**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**







**(Mark
      One)**




**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31,
                2007**




**OR**




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




**Commission
      file number: 333-111486**





**DAIRY
      FRESH FARMS INC.**




**(Name
      of small business issuer in its charter)**


****  **Nevada**
              **98-0407549****(State
                  or other jurisdiction of incorporation )**
              **(I.R.S.Employer
                  identification
                  No.)**




**413
      Churchill Avenue N. Ottawa, Ontario, Canada K1Z 5C7**


**(Address
      of principal executive offices)**





**Tel:
      613-724-2484**


**(Issuer's
      telephone number)**





**Securities
      registered under Section 12(b) of the Exchange Act:**


**None**




**Securities
      registered under Section 12(g) of the Exchange Act:**


**Common
      Stock, $0.001 par value per share**


**(Title
      of Class)**






Check
      whether the issuer: (i) 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 (ii) has been
      subject to such filing requirements for the past 90
      days.    Yes x No  ̈




As
      of
      April 30, 2007, there were 23,003,549  shares
      of
      the registrant's common stock outstanding.





Transitional
      Small Business Disclosure Format (check one) Yes  ̈No x





Indicate
      by check mark whether the registrant is a shell company (as defined in rule
      12b-2 of the Exchange Act).   Yes o ; 
      No x














**Page****Part
                I. Financial Information**Item
                1.
            Condensed
                Consolidated Financial Statements and Notes to Condensed Consolidated
                Financial Statements(a)
                Unaudited Condensed Consolidated Statements of Operations for the
                Three
                Months Ended March 31, 2007 and 2006.
            
            4(b)
                Unaudited Condensed Consolidated Statements of Cash Flows for the
                Three
                Months Ended March 31, 2007 and 2006.
            
            5(c)
                Unaudited Condensed Consolidated Balance Sheets as at March 31, 2007
                and
                December 31, 2006.
            
            6(d)
                Unaudited Notes to Condensed Consolidated Financial
                Statements.
            
            7Item
                2.
            Management's
                Discussion and Analysis or Plan of Operations
            
            13Item
                3.
            Controls
                and Procedures
            
            18**Part
                II. Other Information**Item
                1.
            Legal
                Proceedings
            
            19Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            19Item
                3.
            Defaults
                upon Senior Securities
            
            19Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            19Item
                5.
            Other
                Information
            
            19Item
                6.
            Exhibits
            
            19Signatures
            
            20




2




PART
      I
      FINANCIAL INFORMATION





General





The
      accompanying condensed consolidated financial statements have been prepared
      in
      accordance with the instructions to Form 10-QSB. Therefore, they do not include
      all information and footnotes necessary for a complete presentation of financial
      position, results of operations, cash flow, and stockholders’ deficit in
      conformity with generally accepted accounting principles in the United States
      of
      America. Except as disclosed herein, there has been no material change in the
      information disclosed in the notes to the consolidated financial statements
      included in the Company’s annual report on Form 10-KSB for the year ended
      December 31, 2006. In the opinion of management, all adjustments considered
      necessary for a fair presentation of the results of operations and financial
      position have been included and all such adjustments are of a normal recurring
      nature. Operating results for the quarter ended March 31, 2007 are not
      necessarily indicative of the results that can be expected for the year ended
      December 31, 2007.





3




**Dairy
      Fresh Farms Inc.**


**Condensed
      Consolidated Statements of Operations**


Expressed
      in U.S. Dollars





Three
                Months EndedMarch
                312007
            
            2006Operating
                expensesFreight
                and product costs
            
            $
            12,073
            
            $
            233Advertising
            
            
            3,343
            
            
            15,033Depreciation
                of property and equipment
            
            
            855
            
            
            1,001Interest
                and bank charges, net
            
            
            (57
            )
            
            2,537Management
                fees
            
            
            77,114
            
            
            91,376Office
            
            
            3,047
            
            
            2,091Investor
                relations
            
            
            46,775
            
            
            -Professional
                fees
            
            
            238,034
            
            
            32,806Rent
            
            
            4,088
            
            
            4,018Telecommunications
            
            
            4,695
            
            
            4,322Travel
            
            
            9,900
            
            
            24,563399,867
            
            
            177,980Net
                loss
            
            $
            (399,867
            )
            $
            (177,980
            )Basic
                and diluted loss per share
            
            
            (0.02
            )
            
            (0.01
            )Weighted
                average common shares outstanding.
            
            
            21,438,349
            
            
            15,658,748




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





4




**Dairy
      Fresh Farms Inc.**


**Condensed
      Consolidated Statements of Cash Flows**


Expressed
      in U.S. Dollars




Three
                months endedMarch
                312007
            
            2006CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income (loss)
            
            $
            (399,867
            )
            $
            (177,980
            )Adjustments
                to reconcile net income(loss) to net cash provided by(used
                in)operating
                activitiesDepreciation
                and amortization
            
            
            775
            
            
            1,001Issuance
                of common stocks in exchange for services
            
            
            1,020,600
            
            
            26,250Changes
                in assets and liabilitiesAccounts
                receivable
            
            
            59,440
            
            
            (2,245
            )Prepaid
                expenses
            
            
            (675,363
            )
            
            -Accounts
                payable and accrued liabilities
            
            
            (121,291
            )
            
            9,455Management
                contracts payable
            
            
            (48,503
            )
            
            93,116NET
                CASH USED IN OPERATING ACTIVITES
            
            
            (164,209
            )
            
            (50,403
            )CASH
                FLOWS FROM FINANCING ACTIVITIESNotes
                payable
            
            
            
            
            
            43,512NET
                CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
            
            
            -
            
            
            43,512EFFECT
                OF EXCHANGE RATE ON CASH
            
            
            (3,895
            )
            
            (328
            )NET
                INCREASE(DECREASE) IN CASH
            
            
            (168,104
            )
            
            (7,219
            )Cash,
                beginning of period
            
            
            375,858
            
            
            12,976Cash,
                end of period
            
            $
            207,754
            
            $
            5,757NON-CASH
                FINANCING ACTIVITIES:Issuance
                of common stocks in repayment of note payable
            
            $
            59,832
            
            $
            -




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




5





**Dairy
      Fresh Farms Inc.**


**Condensed
      Consolidated Balance Sheets**


Expressed
      in U.S. Dollars




March
                31
            
            December
                312007
            
            2006$
            
            $AssetsCurrent
                assetsCash
            
            
            207,754
            
            
            375,858Accounts
                receivable
            
            
            18,273
            
            
            77,713Prepaid
                expenses
            
            
            675,750
            
            
            387901,777
            
            
            453,958Property
                and equipment
            
            
            8,818
            
            
            9,593910,595
            
            
            463,551LIABILITIESCurrent
                liabilitiesAccounts
                payable and accrued liabilities
            
            
            337,202
            
            
            458,493Management
                contracts payable (Notes 6)
            
            
            165,407
            
            
            213,910Notes
                payable
            
            
            25,983
            
            
            85,815528,592
            
            
            758,218SHAREHOLDERS'
                DEFICIENCYCommon
                shares, $0.001 par value, voting, 75,000,000 authorized shares, 23,003,549
                shares issued and outstanding as of March 31, 2007 and 19,391,549
                shares
                as of December 31, 2006
            
            
            9,699
            
            
            6,087Contributed
                surplus
            
            
            4,233,707
            
            
            3,153,719Accumulated
                comprehensive loss
            
            
            (189,824
            )
            
            (107,622
            )Deficit
            
            
            (3,671,579
            )
            
            (3,352,711
            )382,003
            
            
            (294,667
            )910,595
            
            
            (463,551
            )




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




6


**Dairy
      Fresh Farms Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007**


Expressed
      in U.S. Dollars


(Unaudited)




***1
      - BASIS OF PRESENTATION***




The
      accompanying unaudited condensed consolidated financial statements of Dairy
      Fresh Farms Inc. (“Dairy Fresh” or the “Company”) and its subsidiaries have been
      prepared pursuant to the rules and regulations of the United States Securities
      and Exchange Commission (“SEC”). Certain information and footnote disclosures
      normally included in financial statements prepared in accordance with generally
      accepted accounting principles in the United States of America (“US GAAP”) have
      been condensed or omitted pursuant to such rules and regulations. These
      condensed consolidated financial statements should be read in conjunction with
      the financial statements and notes included in the latest annual report on
      Form
      10-KSB. These statements have been prepared on the same basis as the audited
      consolidated financial statements for the year ended December 31, 2006 and,
      in
      the opinion of management, include all adjustments considered necessary for
      a
      fair presentation of financial position, results of operations and cash flows
      of
      the Company. The results of operations for the three months ended March 31,
      2007
      are not necessarily indicative of the results to be expected for the full
      year.




**2 - COMPANY
      BACKGROUND AND LIQUIDITY**




***COMPANY
      BACKGROUND***





The
      Company was incorporated under the name of Northwest Horizon Corporation in
      the
      State of Nevada, United States of America on February 5, 2003. The name was
      changed to Dairy Fresh Farms Inc. on August 11, 2005.





The
      Company was in the development stage until January 1, 2005. The Company
      originally intended to establish itself as a transportation broker specializing
      in trucking as the efficient mode of transporting both raw materials and
      finished products to their destination. On December 17, 2004 the Board of
      Directors passed a resolution indicating that the Company would be unable to
      raise the necessary funds to proceed with this original plan.




On
      March
      3, 2005, the Company merged via a reverse takeover with Dairy Fresh Technologies
      Ltd. Dairy Fresh Technologies Ltd. was incorporated under the Canada Business
      Corporations Act on May 14, 2002 to develop and exploit a unique patented dairy
      process in Canada. This patent, "Dairy Fresh Farms TM" produces
      monounsaturated-enhanced dairy products. Dairy Fresh Technologies Ltd. was
      also
      in the development stage until January 1, 2005.




7


**Dairy
      Fresh Farms Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007**


Expressed
      in U.S. Dollars


(Unaudited)




***LIQUIDITY***





The
      Company has incurred a net loss of $399,867 during the three months ended March
      31, 2007. In addition, the Company generated negative cash flows from operations
      of $164,209 for the three months ended March 31, 2007 and has generated negative
      cash flows from operations since inception.




The
      net
      loss incurred during the year ended December 31, 2006, the accumulated deficit
      as of that date and the other factors described in Note 2 to the Consolidated
      Financial Statements included in the Company’s Annual Report on Form 10-KSB for
      the year ended December 31, 2006 raise substantial doubt about the Company’s
      ability to continue as a going concern. The consolidated financial statements
      have been prepared assuming the Company will continue as a going concern and
      do
      not include any adjustments that might result from the outcome of this
      uncertainty.





Management
      plans to address these issues by continuing to seek new financing and continuing
      to control expenses. The Company’s ability to continue as a going concern is
      subject to management’s ability to successfully implement the above plans.
      Failure to implement these plans could have a material adverse effect on the
      Company’s position and/or results of operation and may necessitate a reduction
      in operating activities. These condensed consolidated financial statements
      do
      not include adjustments that may be required if the assets are not realized
      and
      the liabilities settled in the normal course of operations.





In
      the
      longer term, the Company has to generate the levels of revenue which would
      result in cash sufficiency and it may need to continue to raise capital by
      selling additional equity or by obtaining credit facilities. No assurance can
      be
      given that any such financing will be available or that, if available, it can
      be
      obtained on terms favourable to the company.





8





**Dairy
      Fresh Farms Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007**


Expressed
      in U.S. Dollars


(Unaudited)




***3 - RELATED
      PARTY TRANSACTIONS***




The
      Company entered into the following related party transactions. These
      transactions were concluded in the normal course of operations at the exchange
      amount, which is the amount established and accepted by the parties.




**Three
                months ended**
              **March
                31, 2007**
              **(Unaudited)**
            
            **Three
                months ended**
              **March
                31.
                2006**
              **(Unaudited)****$**ExpensesManagement
                fees (a)
            
            
            **77,114**
            
            
            **91,376**Amounts
                due to and due from related parties
            
            
            **March
                31, 2007**
            
            
            **March
                31, 2006**Amount
                due from companies under common control (b)
            
            
            10,820
            
            
            **9,794**Notes
                payable to related parties (c)
            
            
            **25,983**
            
            
            **25,722**Amount
                due to a company under common control (d)
            
            
            **6,754**
            
            
            **6,686**




(a)
      During the three month periods ended March 31, 2007 and March 31, 2006, the
      Company incurred management services to four companies controlled by officers
      of
      the Company. The management fees payable are $165,407 as at March 31, 2007
      and
      $500,704 as at March 31, 2006




(b)
      The
      Company paid legal expenses for Dairy One Technologies Limited and Purple Cow
      Investments Inc., companies under common control, during the year ended December
      31, 2006 resulting in the above amount receivable from companies under common
      control. The legal fees paid during the three months ended March 31, 2007 were
      $Nil.




(c)
      The
      Company issued $25,983 of 5% promissory notes to an officer of the Company
      during the year ended December 31, 2006. The notes are repayable when a major
      financing is completed.




9





**Dairy
      Fresh Farms Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007**


Expressed
      in U.S. Dollars


(Unaudited)




(d)
      The
      Company incurred royalty expense to Dairy One Technologies Limited, a company
      under common control, in the amount of $6,754 during the year ended December
      31,
      2005. The amount payable as at March 31, 2007 is $6,754 (March 31, 2006 -
      $6,754). The Company expensed $nil in the three months ended March 31, 2007
      and
      $nil in the three ended March 31, 2006, respectively.




***4
      - NOTES PAYABLE***




Notes
      payable bear interest at 5%, unsecured and repayable when a major financing
      is
      completed.




***5
      - LOSS PER SHARE***




For
      the
      purpose of the loss per share computation, the weighted average number of common
      shares outstanding has been used. Had the treasury stock method been applied
      to
      the unexercised share warrants, the effect on the loss per share would be
      anti-dilutive.




The
      total
      warrants outstanding at March 31, 2007 and March 31, 2006 were 2,935,078 and
      2,220,792 respectively.




***6
      - SHAREHOLDERS’ EQUITY***




In
      February 2007, the Company issued 3,402,000 common shares were issued as payment
      for professional fees incurred for the period from October 1, 2006 to December
      31, 2007, valued at $0.30 per share which represents the fair value of the
      Company’s share when the services were completed. The excess in the par value is
      recorded in contributed surplus.




10





**Dairy
      Fresh Farms Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007**


Expressed
      in U.S. Dollars


(Unaudited)




In
      February 2007, the Company issued 210,000 common shares to repay a Note Payable
      to an Officer of the Company. The shares were valued at $0.30 per share which
      represents the fair value of the Company’s share when the Note Payable was
      repaid. The excess in the par value is recorded in contributed
      surplus.




***8
      -COMPREHENSIVE LOSS***




Comprehensive
      loss includes changes in the balances of items that are reported directly in
      a
      separate component of shareholders’ equity in the Company’s unaudited condensed
      consolidated balance sheets. The components of comprehensive loss are as
      follows:





**Three
                months ended**
              **March
                31, 2007 (Unaudited)**
            
            **Three
                months ended**
              **March
                31, 2007 (Unaudited)**$
            
            $Net
                loss as reported
            
            
            (399,867
            )
            
            (177,980
            )Foreign
                currency translation adjustment
            
            
            (82,202
            )
            
            4,086Comprehensive
                loss
            
            
            (482,069
            )
            
            (173,894
            )





**9
      - NEW ACCOUNTING PRONOUNCEMENTS**




**FASB
      Interpretation 48**





In
      July
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109”,
      (“FIN No. 48”), which clarifies the accounting for uncertainty in tax
      positions. FIN No. 48 requires that the Company recognize the impact of a
      tax position, if that position is more likely than not of not being sustained
      on
      audit, based on the technical merits of the position. FIN No. 48 seeks to
      reduce the diversity in practice associated with certain aspects of the
      recognition and measurement related to accounting for income taxes. The
      provisions of FIN No. 48 will be effective for fiscal year ends beginning
      after December 15, 2006, with the cumulative effect of the change in accounting
      principle recorded as an adjustment to opening retained earnings. The Company
      expects that the adoption of FIN No. 48 will not have a material impact on
      the consolidated financial position and results of operations or cash flows.




11




**Dairy
      Fresh Farms Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007**


Expressed
      in U.S. Dollars


(Unaudited)




**SFAS
      No. 157**




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”,
      which establishes a framework for measuring fair value under other accounting
      pronouncements that require fair value measurements and expands disclosures
      about such measurements. SFAS No. 157 does not require any new fair value
      measurements, but rather it creates a consistent method for calculating fair
      value measurements to address non-comparability of financial statements
      containing fair value measurements utilizing different definitions of fair
      value. SFAS No. 157 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007. The Company does not anticipate
      that the adoption of SFAS No. 157 will have a significant impact on the
      consolidated financial position, results of operations or cash
      flows.




**SFAS
      No. 159**




On
      February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value
      Option for Financial Assets and Financial Liabilities: Including an amendment
      of
      FASB Statement No. 115”, to reduce earnings volatility caused by related
      assets and liabilities measured differently under GAAP. SFAS No. 159 allows
      all entities to make an irrevocable instrument-by-instrument election to measure
      eligible items at fair value in their entirety. In addition, unrealized gains
      and losses will be reported in earnings at each reporting date. SFAS
      No. 159 also establishes presentation and disclosure requirements that
      focus on providing information about the impact of electing the fair value
      option. SFAS No. 159 is effective as of the beginning of the first fiscal
      year that begins after November 15, 2007, concurrent with the adoption of
      SFAS No. 157. The Company does not anticipate that the adoption of SFAS
      No. 159 will have a significant impact on the consolidated financial
      position, results of operations or cash flows.




12




**SAB
      108**




In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 108, Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial Statements (‘SAB 108’). SAB
      108 provides interpretative guidance on how the effects of prior year
      uncorrected misstatements should be considered when quantifying misstatements
      in
      the current year financial statements. SAB 108 requires registrants to quantify
      misstatements using both an income statement (‘rollover’) and balance sheet
      (‘iron curtain’) approach and evaluate whether either approach results in a
      misstatement that, when all relevant quantitative and qualitative factors are
      considered, are material. If prior years errors that had been previously
      considered immaterial now are considered material based on either approach,
      no
      restatement is required so long as management properly applied its previous
      approach and all relevant facts and circumstances were considered. If prior
      years are not restated, the cumulative effect adjustment is recorded in opening
      accumulated earnings of the beginning of the fiscal year of adoption. SAB 108
      is
      effective for fiscal years ending after November 15, 2006. The company has
      determined that there will be no material impact to the financial statements
      upon the adoption of thsi bulletin.




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





This
      Management's Discussion and Analysis of Financial Condition and Results of
      Operation contains various "forward looking statements" within the meaning
      of
      Section 21E of the Securities Exchange Act of 1934 and Section 27A of the
      Securities Act of 1933, regarding future events or the future financial
      performance of the Company that involve risks and uncertainties. Certain
      statements included in this Form 10−QSB, including, without limitation,
      statements related to anticipated cash flow sources and uses, and words
      including but not limited to “anticipates", "believes", "plans", "expects",
      "future" and similar statements or expressions, identify forward looking
      statements. Any forward looking statements herein are subject to certain risks
      and uncertainties in the Company’s business, including but not limited to,
      reliance on key customers and competition in its markets, market demand, product
      performance, technological developments, maintenance of relationships with
      key
      suppliers, difficulties of hiring or retaining key personnel and any changes
      in
      current accounting rules, all of which may be beyond the control of the Company.
      The Company's actual results could differ materially from those anticipated
      in
      these forward looking statements as a result of certain factors, including
      those
      set forth therein.





Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
      ("MD&A") should be read in conjunction with the consolidated condensed
      financial statements included herein. Further, this quarterly report on Form
      10−QSB should be read in conjunction with the Company’s consolidated financial
      statements and notes to consolidated financial statements included in its 2005
      Annual Report on Form 10−KSB. In addition, you are urged to read this report in
      conjunction with the risk factors described herein.





13




**BACKGROUND**





This
      discussion and analysis of financial position and results of operations is
      prepared as at March 31, 2007 and should be read in conjunction with the
      condensed consolidated financial statements for the three months ended March
      31,
      2007. These condensed consolidated financial statements have been prepared
      using
      the generally accepted accounting principles in the United States of America
      on
      the same basis as the audited consolidated financial statements for the year
      ended December 31, 2006 and, in the opinion of management, include all
      adjustments considered necessary for a fair presentation of financial position,
      results of operations and cash flows of the Company.




**Company’s
      overview**





Dairy
      Fresh Farms Inc. (“Dairy Fresh” or the “Company”) and its wholly owned
      subsidiary, Dairy Fresh Technologies Ltd., have the exclusive license in Canada
      to develop and exploit the patented formula for a healthy milk based product
      ”Dairy Fresh Farms”. The Company launched a test trial of 2-litre regular milk
      and a 1-litre lactose free product with Canada Safeway stores in Western Canada
      during the period of January 2005 to December 2005.





The
      Company will launch an expanded product line and in Ultra High Temperature
      (UHT)
      form when planned financing as discussed under “Liquidity and Capital Resources”
is completed. Consequently there were no revenues in the three months ended
      March 31, 2007.





Dairy
      Fresh Farms is an all natural process resulting in a healthier milk based
      product which is low in cholesterol, trans fat free, lactose free, low in
      saturated fat, 99% fat free and has high levels of omega 6 and 3 and
      monounsaturated fat enhanced without compromising great taste.




**Critical
      accounting policies and estimates**




Our
      discussion and analysis of our financial condition and results of operations
      are
      based on our condensed consolidated financial statements, which have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America. The preparation of financial statements requires
      application of management’s subjective judgments, often requiring the need to
      make estimates about the effect of matters that are inherently uncertain and
      may
      change in the subsequent periods. Our actual results may differ substantially
      from these estimates under different assumptions or conditions. While our
      significant accounting policies are described in more detail in the notes to
      the
      condensed consolidated financial statements included in the Form 10-KSB for
      the
      year ended December 31, 2006, we believe that the following accounting policies
      require the application of significant judgments and estimates.





**Plan
      of operation**





The
      plan
      of operation for the Company was developed over a three-year period. Management
      started by studying the Australian experience as it related to the Canadian
      market place. Significant sales numbers had been delivered out of Sydney, Australia
      but with both market changes and potential differing Canadian tastes management
      decided to take another approach to tackling the Canadian market. Camelford
      Graham Research Group undertook an independent market research study. This
      study
      was conducted in Vancouver, British Columbia and Montreal, Quebec. The results
      from the study were published in December 2003 with resulting findings focusing
      our operations on several very important areas.




14





First,
      the size of the opportunity was much larger than originally anticipated due
      to
      the intent to purchase numbers that resulted from this study. This meant that
      management had to revise the packing sizes for the Dairy Fresh Farms upwards
      to
      accommodate the anticipated demand.





Second,
      the study directed management to launch in Western Canada as a first step into
      the rest of the country. It was perceived that the logistics and more
      importantly the market reception would be very favorable with a product launch
      in the West. This decision was also reinforced with the effort and support
      that
      Canada Safeway stores and their manufacturing division Lucerne Foods gave our
      group with initial manufacturing test runs and distribution
      expertise.





Finally,
      it was felt that perfecting the launch strategy in Western Canada would give
      Dairy Fresh Farms a strong base of operations prior to moving into the much
      larger and diverse markets of both Ontario and Quebec.





The
      most
      significant conclusion from our test launch with Canada Safeway/Lucerne was
      the
      need to produce the product in Ultra High Temperature (UHT) format, which will
      provide extended shelf life to approximately 45 days. This is necessary to
      build
      brand awareness with the customers during the early stages of growth and allow
      sufficient distribution time, as the product is rolled out to other retailers.
      Otherwise the company would need to spend excessive amounts on marketing and
      in
      store demos in order to move the product on a timely basis.





We
      finished our test launch in December 2005. We are currently actively seeking
      new
      financing. When the financing is completed, we will resume our production and
      distribution plan for Western Canada and the rest of Canada.





Assuming
      our funding is raised, we intend to focus our sales and marketing efforts over
      the next 12 months primarily on expanding our distribution in Canada. If we
      are
      not able to raise additional funds on a timely basis, any progress with respect
      to our products and our potential revenues will be adversely
      affected.





**RESULTS
      OF OPERATIONS**





**Fluctuations
      in operating results**





Our
      results of operations have fluctuated significantly from period to period and
      are likely to continue to do so in the future. We anticipate that our annual
      results of operations will be impacted for the foreseeable future by several
      factors including the progress and timing of expenditures related to product
      launches. Due to these fluctuations, we believe that the period-to-period
      comparisons of our operating results are not a good indication of our future
      performance.





15




**OPERATING
      EXPENSES**




**Advertising
      and product support**





With
      the
      launch of the Company’s initial two products there was a marketing program
      established to support sales in the year ended December 31, 2005. The majority
      of the focus was on in-store demos. With the products off the shelves, there
      was
      little in the way of initiatives in March 31, 2007.




**Management
      fees**




Management
      fees for the quarter ended March 31, 2007 decreased about 16% from the quarter
      ended March 31, 2006 with no changes to the management structure. Certain of
      the
      senior management team have reduced their compensation to preserve
      cash.




**Investor
      Relations**




Investor
      Relations in the quarter ended March 31, 2007 include a significant investment
      for advisory services regarding a proposed financing transaction as well as
      preparation of corporate materials such as business plans and corporate
      presentations.




**Travel**




Travel
      costs for the quarter ended March 31, 2007 decreased 60% from the quarter ended
      March 31, 2006 due to the lack of product support requirements. Travel costs
      reflect senior management maintaining a presence for financing and business
      activity in Western Canada.




**Off-Balance
      Sheet Arrangements**




The
      Company did not engage in any off-balance sheet arrangements during the
      quarter.





16




**Liquidity
      and Capital Resources**




At
      March
      31, 2007, we have a accumulated deficit of $3,671,579 and we expect to incur
      additional losses in the short term at least until such time, if ever, that
      our
      products are manufactured and marketed profitably. We have financed our
      operations since inception primarily through the private placements of equity
      and debt securities.





At
      March
      31, 2007 we have $207,754 in cash. Net cash used in operating activities was
      $109,772 for the three months ended March 31, 2007 compared to $50,403 for
      the
      three months ended March 31, 2007.





We
      expect
      to put our current capital resources to the following uses:





·
            for
                the marketing and sales of our
                products;


·
            to
                continue our product line
                expansion;


·
            for
                working capital purposes, including for additional salaries and wages
                as
                our organization grows and as we expand our presence in the Canadian
                Market and for additional professional fees and expenses and other
                operating costs.





Assuming
      our funding is raised, we intend to focus our sales and marketing efforts over
      the next twelve months on expanding our distribution and retail share in the
      rest of the Canadian marketplace. In such event, if we are unable to raise
      additional funds on a timely basis or at all, any progress with respect to
      our
      products and, therefore, our potential revenues, would be adversely
      affected.





In
      the
      event that our plans change, our assumptions change or prove inaccurate, or
      if
      our existing cash resources, together with other funding resources including
      anticipated sales of our products, otherwise prove to be insufficient to fund
      our operations, we could be required to seek additional financing. We have
      no
      current arrangements with respect to sources of additional
      financing.





The
      auditors’ report on the Company’s consolidated financial statements as of
      December 31, 2006 states that the net loss incurred during the year ended
      December 31, 2006, the accumulated deficit as of that date, and the other
      factors described in Note 2 to the consolidated financial statements included
      in
      the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006,
      raise substantial doubt about the Company’s ability to continue as a going
      concern. The auditors’ report on the Company’s financial statements for the year
      ended December 31, 2005 contained a similar statement. The consolidated
      financial statements have been prepared assuming the Company will continue
      as a
      going concern and do not include any adjustments that might result from the
      outcome of this uncertainty.




**Risks
      Related to Our Company**




We
      have
      not been profitable since our inception in 2003. As of March 31, 2007, we have
      an accumulated deficit of $3,671,579 primarily as a result of our start up
      expenses. We may never realize sufficient revenues from the sale of our products
      or be profitable. Each of the following factors, among others, may influence
      the
      timing and extent of our profitability, if any:





·
            the
                completion and success of financing to provide marketing and
                administration support
                for the launch of our
                product;


·
            the
                market acceptance of Dairy Fresh Farms with the Canadian
                Consumer;


·
            our
                ability to effectively and efficiently manufacture, market and distribute
                our products; and


·
            our
                ability to sell our products at competitive prices which exceed our
                per
                unit costs.




17




We
      anticipate that, if cash generated from operations is insufficient to satisfy
      our requirements, we will require additional funding to continue to market
      our
      products. We will continue to rely on private funding. However, our projections
      of future cash needs and cash flows may differ from actual results.





Our
      plan
      to sell additional equity securities or convertible debt could result in
      dilution to our stockholders. We can give no assurance that we will be able
      to
      generate adequate funds from operations, that funds will be available to us
      from
      debt or equity financing or that, if available, we will be able to obtain such
      funds on favorable terms and conditions. If we cannot obtain such funds if
      needed, we would need to curtail or cease some or all of our
      operations.




**ITEM
      3. CONTROLS AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**





We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our Chief Executive Officer and Principal Financial
      and Accounting Officer, of the effectiveness of our disclosure controls and
      procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
      Exchange Act of 1934 as of the end of the period covered by this report. Based
      on that evaluation, our Chief Executive Officer and Principal Financial and
      Accounting Officer have concluded that our disclosure controls and procedures
      as
      of March 31, 2007 were not effective due to material weakness in our internal
      controls over financial reporting described below, and other factors related
      to
      the Company’s financial reporting processes and information technology security
      protocols.





As
      disclosed in the Company’s Form 10-KSB for the year ended December 31, 2006,
      both the Company and its independent registered public accounting firm
      identified certain significant internal control deficiencies that we considered
      to be, in the aggregate, a material weakness. The primary concern was the
      adequacy of review of supporting schedules that result in adjusting journal
      entries being entered into the accounting systems that were inaccurate or
      disclosures in the notes to the financial statements that were incorrect or
      inadequate. These inaccuracies were not detected by the control procedures
      of
      management reviewing the schedules and supporting documentation, resulting
      in
      errors appearing on the financial statements and subsequent detection in the
      audit. The other area of concern was the inadequate segregation of duties among
      the administrative staff. Due to the size of our Company and the costs
      associated to remediate these issues, we still consider these concerns to be
      relevant.





**Changes
      in Internal Controls**





There
      have been no material changes in our internal controls over financial reporting
      or in other factors that could materially affect, or are reasonably likely
      to
      affect, our internal controls over financial reporting during the quarter ended
      March 31, 2007.





18




PART
      II OTHER INFORMATION




Item
      1.
      Legal Proceedings




Not
      applicable





Item
      2.
      Unregistered Sales of Equity Securities and Use of Proceeds




In
      February 2007, the Company issued 3,402,000 common shares were issued as payment
      for professional fees incurred for the period from October 1, 2006 to December
      31, 2007, valued at $0.30 per share which represents the fair value of the
      Company’s share when the services were completed. The excess in the par value is
      recorded in contributed surplus. In
      February 2006, the Company issued 35,000 common shares in exchange for
      professional fees incurred. The shares were valued at $0.75 per share which
      represents the fair value of the Company’s share when the services were
      completed. The excess in the par value is recorded in contributed
      surplus.




In
      February 2007, the Company issued 210,000 common shares to repay a Note Payable
      to an Officer of the Company. The shares were valued at $0.30 per share which
      represents the fair value of the Company’s share when the Note Payable was
      repaid. The excess in the par value is recorded in contributed
      surplus.




Item
      3.
      Defaults Upon Senior Securities





Not
      applicable





Item
      4.
      Submission of Matters to a Vote of Security Holders





None.





Item
      5.
      Other Information





None.





Item
      6.
      Exhibits




A.
      Exhibits:





31.1
            Certification of Chief Executive Officer Pursuant
              to
              Section 302 of the Sarbanes-Oxley
              Act.  31.2
            Certification of Principal Financial and Accounting
              Officer Pursuant to
              Section 302 of the Sarbanes-Oxley Act.  32.1
            Certification of Chief Executive Officer Pursuant
              to
              Section 906 of the Sarbanes-Oxley
              Act.  32.2
            Certification
                of Principal Financial and Accounting Officer Pursuant to
                Section 906 of the Sarbanes-Oxley Act.





19




**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(b) of the Securities Exchange Act of
      1934, the registrant caused this report to be signed on its behalf by the
      undersigned, thereunto duly authorized, in the city of Ottawa,
      Canada.


DAIRY
              FRESH FARMS
              INC.By
            /s/
              Robert HarrisonRobert
              HarrisonChief
                Executive Officer Date:
                May 15, 2007By
            /s/
              Don
              PatersonDon
                Paterson
              Principal
                Accounting Officer  Date
        May 15, 2007


20