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|UNITED STATESSECURITIES
      AND EXCHANGE COMMISSIONWashington, D.C. 20549
      FORM 10-Q           
|------------------------------------------------------------------------------------------------------
|                                                                                                      
|(Mark One)                                                                                            
|                                                                                                      
|[ X ] QUARTERLY REPORT PURSUANT TO SECTION
      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   
|                                                                                                      
|For the quarterly period ended: December
      31, 2010                                               
|                                                                                                      
|[    ]  TRANSITION REPORT PURSUANT TO SECTION
      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                                                                      
|For the transition period from
      _____________ to _______________                                 

Commission File Number: 001-34440

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

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

5th Floor, Chuangye Building, Chuangye 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 [   ] 
    (Do not check
      if a smaller reporting company) | Smaller reporting company [ X ]

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

Yes [   ]          No [ X ]

The number of shares outstanding of each of the issuers
classes of common stock, as of February 14, 2011 is as follows:

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

---



|CHINA NUTRIFRUIT GROUP
      LIMITED
|------------------------------------
|                                    
|Quarterly Report on FORM
      10-Q 
|Three Months Ended December 31, 2010
|                                    
|TABLE OF CONTENTS                   
|                                    
|PART I                              
|FINANCIAL INFORMATION               
|Item 1.                             
|Item 2.                             
|Item 3.                             
|Item 4.                             
|PART II                             
|OTHER INFORMATION                   
|Item 1.                             
|Item 1A.                            
|Item 2.                             
|Item 3.                             
|Item 4.                             
|Item 5.                             
|Item 6.                             

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**PART I**
FINANCIAL INFORMATION

|ITEM 1. FINANCIAL
      STATEMENTS.
|-----------------------------------
|
|

CHINA NUTRIFRUIT GROUP LIMITED AND SUBSIDIARIES CONDENSED
CONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2010 AND FOR THE
NINE MONTHS ENDED DECEMBER 31, 2010

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

2

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|CHINA NUTRIFRUIT GROUP LIMITED AND
      SUBSIDIARIES        |   |              |  |   |            | 
|------------------------------------------------------------ | - | ------------ |  | - | ---------- | 
|                                                             |   |              |  |   |            | 
|CONDENSED CONSOLIDATED BALANCE SHEETS                        |   |              |  |   |            | 
|(Stated in US Dollars)                                       |   |              |  |   |            | 
|                                                             |   | December 31, |  |   | March 31,  | 
|                                                             |   | 2010         |  |   | 2010       | 
|ASSETS                                                       |   | (unaudited)  |  |   |            | 
|Current assets:                                              |   |              |  |   |            | 
|Cash and cash equivalents                                    | $ | 24,336,712   |  | $ | 35,994,443 | 
|Proceeds from private
      placement held in escrow account |   | -            |  |   | 931,630    | 
|Trade receivables, net of allowance                          |   | 5,535,909    |  |   | 11,047,846 | 
|Inventories, net                                             |   | 20,138,578   |  |   | 4,179,910  | 
|Prepayments and deposits                                     |   | 10,164,077   |  |   | -          | 
|Other current assets                                         |   | 1,512        |  |   | 116,196    | 
|Total current assets                                         |   | 60,176,788   |  |   | 52,270,025 | 
|Property and equipment, net                                  |   | 20,644,612   |  |   | 17,066,907 | 
|Construction in progress                                     |   | 5,152,212    |  |   | -          | 
|Deferred tax assets                                          |   | 950,652      |  |   | 1,068,878  | 
|Land use rights, net                                         |   | 187,730      |  |   | 185,686    | 
|TOTAL ASSETS                                                 | $ | 87,111,994   |  | $ | 70,591,496 | 
|LIABILITIES AND SHAREHOLDERS EQUITY                         |   |              |  |   |            | 
|Current liabilities:                                         |   |              |  |   |            | 
|Other payables and accrued expenses                          | $ | 1,768,965    |  | $ | 2,379,246  | 
|Trade payables                                               |   | 327,535      |  |   | 87,954     | 
|Income taxes payable                                         |   | 2,107,673    |  |   | 2,296,513  | 
|Total current liabilities                                    |   | 4,204,173    |  |   | 4,763,713  | 
|TOTAL LIABILITIES                                            |   | 4,204,173    |  |   | 4,763,713  | 

|Commitments and Contingencies                                                                                                                                                                  |   |            |  |   |            | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- |  | - | ---------- | 
|Shareholders' equity                                                                                                                                                                           |   |            |  |   |            | 
|Series A Preferred stock
       Authorized: 5,000,000 shares, par value $0.001   Issued
      and outstanding: 342,983 shares as at December 31, 2010;   
      (365,109 as at March 31, 2010) |   | 343        |  |   | 365        | 
|Common stock                                                                                                                                                                                   |   |            |  |   |            | 
|Authorized: 120,000,000 shares, par
      value $0.001   Issued and outstanding: 36,794,532
      shares as at December 31, 2010;    (36,573,272 shares as at
      March 31, 2010)            |   | 36,794     |  |   | 36,573     | 
|Additional paid-in-capital                                                                                                                                                                     |   | 36,492,675 |  |   | 36,492,875 | 
|Statutory reserves - restricted                                                                                                                                                                |   | 6,850,422  |  |   | 4,564,345  | 
|Accumulated other comprehensive income                                                                                                                                                         |   | 3,108,926  |  |   | 440,714    | 
|Retained earnings                                                                                                                                                                              |   | 36,418,661 |  |   | 24,292,911 | 
|TOTAL SHAREHOLDERS EQUITY                                                                                                                                                                     |   | 82,907,821 |  |   | 65,827,783 | 
|TOTAL LIABILITIES AND
      SHAREHOLDERS EQUITY                                                                                                                                               | $ | 87,111,994 |  | $ | 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 |   |   | Nine months ended |  
|                                                              |   | December 31,       |   |   | December 31,      |  
|                                                              |   | 2010               |   |   | 2009              |   |   | 2010        |   |  
|Net sales                                                     | $ | 22,136,504         |   | $ | 17,816,916        |   | $ | 54,955,885  |   | $
|Cost of sales                                                 |   | (11,856,020        | ) |   | (9,680,959        | ) |   | (29,600,110 | ) |  
|Gross profit                                                  |   | 10,280,484         |   |   | 8,135,957         |   |   | 25,355,775  |   |  
|Selling expenses                                              |   | (1,111,697         | ) |   | (1,094,111        | ) |   | (2,369,675  | ) |  
|General and administrative expenses                           |   | (807,231           | ) |   | (816,069          | ) |   | (2,503,801  | ) |  
|Operating earnings                                            |   | 8,361,556          |   |   | 6,225,777         |   |   | 20,482,299  |   |  
|Other income (expenses)                                       |   |                    |   |   |                   |   |   |             |   |  
|Other income                                                  |   | 8,988              |   |   | 9,204             |   |   | 57,009      |   |  
|Total other income (expenses)                                 |   | 8,988              |   |   | 9,204             |   |   | 57,009      |   |  
|Earnings before income taxes                                  |   | 8,370,544          |   |   | 6,234,981         |   |   | 20,539,308  |   |  
|Provision for income taxes                                    |   | (2,131,289         | ) |   | (1,609,004        | ) |   | (5,317,931  | ) |  
|Net earnings                                                  |   | 6,239,255          |   |   | 4,625,977         |   |   | 15,221,377  |   |  
|Other comprehensive income                                    |   |                    |   |   |                   |   |   |             |   |  
|Foreign currency translation                                  |   | 1,092,793          |   |   | (39,255           | ) |   | 2,668,212   |   |  
|Comprehensive income                                          | $ | 7,332,048          |   | $ | 4,586,722         |   | $ | 17,889,589  |   | $
|Earnings per share                                            |   |                    |   |   |                   |   |   |             |   |  
|Basic                                                         | $ | 0.16               |   | $ | 0.12              |   | $ | 0.40        |   | $
|Diluted                                                       | $ | 0.15               |   | $ | 0.11              |   | $ | 0.38        |   | $
|Weighted average number of common
      stock outstanding     |   |                    |   |   |                   |   |   |             |   |  
|Basic                                                         |   | 36,762,896         |   |   | 36,125,754        |   |   | 36,703,018  |   |  
|Diluted                                                       |   | 40,375,048         |   |   | 40,167,345        |   |   | 40,350,605  |   |  

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)

|                                                                                                                |   | Nine months ended |  
|--------------------------------------------------------------------------------------------------------------- | - | ----------------- | -
|                                                                                                                |   | December 31,      |  
|                                                                                                                |   | 2010              |  
|Operating activities:                                                                                           |   |                   |  
|Net earnings                                                                                                    | $ | 15,221,377        |  
|Adjustments to reconcile net earnings
      to net cash used                                                    |   |                   |  
|in
      operating activities                                                                                   |   |                   |  
|Depreciation and
      amortization                                                                             |   | 1,489,507         |  
|Benefit for deferred income taxes                                                                               |   | 117,392           |  
|Changes in operating assets and liabilities:                                                                    |   |                   |  
|Trade receivables, net                                                                                          |   | 5,644,090         |  
|Inventories                                                                                                     |   | (15,705,832       | )
|Prepayments and deposits                                                                                        |   | (10,025,807       | )
|Other current
      assets                                                                                      |   | 114,703           |  
|Trade payables                                                                                                  |   | 232,288           |  
|Income taxes
      payable                                                                                      |   | (218,770          | )
|Other payables and accrued expenses                                                                             |   | (629,515          | )
|Net cash (used in) provided by operating activities                                                             |   | (3,760,567        | )
|Investing activities:                                                                                           |   |                   |  
|Purchase of property and equipment                                                                              |   | (4,333,519        | )
|Addition to construction in progress                                                                            |   | (5,084,541        | )
|Net cash used in investing activities                                                                           |   | (9,418,060        | )
|Financing activities:                                                                                           |   |                   |  
|Proceeds from issuance of preferred stocks                                                                      |   | -                 |  
|Proceeds from issuance of warrants                                                                              |   | -                 |  
|Cost of raising capital                                                                                         |   | -                 |  
|Dividend paid                                                                                                   |   | (809,550          | )
|Proceeds from private placement held in escrow
      account                                                    |   | 931,630           |  
|Net cash provided by financing
      activities                                                                 |   | 122,080           |  
|(Decrease) Increase in cash and cash equivalents                                                                |   | (13,056,547       | )
|Effect of exchange rate on cash and
      cash equivalents                                                      |   | 1,398,816         |  
|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 | $ | 24,336,712        |  
|Supplemental disclosure of cash flows
      information:                                                        |   |                   |  
|Cash paid for:                                                                                                  |   |                   |  
|Income taxes                                                                                                    | $ | 5,418,475         |  
|Supplemental disclosure of
      non-cash information:                                                          |   |                   |  
|Issuance of warrants                                                                                            | $ | -                 |  
|Purchases of property and equipment                                                                             | $ | -                 |  

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

5

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

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

Nature of Business

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

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

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

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

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

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

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

6

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

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

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

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

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

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

Fezdale Investments Limited

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

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

Solar Sun Holdings Limited

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

Daqing Longheda Food Company Limited

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

7

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsDecember 31, 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 the PRC in June 2010. Senyang is a dormant company and currently has no operations. It is planned that Senyang will
eventually be engaged in operating new fruit and vegetable production.

Basis of presentation

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

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

Segment information

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

Construction in progress

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

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

8

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsDecember 31, 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 and financial position maybe influenced by the political, economic and legal environment in the PRC, and by the general state of the PRCs economy.

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

Earnings per share

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

Cash and cash equivalents

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

Trade accounts receivable

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

Inventories

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

9

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsDecember 31, 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 receivables, trade payables, other current assets, other payables and accrued expenses, approximates fair value due to the
relatively short maturity.

Property and equipment, net

Property and equipment are recorded at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. Maintenance and repairs are expensed as incurred. The principal estimated useful lives generally are: buildings
 20 years; leasehold improvements  10 years; machinery - 10 years, furniture, fixture and office equipment  5 years; motor vehicles  5 years. Depreciation of property and equipment was $552,782, $1,487,353,
$372,668 and $1,118,780 for the three and nine months ended December 31, 2010 and 2009 respectively.

Revenue recognition

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

Shipping and handling costs

Shipping and handling costs are included in selling expenses. The shipping and handling costs for the three and nine months ended December 31, 2010 and 2009 were $856,936, $1,799,142, $907,934 and $2,125,427 respectively.

Impairment of long-lived assets

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

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

10

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China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial
StatementsDecember 31, 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 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 $33,691, $49,094, $24,633 and $35,511 for the three and
nine months ended December 31, 2010 and 2009 respectively.

Foreign currency translation

The accompanying financial statements are presented in United
States dollars. The functional currency of the Group is Renminbi, RMB. The
financial statements are translated into United States dollars from RMB at
year-end exchange rates as to assets and liabilities and average exchange rates
as to revenues and expenses. Capital accounts are translated at their historical
exchange rates when the capital transactions occurred.

|Balance sheet                                      |                     
|-------------------------------------------------- | --------------------
|December 31, 2010                                  | RMB6.6120 to US$1.00
|March 31, 2010                                     | RMB6.8400 to US$1.00
|                                                   |                     
|Statement of income and
      comprehensive income |                     
|For the nine months ended December
      31, 2010  | RMB6.7721 to US$1.00
|For the nine months ended December
      31, 2009  | RMB6.8400 to US$1.00

As at December 31, 2010, RMB159,748,811 or US$24,160,437 (March
31, 2010: RMB236,619,999 or US$34,613,303) is not freely convertible into
foreign currency and all foreign exchange transactions must take place through
authorized institutions. No representation is made that the RMB amounts could
have been, or could be, converted into US$ at the rates used in translation.

11

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsDecember 31, 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.

12

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2010, the Financial Accounting Standards Board (FASB) issued an accounting pronouncement related to intangibles - goodwill and other, which requires a company to consider whether there are any adverse qualitative factors indicating that
an impairment may exist in performing step 2 of the impairment test for reporting units with zero or negative carrying amounts. The provisions for this pronouncement are effective for fiscal years, and interim periods within those years, beginning
after December 15, 2010, with no early adoption. The Company will adopt this pronouncement for our fiscal year beginning April 1, 2011. The adoption of this pronouncement is not expected to have an impact on our consolidated financial statements.

In December 2010, the FASB issued an accounting pronouncement related to business combinations, which requires a company to disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year
had occurred as of the beginning of the comparable prior annual reporting period only in comparative financial statements. The disclosure provisions are effective prospectively for business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted. If applicable, we will include the required disclosures for our fiscal year beginning April 1, 2011.

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

13

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial
StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated
in U.S. Dollars)

NOTE 3. EARNINGS PER SHARE

The computations of basic and diluted earnings per share for
the three and nine months ended December 31 is as follows:

|                                                  |   | Three months ended |   |   | Nine months ended |  
|------------------------------------------------- | - | ------------------ | - | - | ----------------- | -
|                                                  |   | December 31,       |   |   | December 31,      |  
|                                                  |   | 2010               |   |   | 2009              |  
|Numerator:                                        |   |                    |   |   |                   |  
|Net earnings                                      | $ | 6,239,255          |   | $ | 4,625,977         |  
|Less: dividends on
      preferred stock          |   | (205,347           | ) |   | (253,780          | )
|Net earnings for basic earnings per
      share   | $ | 6,033,908          |   | $ | 4,372,197         |  
|Net earnings for basic
      earnings per share   | $ | 6,033,908          |   | $ | 4,372,197         |  
|Add: dividends on preferred stock                 |   | 205,347            |   |   | 253,780           |  
|Net earnings for
      diluted earnings per share | $ | 6,239,255          |   | $ | 4,625,977         |  
|Denominator:                                      |   |                    |   |   |                   |  
|Weighted average common
      stock outstanding   |   | 36,762,896         |   |   | 36,125,754        |  
|Effect of dilutive preferred stock                |   | 3,606,966          |   |   | 4,000,398         |  
|Effect of dilutive
      warrant                  |   | 5,186              |   |   | 41,193            |  
|Weighted average common stock and
      dilutive  |   |                    |   |   |                   |  
|potential common stock                            |   | 40,375,048         |   |   | 40,167,345        |  
|Basic net earnings per share                      | $ | 0.16               |   | $ | 0.12              |  
|Diluted net earnings per share                    | $ | 0.15               |   | $ | 0.11              |  

14

---

|China Nutrifruit Group Limited and
      Subsidiaries                                            |   |             |  |   |           | 
|------------------------------------------------------------------------------------------------ | - | ----------- |  | - | --------- | 
|Notes to Condensed Consolidated Financial
      Statements                                       |   |             |  |   |           | 
|December 31, 2010 and 2009 (Unaudited)                                                           |   |             |  |   |           | 
|(Stated in U.S. Dollars)                                                                         |   |             |  |   |           | 
|                                                                                                 |   |             |  |   |           | 
|NOTE 4. INVENTORY, NET                                                                           |   |             |  |   |           | 
|                                                                                                 |   |             |  |   |           | 
|At December 31, 2010 and March 31, 2010
      (audited) inventory is comprised of the following: |   |             |  |  
|                                                                                                 |   | December 31 |  |   | March 31  | 
|Finished goods                                                                                   | $ | 20,045,512  |  | $ | 4,101,918 | 
|Raw material                                                                                     |   | 93,066      |  |   | 77,992    | 
|                                                                                                 | $ | 20,138,578  |  | $ | 4,179,910 | 

**NOTE 5. PROPERTY AND EQUIPMENT, NET**

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

|                                         |   | December 31 |   |   | March 31   |  
|---------------------------------------- | - | ----------- | - | - | ---------- | -
|Buildings                                | $ | 5,585,300   |   | $ | 4,673,420  |  
|Leasehold improvement                    |   | 1,384,945   |   |   | 1,339,544  |  
|Machinery                                |   | 18,958,233  |   |   | 14,616,662 |  
|Furniture, fixtures and office equipment |   | 40,888      |   |   | 13,742     |  
|Motor vehicles                           |   | 15,011      |   |   | 6,194      |  
|Total                                    |   | 25,984,377  |   |   | 20,649,562 |  
|Less: accumulated depreciation           |   | (5,339,765  | ) |   | (3,582,655 | )
|                                         | $ | 20,644,612  |   | $ | 17,066,907 |  

As of December 31, 2010, buildings and machinery, of $7,032,219
(March 31, 2010: $7,297,850) and $322,562 (March 31, 2010: $342,365)
respectively, were pledged to secure the unused banking facilities obtained by
the Group. (Note 13)

NOTE 6. PREPAYMENTS AND DEPOSITS

Prepayments and deposits mainly comprised the amount paid to
the suppliers of property and equipment as of December 31, 2010.

15

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial
StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated
in U.S. Dollars)

NOTE 7. OTHER PAYABLES AND ACCRUED EXPENSES

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

|                         |   | December 31, |  |   | March 31, | 
|------------------------ | - | ------------ |  | - | --------- | 
|Accruals                 | $ | 449,807      |  | $ | 723,588   | 
|Value added tax payables |   | 628,890      |  |   | 1,104,630 | 
|Other payables           |   | 690,268      |  |   | 551,028   | 
|                         | $ | 1,768,965    |  | $ | 2,379,246 | 

The other payables mainly comprised amounts payable to the
suppliers of property and equipment, amounting to $427,571 and $398,056 as of
December 31, 2010 and March 31, 2010 respectively.

|NOTE 8. PROVISION FOR INCOME TAXES          |   |                    |  |   |                   |  |   |           |  |   |           | 
|------------------------------------------- | - | ------------------ |  | - | ----------------- |  | - | --------- |  | - | --------- | 
|                                            |   |                    |  |   |                   |  |   |           |  |   |           | 
|The provision for income tax is as follows: |   |                    |  |   |                   |  |   |           |  |   |           | 
|                                            |   | Three months ended |  |   | Nine months ended | 
|                                            |   | December 31,       |  |   | December 31,      | 
|                                            |   | 2010               |  |   | 2009              |  |   | 2010      |  |   | 2009      | 
|Current:                                    |   |                    |  |   |                   |  |   |           |  |   |           | 
|PRC                                         | $ | 2,091,951          |  | $ | 1,553,696         |  | $ | 5,200,539 |  | $ | 4,214,660 | 
|Other jurisdictions                         |   | -                  |  |   | -                 |  |   | -         |  |   | -         | 
|Deferred:                                   |   |                    |  |   |                   |  |   |           |  |   |           | 
|PRC                                         |   | 39,338             |  |   | 55,308            |  |   | 117,392   |  |   | 164,934   | 
|Other jurisdictions                         |   | -                  |  |   | -                 |  |   | -         |  |   | -         | 
|                                            | $ | 2,131,289          |  | $ | 1,609,004         |  | $ | 5,317,931 |  | $ | 4,379,594 | 

16

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial
StatementsDecember 31, 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:

|                                                                                         |   | December 31, |   |   | March 31, |  
|---------------------------------------------------------------------------------------- | - | ------------ | - | - | --------- | -
|                                                                                         |   | 2010         |   |   | 2010      |  
|                                                                                         |   |              |   |   | (audited) |  
|Deferred tax assets:                                                                     |   |              |   |   |           |  
|Difference between book
      and tax basis of land use right and property and equipment | $ | 950,652      |   | $ | 1,068,878 |  
|Tax losses
      carry-forward                                                           |   | 1,111,335    |   |   | 913,721   |  
|Less: valuation
      allowance                                                          |   | (1,111,335   | ) |   | (913,721  | )
|Net deferred tax assets                                                                  | $ | 950,652      |   | $ | 1,068,878 |  

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

The Company has provided valuation allowances of $1,111,335 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 December 31, 2010 and March 31,
2010 were reduced by valuation allowances of $1,111,335 and $913,721,
respectively. The total valuation allowance between periods presented increased
by $197,614 (March 31, 2010: $368,853) and such increase was attributable to the
tax effect on foreign tax losses incurred for the nine months ended December 31,
2010 of $39,887 (March 31, 2010: $56,757) at enacted foreign profit tax rates
and the tax effect on federal net operating loss incurred for the nine months
ended December 31, 2010 of $157,727 (March 31, 2010: $312,096) at the federal
tax rate of 35%.

17

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial
StatementsDecember 31, 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 three months and nine months
ended December 31 is as follows:

|                                                                   |   | Three months       |   |   | Nine months        |  
|------------------------------------------------------------------ | - | ------------------ | - | - | ------------------ | -
|                                                                   |   | ended December 31, |   |   | ended December 31, |  
|                                                                   |   | 2010               |   |   | 2009               |  
|Provision for income taxes at statutory
      rate of 35%          | $ | 2,929,690          |   | $ | 2,181,522          |  
|Chinese tax rate difference                                        |   | (823,883           | ) |   | (604,347           | )
|Non-deductible expenses and non- assessable
      profits          |   | (56,240            | ) |   | (76,969            | )
|Changes in valuation allowance                                     |   | 41,550             |   |   | 53,820             |  
|Tax effect of non-deductible temporary
      difference recognized |   | 40,172             |   |   | 54,978             |  
|Income taxes                                                       | $ | 2,131,289          |   | $ | 1,609,004          |  

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 December 31, 2010 and
March 31, 2010, is 125,000,000 shares of which 120,000,000 shares are common
stock of par value $0.001 and 5,000,000 shares are preferred stock of par value
$0.001.

18

---

China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

NOTE 9. SHAREHOLDERS EQUITY (CONTD)

Series A Preferred Stock

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

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

Ranking

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

Voting

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

Conversion

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

Mandatory Conversion

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

19

---

China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

NOTE 9. SHAREHOLDERS EQUITY (CONTD)

Dividends

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

Liquidation

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

Redemption

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

Common stock

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

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

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

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

20

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial
StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated
in U.S. Dollars)

NOTE 9. SHAREHOLDERS EQUITY (CONTD)

Warrants

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

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

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

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

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

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

21

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial
StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated
in U.S. Dollars)

NOTE 9. SHAREHOLDERS EQUITY (CONTD)

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

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

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

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

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

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

22

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China Nutrifruit Group Limited and SubsidiariesNotes to Condensed Consolidated Financial StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated in U.S. Dollars)

NOTE 9. SHAREHOLDERS EQUITY (CONTD)

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

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

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

The following is the movement of warrants during the nine
months ended December 31, 2010:

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


23

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial
StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated
in U.S. Dollars)

NOTE 9. SHAREHOLDERS EQUITY (CONTD)

The following is the movement of warrants during the nine
months ended December 31, 2009:

Granted
    
    
    Exercised
    
    
    Outstanding atOutstanding at
    
    
    during the
    
    
    during the
    
    
    December 31,
    
    
    ExerciseDate of grant
    
    April 1, 2010
    
    
    period
    
    
    period
    
    
    2010
    
    
    priceOctober 10, 2008
    
    120,228
    
    
    -
    
    
    -
    
    
    120,228
    
    $
    2.78September 30, 2009
    
    359,502
    
    
    -
    
    
    -
    
    
    359,502
    
    $
    3.30October 8, 2009
    
    -
    
    
    140,737
    
    
    -
    
    
    140,737
    
    $
    3.30479,730
    
    
    140,737
    
    
    -
    
    
    620,467Weighted average exercise price
    $
    3.17
    
    $
    3.30
    
    
    -
    
    $
    3.20


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 $107,014,
$231,311, $92,945 and $219,567 for the three and nine months ended December 31,
2010 and 2009 respectively.

NOTE 11. CONCENTRATION OF RISK

Credit Risk

Financial instruments that potentially subject the Group to
significant concentration of credit risk consist primarily of cash and cash
equivalents. As of December 31, 2010, substantially all of the Groups cash and
cash equivalents were held by major financial institutions located in the PRC,
which management believes are of high credit quality.

Groups operations are in China

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

24

---

China Nutrifruit Group Limited and
SubsidiariesNotes to Condensed Consolidated Financial
StatementsDecember 31, 2010 and 2009 (Unaudited)(Stated
in U.S. Dollars)

NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES

Operating Lease Commitments

As of December 31, 2010, the Group did not have any significant
operating lease commitments.

Rent for the three and nine months ended December 31, 2010 and
2009 was $4,500, $13,268, $4,386 and $19,141, respectively.

Capital Commitments

As of December 31, 2010, the Group had the followings
outstanding capital expenditure commitments:

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

NOTE 13. UNUSED SECURED CREDIT FACILITIES

As of December 31, 2010, the Group had $2,846,352 (March 31,
2010 (audited): $2,756,791) of unused credit facilities granted by banks. Those
banking facilities were secured by land use rights, buildings and machinery, of
$187,730 (March 31, 2010 (audited): $185,686), $7,032,219 (March 31, 2010
(audited): $7,297,850) and $322,562 (March 31, 2010 (audited): $342,365)
respectively.

NOTE 14. SUBSEQUENT EVENTS

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

End of condensed consolidated financial
statements.





25

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

Special Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include, among
others, those concerning our expected financial performance; strategic and operational plans; management forecast; potential and contingent liabilities; managements plans; taxes; as well as all assumptions, expectations, predictions,
intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the Company to differ
materially from those anticipated, expressed or implied in the forward-looking statements. The words believe, expect, anticipate, project, targets, optimistic,
intend, aim, will or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements.
Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to our views on the growth of the fruit industry, particularly the specialty fruit industry; general economic conditions; our
ability to overcome competition in the Chinese fruit processing market; the impact that a downturn or negative changes in the industries in which our products are sold could have on our business and profitability; any decrease in the availability,
or increase in the cost, of raw materials and energy; our ability to simultaneously fund the implementation of our business plan and invest in new projects; economic, political, regulatory, legal and foreign exchange risks associated with
international expansion; loss of key members of our senior management; unexpected changes to Chinas political or economic situation and legal environment; and any of the factors mentioned in the Risk Factors section of our Annual
Report on Form 10-K for the year ended March 31, 2010 and other risks and uncertainties mentioned in this Form 10-Q or our other reports filed with the Securities and Exchange Commission.

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

Use of Terms

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

Overview

We are a holding company and conduct all of our operations through our indirect, wholly-owned subsidiary, Longheda, which is a leading producer of premium specialty fruit-based products in China. We develop, process, market and distribute a variety
of food products processed primarily from premium specialty fruits grown in Northeast China, mainly including golden berry, crab apple, blueberry, raspberry, blackcurrant and seabuckthorn. Our primary product offering includes fruit concentrate,
nectar, glazed fruits, concentrate pulp as well as fresh fruits.

Our processed fruit products are mainly sold to food producers for further processing into fruit juice and other fruit related foods, and our fresh fruits are mainly sold to fruit retailers and supermarkets. Our manufacturing facilities are located
in Daqing City and Mudanjiang City, Heilongjiang Province, China where abundant supply of various premium specialty fruits is readily available. We currently have five fruit processing lines with an aggregate capacity of 17,160 tons.

26

---

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

Third Fiscal Quarter Highlights

We continued to experience strong growth in net sales and net
income while maintaining stable margin during the third fiscal quarter. Market
demand for our products remained strong and sales increased across all product
categories in this fiscal quarter. Due to difficult weather conditions in
Daqing, we decided to delay the final equipment installation phase of our new
fruit and vegetable powder production facility until March 2011 and expect to
commence trial production of the new production line in June 2011.

The following sets forth certain key financial information for
the third fiscal quarter.

- Net Sales: Net sales increased $4.3 million, or 24.2%, to
  $22.1 million for the third fiscal quarter of 2011 from $17.8 million for the
  same period last year.
- Gross Margin: Gross margin was 46.4% for the third fiscal
  quarter of 2011, as compared to 45.7% for the same period last year.
- Net Income: Net income increased $1.6 million, or 34.9%, to
  $6.2 million for the third fiscal quarter of 2011 from $4.6 million for the
  same period last year.
- Fully diluted earnings per share: Fully diluted earnings per
  share were $0.15 for the third fiscal quarter of 2011, as compared to $0.11
  for the same period last year.

Results of Operations

Comparison of Three Months Ended December 31, 2010 and
December 31, 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 | 
|------------------------------------------------------------- | - | ------------------ |  |  | ------------------ | 
|                                                              |   | December 31, 2010  |  |  | December 31, 2009  | 
|                                                              |   |                    |  |  | As a               | 
|                                                              |   | In                 |  |  | Percentage         | 
|                                                              |   | Thousands          |  |  | of Net Sales       | 
|Net Sales                                                     | $ | 22,137             |  |  | 100.0%             | 
|Costs of Sales                                                |   | 11,856             |  |  | 53.6%              | 
|Gross profit                                                  |   | 10,281             |  |  | 46.4%              | 
|Selling expenses                                              |   | 1,112              |  |  | 5.0%               | 
|General and administrative expenses                           |   | 807                |  |  | 3.6%               | 
|Other income                                                  |   | 9                  |  |  | 0.0%               | 
|Income before noncontrolling
      interests and income taxes |   | 8,371              |  |  | 37.8%              | 
|Income taxes                                                  |   | 2,132              |  |  | 9.6%               | 
|Net income                                                    |   | 6,239              |  |  | 28.2%              | 
|Earnings per share:                                           |   |                    |  |  |                    | 
|Basic                                                         | $ | 0.16               |  |  |                    | 
|Diluted                                                       | $ | 0.15               |  |  |                    | 

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 6.667 to $1 for the three
months ended December 31, 2010 and the rate of RMB 6.84 to $1 for the three
months ended December 31, 2009.

27

---

Net Sales

Net sales consist of revenue from the sale of our fruit and
fruit based products. We continued to experience strong growth in net sales in
this fiscal quarter. Net sales increased $4.3 million, or 24.2 %, to $22.1
million for the three months ended December 31, 2010 from $17.8 million for the
three months ended December 31, 2009. Strong market demand drove increased sales
volume across all product categories, especially our concentrate pulp and glazed
fruit products which grew from $1.9 million and $5.4 million in the three months
ended December 31, 2009 to $4.9 million and $6.0 million in the three months
ended December 31, 2010, respectively. Net sales also increased as a result of
an increase in the average sales price of crab apple concentrate juice and pear
concentrate pulp which increased approximately 37.6% and 48.4%, respectively, in
this fiscal quarter as compared to the same quarter last year. Because beverage
products usually require large capital for advertising and other sales and
marketing efforts, we made a strategic decision to cease production of beverage
products in March 2010 and to focus on our more profitable high-end premium
products.

The following table sets forth percentage of net sales
generated by each product for the three months ended December 31, 2010 and
2009:

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

|                  |   | Three Months Ended |  |  | Three Months Ended | 
|----------------- | - | ------------------ |  |  | ------------------ | 
|                  |   | December 31, 2010  |  |  | December 31, 2009  | 
|                  |   |                    |  |  | As a               | 
|                  |   | In                 |  |  | Percentage         | 
|Product           |   | Thousands          |  |  | of Net Sales       | 
|Fresh fruit       | $ | 763                |  |  | 3.4%               | 
|Glazed fruit      |   | 6,040              |  |  | 27.3%              | 
|Nectar            |   | 1,297              |  |  | 5.9%               | 
|Concentrate juice |   | 9,164              |  |  | 41.4%              | 
|Concentrate pulp  |   | 4,873              |  |  | 22.0%              | 
|Beverage          |   | -                  |  |  | -                  | 
|Total             | $ | 22,137             |  |  | 100.0%             | 

Cost of Sales

Cost of sales is primarily comprised of the costs of our raw
materials, labor, overhead and sales tax. Cost of sales increased $2.2 million,
or 22.5%, to $11.9 million for the three months ended December 31, 2010 from
$9.7 million for the three months ended December 31, 2009. Cost of sales as a
percentage of net sales was 53.6% for the three months ended December 31, 2010,
as compared to 54.3% for the same period last year. The amount increase in costs
of sales was mainly attributable to the increased sales volume.

Gross Profit

Gross profit is equal to net sales less cost of sales. Gross
profit increased by $2.2 million to $10.3 million for the three months ended
December 31, 2010 from $8.1 million for the three months ended December 31,
2009. Gross profit as a percentage of net sales increased to 46.4% for the three
months ended December 31, 2010 as compared to 45.7% for the same period last
year. The slight increase in gross margin was mainly driven by a significant
increase in the gross margin of concentrate pulp products. Our average sales
price of concentrate pulp products increased due to strong market demand in this
fiscal quarter. The gross margin for glazed fruit, nectar, concentrate juice and
concentrate pulp products for the three months ended December 31, 2010 were
54.2%, 67.7%, 43.7% and 36.5%, as compared to 51.9%, 69.7%, 44.4% and 28.3% for
the same period last year, respectively.

Selling and General and Administrative
Expenses

Selling and general and administrative expenses remained stable
at $1.9 million for the three months ended December 31, 2010.

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 increased $17,586, or
1.6%, to $1.1 million for the three months ended December 31, 2010 from $1.1 million for the three
months ended December 31, 2009. As a percentage of net sales, selling expenses
decreased 1.1% from 6.1% for three months ended December 31, 2009 to 5.0% for
the three months ended December 31, 2010. Due to well established relationships
with our existing customers, we received repeat orders with higher volume from
our existing clients, which led to lower sales related expenses in this quarter.
In addition, we incurred less selling expenses due to the cessation of
production and sale of beverage products in this fiscal quarter. We plan to
continue to spend more efforts on identifying new distributors in regions where
we have no or limited sales to further expand our customer base and market
share.

28

---

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
decreased $8,838, or 1.1%, to $807,231 for the three months ended December 31,
2010 from $816,069 for the three months ended December 31, 2009. As a percentage
of net sales, general and administrative expenses for the three months ended
December 31, 2010 decreased by 1.0% to 3.6%, as compared to 4.6% for the three
months ended December 31, 2009. Due to our efforts in cost management, we were
able to keep our general and administrative expenses relatively stable despite
the significant increase in net sales in this quarter.

Income before Noncontrolling Interests and Income
Taxes

Income before noncontrolling interests and income taxes
increased $2.2 million, or 34.3%, to $8.4 million for the three months ended
December 31, 2010 from $6.2 million for the three months ended December 31,
2009. Income before noncontrolling interests and income taxes as a percentage of
net sales increased from 35.0% for the three months ended December 31, 2009 to
37.8% for the three months ended December 31, 2010. The percentage increase was
primarily attributable to the increase in gross margin and our ability to
maintain stable selling and general and administrative expenses as discussed
above.

Provision for Income Taxes

The provision for income taxes increased $522,285, or 32.5%, to
$2.1 million for the three months ended December 31, 2010 from $1.6 million for
the three months ended December 31, 2009. The increase in the provision for
income taxes is mainly attributed to the increase in net income before income
taxes.

We file separate tax returns in the United States and China.
Income taxes of our PRC subsidiary are calculated in accordance with taxation
principles currently effective in the PRC. For China Nutrifruit Group Limited,
applicable U.S. tax laws are followed. The applicable tax rate for our PRC
operating subsidiary Longheda was 25% in calendar year 2010 and is expected to
remain at 25% for calendar year 2011.

Net Income

Net income increased $1.6 million, or 34.9%, to $6.2 million
for the three months ended December 31, 2010 from $4.6 million for the three
months ended December 31, 2009, mainly as a result of the increase in sales
revenue as discussed above.

Comparison of Nine Months Ended December 31, 2010 and
December 31, 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.

29

---

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

|                                                              |   | Nine Months Ended |  |   | Nine Months Ended | 
|------------------------------------------------------------- | - | ----------------- |  | - | ----------------- | 
|                                                              |   | December 31, 2010 |  |   | December 31, 2009 | 
|                                                              |   |                   |  |   | As a              | 
|                                                              |   | In                |  |   | Percentage        | 
|                                                              |   | Thousands         |  |   | of Net Sales      | 
|Net Sales                                                     | $ | 54,956            |  |   | 100.0%            | 
|Costs of Sales                                                |   | 29,600            |  |   | 53.9%             | 
|Gross profit                                                  |   | 25,356            |  |   | 46.1%             | 
|Selling expenses                                              |   | 2,370             |  |   | 4.3%              | 
|General and administrative expenses                           |   | 2,504             |  |   | 4.6%              | 
|Other income                                                  |   | 57                |  |   | 0.1%              | 
|Income before noncontrolling
      interests and income taxes |   | 20,539            |  |   | 37.4%             | 
|Income taxes                                                  |   | 5,318             |  |   | 9.7%              | 
|Net income                                                    |   | 15,221            |  |   | 27.7%             | 
|Earnings per share:                                           |   |                   |  |   |                   | 
|Basic                                                         | $ | 0.40              |  | $ |                   | 
|Diluted                                                       | $ | 0.38              |  | $ |                   | 

The results of operations reported in the table above is based
on the exchange rate of RMB 6.772 to $1 for the nine months ended December 31,
2010 and the rate of RMB 6.84 to $1 for the nine months ended December 31,
2009.

Net Sales

Net sales increased $8.5 million, or 18.2%, to $55.0 million
for the nine months ended December 31, 2010 from $46.5 million for the nine
months ended December 31, 2009. The increase was mainly attributable to
increased sales volume of our concentrate juice, concentrate pulp and glazed
products due to strong market demand. We also benefited from the increased
average price of concentrate juice and concentrate pulp products, especially our
crab apple concentrate juice and pear concentrate pulp products which increased
approximately 24.3% and 25.8% as compared to the same period last year. We
experienced strong demand for concentrate pulp products in the first nine months
of fiscal year 2011, as a result, sales of concentrate pulp products increased
$3.0 million, or 46.9% to $9.4 million for the nine months ended December 31,
2010. With the new glazed fruit production line and the upgrade of the
concentrate juice production line, revenue generated from the sale of glazed
fruit and concentration juice grew from $10.2 million and $20.1 million in the
nine months ended December 31, 2009 to $11.6 million and $26.7 million in the
nine months ended December 31, 2010, respectively. The increase in sales of
concentrate juice products was mainly due to the increase of sales price of crab
apple and raspberry concentrate juice. In addition, our new launched
seabuckthorn and blackcurrant concentrate juice products generated revenues of
approximately $1.3 million. The increase in sales of glazed fruit was due to
increased sales of our new seabuckthorn and blackcurrant glazed fruit products
which were launched in July 2010. The following table sets forth percentage of
net sales generated by each product for the nine months ended December 31, 2010
and 2009:

|(All amounts, other than percentages, in
      thousands of U.S. dollars) |  
|------------------------------------------------------------------------- | -
|                                                                          |  
|                                                                          |  
|                                                                          |  
|                                                                          |  
|                                                                          |  
|Product                                                                   |  
|Fresh fruit                                                               | $
|Glazed fruit                                                              |  
|Nectar                                                                    |  
|Concentrate juice                                                         |  
|Concentrate pulp                                                          |  
|Beverage                                                                  |  
|Total                                                                     | $

***Cost of Sales***

Cost of sales increased $4.9 million, or 19.7%, to $29.6
million for the nine months ended December 31, 2010 from $24.7 million for the
nine months ended December 31, 2009. Cost of sales as a percentage of net sales
was 53.9% for the nine months ended December 31, 2010, as compared to 53.2% for
the same period last year. The dollar increase was mainly due to increased sales
volume and higher labor costs.

30

---

Gross Profit

Gross profit increased by $3.6 million to $25.4 million for the nine months ended December 31, 2010 from $21.8 million for the nine months ended December 31, 2009. Gross profit as a percentage of net sales was 46.1% for the nine months
ended December 31, 2010 as compared to 46.8% for the same period last year. The slight decrease in gross margin was mainly because we sold more lower margin concentrate juice and concentrate pulp products in the nine months ended December 31, 2010,
and we incurred start up costs associated with the launch of our new seabuckthorn and blackcurrant glazed fruit products in July 2010. As part of our marketing strategy, we offered our new seabuckthorn and blackcurrant glazed fruit products at
attractive prices to our customers to test the market which resulted in relatively lower margins than our existing glazed fruit products. We will continue to monitor the market demand for these new products and may increase our sales price to
improve gross margin in the future when market conditions permit. In addition, we ceased beverage production in March 2010, as a result, the portion of the factory overhead costs previously allocated to the beverage production line was re-allocated
to other production lines in this production season. Furthermore, we increased workers salary in the nine months ended December 31, 2010. The gross margins for glazed fruit, nectar, concentrate juice and concentrate pulp products for the nine
months period ended December 31, 2010 were 53.2%, 68.2%, 43.2% and 33.7%, as compared to 57.6%, 68.1%, 43.5% and 33.8% for the same period last year, respectively.

Selling and General and Administrative Expenses

Selling and general and administrative expenses decreased $51,920, or 1.1%, to $4.9 million for the nine months ended December 31, 2010 from $4.9 million for the nine months ended December 31, 2009.

Selling expenses decreased $222,689, or 8.6%, to $2.4 million for the nine months ended December 31, 2010 from $2.6 million for the nine months ended December 31, 2009. As a percentage of net sales, selling expenses decreased 1.3% from
5.6% for nine months ended December 31, 2009 to 4.3% for the nine months ended December 31, 2010. Due to well established relationships with our existing customers, we received repeat customer orders with higher volume, which led to lower sales
related expenses in the first nine months of fiscal year 2011. In addition, we incurred less selling expenses due to the cessation of production and sale of beverage products in the nine months ended December 31, 2010.

Our general and administrative expenses increased $170,768, or 7.3%, to $2.5 million for the nine months ended December 31, 2010 from $2.3 million for the nine months ended December 31, 2009. As a percentage of net sales, general and
administrative expenses for the nine months ended December 31, 2010 decreased by 0.4% to 4.6%, as compared to 5.0% for the nine months ended December 31, 2009. The slight dollar 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 $3.6 million, or 21.9%, to $20.5 million for the nine months ended December 31, 2010 from $16.9 million for the nine months ended December 31, 2009. Income before
noncontrolling interests and income taxes as a percentage was 37.4% for the nine months ended December 31, 2010 as compared to 36.3% for the nine months ended December 31, 2009.

Provision for Income Taxes

The provision for income taxes increased $0.9 million, or 21.4%, to $5.3 million for the nine months ended December 31, 2010 from $4.4 million for the nine months ended December 31, 2009. The increase in the provision for income taxes is
mainly attributed to the increase in net income before income taxes.

Net Income

Net income increased $2.7 million, or 21.7%, to $15.2 million for the nine months ended December 31, 2010 from $12.5 million for the nine months ended December 31, 2009, mainly as a result of the increase in sales revenue as discuss
above.

Liquidity and Capital Resources

As of December 31, 2010, we had cash and cash equivalents of $24.3 million. The following table sets forth a summary of our cash flows for the periods indicated.

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

Operating Activities

Net cash used in operating activities was $3.8 million for the
nine months ended December 31, 2010 as compared to $5.7 million provided by in
operating activities for the nine months ended December 31, 2009. Net cash used
in operating activities for the nine months ended December 31, 2010 was mainly
attributable to approximately $10.0 million in advance payment for the
construction of our fruit and vegetable powder factory and production line and a
$15.7 million increase in inventories. The significant increase in inventories
was mainly because our new production season started in July and we manufactured
more products in this fiscal quarter as compared to the same period last year in
anticipation of the increased market demand.

Investing Activities

During the nine months ended December 31, 2010, we used
approximately $4.3 million to upgrade concentrate juice production lines in our
Daqing and Mudanjiang facilities and approximately $5.1 million to construct a
new fruit and vegetable powder factory. Our cash used in investing activities
during the nine months ended December 31, 2009 was primarily for the purchase of
a new glazed fruit production line in December 2009 for approximately $2.6
million.

Financing Activities

In connection with our 2009 private placement of Series A
Convertible Preferred Stock, we set up an escrow account for the payment of
dividends to holders of Series A Convertible Preferred Stock due on September 1,
2010, $809,550 of the escrow amount was paid as dividends to holders of our
Series A Convertible Preferred Stock on September 1, 2010 and the remaining
$122,080 was returned to us due to conversion of some shares of the Series A
Convertible Preferred Stock before the dividend payment date. The net cash
provided by financing activities for the nine months ended December 31, 2009 was
the net proceeds from our private placement of the Series A Convertible
Preferred Stock closed in September 2009.

On February 23, 2010, we entered into a $1.21 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 $1.65
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.

On December 20, 2010, we filed a registration statement on Form
S-1 to register 73,000,000 units of Taiwan Depositary Receipts (TDRs),
representing 7,300,000 shares of our common stock, consisting 5,000,000 shares
to be issued by our company and 2,300,000 shares of our common stock owned by a
selling stockholder. We plan to apply for listing the TDRs on the Taiwan Stock
Exchange upon the consummation of the proposed TDR offering. We intend to use
the net proceeds from the proposed TDR offering to construct a new fruit and
vegetable production line in Daqing and a new factory facility with a new
multi-purpose concentrate juice/pulp production line in Mu Dan Jiang.

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. As stated above, we plan to expand our production capacities
through the proposed TDR offering. We cannot assure that the proposed TDR
offering will succeed and we may require additional cash resources due to
changed business conditions or other investments or acquisitions we may decide
to pursue. If the proposed TDR offering does not materialize or result in
sufficient fund to support our planned capacity expansion, and 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, or we may have to abandon our capacity expansion plan. 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.

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Critical Accounting Policies

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

Recently Issued Accounting Pronouncements

See Note 2 (Recent Account Pronouncements) to our unaudited condensed consolidated financial statements included elsewhere in this report.

Off-Balance Sheet Arrangements

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

Seasonality

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

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

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

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer, Mr. Changjun Yu, and Chief Financial Officer, Mr. Colman Cheng, evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of December 31, 2010. Based on our assessment, Mr. Yu and Mr. Cheng determined that, as of December 31, 2010, and as of the date that the evaluation of the effectiveness of our disclosure
controls and procedures was completed, our disclosure controls and procedures were effective to satisfy the objectives for which they are intended.

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Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 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.

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.

34

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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: February 14, 2011

CHINA NUTRIFRUIT GROUP LIMITED

By: /s/ Changjun Yu

Changjun Yu, Chief Executive Officer(Principal Executive Officer)

By: /s/ Colman Cheng

Colman Cheng, Chief Financial Officer (Principal Financial Officer and PrincipalAccounting Officer)

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EXHIBIT INDEX

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

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