruits. Longheda currently has five types of fruit based products, including fruit concentrate,
nectar, glazed fruits, concentrate pulp and fruit beverage. Longheda sells its products through an extensive sales and distribution network covering 20 provinces in China. The fresh fruits are mainly sold to fruit supermarkets and stores while the
processed fruit products are mainly sold to manufacturers for further processing into fruit juice and other fruit related products.

8

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to Condensed Consolidated Financial Statements 
For the three months ended June 30, 2010 and 2009 
(Unaudited) 
(Stated in U.S. Dollars)

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

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 Peoples Republic of China (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 have been prepared in accordance
with the US GAAP. All significant intercompany transactions and balances have been 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 have been 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 segment based on the nature of the products with similar economic characteristics. No segment information is provided as the Group only has one business and geographical segment. The Groups
reportable segment is the manufacture and sell of food products, which the operations are located in 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.

9

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China Nutrifruit Group Limited and Subsidiaries 
Notes to Condensed Consolidated Financial Statements 
For the three months ended June 30, 2010 and 2009 
(Unaudited) 
(Stated in U.S. Dollars)

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

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

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

Earnings per share

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

10

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to Condensed Consolidated Financial Statements 
For the three months ended June 30, 2010 and 2009 
(Unaudited) 
(Stated in U.S. Dollars)

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

Fair value of financial instruments

The carrying amount of certain of the Groups financial instruments, including cash and cash equivalents, trade accounts receivable, account payable, 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 were $427,689 and $355,102 for the
three months period ended June 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 months ended June 30, 2010 and 2009 were $465,185 and $711,530 respectively.

Impairment of long-lived assets

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

All land in the PRC is owned by the PRC government. The government in the PRC, according to the relevant PRC law, may sell the right to use the land for a specific period of time. Thus, all of the Groups land located in the PRC
is considered to be leasehold land and is stated at cost less accumulated
amortization and any recognized impairment loss. Amortization is provided on a
straight-line basis over 50 years, the term of the land use right
agreements, and the land use rights will expire in 2055.

11

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to
Condensed Consolidated Financial Statements 
For the three months ended June 30,
2010 and 2009 
(Unaudited) 
(Stated in U.S. Dollars)

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

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 in 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 $5,539 and $4,642 for the three months ended June 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.

|June 30, 2010                                |                     
|-------------------------------------------- | --------------------
|Balance sheet                                | RMB6.8430 to US$1.00
|Statement of income and comprehensive income | RMB6.8430 to US$1.00
|                                             |                     
|March 31, 2010                               |                     
|Balance sheet                                | RMB6.8361 to US$1.00
|Statement of income and comprehensive income | RMB6.8383 to US$1.00

As of June 30, 2010, RMB173,773,995 which equated to
US$25,394,417 (March 31, 2010: RMB236,619,999 equated to 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.

12

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to Condensed Consolidated Financial Statements 
For the three months ended June 30, 2010 and 2009 
(Unaudited) 
(Stated in U.S. Dollars)

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

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.

13

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to Condensed Consolidated Financial Statements 
For the three months ended June 30, 2010 and 2009 
(Unaudited) 
(Stated in U.S. Dollars)

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2009, the Financial Accounting Standards Board (the "FASB") issued the FASB Accounting Standards Codification (the
"Codification") as the source of authoritative accounting principles recognized
by the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with Generally Accepted Accounting Principles
("GAAP"). Rules and interpretative releases of the Securities and Exchange Commission are also sources of
authoritative GAAP for SEC registrants. As a result of the Codification, all changes to GAAP originating from the FASB will now be issued in Accounting Standards Updates
("ASUs"). These changes and the Codification do not change GAAP. The Company adopted the
changes resulting from the Codification, effective September 30, 2009. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Companys results of operations, financial position
or notes to the condensed consolidated financial statements.

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

14

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to
Condensed Consolidated Financial Statements 
For the three months ended June 30,
2010 and 2009 
(Unaudited) 
(Stated in U.S. Dollars)

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

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

Other recent accounting pronouncements issued by the FASB
(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.

NOTE 3. EARNINGS PER SHARE

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

|                                                                        |   | Three months ended June
      30, |  
|----------------------------------------------------------------------- | - | --------------------------------- | -
|                                                                        |   | 2010                              |  
|Numerator:                                                              |   |                                   |  
|Net earnings                                                            | $ | 1,793,506                         |  
|Less: dividends on preferred stock                                      |   | (202,846                          | )
|                                                                        | $ | 1,590,660                         |  
|Denominator:                                                            |   |                                   |  
|Weighted average common
      stock outstanding                         |   | 36,670,809                        |  
|Effect of dilutive warrant                                              |   | 103,624                           |  
|Weighted average common stock and dilutive
      potential common stock |   | 36,774,433                        |  
|                                                                        |   |                                   |  
|Basic net earnings per share                                            | $ | 0.04                              |  
|                                                                        |   |                                   |  
|Diluted net earnings per share                                          | $ | 0.04                              |  

15

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to
Condensed Consolidated Financial Statements 
For the three months ended June 30,
2010 and 2009 
(Unaudited) 
(Stated in U.S. Dollars)

NOTE 4. INVENTORY, NET

At June 30, 2010 and March 31, 2010 inventory is comprised of
the following:

|               |   | June 30, |  |   | March 31, | 
|-------------- | - | -------- |  | - | --------- | 
|               |   | 2010     |  |   | 2010      | 
|Finished goods | $ | 193,974  |  | $ | 4,101,918 | 
|Raw material   |   | 77,914   |  |   | 77,992    | 
|               | $ | 271,888  |  | $ | 4,179,910 | 

NOTE 5. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, at June 30, 2010 and March 31,
2010 are summarized as follows:

|                                         |   | June 30,   |   |   | March 31,  |  
|---------------------------------------- | - | ---------- | - | - | ---------- | -
|                                         |   | 2010       |   |   | 2010       |  
|                                         |   |            |   |   |            |  
|Buildings                                | $ | 4,667,214  |   | $ | 4,673,420  |  
|Leasehold improvement                    |   | 1,338,193  |   |   | 1,339,544  |  
|Machinery                                |   | 14,596,220 |   |   | 14,616,662 |  
|Furniture, fixtures and office equipment |   | 13,704     |   |   | 13,742     |  
|Motor vehicles                           |   | 6,158      |   |   | 6,194      |  
|                                         |   |            |   |   |            |  
|Total                                    | $ | 20,621,489 |   | $ | 20,649,562 |  
|Less: accumulated depreciation           |   | (4,003,789 | ) |   | (3,582,655 | )
|                                         | $ | 16,617,700 |   | $ | 17,066,907 |  

As of June 30, 2010, buildings and machinery, of $7,126,175
(March 31, 2010: $7,297,850) and $330,694 (March 31, 2010: $342,365)
respectively, were pledged to secure the unused banking facilities obtained by
the Group. (Note 14)

NOTE 6. PROCEEDS FROM PRIVATE PLACEMENT HELD IN ESCROW
ACCOUNT

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

16

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to
Condensed Consolidated Financial Statements 
For the three months ended June 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 are
summarized as follows:

|                         |   | June 30,  |  |   | March 31, | 
|------------------------ | - | --------- |  | - | --------- | 
|                         |   | 2010      |  |   | 2010      | 
|Accruals                 | $ | 617,626   |  | $ | 723,588   | 
|Value added tax payables |   | 589,051   |  |   | 1,104,630 | 
|Other payables           |   | 718,696   |  |   | 551,028   | 
|                         | $ | 1,925,373 |  | $ | 2,379,246 | 

The other payables mainly comprised the amount payable to the
suppliers of property and equipment, amounting to $397,655 and $398,056 as of
June 30, 2010 and March 31, 2010 respectively.

NOTE 8. PROVISION FOR INCOME TAXES

The provision for income tax is as follows:

|                    |   | For the three months | 
|------------------- | - | -------------------- | 
|                    |   | ended June 30,       | 
|                    |   | 2010                 | 
|                    |   |                      | 
|Current:            |   |                      | 
|PRC                 | $ | 626,839              | 
|Other jurisdictions |   | -                    | 
|Deferred:           |   |                      | 
|PRC                 |   | 39,027               | 
|Other jurisdictions |   | -                    | 
|                    | $ | 665,866              | 

17

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to
Condensed Consolidated Financial Statements 
For the three months ended June 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:

|                                                                                         |   | June 30,  |   |   | March 31, |  
|---------------------------------------------------------------------------------------- | - | --------- | - | - | --------- | -
|                                                                                         |   | 2010      |   |   | 2010      |  
|Deferred tax assets:                                                                     |   |           |   |   |           |  
|Difference between book and tax basis of
      land use right and property and equipment | $ | 1,029,851 |   | $ | 1,068,878 |  
|Tax losses carryforward                                                                  |   | 951,663   |   |   | 913,721   |  
|Less: valuation
      allowance                                                          |   | (951,663  | ) |   | (913,721  | )
|Net deferred tax assets                                                                  | $ | 1,029,851 |   | $ | 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 $951,663 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 June 30, 2010 and March 31, 2010
were reduced by a valuation allowance of $951,663 and $913,721, respectively. The
total valuation allowance between periods presented increased by $37,942 (March
31, 2010: $368,853) and such increase was attributable to the tax effect on
foreign tax losses incurred for the three months ended June 30, 2010 of $15,023
(March 31, 2010: $56,757) at enacted foreign profit tax rates and the tax effect
on federal net operating loss incurred for the three months ended June 30, 2010
of $22,919 (March 31, 2010: $312,096) at the federal tax rate of 35%.

18

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to
Condensed Consolidated Financial Statements 
For the three months ended June 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 years ended March 31 is as
follows:

|                                                                   |   | For the three months |  
|------------------------------------------------------------------ | - | -------------------- | -
|                                                                   |   | ended June 30,       |  
|                                                                   |   | 2010                 |  
|Provision for income taxes at
      statutory rate of 35%          | $ | 860,780              |  
|Chinese tax rate difference                                        |   | (229,135             | )
|Non-deductible expenses and
      non-assessable profits           |   | (42,748              | )
|Changes in valuation allowance                                     |   | 37,942               |  
|Tax effect of non-deductible
      temporary difference recognized |   | 39,027               |  
|Income taxes                                                       | $ | 665,866              |  

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 June 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.

19

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to Condensed Consolidated Financial Statements 
For the three months ended June 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.

20

---

China Nutrifruit Group Limited and Subsidiaries 
Notes to Condensed Consolidated Financial Statements 
For the three months ended June 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 stockholders converted 14,550 shares into 145,500 shares of the Companys common stock at a conversion ratio of
one Series A Preferred Stock to ten 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.

21

---

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

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

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

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

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

22

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China Nutrifruit Group Limited and Subsidiaries 
Notes to
Condensed Consolidated Financial Statements 
For the three months ended June 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, as partial
compensation, 86,281 warrants to purchase 215,703 shares of the Companys common
stock. The warrants have a term of 4 years and are immediately exercisable at
$3.30 per share, subject to customary adjustments.

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

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

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

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

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

23

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China Nutrifruit Group Limited and Subsidiaries 
Notes to
Condensed Consolidated Financial Statements 
For the three months ended June 30,
2010 and 2009 
(Unaudited) 
(Stated in U.S. Dollars)

NOTE 9. SHAREHOLDERS EQUITY (CONTD)

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

|                                |   |                |  |  | Granted    |  |  | Exercised  |  |   |                |  |   |          | 
|------------------------------- | - | -------------- |  |  | ---------- |  |  | ---------- |  | - | -------------- |  | - | -------- | 
|                                |   | Outstanding at |  |  | during the |  |  | during the |  |   | Outstanding at |  |   | Exercise | 
|Date of grant                   |   | April 1, 2010  |  |  | period     |  |  | period     |  |   | June 30, 2010  |  |   | price    | 
|October 10, 2008                |   | 120,228        |  |  | -          |  |  | -          |  |   | 120,228        |  | $ | 2.78     | 
|September 30, 2009              |   | 445,783        |  |  | -          |  |  | -          |  |   | 445,783        |  | $ | 3.30     | 
|October 8, 2009                 |   | 43,916         |  |  | -          |  |  | -          |  |   | 43,916         |  | $ | 3.30     | 
|                                |   | 609,927        |  |  | -          |  |  | -          |  |   | 609,927        |  |   |          | 
|Weighted average exercise price | $ | 3.20           |  |  | -          |  |  | -          |  | $ | 3.20           |  |   |          | 

The following is the movement of warrants during first quarter
of fiscal 2010:

|                               |   |                |  |  | Granted    |  |  | Exercised  |  |   |                |  |   |          | 
|------------------------------ | - | -------------- |  |  | ---------- |  |  | ---------- |  | - | -------------- |  | - | -------- | 
|                               |   | Outstanding at |  |  | during the |  |  | during the |  |   | Outstanding at |  |   | Exercise | 
|Date of grant                  |   | April 1, 2009  |  |  | period     |  |  | period     |  |   | June 30, 2009  |  |   | price    | 
|October 10, 2008               |   | 120,228        |  |  | -          |  |  | -          |  |   | 120,228        |  | $ | 2.78     | 
|                               |   | 120,228        |  |  | -          |  |  | -          |  |   | 120,228        |  |   |          | 
|Weighted averageexercise 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
approximately $91,535 and $83,549 for the three months ended June 30, 2010 and
2009 respectively.

24

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China Nutrifruit Group Limited and Subsidiaries 
Notes to
Condensed Consolidated Financial Statements 
For the three months ended June 30,
2010 and 2009 
(Unaudited) 
(Stated in U.S. Dollars)

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 June 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.

NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES

Operating Lease Commitments

As of June 30, 2010, the Group did not have any significant
operating lease commitment.

Rent expenses for the three months ended June 30, 2010 and 2009
were $2,923 and $10,370, respectively.

Capital Commitments

As of June 30, 2010, the Group had the followings outstanding
capital commitment:

|                                                 |   | June 30,  | 
|------------------------------------------------ | - | --------- | 
|                                                 |   | 2010      | 
|Authorized and contracted, but not provided for: |   |           | 
|Construction in progress                         | $ | 4,675,594 | 
|Property and equipment                           |   | 1,307,365 | 
|                                                 | $ | 5,982,959 | 

25

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China Nutrifruit Group Limited and Subsidiaries 
Notes to Condensed Consolidated Financial Statements 
For the three months ended June 30, 2010 and 2009 
(Unaudited) 
(Stated in U.S. Dollars)

NOTE 13. UNUSED SECURED CREDIT FACILITIES

As of June 30, 2010, the Group had $2,754,011 (March 31, 2010: $2,756,791) of unused credit facilities granted by banks. Those banking facilities were secured by land use rights, buildings and machinery, of $184,892 (March 31, 2010:
$185,686), $7,126,175 (March 31, 2010: $7,297,850) and $330,694 (March 31, 2010: $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.

26

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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; economies of scales; litigation; potential and contingent liabilities; managements plans; taxes; as well as all assumptions,
expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the
Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. The words
"believe," "expect," "anticipate," "project," "targets," "optimistic," "intend,"
"aim," "will" or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements.
Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to our views on the growth of the fruit industry, particularly the specialty fruit industry; general economic conditions; our
ability to overcome competition in the Chinese fruit processing market; the impact that a downturn or negative changes in the industries in which our products are sold could have on our business and profitability; any decrease in the availability,
or increase in the cost, of raw materials and energy; our ability to simultaneously fund the implementation of our business plan and invest in new projects; economic, political, regulatory, legal and foreign exchange risks associated with
international expansion; loss of key members of our senior management; 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.

Overview

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

Our processed fruit products are mainly sold to food producers for further processing into fruit juice and other fruit related foods, and our fresh fruits are mainly sold to fruit supermarkets. Due to our strategic decision to cease production and
distribution of beverage products, the number of our distributors decreased from 75 in fiscal year 2010 to 34 as of June 30, 2010. We believe the decrease in number of distributors will
not have any adverse impact to the sales of others fruit base products or our
revenue growth.

27

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

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 powder production line to start operations in late
September of this year, and its annual production capacity is expected to be 10,000 tons.

First Fiscal Quarter Highlights

We experienced modest growth in net sales, gross margin and
net income during the first fiscal quarter. Historically, first fiscal quarter
has generally been our weakest quarter. In fiscal years 2009 and 2010,
approximately 9.2% and 12.8% of the total annual revenue was generated from the
first fiscal quarter, respectively. All products sold in this quarter were
produced in the fiscal year 2010 production season. Most of our inventory was
sold out as of June 30, 2010, and our new production season started on July 23,
2010. We also completed technological upgrades to our fruit concentrate
production lines at Mudanjiang and Daqing facilities. We believe that our new fruit
and vegetable powder production line, which is expected to become operational in
late September, will contribute to our revenue and net income growth in the
future.

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

- Net Sales: Net sales increased $270,051, or 2.9%, to $9.6
  million for the first fiscal quarter of 2011 from $9.4 million for the same
  period last year, primarily as a result of increased sales volume.
- Gross Margin: Gross margin was 42.8% for the first fiscal
  quarter of 2011, as compared to 41.9% for the same period last year.
- Net Income: Net income increased $220,825, or 14.0%, to $1.8
  million for the first fiscal quarter of 2011, from $1.6 million for the same
  period last year.
- Fully diluted earnings per share: Fully diluted earnings per
  share were $0.04 for the first fiscal quarter of 2011, as compared to $0.04
  for the same period last year.

Results of Operations

Comparison of Three Months Ended June 30, 2010 and June
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)

|                                                              |   | Three Months
      Ended |  |  | Three Months
      Ended | 
|------------------------------------------------------------- | - | ------------------------ |  |  | ------------------------ | 
|                                                              |   | June 30,
      2010      |  |  | June 30,
      2009      | 
|                                                              |   |                          |  |  | As a                     | 
|                                                              |   | In                       |  |  | Percentage               | 
|                                                              |   | Thousands                |  |  | of Net Sales             | 
|Net Sales                                                     | $ | 9,628                    |  |  | 100.0%                   | 
|Costs of Sales                                                |   | 5,509                    |  |  | 57.2%                    | 
|Gross profit                                                  |   | 4,119                    |  |  | 42.8%                    | 
|Selling expenses                                              |   | 584                      |  |  | 6.1%                     | 
|General and
      administrative expenses                     |   | 1,106                    |  |  | 11.5%                    | 
|Other income                                                  |   | 31                       |  |  | 0.3%                     | 
|Income before
      noncontrolling interests and income taxes |   | 2,460                    |  |  | 25.5%                    | 
|Income taxes                                                  |   | 666                      |  |  | 6.9%                     | 

|Net income          |   | 1,794 |  |  | 18.6% |  |   | 1,573 |  |  | 16.8% | 
|------------------- | - | ----- |  |  | ----- |  | - | ----- |  |  | ----- | 
|Earnings per share: |   |       |  |  |       |  |   |       |  |  |       | 
|Basic               | $ | 0.04  |  |  |       |  | $ | 0.04  |  |  |       | 
|Diluted             | $ | 0.04  |  |  |       |  | $ | 0.04  |  |  |       | 

28

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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 June 30, 2010 and the rate of RMB 6.83992 to $1 for the three
months ended June 30, 2009.

Net Sales

Net sales consist of revenue derived from the sale of our
fruit and fruit based products. Net sales increased $270,051, or 2.9%, to $9.6
million for the three months ended June 30, 2010 from $9.4 million for the three
months ended June 30, 2009. The modest increase was mainly attributable to the
increased sales volume of our glazed fruit and concentrated juice products
resulting from the increased market demand as well as the increase of average
sales price of crab apple concentrate products which increased approximately 21%
in this quarter as compared to the same quarter last year. Sales of glazed fruit
and concentration juice grew from $1.0 million and $3.6 million in the three
months ended June 30, 2009 to $1.7 million and $5.0 million in the three months
ended June 30, 2010, respectively. The significant increase in sales of glazed
fruit was due to increased sales of our new blueberry glazed fruit product
launched in December 2009. Sales of nectar and concentrate pulp decreased
$286,593 and $503,372 from $843,448 and $2.8 million to $556,855 and $2.3
million, respectively. Because beverage products usually require large capital
for advertising and other sales and marketing efforts, we made a strategic
decision to cease the production of beverage in March 2010 to focus on the our
more profitable primary high-end premium products.

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

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

|                  |   | Three Months
      Ended |  |  | Three Months
      Ended | 
|----------------- | - | ------------------------ |  |  | ------------------------ | 
|                  |   | June 30,
      2010      |  |  | June 30,
      2009      | 
|                  |   |                          |  |  | As a                     | 
|                  |   | In                       |  |  | Percentage               | 
|Products          |   | Thousands                |  |  | of Net Sales             | 
|                  |   |                          |  |  |                          | 
|Glazed fruit      |   | 1,749                    |  |  | 18.2%                    | 
|Nectar            |   | 557                      |  |  | 5.8%                     | 
|Concentrate juice |   | 5,034                    |  |  | 52.2%                    | 
|Concentrate pulp  |   | 2,288                    |  |  | 23.8%                    | 
|Beverage          |   | -                        |  |  | -                        | 
|Total             | $ | 9,628                    |  |  | 100%                     | 

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 $72,851, or
1.3%, to $5.5 million for the three months ended June 30, 2010 from $5.4 million
for the three months ended June 30, 2009. Cost of sales as a percentage of net
sales was 57.2% for the three months ended June 30, 2010 as compared to 58.1%
for the same period last year. The modest percentage decrease was due to our
strategic decision to cease the production of beverage products which generally
had lower margin than that of other products.

Gross Profit

Gross profit is equal to net sales less cost of sales. Gross
profit increased by $197,200 to $4.1 million for the three months ended June 30,
2010 from $3.9 million for the three months ended June 30, 2009. Gross profit as
a percentage of net sales was 42.8% for the three months ended June 30, 2010 as
compared to 41.9% for the same period last year. The modest increase in gross
margin was mainly because we have ceased the production of beverage products
since March 2010 and our beverage products were generally less profitable than
other products. In addition, the gross margin for fruit concentrate products
increased in this quarter because the average sales price of crab apple
concentrate products increased approximately 21% in this quarter as compared to
the same quarter last year. The gross margin for fruit concentrate, glazed
fruit, nectar and concentrate pulp products for the three months period ended June 30, 2010 were 45.3%, 55.4%, 69.3% and 25.5%, as compared to 36.2%, 65.5%, 67.3% and 38.1% for the same period last year, respectively.

29

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On a product basis, our gross margin of glazed fruit decreased approximately 10.1% for the three months period ended June 30, 2010 in comparison with the same period last year. We used frozen blueberries during the non-harvest season to process new
blueberry glazed fruit in order to maximize the utilization rate of our glazed fruit production line and increase sales volume to distributors. The cost of frozen blueberries is relatively higher than fresh blueberries.

Selling and General and Administrative Expenses

Selling and general and administrative expenses decreased $81,621, or 4.6%, to $1.7 million for the three months ended June 30, 2010 from $1.8 million for the three months ended June 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 $244,241, or 29.5%, to $584,508 for the
three months ended June 30, 2010 from $828,749 for the three months ended June 30, 2009. As a percentage of net sales, selling expenses decreased 2.8% from 8.9% for three months ended June 30, 2009 to 6.1% for the three months ended June 30,
2010. Due to well established relationship with our existing customers, we received repeat orders with higher volume from our existing clients, which led to lower sales related travel 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 $162,620, or 17.2%, to $1.1 million for the three months ended June 30, 2010 from $943,104 for the three months ended June 30, 2009. As a percentage of net sales, general and
administrative expenses for the three months ended June 30, 2010 increased by 1.4% to 11.5%, as compared to 10.1% for the three months ended June 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 $301,549, or 14.0%, to $2.5 million for the three months ended June 30, 2010 from $2.2 million for the three months ended June 30, 2009. Income before noncontrolling
interests and income taxes as a percentage of net sales increased from 23.1% for the three months ended June 30, 2009 to 25.5% for the three months ended June 30, 2010. The percentage increase was primarily attributable to the increase in sales
volume and gross margin as discussed above.

Provision for Income Taxes

The provision for income taxes increased $80,724, or 13.8%, to $665,866 for the three months ended June 30, 2010 from $585,142 for the three months ended June 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 Longheda is 25%.

Net Income

Net income increased $220,825, or 14.0%, to $1.8 million for the three months ended June 30, 2010 from $1.6 million for the three months ended June 30, 2009, mainly as a result of the increase in sales revenue and gross margin as discuss
above.

30

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Liquidity and Capital Resources

As of June 30, 2010, we had cash and cash equivalents of $26.7
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)

|                                                           |   | Three Months Ended June
      30 |  
|---------------------------------------------------------- | - | -------------------------------- | -
|                                                           |   | (in thousands)                   |  
|                                                           |   | 2010                             |  
|Net cash (used in)/provided by
      operating activities  | $ | (5,794                           | )
|Net cash (used in) investing activities                    |   | (3,503                           | )
|Net cash used in financing
      activities                |   | -                                |  
|Effect of exchange rate on cash and cash equivalents       |   | (36                              | )
|Cash and cash equivalents at
      beginning of the period |   | 35,994                           |  
|Cash and cash equivalents at end of period                 |   | 26,661                           |  

Operating Activities

Net cash used in operating activities was $5.8 million for the
three months ended June 30, 2010 as compared to $11.1 million provided by
operating activities for the three months ended June 30, 2009. Net cash used in
operating activities for the three months ended June 30, 2010 was mainly
attributable to approximately $13.7 million in advance payment for the
construction of the fruit and vegetable powder factory and production line.

Investing Activities

Our cash used in investing activities during the three months
ended June 30, 2010 was primarily for the upgrade of concentrate juice
production lines in our Daqing and Mu Dan Jiang facilities. We had no investing
activities for the three months ended June 30, 2009.

Financing Activities

We had no financing activities for the three months ended June
30, 2010 and 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.

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.

31

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Recently Issued Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (the "FASB") issued the FASB Accounting Standards Codification (the
"Codification") as the source of authoritative accounting principles recognized
by the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with Generally Accepted Accounting Principles
("GAAP"). Rules and interpretative releases of the Securities and Exchange Commission are also sources of
authoritative GAAP for SEC registrants. As a result of the Codification, all changes to GAAP originating from the FASB will now be issued in Accounting Standards Updates
("ASUs"). These changes and the Codification do not change GAAP. The Company adopted the
changes resulting from the Codification, effective September 30, 2009. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Companys results of operations, financial position
or notes to the condensed consolidated financial statements.

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

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

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.

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.

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Seasonality

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

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

ITEM 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 June 30, 2010. Based on our assessment, Mr. Yu and Mr. Cheng determined that, as of June 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 June 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.

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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: August 16, 2010

CHINA NUTRIFRUIT GROUP LIMITEDBy:
	/s/ Changjun YuChangjun Yu, Chief Executive Officer(Principal Executive Officer)By:
	/s/ Colman ChengColman Cheng, Chief Financial Officer(Principal Financial Officer and PrincipalAccounting Officer)


35

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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.

36

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