---

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

FORM 10–Q

(Mark One)

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

For the quarterly period ended: June 30, 2010

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

For the transition period from _____________ to _____________

Commission File Number: 000-52899

NUTRASTAR INTERNATIONAL INC.
(Exact Name of Registrant as Specified in Its Charter)

Nevada	80-0264950
(State or other jurisdiction of	(I.R.S. Empl. Ident. No.)
incorporation or organization)

7/F Jinhua Mansion
41 Hanguang Street
Nangang District, Harbin 150080
People’s Republic of China
(Address of principal executive offices, Zip Code)

(86) 451-82287746
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. (Check one):

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

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

Yes [   ]    No [X]

The number of shares outstanding of each of the issuer’s classes of common equity, as of August 13, 2010 is as follows:

Class of Securities	Shares Outstanding
Common stock, $0.001 par value	14,332,731

---

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	[Removed and Reserved]	37
Item 5.	Other Information	37
Item 6.	Exhibits	37

i

---

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS EXPRESSED IN US DOLLARS)

		June 30			December 31
		2010			2009
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	32,262,243		$	20,115,677
Restricted cash		350,000			-
Accounts receivable		279,564			215,486
Inventories		704,502			616,073
Due from related party		51,000			-
Prepayments and other receivables		209,733			251,235
Total current assets		33,857,042			21,198,471
OTHER ASSETS
Intangible assets, net		2,541,496			2,747,402
Property, plant and equipment, net		10,174,213			10,396,507
Total assets	$	46,572,751		$	34,342,380
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	55,214		$	863
Other payables and accruals		380,184			453,504
Payable for intangible assets		883,535			878,709
Income tax payable		241,032			319,873
Due to related parties		551,665			49,794
Preferred stock dividend payable		13,748			-
Acquisition payable		8,784,821			8,736,833
Total current liabilities		10,910,199			10,439,576
Warrants liabilities		1,006,279			-
Total liabilities		11,916,478			10,439,576
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock, $0.001 par value, 1,000,000 shares authorized, 197,706 shares     and none shares issued and outstanding, respectively; aggregate liquidation     preference amount: $5,535,768 and $nil, plus accrued but unpaid dividend of     $13,748 and $nil, at June 30, 2010 and December 31, 2009, respectively		4,554,406			-
Common stock, $0.001 par value, 190,000,000 shares authorized,     14,332,731 and 14,297,731 shares issued and outstanding		14,333			14,298
Additional paid-in capital		6,356,116			4,715,891
Statutory reserves		1,345,894			1,341,687
Retained earnings		21,234,521			16,858,012
Accumulated other comprehensive income		1,151,003			972,916
Total shareholders' equity		34,656,273			23,902,804
Total liabilities and shareholders' equity	$	46,572,751		$	34,342,380

See accompanying notes to condensed consolidated financial statements

1

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
(AMOUNTS EXPRESSED IN US DOLLARS)

		For the Three Months						For the Six Months
		Ended June 30,						Ended June 30,
		2010			2009			2010			2009
Revenue	$	5,458,152		$	3,339,762		$	10,226,547		$	7,983,039
Cost of goods sold		(888,415	)		(1,183,805	)		(1,944,930	)		(2,939,751	)
Gross profit		4,569,737			2,155,957			8,281,617			5,043,288
Selling expenses		(233,310	)		(81,574	)		(405,028	)		(193,119	)
General and administrative expenses		(547,331	)		(354,696	)		(977,117	)		(658,211	)
Income from operations		3,789,096			1,719,687			6,899,472			4,191,958
Other income (expenses):
Interest income		33,719			39,849			66,796			52,584
Exchange loss		(15,698	)		(5,109	)		(15,269	)		(3,509	)
Change in fair value of warrants		131,088			-			131,088			-
Other		-			-			-			152
Total other income (expenses)		149,109			34,740			182,615			49,227
Income before income tax		3,938,205			1,754,427			7,082,087			4,241,185
Provision for income tax		(522,564	)		(254,620	)		(945,384	)		(570,838	)
Net income		3,415,641			1,499,807			6,136,703			3,670,347
Other comprehensive income:
Foreign currency translation adjustment		169,229			13,628			178,087			9,317
Total comprehensive income	$	3,584,870		$	1,513,435		$	6,314,790		$	3,679,664
Earnings per share:
Basic	$	0.12		$	0.12		$	0.31 $			0.29
Diluted	$	0.12		$	0.12		$	0.30 $			0.29
Weighted average number of shares outstanding:
Basic		14,332,731			12,874,654			14,322,786			12,836,405
Diluted		14,342,168			12,874,654			14,445,374			12,836,405

See accompanying notes to condensed consolidated financial statements.

2

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2010
(AMOUNTS EXPRESSED IN US DOLLARS)

																					Accumulated
	Preferred Stock					Common Stock						Additional									Other
	Number					Number						Paid-in			Statutory			Retained			Comprehensive
	of Shares			Amount		of Shares			Amount			Capital			Reserves			Earnings			Income			Total
Balance at January 1, 2010	-		$	-		14,297,731		$	14,298		$	4,715,891		$	1,341,687		$	16,858,012		$	972,916		$	23,902,804
Net income	-			-		-			-			-			-			6,136,703			-			6,136,703
Foreign currency translation adjustment	-			-		-			-			-			-			-			178,087			178,087
Issue preferred stock and warrants	197,706			4,554,406		-			-			-			-			-			-			4,554,406
Beneficial conversion feature of convertible preferred stock	-			-		-			-			1,742,239			-			-			-			1,742,239
Amortization of preferred stock discount resulting from accounting for a beneficial conversion feature, deemed analogous to a dividend	-			-		-			-			-			-			(1,742,239	)		-			(1,742,239	)
Fair value of placement agent warrant liabilities	-			-		-			-			(45,493	)		-			-			-			(45,493	)
Issuance fees and
costs	-			-		-			-			(162,361	)		-			-			-			(162,361	)
Preferred stock dividend	-			-		-			-			-			-			(13,748	)		-			(13,748	)
Appropriation of statutory reserves	-			-		-			-			-			4,207			(4,207	)		-			-
Share-based payment	-			-		35,000			35			105,840			-			-			-			105,875
At June 30, 2010 (Unaudited)	197,706		$	4,554,406		14,332,731		$	14,333		$	6,356,116		$	1,345,894		$	21,234,521		$	1,151,003		$	34,656,273

See accompanying notes to condensed consolidated financial statements.

3

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(AMOUNTS EXPRESSED IN US DOLLARS)

		For the Six Months
		Ended June 30,
		2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,136,703		$	3,670,347
Adjustments to reconcile net income to cash provided by operating activities:
Change in fair value of warrants		(131,088	)		-
Share-based compensation expense		105,875			25,000
Depreciation and amortization		506,125			504,872
(Increase) decrease in assets:
Accounts receivable		(62,578	)		(57,381	)
Prepayments and other receivables		41,662			(4,625	)
Inventories		(84,617	)		543,706
Increase (decrease) in liabilities:
Accounts payable		54,073			15,950
Other payables and accruals		(75,431	)		(60,928	)
Income tax payable		(80,193	)		14,991
Trade payable due to related parties		-			4,500
Net cash provided by operating activities		6,410,531			4,656,432
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(8,246	)		-
Net cash used in investing activities		(8,246	)		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Private Placement		5,483,919			-
Increase in restricted cash		(350,000	)		-
Repayment of acquisition payable		-			(50,269	)
Advances from related parties		436,047			61,615
Net cash provided by financing activities		5,569,966			11,346
Foreign currency translation adjustment		174,315			7,749
INCREASE IN CASH AND CASH EQUIVALENTS		12,146,566			4,675,527
CASH AND CASH EQUIVALENTS, at the beginning of the period		20,115,677			9,198,243
CASH AND CASH EQUIVALENTS, at the end of the period	$	32,262,243		$	13,873,770
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Share-based payments to officer under equity incentive plan	$	105,875		$	25,000
SUPPLEMENTAL DISCLOSURE INFORMATION
Income taxes paid	$	980,764		$	592,947

See accompanying notes to condensed consolidated financial statements.

4

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1        DESCRIPTION OF BUSINESS AND ORGANIZATION

Nutrastar International Inc. (“Nutrastar” or the “Company”) was incorporated in the State of Nevada on December 22, 2002. On December 23, 2008, the Company completed a reverse acquisition with New Zealand WAYNE’S New Resources Development Co., Ltd. (“New Resources”). As a result of the reverse acquisition with New Resources, the Company is no longer a shell company and active business operations have been revived. Nutrastar together with its subsidiaries are referred to as the “Company”.

On May 19, 2009, the Company filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State to amend the Company’s current Articles of Incorporation to, among other things, (1) change the name of the Company from “YzApp International Inc.” to “Shuaiyi International New Resources Development Inc.,” (2) increase the total number of shares of common stock that the Company has the authority to issue from 50,000,000 to 190,000,000 shares and (3) effect a one for 114.59 reverse split of the Company’s outstanding common stock (the “Reverse Split”). The detailed description of the Amendments is stated in the Company’s Form 8-K dated May 26, 2009.

On January 11, 2010, the Company, filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada, pursuant to which the Company further changed its name from "Shuaiyi International New Resources Development Inc." to "Nutrastar International Inc.".

As of June 30, 2010, details of the subsidiaries of the Company are as follows:

5

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2        BASIS OF PRESENTATION

These interim condensed consolidated financial statements are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have been included. The results reported in the condensed consolidated financial statements for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The following (a) condensed consolidated balance sheet as of December 31, 2009, which was derived from audited financial statements, and (b) the unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes of the Company for the year ended December 31, 2009.

These condensed consolidated financial statements include the financial statements of Nutrastar and its subsidiaries. All significant inter-company balances or transactions have been eliminated on consolidation.

Research and development costs

Research and development costs are expensed as incurred. For the six months ended June 30, 2010 and 2009, research and development costs were $29,977 and $18,139, respectively.

Advertising costs

The Company expenses all advertising costs as incurred. The total amount of advertising costs charged to selling, general and administrative expense were $23,061 and $1,098 for the six months ended June 30, 2010 and 2009, respectively.

Shipping and handling costs

Costs of shipping and handling of products to customers are included in selling, general and administrative expense. Shipping and handling costs for the six months ended June 30, 2010 and 2009 were insignificant.

Foreign currency

The Company uses the United States dollars (“U.S. Dollar” or “US$” or “$”) for financial reporting purposes. The PRC subsidiaries within the Company maintain their books and records in their functional currency, Chinese Renminbi (“RMB”), being the lawful currency in the PRC. Assets and liabilities of the PRC subsidiaries are translated from RMB into US Dollars using the applicable exchange rates prevailing at the balance sheet date. Items on the statement of operations are translated at average exchange rates during the reporting period. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the Company’s financial statements are recorded as accumulated other comprehensive income.

The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements are based on the rates as published on the website of People’s Bank of China and are as follows:-

	June 30, 2010		December 31, 2009
Balance sheet items, except for equity accounts	US$1=RMB 6.7909		US$1=RMB6.8282
	Three months ended June 30,
	2010		2009
Items in the statements of income and cash flows	US$1=RMB 6.8235		US$1=RMB 6.8299
	Six months ended June 30,
	2010		2009
Items in the statements of income and cash flows	US$1=RMB 6.8252		US$1=RMB6.8328

6

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2        BASIS OF PRESENTATION (CONTINUED)

No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the above rates. The value of RMB against U.S. dollars and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of U.S. dollar reporting.

NOTE 3        RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncement

Effective January 1, 2010, the Company adopted the provisions in ASU 2010-06, “Fair Value Measurements and Disclosures (ASC Topic 820): Improving Disclosures about Fair Value Measurements, which requires new disclosures related to transfers in and out of levels 1 and 2 and activity in level 3 fair value measurements, as well as amends existing disclosure requirements on level of disaggregation and inputs and valuation techniques. The adoption of the provisions in ASU 2010-06 did not have an impact on the Company’s consolidated financial statements.

In February 2010, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that amends the disclosure requirements related to subsequent events. This guidance includes the definition of a Securities and Exchange Commission filer, removes the definition of a public entity, redefines the reissuance disclosure requirements and allows public companies to omit the disclosure of the date through which subsequent events have been evaluated. This guidance is effective for financial statements issued for interim and annual periods ending after February 2010. This guidance did not materially impact the Company’s results of operations or financial position, but did require changes to the Company’s disclosures in its financial statements.

In April 2010, the FASB issued ASU No. 2010-13—Compensation—Stock Compensation (Topic 718), which addresses the classification of an employee share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. This Update provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company expects that the adoption of the amendments in this Update will not have any significant impact on its financial position and results of operations.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s Consolidated Financial Statements upon adoption.

7

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4        FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

	Level one —	Quoted market prices in active markets for identical assets or liabilities;
	Level two —	Inputs other than level one inputs that are either directly or indirectly observable; and
	Level three —	Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.

Assets and liabilities measured at fair value on a recurring basis are summarized as follows:

The carrying values of cash and cash equivalents, trade and other receivables and payables approximate their fair values due to the short maturities of these instruments.

There was no asset or liability measured at fair value on a non-recurring basis as of June 30, 2010 and December 31, 2009.

8

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5        RESTRICTED CASH

As of June 30, 2010, $350,000 in total was held in escrow arising from agreements in conjunction with the Private Placement, which are further disclosed in Note 14.

Restricted cash consisted of the following:

		June 30			December 31
		2010			2009
		(Unaudited)
Special fund for distribution to Investor Relations Firms	$	100,000		$	-
Compensation for a yet-to-be-determined Chief Financial Officer		250,000			-
Total	$	350,000		$	-

NOTE 6        ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

		June 30			December 31
		2010			2009
		(Unaudited)
Accounts receivable	$	279,564		$	215,486
Less: Allowance for doubtful debts		-			-
Accounts receivable	$	279,564		$	215,486

No allowance has been established as management has determined that all accounts receivable are deemed collectible.

NOTE 7        INVENTORIES

Inventories by major categories are summarized as follows:

		June 30			December 31
		2010			2009
		(Unaudited)
Raw materials	$	192,287		$	183,934
Work in progress		298,057			294,983
Finished goods		214,158			137,156
Total	$	704,502		$	616,073

9

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8        PREPAYMENTS AND OTHER RECEIVABLES

Prepayments and other receivables consist of the following:

		June 30			December 31
		2010			2009
		(Unaudited)
Prepayments	$	750		$	12,812
Other receivables		208,983			238,423
	$	209,733		$	251,235

NOTE 9        INTANGIBLE ASSETS, NET

Intangible assets, net consisted of the following:

		June 30			December 31
		2010			2009
		(Unaudited)
Computer software, cost	$	1,462		$	1,454
Exclusive right to use a secret process, cost		4,419,451			4,395,309
Less: Accumulated amortization		(1,879,417	)		(1,649,361	)
	$	2,541,496		$	2,747,402

In April 2006, the Company purchased from a third party a ten-year exclusive right to use a secret process and method in the cultivation and growing of Chinese Golden Grass, which is widely used for Chinese medicine, for a cash consideration of RMB30,000,000, payable over five years. The exclusive right is amortized over its term of ten years using the straight-line method.

Amortization expenses for the six months ended June 30, 2010 and 2009 were $219,885 and $219,641, respectively.

NOTE 10      PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following:

		June 30			December 31
		2010			2009
		(Unaudited)
Cost:
Buildings	$	11,736,579		$	11,672,404
Office equipment		23,573			15,264
Machinery		128,990			128,286
Motor vehicles		55,143			54,842
Total cost		11,944,285			11,870,796
Less: Accumulated depreciation		(1,770,072	)		(1,474,289	)
Net book value	$	10,174,213		$	10,396,507

Depreciation expenses for the six months ended June 30, 2010 and 2009 were $286,240 and $285,231, respectively.

10

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11      OTHER PAYABLES AND ACCRUALS

Other payables and accruals consisted of the following:

		June 30			December 31
		2010			2009
		(Unaudited)
Accrued staff costs	$	372,407		$	370,395
Other taxes payable		2,302			25,030
Other payables		5,475			58,079
	$	380,184		$	453,504

NOTE 12      PAYABLE FOR INTANGIBLE ASSETS

As described in Note 9, the Company purchased an exclusive right from an independent party for a secret process and method for a stated value of RMB30,000,000 payable over 5 years from the date of purchase. The agreement provides that all payments by the Company for the secret process and method will be refundable if the secret process and method prove ineffective. Under ASC Subtopic 835-30, “Imputation of Interest” (formerly APB 21, “Interest on Receivables and Payables”), the payable for intangibles are stated without imputed interest as the noninterest factor fairly represents the warranty for performance.

The following table presents the amounts payable for the next five years and thereafter:

		(Unaudited)
Remainder of year ending December 31, 2010	$	883,535
2011 and thereafter		-
Total		883,535
Current portion		883,535
Non-current portion	$	-

NOTE 13      ACQUISITION PAYABLE

The acquisition payable represents the transfer price of RMB60,000,000, equivalent to USD 8,736,833, payable by New Resources for the acquisition of 100% equity interest in Heilongjiang Shuaiyi, as further discussed in Note 21, the acquisition payable is due for payment in full on or before December 31, 2010 by New Resources to the Shuaiyi Founders who are also shareholders of the Company. See Note 19(b).

11

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14      SHAREHOLDERS’ EQUITY

Private Placement

On May 27, 2010, the Company entered into a securities purchase agreement (the "Securities Purchase Agreement") with certain investors, pursuant to which, the Company agreed to issue and sell up to an aggregate of 250,000 Units at a purchase price of $28.56 per Unit, for an aggregate purchase price of up to $7,140,000 (the "Aggregate Purchase Price"). Each Unit consists of (i) one share of a newly designated series A preferred stock, par value $0.001 per share ("Series A Preferred Stock"), with an initial one-to-ten conversion ratio into shares of the Company’s common stock, par value $0.001 per share ("Common Stock"), and (ii) warrants to purchase five shares of Common Stock at an exercise price of $3.40 per share ("Warrants", together with the shares of Series A Preferred Stock, the "Securities"). In addition, the Company and the investors agreed, that the placement agent of this transaction, will receive from the investors a fee equal to 2% of the Aggregate Purchase Price and Warrants to purchase 2% of the aggregate number of shares of Common Stock that shares of Series A Preferred Stock to be issued under the Securities Purchase Agreement are convertible into.

Pursuant to the Securities Purchase Agreement, the Company also granted registration rights to holders of registrable securities, which include shares of Common Stock issued or issuable upon conversion of shares of the Series A Preferred Stock and shares of Common Stock issuable upon exercise of the Warrants (the "Registrable Securities"). Holders holding a majority of the Securities then outstanding may request the Company to file a registration statement to register the Registrable Securities within a pre-defined period (the "Registration Statement"). The Company may be subject to liquidated damages in the amounts prescribed by the Securities Purchase Agreement if it is unable to file the Registration Statement timely or maintain its effectiveness as required by the Securities Purchase Agreement.

On June 7, 2010, the Company effected the first closing of a private placement transaction and issued approximately 123,403 Units at a purchase price of $28.56 per unit for gross proceeds of $3,524,342.

On June 28, 2010, the Company effected the second closing of a private placement transaction and issued approximately 74,303 Units at a purchase price of $28.56 per unit for gross proceeds of $2,121,938.

Pursuant to the Securities Purchase Agreement, a written request was received from the majority holders of Series A Preferred Stock on July 14, 2010 and the Company filed the Registration Statement on Form S-1 on August 11, 2010. The Registration Statement needs to be declared effective by the Securities and Exchange Commission ("SEC") within approximately 150 days after the filing to avoid the liquidated damages under the Securities Purchase Agreement.

Escrow Agreement

In connection with the Securities Purchase Agreement, the Company entered into an escrow agreement (the "Escrow Agreement") pursuant to which the parties agreed to deposit the investment amount received from the investors into escrow to be released upon the occurrence of the events set forth in the Escrow Agreement. In addition, the Company agreed that $100,000 out of the investment amount will remain in escrow and will be disbursed to an investor relations firm hired by the Company. The Company also agreed that an additional $250,000 will remain in escrow and will be used as compensation for a yet-to-be-determined Chief Financial Officer of the Company.

12

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14      SHAREHOLDERS’ EQUITY (CONTINUED)

Allocation of Proceeds in the Private Placement (continued)

The guidance provided in ASC 470-20-30-5 has been applied to the amount allocated to the convertible Preferred Stock, and the effective conversion price has been used, to measure the intrinsic value, if any, of the embedded conversion option. The fair value of the embedded conversion feature of the Preferred Shares of $1,114,444 and $627,795 were calculated using the intrinsic value model in accordance with the guidance provided in ASC Topic 470-20-30-6 (formerly EITF 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”), limited to the amount of the proceeds allocated to the convertible instrument on June 7, 2010 and June 28, 2010, respectively. The intrinsic value of the beneficial conversion feature was calculated by comparing the effective conversion price, which was determined based on the proceeds from the Private Placement allocated to the convertible Preferred Shares, and the market price of the Company’s common stock of $3.2 and $3.16 on June 7, 2010 and June 28, 2010, respectively. The fair value of $1,114,444 and $627,795 of the beneficial conversion feature has been recognized as a reduction to the carrying amount of the convertible Preferred Shares and an addition to paid-in capital.

The following table sets out the allocation of the proceeds from the Private Placement:

Proceeds of the Private Placement on June 7, 2010	$	3,524,342
Allocation of proceeds to Warrants		(689,944	)
Allocation of proceeds to beneficial conversion feature		(1,114,444	)
Amortization of discount resulting from the accounting for a beneficial conversion feature		1,114,444
Convertible Preferred Stock at June 30, 2010	$	2,834,398
Expenses related to private placement		(114,567	)
Convertible Preferred Stock (net of fees and expenses) at June 30, 2010	$	2,719,831
Proceeds of the Private Placement on June 28, 2010	$	2,121,938
Allocation of proceeds to Warrants		(401,930	)
Allocation of proceeds to beneficial conversion feature		(627,795	)
Amortization of discount resulting from the accounting for a beneficial conversion feature		627,795
Convertible Preferred Stock at June 30, 2010	$	1,720,008
Expenses related to private placement		(47,794	)
Convertible Preferred Stock (net of fees and expenses) at June 30, 2010	$	1,672,214

In accordance with ASC Topic 470-20-30-6, the discount on the Preferred Shares resulting from the accounting for a beneficial conversion feature was amortized and charged to retained earnings, because the Preferred Shares are immediately convertible upon issuance and have no stated redemption date. Amortization of the discount resulting from the accounting for a beneficial conversion feature is considered analogous to a return to holders of perpetual preferred stock and has been accounted for as a reduction to net income available to common stockholders for the purpose of calculation of earnings per share.

13

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14      SHAREHOLDERS’ EQUITY (CONTINUED)

Preferred Stock

The following are the principal terms of the Series A Preferred Stock:

Rank: The Series A Preferred Stock ranks senior to the Company’s common stock, but junior to all indebtedness of the Company.

Dividend: Holders of the Series A Preferred Stock are entitled to a cumulated dividend at an annual rate of 6% of the Series A Preferred Stock, payable in additional shares of Series A Preferred Stock, shall compound quarterly, and shall be payable upon the occurrence of a Liquidation Event, Conversion, Mandatory Conversion or from time-to-time at the discretion of the Board. When dividends on the Series A Preferred Stock are paid, each such additional share of Series A Preferred Stock shall be valued at the Original Series A purchase price, which may be adjusted from time to time pursuant to a split, subdivision, combination or other similar events.

Optional 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 (i) $28.00 per share plus any declared, accrued but unpaid dividends by (ii) the conversion price, which is initially $2.80 per share, subject to adjustment as provided in the Certificate. Initially, each share of Series A Preferred Stock is convertible into 10 shares of Common Stock.

Mandatory Conversion: All outstanding shares of the Series A Preferred Stock will automatically convert to shares of Common Stock, subject to the conversion restrictions set forth in the Certificate (the "Mandatory Conversion"), at the earlier to occur of (i) the Company’s shares of Common Stock being listed on the New York Stock Exchange, the NYSE Amex, the NASDAQ Global Market, the NASDAQ Global Select Market or the NASDAQ Capital Market (each, a "National Stock Exchange") and the registration statement on Form S-1 or such other appropriate form promulgated by the Securities and Exchange Commission (the "Commission") registering the Common Stock underlying the Securities pursuant to the Securities Purchase Agreement being declared effective by the Commission, and (ii) 12 months from the date that the Company's shares of Common Stock are first listed on a National Stock Exchange.

Adjustment to Conversion Price: If the Company shall issue any additional stock without consideration or for consideration per share less than the Conversion Price in effect immediately prior to the issuance of such Additional Stock, then such Conversion Price in effect immediately prior to such issuance shall be adjusted to a price determined by multiplying such Conversion Price by a fraction:-

Sum of (x) the number of shares of Common Stock outstanding immediately prior to the issuance of such Additional Stock plus (y) the number of shares of Common Stock that the aggregate consideration received by the Company for the total number of such Additional Stock so issued would purchase at Conversion Price (divided by) (x) the number of shares of Common Stock outstanding immediately prior to the issuance of such Additional Stock plus (y) the number of shares of such Additional Stock so issued

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 stockholders, except as required by Nevada law.

Liquidation Preference: The Series A Preferred Stock has a preference over the Company’s common stock on the Company’s liquidation, dissolution or winding up equal to $28 per share of the Series A Preferred Stock plus any accrued but unpaid dividends thereon, as of the date of liquidation.

14

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14      SHAREHOLDERS’ EQUITY (CONTINUED)

Registration Rights: The holders of Series A Preferred Stock have the right to request the Company to file a Registration Statement to register “Registrable Securities” (which include the common stock into which the Series A Preferred Stock and Warrants are convertible). Upon such request, no later than 30 days upon receipt of such request (the “Required Filing Date”) the Company should use its commercially reasonable efforts to register the Common Stock underlying the Registrable Securities and have the Registration Statement declared effective by the SEC which is not later than the earlier of (x) 150 calendar days after the Required Filing Date, or (y) if the Registration Statement is not reviewed by the SEC, 5 business days after oral or written notice to the Company or its counsel from the SEC that there will not be a review.

Effect of failure to file and obtain and maintain effectiveness of Registration Statement – the Company shall pay to each holder of Registrable Securities an amount in cash equal to 1% of the aggregate purchase price of the Securities owned by such holder as liquidated damages, but in no event shall liquidated damages exceed 8% of the Purchase Price

Accounting for Series A Preferred Stock

The Company has evaluated the terms of the Preferred Stock and determined that the Series A Preferred Stock, without embodying an obligation for the Company to repurchase or to settle by transferring assets, is not a liability in accordance with the guidance provided in ASC Topic 480, Distinguishing Liabilities from Equity.

Also, the Preferred Stock has no redemption clause at all, it is not a mezzanine equity (out of permanent equity) in accordance with the requirement of ASC 480-10-S99.

The Preferred Shares are not subject to redemption (except on liquidation) and the holders of the Preferred Shares are entitled to vote together with common stock holders on an as-converted basis. The Preferred Shares, excluding the embedded conversion option, are considered to be an equity instrument and accordingly, the embedded conversion option has not been separated and accounted for as a derivative instrument liability.

Common Stock Purchase Warrants

Series C Warrants

In conjunction with the issuance of the Preferred Shares, the Company issued Series C Warrants to the investors and the placement agent in aggregate to purchase up to 617,008 shares and 371,493 shares of Common Stock on June 7, 2010 and June 28, 2010, respectively, at an exercise price of $3.40 per share issued and outstanding. The Series C Warrants have a term of exercise expiring 3 years from issuance date. The Series C Warrants at the option of the holder, may be exercised by cash payment of the exercise price or, the holder may satisfy its obligation to pay the exercise price through a "cashless exercise."

The Company will not receive any additional proceeds to the extent that the Series C Warrants are exercised by cashless exercise.

15

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14      SHAREHOLDERS’ EQUITY (CONTINUED)

Common Stock Purchase Warrants (continued)

Series C Warrants (continued)

The exercise price and number of shares of Common Stock issuable upon exercise of the Series C Warrants may be adjusted for: 1) upon issuance of additional stock lower than the exercise price. 2) upon subdivision or combination of common stocks 3) rights upon distribution of assets and other dilutive events

Accounting for Warrants

Series A and Series B Warrants issued to certain investors to purchase 500,000 shares of the Company’s common stock remained outstanding at December 31, 2009 had a term of three years and exercise prices of $3.25 and $4.00 per share, respectively. These warrants contain standard anti-dilution provisions for stock dividends, stock splits, stock combination, recapitalization and a change of control transaction. Because these warrants do not contain any contingent exercise provisions and their settlement amount will equal the difference between the fair value of a fixed number of the Company’s equity shares and a fixed strike price, these warrants, which are freestanding instruments, qualify for the scope exception under the guidance provided in ASC 815-40-15-5 through 815-40-15-8, and are considered indexed to the Company’s own stock. Accordingly, Series A and Series B Warrants have been classified as equity.

Since the Series C Warrants issued to the investors and the placement agent in June 2010 contain reset exercise price provisions, the Company had determined to classify these warrants as derivative liabilities. The reset exercise provisions of the warrants issued to the investors and the placement agent in June 2010 were recorded at their relative fair values at issuance of $1,137,367 and will continue to be recorded at fair value at each subsequent balance sheet date. Any change in value between reporting periods will be recorded as other income (expense). These warrants will continue to be reported as a liability until such time when they are exercised or expire. The fair value of these warrants is estimated using Monte-Carlo simulation methods.

As of June 30, 2010, the fair value of these outstanding Series C Warrants was determined to be $1,006,279, accordingly, the Company recorded $131,088 in other income related to the change in the fair value of the Series C Warrants. There is no cash flow impact for the warrant liability until the Series C Warrants are exercised.

The following table presents a reconciliation of the warrant liabilities measured at fair value on a recurring basis using significant unobservable input (Level 3) from January 1, 2010 to June 30, 2010:

		Warrant liabilities
Balance at January 1, 2010 and at March 31, 2010	$	-
Issuance of warrants		1,137,367
Change in fair value included in earnings		(131,088	)
Balance at June 30, 2010	$	1,006,279

16

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Warrants issued and outstanding at June 30, 2010, and changes during the six months then ended, are as follows:

					Weighted			Average
		Number of			Average			Remaining
		underlying			Exercise			Contractual Life
		shares			Price			(years)
Outstanding at December 31, 2009		500,000		$	3.63			2.96
Granted		988,501			3.40			3.00
Forfeited		-			-			-
Exercised		-			-
Outstanding at June 30, 2010 (Unaudited)		1,488,501		$	3.48			2.78
Exercisable at June 30, 2010 (Unaudited)		1,488,501		$	3.48			2.78

NOTE 15      STATUTORY RESERVES

In accordance with the PRC Companies Law, the Company’s PRC subsidiaries were required to transfer 10% of their profits after tax, as determined in accordance with accounting standards and regulations of the PRC, to the statutory surplus reserve and a percentage of not less than 5%, as determined by management, of the profits after tax to the public welfare fund. However, the Company’s PRC subsidiaries were not required to transfer any profit after tax to the statutory surplus reserve only after the accumulated statutory surplus reserves reached 50% of registered capital of the Company’s PRC subsidiaries. The statutory surplus reserve is non-distributable.

17

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16      SHARE-BASED COMPENSATION

On January 1, 2010, the Company entered into a stock option agreement with Mr. Daniel K. Lee (“Mr. Lee”), the Chief Financial Officer of the Company, under the Company’s 2009 Equity Incentive Plan. Pursuant to the terms of the Stock Option Agreement, Mr. Lee was granted options (the “Options”) to purchase an aggregate 250,000 shares of common stock of the Company, among which, an option to purchase 100,000 shares will be vested in 2011 with an exercise price of $7.00 per share, an option to purchase 100,000 shares will be vested in 2012 with an exercise price of $10.00 per share and an option to purchase 50,000 shares will be vested in 2013 with an exercise price of $10.00 per share. Each of the Options expires three years after its respective vesting date.

According to the Stock Option Agreement, in the event Mr. Lee’s employment with the Company is terminated for any reason except for death or disability, he may exercise the Options only to the extent that the Options would have been exercisable on the termination date and no later than three months after the termination date. If Mr. Lee’s employment is terminated because of his death or disability, the Options may be exercised only to the extent that such Options would have been exercisable by Mr. Lee on the termination date and must be exercised by Mr. Lee no later than twelve months after the termination date. If Mr. Lee is terminated for cause, the Options will terminate immediately. In no event will the Options be exercised later than December 31, 2015.

On May 5, 2010, Mr. Lee resigned as the Chief Financial Officer and Treasurer of the Company, effectively immediately.

No expense has been recognized related to the Options which were forfeited because the requisite service for the Options has not been rendered.

On January 1, 2010, the Company also entered into a restricted shares grant agreement (the “Restricted Shares Grant Agreement”) under the Company’s 2009 Equity Incentive Plan with Mr. Lee. Pursuant to the terms of the Restricted Shares Grant Agreement, the Company granted to Mr. Lee 140,000 restricted shares of the Company’s common stock subject to the vesting schedule therein. If Mr. Lee’s service with the Company ceases for any reason other than Mr. Lee’s (a) death, (b) Disability, (c) Retirement, or (d) termination by the Company without cause, any nonvested restricted shares will be automatically forfeited to the Company.

The Restricted Shares vest under the following schedule:

Number of Shares	Vesting Date
15,000	January 1, 2010
20,000	April 1, 2010
35,000	July 1, 2010
35,000	January 1, 2011
35,000	July 1, 2011

As a result of the resignation of Mr. Lee, his employment agreement with the Company, dated November 16, 2009, the stock option agreement with the Company, dated January 1, 2010, and the restricted shares grant agreement with the Company, dated January 1, 2010 were terminated, effective on May 5, 2010. In addition, upon his resignation, the unvested 105,000 restricted shares and the unvested options to purchase 250,000 shares of the Company’s common stock granted to Mr. Lee were cancelled.

The Company recognizes compensation cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award, provided that the compensation cost recognized at any date must at least equal the portion of the grant-date value of the award that is vested at that date. No compensation cost is recognized for instruments that employees forfeit because a service condition or a performance condition is not satisfied.

18

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16      SHARE-BASED COMPENSATION (CONTINUED)

Accordingly, the Company recognized compensation expense of $105,875, related to the restricted shares granted to Mr. Lee, which vested before his resignation, for the six months ended June 30, 2010, based on the estimated grant-date fair value of $3.025 of the Company’s common stock.

Before January 1, 2010, the Company’s common stock had scarcely been traded. The Company has determined the fair value of its common stock as of January 1, 2010 based on the volume weighted average of the fair value of the Company’s common stock issued in the private placement of shares and warrants to unaffiliated investors on December 17, 2009 and the closing prices of Company’s common stock traded during January 2010.

NOTE 17      EARNINGS PER SHARE

The following table is a reconciliation of the net income and the weighted average shares used in the computation of basic and diluted earnings per share for the periods presented:

		For the three months						For the six months
		Ended June 30,						Ended June 30,
		2010			2009			2010			2009
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Income available to common shareholders:
- Net income	$	3,415,641		$	1,499,807		$	6,136,703		$	3,670,347
Less: Preferred stock dividend		(13,748	)		-			(13,748	)		-
Less: Beneficial conversion feature of convertible preferred stock		(1,742,239	)		-			(1,742,239	)		-
Income available to common shareholders (Basic and diluted)	$	1,659,654		$	1,499,807		$	4,380,716		$	3,670,347
Weighted average number of shares:
- Basic		14,332,731			12,874,654			14,322,786			12,836,405
- Effect of dilutive warrants and options		9,437			-			122,588			-
- Diluted		14,342,168			12,874,654			14,445,374			12,836,405
Net income per share
- Basic	$	0.12		$	0.12		$	0.31		$	0.29
- Diluted	$	0.12		$	0.12		$	0.30		$	0.29

As discussed in note 1, the Company effected a 1-for-114.59 Reverse Split of its common stock. The weighted average number of shares for the purposes of calculating the earnings per share has been retroactively adjusted as if the Reverse Split took effect as of the beginning of the earliest period presented.

Diluted earnings per share is calculated by adjusting the weighted average number of common shares outstanding to assume conversion of all dilutive potential common shares. The Company has one category of dilutive potential common shares: the Series C Warrants issued in connection with the Preferred Shares financing described in Note 14. The Warrants are assumed to have been converted into common shares and the calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s common stock) based on the monetary value of the subscription rights attached to outstanding Warrants. The Preferred Shares as converted to common stock have been excluded from the diluted earnings per share because to do so would be anti-dilutive. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the Warrants.

19

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18      INCOME TAXES

The Company’s PRC subsidiaries are subject to PRC enterprise income tax (“EIT”). Before January 1, 2008, the PRC EIT rate was generally 33%. In March 2007, the PRC government enacted a new PRC Enterprise Income Tax Law, or the New EIT Law, and promulgated, Implementation Regulations for the PRC Enterprise Income Tax Law. The New EIT Law and Implementation Regulations became effective January 1, 2008. The NEW EIT Law, among other things, imposes a unified income tax rate of 25% for both domestic and foreign invested enterprises registered in the PRC.

The New EIT Law provides a grandfathering on tax holidays which were granted under the then effective tax laws and regulations. Therefore, one of the Company's subsidiaries, Daqing Shuaiyi, being engaged in growing and sales of agricultural products, has continued to be entitled to a preferential tax treatment: an EIT holiday for each of the two years ended December 31, 2006 and 2007 and a 50% reduction on the EIT rate for each of the three years ended December 31, 2008, 2009 and 2010.

Harbin Shuaiyi has been subject to an EIT rate of 25% for the years ended December 31, 2010 and 2009.

No provision for other overseas taxes is made as neither Nutrastar or New Resources has any taxable income in the U.S. or British Virgin Islands, respectively.

The Company’s income tax expense consisted of:

		For the Three Months						For the Six Months
		Ended June 30,						Ended June 30,
		2010			2009			2010			2009
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Current income tax – PRC	$	522,564		$	254,620		$	945,384		$	570,838
Deferred		-			-			-			-
Income tax expenses	$	522,564		$	254,620		$	945,384		$	570,838

The Company had deferred tax assets as follows:

		June 30			December 31
		2010			2009
		(Unaudited)
Net operating losses carried forward	$	350,039		$	355,212
Less: Valuation allowance		(350,039	)		(355,212	)
Net deferred tax assets	$	-		$	-

As of June 30, 2010 and December 31, 2009, the Company has $1,029,527 and $1,044,740, net operating loss carryforwards available to reduce future taxable income which will expire in various years through 2029. It is more-likely-than-not that the deferred tax assets can not be utilized in the future because there will not be significant future earnings from the entity which generated the net operating loss. Therefore, the Company recorded a full valuation allowance on its deferred tax assets.

As of June 30, 2010 and December 31, 2009, the Company did not have any other significant temporary differences and carry forwards that may result in deferred tax.

20

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19      RELATED PARTY TRANSACTIONS

(a)      Due from (to) related parties

			June 30			December 31
			2010			2009
			(Unaudited)
Due from related parties:
Due from Ms. Yuehong Luan, shareholder of the Company	a	$	51,000		$	-
Due to related parties:
Due to Ms. Lianyun Han, Chairperson, CEO and President of the Company	b	$	551,665		$	49,794

a.	The amount due from Ms. Yuehong Luan was non-interest bearing and unsecured. The amount was subsequently repaid by Ms. Yuehong Luan in July 2010. As of June 30, 2010, the acquisition payable due to Mr Yuehong Luan is $411,727 (see note19(b)).
b.	The amount due to Ms. Lianyun Han was non-interest bearing, unsecured and without fixed repayment date.

(b)      Acquisition payable

The acquisition payable arose from the Equity Transfer Agreement which formed part of the restructuring of Heilongjiang Shuaiyi in July 2008, pursuant to which New Resources acquired 100% equity interest in Heilongjiang Shuaiyi from Ms. Lianyun Han, Chairperson, CEO and President of the Company, and other individual shareholders (collectively the “Shuaiyi Founders”).

As part of the restructuring plan, Heilongjiang Shuaiyi entered into separate loan agreements dated December 8, 2008, as amended on February 12, 2009, and promissory notes with the Shuaiyi Founders, pursuant to which, the Shuaiyi Founders have agreed to lend to Heilongjiang Shuaiyi a loan in the aggregate amount of RMB60,000,000 (approximately $8.8 million, “Subordinated Loan”). The amount of the Subordinated Loan exactly equals to the transfer price payable to the Shuaiyi Founders by New Resources for the acquisition of Heilongjiang Shuaiyi in compliance with regulatory requirements of the PRC. The Subordinated Loan ranks behind all other debts of Heilongjiang Shuaiyi, bears no interest and is only repayable after 10 years, in successive equal yearly payments beginning on the tenth anniversary of the Notes, December 8, 2018, and within the first month of each year thereafter. The final payment will be due on January 1, 2028.

According to the PRC rules and regulations, New Resources is required to settle the transfer price for acquisition of Heilongjiang Shuaiyi by way of remittance of the RMB60,000,000 to Shuaiyi Founders within three months from the issue of the new business license. However, New Resources has obtained the approval of the relevant business bureau for the extension of the time to one year until December 1, 2009. On January 4, 2010, the relevant PRC regulatory agency further extended the payment due date to June 30, 2010. On July 12, 2010, the relevant PRC regulatory agency further extended the payment due date to December 31, 2010. As of June 30, 2010, New Resources had only paid $50,269 of the transfer price and, accordingly, the corresponding Subordinated Loan has not been drawn yet.

The acquisition payable due to the Shuaiyi Founders comprised:

		June 30			December 31
		2010			2009
		(Unaudited)
Ms. Lianyun Han, Chairperson, CEO and President of the Company	$	5,984,014		$	5,951,326
Ms. Nana Jiang, director of the Company		280,081			278,551
Mr. Chunming Zhang , director of the Company		353,414			351,484
Mr. Weihan Zhang, director of a subsidiary of the Company and the son of Ms. Lianyun Han		441,768			439,354
Family members of Ms. Lianyun Han		883,535			878,708
Ms. Yuehong Luan		411,727			409,478
Other Shuaiyi Founders		430,282			427,932
Total	$	8,784,821		$	8,736,833

21

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19      RELATED PARTY TRANSACTIONS (CONTINUED)

(c)      Purchase of goods

For the six months ended June 30, 2010 and 2009, the Company purchased rice amounting to $Nil and $655,032, respectively, from Heilonjiang Shuaiyi Technology Development Co., Ltd. (“Shuaiyi Technology”). Shuaiyi Technology and the Company are under common control and management.

(d)      Lease of land

For the six months ended June 30, 2010 and 2009, the Company paid rental expense of $4,505 and $4,500 for land to Shuaiyi Technology.

NOTE 20      CONCENTRATION OF CREDIT RISK

As of June 30, 2010 and December 31, 2009, 100% of the Company’s cash included cash on hand and deposits in accounts maintained within the PRC where there is currently no rule or regulation in place for obligatory insurance to cover bank deposits in the event of bank failure. However, the Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts

For the six months ended June 30, 2010 and 2009, all of the Company’s sales arose in the PRC. In addition, all accounts receivable as of June 30, 2010 and December 31, 2009 also arose in the PRC.

Except for one customer who accounted for 40% of the Company’s revenue for the six months ended June 30, 2010, there was no other single customer who accounted for more than 10% of the Company’s revenue for either the six months ended June 30, 2010 or 2009.

As of June 30, 2010, five customers accounted for 29%, 19%, 14%, 13% and 12% of total accounts receivable of the Company. As of December 31, 2009, five customers accounted for 18%, 13%, 12%, 12% and 12% of accounts receivable of the Company. Except as disclosed, no other customer accounted for 10% or more of the Company’s accounts receivable as of June 30, 2010 or December 31, 2009.

22

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 21      COMMITMENTS AND CONTINGENCIES

(a)      Operating leases

The Company has entered into tenancy agreements for the leases of an exhibition hall and land with a third party and a related company, Shuaiyi Technology (see 19(d)), respectively, for the purposes of the operation of its subsidiaries. The Company’s commitments for minimum lease payments under these operating leases for the next five years and thereafter as of June 30, 2010 are as follows:

		(Unaudited)
Remainder of fiscal year ending December 31, 2010	$	16,014
Fiscal year ending December 31, 2011		9,056
Fiscal year ending December 31, 2012		9,056
Fiscal year ending December 31, 2013		9,056
Fiscal year ending December 31, 2014		9,056
Thereafter		117,731
Total	$	169,969

(b)      PRC employee costs

According to the prevailing laws and regulations of the PRC, the Company’s subsidiaries in the PRC are required to cover its employees with medical, retirement and unemployment insurance programs. Management believes that due to the transient nature of its employees, they do not need to provide all employees with such social insurances, and have not paid the social insurances for all employees.

In the event that any current or former employee files a complaint with the PRC government, the Company's subsidiaries may be subject to making up the social insurances as well as administrative fines. As the Company believes that these fines would not be material, no provision has been made in this regard.

(c)      Transfer price for equity interest in Heilongjiang Shuaiyi

On July 28, 2008, the Company’s subsidiary, New Resources entered into an equity transfer agreement with the Shuaiyi Founders to acquire all of their equity interests in Heilongjiang Shuaiyi for RMB60,000,000 (approximately $8.8 million). A new business license was issued to Heilongjiang Shuaiyi on December 1, 2008. According to PRC merger and acquisition rules, the equity interest transfer price should be paid in full within three months commencing from the issuance of the new business license to Heilongjiang Shuaiyi. If the transfer price is not paid by this date, the Company may apply to the relevant PRC business bureau for an extension of up to one year from the date of the issuance of the license; provided, however, that 60% of the transfer price will be required to be paid within six months from such date. However, if the Company is unable to make the payment for the transfer price by the March 1, 2009 or extended deadline and the relevant PRC business bureau does not grant the Company additional time to make the payment, the Company may be subject to fines or penalties imposed by the PRC business bureau. In addition, the Company may not be permitted to exercise any decision-making rights as a shareholder in Heilongjiang Shuaiyi or to consolidate Heilongjiang Shuaiyi's financial results into the Company’s financial statements.

On March 10, 2009, New Resources obtained the approval from the relevant PRC business bureau for the extension of time allowed for the payment of the transfer price to one year until December 1, 2009. On January 4, 2010, the relevant PRC regulatory agency further extended the payment due date to June 30, 2010. On July 12, 2010, the relevant PRC regulatory agency further extended the payment due date to December 31, 2010. The Company has engaged financial advisors with a view to raising additional capital for the Company. The Company believes that it will be able to make the payment for the transfer price within the time allowed by the relevant PRC business bureau and therefore has not accrued any amount related to this contingency. However, there can be no assurance that the Company will be successful in raising sufficient capital for the purpose of the payment of the transfer price to the Shuaiyi Founders.

23

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 22      SEGMENT INFORMATION

The Company operates in two business segments identified by product, “Chinese Golden Grass” and “other agricultural products”. The Chinese Golden Grass segment consists of the growing and sales of Chinese Golden Grass, which business is conducted through the Company’s subsidiary, Daqing Shuaiyi. The other agricultural products segment consists of the sales of rice, flour and silage corn etc, agricultural products which business is mainly conducted through the Company’s subsidiary, Harbin Shuaiyi.

Throughout the six months ended June 30, 2010 and 2009, all of the Company’s operations were carried out in one geographical segment - China.

The Company’s segment revenue and results for the six months ended June 30, 2010 and 2009 are as follows:

						Other
			Chinese			Agricultural			Corporate
Six months ended June 30, 2010			Golden Grass			Products			unallocated			Consolidated
			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Segment revenue from external customers		$	9,308,592		$	917,955		$	-		$	10,226,547
Segment profit (loss)		$	7,394,331		$	73,025		$	(385,269	)	$	7,082,087
Income from operations before income taxes											$	7,082,087
Segment assets		$	34,130,009		$	1,173,790		$	11,268,952		$	46,572,751
Total assets											$	46,572,751
Other segment information:
Depreciation and amortization		$	501,293		$	2,890		$	1,942		$	506,125
Expenditure for segment assets		$	7,956		$	-		$	290		$	8,246

						Other
			Chinese			Agricultural			Corporate
Six months ended June 30, 2009			Golden Grass			Products			unallocated			Consolidated
Segment revenue from external customers		$	5,439,084		$	2,543,955		$	-		$	7,983,039
Segment profit (loss)		$	3,848,617		$	558,983		$	(166,415	)	$	4,241,185
Income from operations before income taxes											$	4,241,185
Segment assets		$	24,955,981		$	1,097,455		$	2,392,756		$	28,446,192
Total assets											$	28,446,192
Other segment information:
Depreciation and amortization		$	499,571		$	3,926		$	1,375		$	504,872
Expenditure for segment assets		$	-		$	-		$	-		$	-

24

---

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 22      SEGMENT INFORMATION (CONTINUED)

						Other
			Chinese			Agricultural			Corporate
Three months ended June 30, 2010			Golden Grass			Products			unallocated			Consolidated
			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Segment revenue from external customers		$	5,043,549		$	414,603		$	-		$	5,458,152
Segment profit (loss)		$	4,094,283		$	24,772		$	(180,850	)	$	3,938,205
Income from operations before income taxes											$	3,938,205
Segment assets		$	34,130,009		$	1,173,790		$	11,268,952		$	46,572,751
Total assets											$	46,572,751
Other segment information:
Depreciation and amortization		$	250,830		$	1,430		$	973		$	253,233
Expenditure for segment assets		$	3,430		$	-		$	-		$	3,430

						Other
			Chinese			Agricultural			Corporate
Three months ended June 30, 2009			Golden Grass			Products			unallocated			Consolidated
Segment revenue from external customers		$	2,538,083		$	801,679		$	-		$	3,339,762
Segment profit (loss)		$	1,779,350		$	62,597		$	(87,520	)	$	1,754,427
Income from operations before income taxes											$	1,754,427
Segment assets		$	24,955,981		$	1,097,455		$	2,392,756		$	28,446,192
Total assets											$	28,446,192
Other segment information:
Depreciation and amortization		$	249,694		$	1,963		$	688		$	252,345
Expenditure for segment assets		$	-		$	-		$	-		$	-

25

---

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, including the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that are based on the beliefs of our management, and involve risks and uncertainties, as well as assumptions, that, if they never materialize or prove incorrect, could cause actual results to differ materially from those expressed or implied by such 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, including statements regarding new and existing products, technologies and opportunities; statements regarding market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; and any statements of belief or intention. As such, they are subject to risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward looking statements. Such risks and uncertainties include any of the factors and risks mentioned in the “Risk Factors” sections of the Quarter Report and our Annual Report on Form 10-K for the year ended December 31, 2009 and subsequent SEC filings, and any statements of assumptions underlying any of the foregoing. All forward-looking statements included in this report are based on information available to us on the date of this report. We assume no obligation and do not intend to update these forward-looking statements, except as required by law.

Certain Terms

Except as otherwise indicated by the context,

• “Nutrastar,” “we,” “us,” “our company” and “our” refer to the combined business of Nutrastar International Inc., a Nevada corporation, and/or its consolidated subsidiaries, as the case may be;
• “New Resources” refers to New Zealand WAYNE’s New Resources Development Co., Ltd., our direct, wholly-owned subsidiary, a BVI corporation;
• “Heilongjiang Shuaiyi” refers to Heilongjiang Shuaiyi New Energy Development Co., Ltd. our indirect, wholly-owned subsidiary, a Chinese corporation;
• “Daqing Shuaiyi” refers to Daqing Shuaiyi Biotech Co., Ltd., our indirect, wholly-owned subsidiary, a Chinese corporation;
• “Harbin Shuaiyi” refers to Harbin Shuaiyi Green & Specialty Food Trading LLC, our indirect, wholly-owned subsidiary, a Chinese corporation;
• “BVI” refers to the British Virgin Islands;
• “China,” “Chinese” and “PRC,” refer to the People’s Republic of China;
• “Renminbi” and “RMB” refer to the legal currency of China;
• “U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States;
• “SEC” refers to the United States Securities and Exchange Commission;
• “Securities Act” refers to the Securities Act of 1933, as amended; and
• “Exchange Act” refers to the Securities Exchange Act of 1934, as amended.

Effective May 19, 2009, we implemented a 1-for-114.59 reverse stock split of issued and outstanding shares of our common stock. Except where specifically indicated, all common share information (including information related to warrants to purchase common stock) has been restated to reflect the 1-for-114.59 reverse split.

Overview of Our Business

We are a holding company that operates through our indirectly owned subsidiary Heilongjiang Shuaiyi, a leading grower and producer of Cordyceps Militaris, or “Chinese Golden Grass” in China. We specialize in developing, processing, marketing and distributing a variety of agricultural and nutraceutical products consisting of Chinese Golden Grass, organic and specialty food products. In addition, we plan to produce and market other products developed from Cordyceps Militaris within the coming months and years, including specialty beverage products.

26

---

Our primary product is Chinese Golden Grass, which is developed from Cordyceps Militaris. Cordyceps Militaris is a species of parasitic fungus that is typically found in north-eastern mountainous China. It is a precious ingredient in traditional Chinese medicine, as Cordyceps Militaris is widely believed in China to offer high medical and health benefits by nourishing the yin, boosting the yang, and invigorating the meridians of the lungs and kidneys. Through several years of laboratory tests, we developed the technology to commercially grow and produce Cordyceps Militaris in 2006. We generated 92% and 76% of our revenues from Chinese Golden Grass for the three months ended June 30, 2010 and 2009, respectively. We believe that we own 19% of the market share in the cultivated Chinese Golden Grass industry. We plan to continue to focus on Chinese Golden Grass, which is our fastest growing product line with the greatest market demand and a significantly high profit margin.

We also sell organic and specialty food products through our subsidiary, Harbin Shuaiyi, which was formed in 2001. After years of development, we believe that we have become the largest wholesale distributor of organic and specialty food in Heilongjiang Province, China.

Second Quarter Financial Performance Highlights

We continued to experience strong demand for our products and services during the second quarter of 2010, which resulted in continued growth in our revenues and net income.

The following are some financial highlights for the second quarter of 2010:

• Revenues: Our revenues were approximately $5.46 million for the second quarter of 2010, an increase of 63.4% from the same quarter of last year.

• Gross Margin: Gross margin was 83.7% for the second quarter of 2010, as compared to 64.6% for the same period in 2009.

• Operating Profit: Operating profit was approximately $3.79 million for the second quarter of 2010, an increase of 120.3% from $1.72 million of the same period last year.

• Net Income: Net income was approximately $3.42 million for the second quarter of 2010, an increase of 127.7% from the same period of last year.

• Fully diluted earnings per share was $0.12 for the second quarter of 2010.

On May 27, 2010, we entered into a securities purchase agreement, or the Securities Purchase Agreement with certain investors, pursuant to which, we agreed to issue and sell up to an aggregate of 250,000 Units at a purchase price of $28.56 per Unit. Each Unit consists of (i) one share of a newly designated series A preferred stock, par value $0.001 per share, or Series A Preferred Stock, with an initial one-to-ten conversion ratio into shares of the Company’s common stock, par value $0.001 per share, or Common Stock, and (ii) warrants to purchase five shares of Common Stock at an exercise price of $3.40 per share, or Warrants. In addition, the Company and the investors agreed, that Gilford Securities Incorporated, as the placement agent of this transaction, will receive from the investors a fee equal to 2% of the aggregate purchase price and Warrants to purchase 2% of the aggregate number of shares of Common Stock that shares of Series A Preferred Stock to be issued under the Securities Purchase Agreement are convertible into.

Pursuant to the Securities Purchase Agreement, we also granted registration rights to holders of registrable securities, which include shares of Common Stock issued or issuable upon conversion of shares of the Series A Preferred Stock and shares of Common Stock issuable upon exercise of the Warrants.

In connection with the Securities Purchase Agreement, we filed a Certificate of Designation of Series A Preferred Stock with the Secretary of State of the State of Nevada, or the Certificate, on May 27, 2010, which became effective upon filing. Pursuant to the Certificate, there are 300,000 shares of Series A Preferred Stock authorized.

27

---

On June 7 and June 28, 2010, we consummated two closings of the private placement transaction contemplated by the Securities Purchase Agreement and issued in aggregate approximately 197,706 Units to the investors at a purchase price of $28.56 per unit for gross proceeds of approximately $5.65 million.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009

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

		Three Months Ended June 30,						Three Months Ended June 30,
		2010						2009
					As a						As a
					percentage of						percentage of
		In Thousands			revenues			In Thousands			revenues
Revenues		5,458			100 %			3,340			100%
Cost of goods sold		(888	)		(16.3)%			(1,184	)		(35.4)%
Gross Profit		4,570			83.7 %			2,156			64.6%
Selling expenses		(233	)		(4.3)%			(82	)		(2.5)%
General and administrative expenses		(548	)		(10.0)%			(354	)		(10.6)%
Income from operations		3,789			69.4%			1,720			51.5%
Other income and (expenses)
Interest income		34			0.6%			40			1.2%
Exchange gain (loss)		(16	)		(0.3)%			(5	)		(0.1)%
Change in fair value of warrants		131			2.4%			-			-%
Other income		-			-%			-			-%
Total other income (expenses)		149			2.7%			35			1.0%
Income before income tax		3,938			72.2%			1,754			52.5%
Provision for income tax		(522	)		(9.6)%			(254	)		(7.6)%
Net income		3,416			62.6 %			1,500			44.9%

Revenues. Revenues increased approximately $2.12 million, or 63.4%, to approximately $5.46 million for the three months ended June 30, 2010, from approximately $3.34 million for the same period in 2009. This increase was mainly attributable to the increase of our sales of our core product, Chinese Golden Grass, driven by the continued increase in market demand for our products as well as the sales of our small package Chinese Golden Grass products. In addition, we increased our selling prices for our packaged Chinese Golden Grass products by 21%.

Our business operations can be categorized into two segments based on the type of products we manufacture and sell, specifically (i) Chinese Golden Grass, and (ii) other agricultural products. The following table shows the different segments comprising our total sales revenue:

28

---

Sales Revenue by Product Segments
(all amounts, other than percentages, in thousands of U.S. dollars)

		Three Months Ended June 30,						Percent
		2010			2009			Change
Components of Sales Revenue
Chinese Golden Grass	$	5,044		$	2,538			98.8%
Other agricultural products		414			802			-48.4%
Total revenues	$	5,458		$	3,340			63.4%

Cost of Goods Sold. Our cost of goods sold decreased by $0.29 million, or 25.0%, to approximately $0.89 million for the three months ended June 30, 2010 from approximately $1.18 million during the same period in 2009. This decrease was mainly due to improved production process and economy of scale. As a percentage of revenues, the cost of goods sold decreased to 16.3% for the three months ended June 30, 2010 from 35.4% in 2009. Such decrease of cost of goods sold as a percentage of sales was mainly attributable to the increase of sales volume of small package products with higher unit selling price. Because the gross margin of small package products is higher than big package products, the percentage of cost of sales to total sales revenue decreased as our small package products had a higher percentage in the product mix in the second quarter of 2010.

Gross Profit. Our gross profit increased by approximately $2.41 million, or 112.0%, to approximately $4.57 million for the three months ended June 30, 2010 from approximately $2.16 million during the same period in 2009. Gross profit as a percentage of revenues, or gross margin, was 83.7% for the three months ended June 30, 2010, an increase of 19.1% from 64.6% during the same period in 2009. Such percentage increase was mainly due to continued product mix shift towards Chinese Golden Grass and the increased sales of our higher margin small package Chinese Golden Grass products.

Selling Expenses . Our 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 approximately $0.15 million, or 184.1%, to approximately $0.23 million for the three months ended June 30, 2010 from approximately $0.08 million during the same period in 2009. As a percentage of revenues, selling expenses increased to 4.3% for the three months ended June 30, 2010 from 2.5% for the same period in 2009. The increase in the amount and percentage of selling expenses was mainly attributable to the increase of salaries and travelling expenses of our sales representatives and more marketing activities to promote our products.

General and Administrative Expenses . General and administrative expenses increased approximately $0.20 million, or 54.8%, to approximately $0.55 million for the three months ended June 30, 2010 from approximately $0.35 million for the same period in 2009. As a percentage of revenues, general and administrative expenses decreased to 10.0% for the three months ended June 30, 2010 from 10.6% for the same period in 2009. The increase in the amount and percentage of general and administrative expenses was mainly attributable to the increase of services expenses associated with legal and audit services.

Income Before Income Tax . Income before income tax increased approximately $2.18 million, or 124.5%, to approximately $3.94 million during the three months ended June 30, 2010 from approximately $1.75 million during the same period in 2009. As a percentage of revenues, income before income tax increased to 72.2% during the three months ended June 30, 2010 from 52.5% during the same period in 2009. The increase of income before income tax is mainly attributable to the increase in our gross profit as a result of the increase in our sales.

Income Taxes. Nutrastar International Inc. is subject to United States tax at a tax rate of 34%. No provision for income taxes in the United States has been made as Nutrastar International Inc. had no income taxable in the United States. New Resources was incorporated in the BVI and under the current laws of the BVI, is not subject to income taxes. Our PRC subsidiaries are subject to national and local income taxes within China at the applicable tax rate on the taxable income as reported in their PRC statutory financial statements in accordance with relevant income tax laws. China passed a new Enterprise Income Tax Law, or the New EIT Law, and its implementing rules, both of which became effective on January 1, 2008.

29

---

Under the EIT, newly established high-technology enterprises, such as our subsidiary Daqing Shuaiyi, are entitled to a three-year 50% tax reduction. Daqing Shuaiyi has been subject to a 12.5% income tax rate since 2008 and Harbin Shuaiyi was subject to a tax rate of 25% in 2009 and is subject to a tax rate of 25% in 2010.

Income tax increased approximately $0.27 million to approximately $0.52 million for the three months ended June 30, 2010 from approximately $0.25 million for the same period in 2009. We paid more tax in 2010 because of the increase in sales and taxable income.

Net Income . Net income increased by approximately $1.92million, or 127.7% to approximately $3.42 million for the three months ended June 30, 2010 from approximately $1.50 million for the same period of 2009, as a result of the factors described above.

Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009

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

		Six Months Ended June 30,						Six Months Ended June 30,
		2010						2009
					As a						As a
					percentage of						percentage of
		In Thousands			revenues			In Thousands			revenues
Revenues		10,227			100 %			7,983			100%
Cost of goods sold		(1,945	)		(19.0)%			(2,940	)		(36.8)%
Gross Profit		8,282			81.0 %			5,043			63.2%
Selling expenses		(405	)		(4.0)%			(193	)		(2.4)%
General and administrative expenses		(978	)		(9.6)%			(658	)		(8.2)%
Income from operations		6,899			67.5%			4,192			52.5%
Other income and (expenses)
Interest income		67			0.7%			53			0.7%
Exchange gain (loss)		(15	)		(0.1)%			(4	)		(0.1)%
Change in fair value of warrants		131			1.3%			-			-%
Other income		-			-%			-			-%
Total other income (expenses)		183			1.8%			49			0.6%
Income before income tax		7,082			69.2%			4,241			53.1%
Provision for income tax		(945	)		(9.2)%			(571	)		(7.2)%
Net income		6,137			60.0%			3,670			46.0%

Revenues. Revenues increased approximately $2.24 million, or 28.1%, to approximately $10.23 million for the six months ended June 30, 2010, from approximately $7.98 million for the same period in 2009. This increase was mainly attributable to the increase of our sales of our core product, Chinese Golden Grass, driven by the continued increase in market demand for our products as well as the sales of our small package Chinese Golden Grass products. In addition, we increased our selling prices for our packaged Chinese Golden Grass products by 21%.

Our business operations can be categorized into two segments based on the type of products we manufacture and sell, specifically (i) Chinese Golden Grass, and (ii) other agricultural products. The following table shows the different segments comprising our total sales revenue:

30

---

Sales Revenue by Product Segments

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

		Six Months Ended June 30,						Percent
		2010			2009			Change
Components of Sales Revenue
Chinese Golden Grass	$	9,309		$	5,439			71.2%
Other agricultural products		918			2,544			(63.9)%
Total revenues	$	10,227		$	7,983			28.1%

Cost of Goods Sold. Our cost of goods sold decreased by $1.00 million, or 33.8%, to approximately $1.94 million for the six months ended June 30, 2010 from approximately $2.94 million during the same period in 2009. This decrease was mainly due to improved production process and economy of scale. As a percentage of revenues, the cost of goods sold decreased to 19.0% for the six months ended June 30, 2010 from 36.8% in 2009. Such decrease of cost of goods sold as a percentage of sales was mainly attributable to the increase of sales volume of small package products with higher unit selling price. Because the gross margin of small package products is higher than big package products, the percentage of cost of sales to total sales revenue decreased as our small package products had a higher percentage in the product mix during the six months ended June 30, 2010.

Gross Profit. Our gross profit increased by approximately $3.24 million, or 64.2%, to approximately $8.28 million for the six months ended June 30, 2010 from approximately $5.04 million during the same period in 2009. Gross profit as a percentage of revenues, or gross margin, was 81.0% for the six months ended June 30, 2010, an increase of 17.8% from 63.2% during the same period in 2009. Such percentage increase was mainly due to continued product mix shift towards Chinese Golden Grass and the increased sales of our higher margin small package Chinese Golden Grass products.

Selling Expenses . Our selling expenses increased approximately $0.21 million, or 109.7%, to approximately $0.41 million for the six months ended June 30, 2010 from approximately $0.19 million during the same period in 2009. As a percentage of revenues, selling expenses increased to 4.0% for the six months ended June 30, 2010 from 2.4% for the same period in 2009. The increase in the amount and percentage of selling expenses was mainly attributable to the increase of salaries and travelling expenses of our sales representatives and more marketing activities to promote our products.

General and Administrative Expenses . General and administrative expenses increased approximately $0.32 million, or 48.5%, to approximately $0.98 million for the six months ended June 30, 2010 from approximately $0.66 million for the same period in 2009. As a percentage of revenues, general and administrative expenses increased to 9.6% for the six months ended June 30, 2010 from 8.2% for the same period in 2009. The increase in the amount and percentage of general and administrative expenses was mainly attributable to the increase of services expenses associated with legal and audit services.

Income Before Income Tax . Income before income tax increased approximately $2.84 million, or 67.0%, to approximately $7.08 million during the six months ended June 30, 2010 from approximately $4.24 million during the same period in 2009. As a percentage of revenues, income before income tax increased to 69.2% during the six months ended June 30, 2010 from 53.1% during the same period in 2009. The increase of income before income tax is mainly attributable to the increase in our gross profit as a result of the increase in our sales.

Income Taxes. Income tax increased approximately $0.37 million to approximately $0.95 million for the six months ended June 30, 2010 from approximately $0.57 million for the same period in 2009. We paid more tax in 2010 because of the increase in sales and taxable income.

Net Income . Net income increased by approximately $2.47 million, or 67.2% to approximately $6.14 million for the six months ended June 30, 2010 from approximately $3.67 million for the same period of 2009, as a result of the factors described above.

31

---

Business Segment Information

Our business operations can be categorized into two segments based on the type of products we manufacture and sell, specifically (i) Chinese Golden Grass, and (ii) other agricultural products.

For the six months ended June 30, 2010, our sales revenue from our Chinese Golden Grass was approximately $9.31 million, and our sales revenue from our other agricultural products was approximately $0.92 million.

We grow and sell our Chinese Golden Grass through our subsidiary, Daqing Shuaiyi. Our subsidiary, Harbin Shuaiyi is mainly engaged in the business of selling our other agricultural products.

Additional information regarding our products can be found at Note 22 in our unaudited consolidated financial statements contained under Part I, Item I “FINANCIAL STATEMENTS” above.

Liquidity and Capital Resources

General

As of June 30, 2010, we had cash and cash equivalents (excluding restricted cash) of approximately $32.26 million. The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.

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

Operating Activities

Net cash provided by operating activities was approximately $6.41 million for the six-month period ended June 30, 2010, which is an increase of approximately $1.75 million from approximately $4.66 million net cash provided by operating activities for the same period of 2009. The cash provided by operating activities during the period was mainly attributable to the increases in our net income.

Investing Activities

Our primary uses of cash for investing activities are payments for the acquisition of property, plant and equipment.

Net cash used in investing activities for the six-month period ended June 30, 2010 was approximately $0.01 million, which is an increase of approximately $0.01 million from net cash used in investing activities of approximately nil million for the same period of 2009.

32

---

Financing Activities

Net cash provided by financing activities for the six-month period ended June 30, 2010 was approximately $5.57 million, which is an increase of approximately $5.56 million from approximately $0.01 million net cash provided by financing activities for the same period of 2009. The cash provided by financing activities during the period was mainly due to the $5.48 million net proceeds from the private placement consummated in June 2010.

On June 7 and June 28, 2010, the Company consummated two closings of a private placement transaction and issued in aggregate approximately 197,706 Units to certain investors at a purchase price of $28.56 per unit for gross proceeds of approximately $5.65 million. Each unit consists of one share of Series A Preferred Stock with an initial one-to-ten conversion ratio into shares of the Company's common stock and a warrant to purchase five shares of common stock at an exercise price of $3.40 per share.

We believe that our cash on hand, cash flow from operations as well as the proceeds we received from the recent private placement transactions will meet our expected capital expenditure and working capital for the next 12 months. However, we may in the future require additional cash resources due to changed business conditions, implementation of our strategy to expand our production capacity or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

Effects of Inflation

Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor the price change and continually maintain effective cost control in operations.

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

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the most significant judgments and estimates in the preparation of financial statements, including the following:

33

---

• Accounts Receivable. The Company maintains allowances for doubtful accounts for estimated losses resulting from the failure of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends.

• Inventories. Inventories are stated at the lower of cost, determined on a weighted average basis, or market. Costs of inventories include purchase and related costs incurred in bringing the products to their present location and condition. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. The management will write down the inventories to market value if it is below cost. The management also regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine if valuation allowance is required.

• Impairment. The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any. An impairment loss is measured and recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable cash flows that are largely independent of future cash flows from other asset groups.

• Property, plant and equipment. The carrying value of property, plant and equipment is assessed annually and when factors indicating impairment is present, the carrying value of the property, plant and equipment is reduced by the amount of the impairment. The Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the net asset carrying value. An impairment loss, if exists, is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

• Intangible assets. The Company’s intangible assets include a ten-year exclusive right to use a secret process and computer software. The Company accounts for its intangible assets pursuant to FASB ASC Subtopic 350-30, “General Intangibles Other Than Goodwill”. Under ASC 350-30-35, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful lives or contractual terms. Intangibles with indefinite lives are evaluated at least annually for impairment by comparing the asset’s estimated fair value with its carrying value, based on cash flow methodology.

• Revenue Recognition. Revenue is recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. Sales revenue is recognized net of value added and sales related taxes, sales discounts and returns at the time when the merchandise is delivered to the customer. Based on historical experience, management estimates that sales returns are immaterial and has not made allowance for estimated sales returns.

• Foreign currency translation. The Company uses the United States dollars (“US Dollar” or “US$” or “$”) for financial reporting purposes. The PRC subsidiaries within the Company maintains the books and records in their functional currency, Chinese Renminbi (“RMB”), being the lawful currency in the PRC. Assets and liabilities of the PRC subsidiaries are translated from RMB into US Dollars using the applicable exchange rates prevailing at the balance sheet date. Items on the statement of operations are translated at average exchange rates during the reporting period. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the Company’s financial statements are recorded as accumulated other comprehensive income. The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements are based on the rates as published on the website of People’s Bank of China. The value of RMB against U.S. dollars and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s results and financial position in terms of U.S. dollar reporting.

34

---

• Stock-based Compensation. The Company accounts for share-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period. The Company accounts for share-based compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-employees”. Under FASB ASC Topic 718 and FASB ASC Subtopic 505-50, stock compensation granted to non-employees has been determined as the fair value of the consideration received or the fair value of equity instrument issued, whichever is more reliably measured and is recognized as expenses as the goods or services are received.

New accounting pronouncement to be adopted

Effective January 1, 2010, the Company adopted the provisions in ASU 2010-06, “Fair Value Measurements and Disclosures (ASC Topic 820): Improving Disclosures about Fair Value Measurements, which requires new disclosures related to transfers in and out of levels 1 and 2 and activity in level 3 fair value measurements, as well as amends existing disclosure requirements on level of disaggregation and inputs and valuation techniques. The adoption of the provisions in ASU 2010-06 did not have an impact on the Company’s consolidated financial statements.

In February 2010, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that amends the disclosure requirements related to subsequent events. This guidance includes the definition of a Securities and Exchange Commission filer, removes the definition of a public entity, redefines the reissuance disclosure requirements and allows public companies to omit the disclosure of the date through which subsequent events have been evaluated. This guidance is effective for financial statements issued for interim and annual periods ending after February 2010. This guidance did not materially impact the Company’s results of operations or financial position, but did require changes to the Company’s disclosures in its financial statements.

In April 2010, the FASB issued ASU No. 2010-13—Compensation—Stock Compensation (Topic 718), which addresses the classification of an employee share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. This Update provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company expects that the adoption of the amendments in this Update will not have any significant impact on its financial position and results of operations.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s Consolidated Financial Statements upon adoption.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

Not applicable.

35

---

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our chief executive officer and chief financial officer, Ms. Lianyun Han and Mr. Robert Tick, respectively, evaluated the effectiveness of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this report, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, Ms. Lianyun Han and Mr. Robert Tick concluded that as of June 30, 2010, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting.

During the fiscal quarter ended June 30, 2010, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

36

---

PART II
OTHER 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. We are currently not aware of any legal proceedings or claims that would require disclosure under Item 103 of Regulation S-K. 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.

ITEM 1A. RISK FACTORS

Not applicable.

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

We have not sold any unregistered equity securities during the fiscal quarter ended June 30, 2010 that were not previously disclosed in a current report on Form 8-K that was filed during that period.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. [REMOVED AND RESERVED]

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

EXHIBITS.
31.1*	Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification 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*	Certification 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.

* Filed herewith.

37

---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DATED: August 16, 2010

NUTRASTAR INTERNATIONAL INC.

By: /s/ Lianyun Han                                    
Lianyun Han
Chief Executive Officer
(Principal Executive Officer)

By: /s/ Robert Tick                                      
Robert Tick
Chief Financial Officer
(Principal Financial Officer)

---

EXHIBIT INDEX

Exhibit . Number	Description
31.1*	Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification 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*	Certification 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.

* Filed herewith.

---