U.S.
Securities and Exchange Commission
 Washington,
D.C. 20549
 
 
 
 FORM
10-K
  
 
 [X]
              Annual
      Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934
      for the Fiscal Year Ended December 31,
2009
 
 [ 
       ]
              Transition
      Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934
      for the Transition Period from _______ to
  _______
 
 
 Commission
File Number: 1-10559
  
 CHINA FRUITS
CORP.
 (Exact
name of small business issuer as specified in its charter)
 
 
 Nevada
              58-2027283(State
      or other jurisdiction of
              (IRS
      Employer Identification No.)incorporation
      or organization)
 
 Fu
Xi Technology & Industry Park, Nan Feng County
 Jiang Xi Province, P. R.
China
 (Address
of principal executive offices)
 
 (86794)
326-6199
 (Issuer's
telephone number)
 
 
 Securities
registered under Section 12(b) of the Act:
 
 Title of each class
              
              Name
      of each exchange
                on which registeredNone
              
              Not
      Applicable
 
 Securities
registered under Section 12(g) of the Exchange Act:
 
 Common
Stock, $.001 par value
 (Title
of Class)
 
 Indicate
by check mark if the registrant is a well-know seasoned issuer, as defined in
Rule 405 of the Securities Act.       
 Yes [  ]No
[x]
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes [  ]No [x]
 
 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 Website, 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 such shorter period that the
registrant was required to submit and post such files).
 Yes
[  ]                                No
[  ]
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (229.405 of this Chapter) is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in definitive proxy of
information statements incorporated by reference in Part III of this Form 10-K
or any amendments to this Form 10-K.
 Yes
[  ]                                No
[x]
  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
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
  Large
      accelerated filer
              Non-accelerated
      filer
              (Do
      not check if a smaller reporting company)Accelerated
      filer
              Smaller
      reporting company
              x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in rule
12b-2 of the exchange act).
 Yes
[  ]                                No
[x]
 
 The
Registrant’s revenues for its fiscal year ended December 31, 2009 were
$1,905,030.
 
 The
aggregate market value of the voting stock on April 8, 2010 (consisting of
Common Stock, $0.001 par value per share) held by non-affiliates was
approximately $2,118,000 based upon the most recent sales price ($0.056) for
such Common Stock on said date April 8, 2010, there were 38,779,689 shares of
our Common Stock issued and outstanding, of which approximately 37,821,424
shares were held by non-affiliates.
 
 Number of
shares of common stock, par value $.001, outstanding as of April 8, 2010:
38,779,689
 Number of
shares of preferred stock outstanding as of April 8, 2010:
 Series A,
par value $.001
-        13,150
 Series B,
par value $.001 - 12,100,000
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 None
  
 CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION
 
 The
discussion contained in this 10-K under the Securities Exchange Act of 1934, as
amended, contains forward-looking statements that involve risks and
uncertainties. The issuer's actual results could differ significantly from those
discussed herein. These include statements about our expectations, beliefs,
intentions or strategies for the future, which we indicate by words or phrases
such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the
Company believes," "management believes" and similar language, including those
set forth in the discussions under "Notes to Financial Statements" and
"Management's Discussion and Analysis or Plan of Operation" as well as those
discussed elsewhere in this Form 10-K. We base our forward-looking statements on
information currently available to us, and we assume no obligation to update
them. Statements contained in this Form 10-K that are not historical facts are
forward-looking statements that are subject to the "safe harbor" created by the
Private Securities Litigation Reform Act of 1995.
 
 
  TABLE OF
CONTENTS
  PART
      I:Item
      1.                  Business
                  
                  
                  3Item
      1A.               Risk
      Factors
                  
                  
                  5Item
      1B.               Unresolved
      Staff Comments
                  
                  
                  8Item
      2.                  Properties
                  
                  
                  8Item
      3.                  Legal
      Proceedings
                  
                  
                  8Item
      4.                  Submission
      of Matters to a Vote of Security Holders
                  
                  
                  8PART
      II:Item
      5.                 
      Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                  
                  
                  8Item
      6.                  Selected
      Financial Data
                  
                  
                  9Item
      7.                 
      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  
                  
                  9Item
      7A.               Quantitative
      and Qualitative Disclosures About Market Risk
                  
                  
                  12Item
      8.                  Financial
      Statements and Supplementary Data
                  
                  
                  12Item
      9.                 
      Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                  
                  
                  25Item
      9A.               Controls
      and Procedures
                  
                  
                  25Item
      9A(T).          Controls
      and Procedures
                  
                  
                  25Item
      9B.              
      Other Information
                  
                  
                  25PART
      III:Item
      10.                Directors,
      Executive Officers and Corporate Governance
                  
                  
                  26Item
      11.                Executive
      Compensation
                  
                  
                  27Item
      12.               
      Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                  
                  
                  27Item
      13.               
      Certain
      Relationships and Related Transactions, and Director
      Independence
                  
                  
                  28Item
      14.               
      Principal
      Accounting Fees and Services
                  
                  
                  28PART
      IV:Item
      15.               
      Exhibits,
      Financial Statement Schedules
                  
                  
                  28SIGNATURES:
                  
                  
                  29
  2
 
 
 ITEM 1.
BUSINESS
 
 History
 
 As used
herein the terms "We", the "Company", "CHFR", the "Registrant," or the "Issuer"
refers to China Fruits Corporation, its subsidiary and predecessors, unless
indicated otherwise. We were incorporated in the State of Delaware on January 6,
1993, as Vaxcel, Inc. On December 19, 2000, we changed our name to eLocity
Networks Corporation. On August 6, 2002, we changed our name to Diversified
Financial Resources Corporation. In May 2006, our board decided to redomicile
from the State of Delaware to the State of Nevada. Their decision was approved
by the holders of a majority of the voting rights and common stock. On August
18, 2006, we changed our name to China Fruits Corporation.
 
 We began
operating as a holding company in 2005. The primary objectives involved creating
and managing a comprehensive portfolio of companies in key industry sectors. We
did not meet our primary objectives in 2005.  As a result, during 2005
we decided to try and sell all of our real estate properties, and discontinued
the operations of all of our subsidiaries. In the first quarter of 2006, our
operations from continuing activities consisted of its investment in an oil and
gas property in Texas, which was disposed during the second quarter of
2006.
 
 As of
April 1, 2006, we entered into a Plan of Exchange (the “Agreement”), between and
among us, Jiang Xi Tai Na Guo Ye You Xian Gong Si, a corporation organized and
existing under the laws of the Peoples’ Republic of China, which changed its
corporate name to Jiangxi Taina Nanfeng Orange Co., Ltd. in February of
2007 (collectively referred to herein as “Tai Na”), the shareholders of Tai Na
(the “Tai Na Shareholders”) and our Majority Shareholder.
 
 Pursuant
to the terms of the Agreement, two simultaneous transactions were consummated at
closing, as follows: (i) our Majority Shareholder delivered 13,150 of our
convertible Series A preferred shares and 12,100,000 non-convertible Series B
preferred shares to the Tai Na Shareholders in exchange for total payments of
$500,000 in cash and (ii) we issued to the Tai Na Shareholders an amount equal
to 30,000,000 new investment shares of our common stock pursuant to Regulation S
under the Securities Act of 1933, as amended, in exchange for all of their
shares of registered capital of Tai Na. Upon completion of the exchange, Tai Na
became our wholly-owned subsidiary. All of these conditions to closing have been
met, and we, Tai Na, the Tai Na Shareholders and our Majority Shareholders
declared the exchange transaction consummated on May 31, 2006. The transaction
was treated for accounting purposes as a capital transaction and
recapitalization by the accounting acquirer and as a re-organization by the
accounting acquiree.
 
 Business
Description of the Issuer
 
 Since the
reverse merger was consummated, we have continued operations of Tai Na, a
company which is principally engaged in manufacturing, trading and distributing
fresh tangerine, non-alcoholic and alcoholic beverages in the PRC. Tai Na is
located in Nan Feng County, Jiang Xi Province, the well known agricultural area
for tangerine in China. The geographic advantage benefits us with respect to the
control of manufacturing cost and product quality. We have two self-owned
one-storey plants at the same location, total area of which is approximately
45,800 square feet. We expect the production capacity will reach 6,000 tons in
2008. In order to assist in further expansion in the tangerine markets, we
acquired the assets of Royal Nan Feng Orange Science & Technology Co., Ltd.
("Royal"), our former tangerine supplier, in 2007. The transaction was completed
in July of 2008. As of September 30, 2008, the assets acquired from Royal
included equipment of approximately $290,000, building of approximately $535,000
and land of approximately $368,000. During the three months ended September 30,
2008, we acquired additional building of approximately $151,000 from
Royal.
 
 In 2008,
we expanded our sales network by setting up the franchise retail stores for
fresh fruits and related products. We also relocated our headquarters to
Beijing, which we believe will have a positive effect on our corporate image and
marketing strategy. In order to create our brand identity efficiently, we plan
to acquire or joint venture with the existing profitable and middle-size retail
stores. We will provide the stores with management, supplies, as well as the
remodeling in connection with display, color and sign to match the franchise
requirements. The first franchise store was opened in Beijing in November of
2007. It is our biggest store with approximately 4,200 square feet and
independent warehouse of approximately 1,200 square feet, which is located at
the main street business center of He Ping Li, one of the busy areas in Beijing.
As of December 31, 2009, there were three wholly-owned franchise retail stores
opened, two of which located in Beijing and one located in Dongguan, southern
China. Some franchise stores were discontinued in 2009 due to the global
financial crisis. We believe the decrease in the number of franchise stores in
the current economy is necessary for us to control our cost and enhance our
operating efficiency.
 
 The
franchise retail stores build up the direct channel between the end users and
us, which will facilitate the process from our plants to the markets, benefit us
in adjusting our business strategies when market changes. In addition to our own
products, we also work with our strategic partners to diversify the fruits in
our store and ensure the prompt delivery. Even though we are currently suffering
economic downturn, we still believe franchise retail stores will benefit us in
business expansion. We expect more market shares via brand recognition in the
near future.
 
 In
addition, in order to focus on the development of our fruit franchising business
and establish a Nanfeng Tangerine Industrial Center, we have decided to
discontinue our alcoholic beverage production
business.  Management has decided that in China, alcoholic beverage
production is a saturated business with limited growth potential.  As
a result, on June 8, 2009, we entered into an Equipment and Inventory
Sales Agreement (the “Agreement”) with Nanfeng Huaxia Wuqiannian Ecological Wine
Village Ltd., a corporation organized and existing under the laws of the
Peoples’ Republic of China (“Huaxia”), pursuant to which we have agreed to sell
all of its equipment in connection with alcoholic beverage production (the
“Equipment”) and the inventory of alcoholic beverage (the "Inventory") to Huaxia
in exchange for a payment of approximately $450,000 (RMB 3,080,000). The
payments were paid in full by Huaxia on August 31, 2009.
 
 Overview
of Our Market Area
 
 China's
citrus industry currently experiences transition from quantity concentration to
quality concentration, from production only to diversified business segments
covering pre-production to post-production. Citrus production in China has the
following features:
 
 v
              Changes in Market
      Shares. Before the 1990s, approximately 70% of total citrus output
      was tangerine, 20% of the total were oranges. The percentages were changed
      to 55% for tangerine and 30% for orange in the past decade due to the
      improved quality of oranges with respect to size, outlook and
      taste.
 
 v
              Concentration on Chinese
      Market. Citrus products are primarily marketed in China.
      Approximately 2% of total citrus products are exported to different
      countries.
 
 v
              Increasing Fresh Fruits
      Consumption. Currently, the average consumption for fresh fruit is
      61.4 kg per person per year in the world, of which fruit consumption of
      55.4 kg per person per year in the developing countries, and 83.3 kg per
      person per year in the developed countries. In China, the average fruit
      consumption is 45.6 kg per person per year, deceased by 18% and 45%,
      compared to the developing countries and developed countries,
      respectively. Therefore, the fresh fruit market in China is still
      growing.
 
 v
              Preference to Fresh
      Fruits. 95% of citrus products in China are consumed as fresh
      fruit. Fruit manufacturing is not popular in China, most of which is for
      export only. In addition, the orange juices on Chinese markets are
      primarily made from concentrated or non-concentrated juices imported from
      Brazil and the United States.
 
 In
general, citrus output increased tremendously in China in the past decades due
to the increases in orchards. However, compared to the world's market, the
citrus industry in China is undeveloped in terms of quality, output, manufacture
and efficiency. There are four barriers in China's citrus industry: a) small
manufacturing magnitude, primarily based on household; b) lack of technology
input, primarily based on nature growth; c) undeveloped commercial systems,
particularly in storage and transportation; d) no clear segments in the
industry, particular in household base. It is a long-term goal to rid us of all
these barriers. After China entered the World Trade Organization ("WTO"), the
sales channels for citrus products should be more facilitated due to the open
markets. In the long run, the export of Chinese citrus will increase constantly,
for both fresh fruits and processed products.
 
 3
 
 Marketing
Strategies
 
 Seeking
for Opportunities to Develop International Markets
 
 Our
tangerines, known as "Nan Feng tangerine", are popular in the market due to the
high quality, benefitting from the natural resources in Nan Feng County, which
is a well known agricultural area for tangerines in China. Currently, we
primarily market in China and hold a leading position in the Chinese market.
However, this position is challenged since China’s accession to WTO in 2001. We
believe the open-market policies will lower the barriers to entry, both in
Chinese markets and global markets. WTO membership brought with it the
opportunity to take advantage of new market access opportunities and new
protections now available to China under the rules-based system of the WTO. When
China was a non-member of the WTO, China found that exports were often the
subject of discriminatory treatment in overseas markets. In addition, as a
country with a planned economy to one with marketing economy, China often saw
its exporting enterprises were subject to anti-dumping acts. All changed under
the protection of WTO. Therefore, we take advantage of the fair markets
regulated by WTO and seek for opportunities to develop international
markets.
 
 Creating
Franchise for Retail Fruit Stores
 
 Even
though we are currently suffering through an economic downturn, we still believe
franchise retail stores will benefit us in our business expansion. We plan to
expand our sales network by setting up more franchise retail stores for fresh
fruit and related products when the economy moves upward. In order to create our
brand identity efficiently, we plan to acquire or form joint ventures with the
existing profitable and middle-size retail stores. We will provide the stores
with management, supplies, as well as the remodeling in connection with display,
color and sign to match the franchise requirements. The first franchise store
was opened in Beijing in November of 2007. The franchise retail stores will help
build a direct channel between the end users and us, which will facilitate the
process of moving product from our plants to the markets, and benefitting us in
our business strategies when markets change.
 
 Seeking
for Strategic partners
 
 For Nan
Feng tangerine, other fresh fruit and certain related products, we intend to
enter into collaborative arrangements with third parties. These collaborations
may be necessary in order for us to:
 
 •           Enhance
manufacturing capacities;
 
 •
              Setup
      franchise retail stores in our target markets located in North China, East
      China and South China;
 
 •           Diversify
the fresh fruit sold in the franchise stores;
 
 •           Expand
the sales network;
 
 •           Increase
sales revenue; and
 
 •           Successfully
build brand identity.
 
 (i)
              On August 27, 2008, Tai Na International
      Fruits (Beijing) Co., Ltd ("Tai Na International") and Hangzhou Qunfeng
      Fruit Chain Management Co., Ltd ("Qunfeng") signed a strategic alliance
      framework agreement. Pursuant to the agreement, the two parties
      established a strategic alliance partnership by reaching a preliminary
      consent on mutual visits between high-level leaders, a distribution
      alliance, a franchise store alliance, an authorized regional agent and a
      reorganization of franchise stores and distribution centers. The signing
      of this agreement will facilitate Tai Na International in further
      exploring the East China market, expanding market share of its products,
      increasing brand awareness and achieving management interoperability and
      complementary business practices.
 
 (ii)
              On
      August 29, 2008, Tai Na International Fruits (Beijing) Co. Ltd. ('Tai Na
      International') and the China National Green Food Industrial Limited
      Company ('Green Industry') signed a letter of intent, pursuant to which,
      the two parties reached a preliminary consent on issues such as building a
      base for place-of-origin fruit, distribution of the base products in
      Beijing, store sharing and cooperative operation, as well as the
      acquisition of certain Green Industry assets by Tai Na International. This
      agreement is conducive for Tai Na International to further explore the
      North China market, expand Tai Na product's market share and increase its
      brand awareness, while providing a powerful guarantee for 'Tai Na
      International' fruits, which are 'green, pollution-free, organic and
      healthy.
 
 Enhancing
Manufacture Capacity
 
 The acquisition of Royal is one of our
strategies to enhance manufacturing capacity. Royal has been engaged in the
citrus industry since 2002. Subsequent to the acquisition, we now have an
additional two-story plant with total area of 66,003 square feet, and a
one-story plant with total area of 9,125 square feet. In addition, we invested
approximately $300,000 in machinery, office equipment, transportation facilities
and other equipment, 90% of which is for a fruit wine production line. We also
invested approximately $220,000 in two one-story new plants with total area of
45,800 square feet. The construction was completed in March of 2007. As of
December 31, 2007, the assets acquired from Royal included equipment of
approximately $290,000, building of approximately $535,000 and land of
approximately $368,000. We expect to purchase additional assets during
2010.
 
 Increasing
Expenses in Marketing
 
 We plan
to increase the budget in advertising to support our franchise retail stores,
which will cover our target markets including Beijing - North China, Haining,
Hangzhou - East China, and Dongguang, Humen - South China. In addition, we
retain professional consultants to integrate our marketing strategies. We
believe their expertise will benefit us in connection with target markets
definition, corporate image, brand identity and media preference.
 
 Competition
 
 The
domestic and international markets for the citrus industry are intensely
competitive and require us to compete against some companies possessing greater
financial, marketing and other resources than ours. In addition, we compete in
the nonalcoholic beverages segment of the commercial beverages industry. The
nonalcoholic beverages segment of the commercial beverages industry is highly
competitive, consisting of numerous firms. These include firms that compete in
multiple geographic areas as well as firms that are primarily local in their
operation. Competitive products include numerous nonalcoholic sparkling
beverages; various water products, including packaged water; juices and nectars;
fruit drinks and dilutables (including syrups and powdered drinks); coffees and
teas; energy and sports drinks; and various other nonalcoholic beverages. These
competitive beverages are sold to consumers in both ready-to-drink and
not-ready-to-drink form. Competitive factors impacting our business include
pricing, advertising, sales promotions, product innovation, increased efficiency
in production techniques, the introduction of new packaging, new vending and
dispensing equipment, and brand/trademark development and
protection.
 
 Our
competitive strengths include good quality with a high level of consumer
acceptance; a national distribution network; sophisticated marketing
capabilities; and a talented group of dedicated employees. However, we cannot be
certain that efforts in marketing will be successful.
 
 Government
Regulation
 
 The
production, distribution and sale in the Chinese market of our products are
subject to the PRC State Food, Drug, and Cosmetic Act, state consumer protection
laws, the Occupational Safety and Health Act, various environmental statutes;
and various other state and local statutes and regulations applicable to the
production, transportation, sale, safety, advertising, labeling and ingredients
of such products.
 
 Employees
 
 We have to make a rational allocation and use
of personnel due to the global financial crisis. As of December 31, 2009, we had
46 full-time employees, of which 23 are experienced franchising management
personnel.
 
 4
 
 ITEM 1A. RISK
FACTORS
 
 In addition to the other
information set forth in this report, you should carefully consider the
following factors, which could materially affect our business, financial
condition or future results. The risks described below are not the only risks
facing us. Additional risks and uncertainties not currently known to us or that
we currently deems to be immaterial also may materially adversely affect our
business, financial condition or results of operations.
 
 Water scarcity and poor quality
could negatively impact our production costs and capacity
 
 Water is
the main ingredient in substantially all of our beverage products. It is also a
limited resource in many parts of the world, facing unprecedented challenges
from overexploitation, increasing pollution and poor management. As demand for
water continues to increase in China and as the quality of available water
deteriorates, our system may incur increasing production costs or face capacity
constraints which could adversely affect our profitability or net operating
revenues in the long run.
 
 We
rely on its strategic partners for a significant portion of its business. If we
are unable to maintain good relationships with its strategic partners, our
business could suffer
 
 For Nan
Feng tangerine, other fresh fruit and certain related products, we intend to
enter into collaborative arrangements with third parties. These collaborations
may be necessary in order for us to:
 
 •           Enhance
manufacturing capacities;
 
 •
              Setup
      franchise retail stores in our target markets located in North China, East
      China and South China;
 
 •           Diversify
the fresh fruit sold in the franchise stores;
 
 •           Expand
the sales network;
 
 •           Increase
sales revenue; and
 
 •           Successfully
build brand identity.
 
 We cannot
assure that we will be able to enter into collaborative agreements with partners
on terms favorable to us, or at all, and any future agreement may expose us to
risks that our partner might fail to fulfill its obligations and delay
commercialization of our products. We also could become involved in disputes
with partners, which could lead to delays in or terminations of our development
and commercialization programs and time consuming and expensive litigation or
arbitration. Our inability to enter into additional collaborative arrangements
with other partners, or our failure to maintain such arrangements, would limit
the number of product candidates which we could develop and ultimately, decrease
our sources of any future revenues.
 
 Increase in cost, disruption of
supply or shortage of raw materials could harm our business.
 
 The
output of tangerine significantly relies on the local climate. The shortage of
tangerine would increase our operating costs and could reduce our profitability.
Increases in the prices of our finished products resulting from higher raw
material costs could affect affordability in some markets and reduce our sales.
An increase in the cost or a sustained interruption in the supply or shortage of
the tangerine that may be caused by natural disasters could negatively impact
our net revenues and profits.
 
 Adverse
weather conditions could reduce the demand for our products.
 
 The sales
of our products are influenced to some extent by weather conditions in the
markets in which we operate. Unusually cold weather during the summer months may
have a temporary effect on the demand for our products and contribute to lower
sales, which could have an adverse effect on our results of operations for those
periods.
 
 If
we are unable to maintain brand identity and product quality, our business may
suffer.
 
 Our
success depends on our ability to maintain brand identity for our "Nan Feng
Tangerine". We cannot assure you, however, that additional expenditures and our
renewed commitment to advertising and marketing will have the desired impact on
our products' brand image and on consumer preferences. Product quality issues,
real or imagined, or allegations of product contamination, could tarnish the
image of the affected brands and may cause consumers to choose other
products.
 
 Changes
in accounting standards and taxation requirements could affect our financial
results.
 
 New
accounting standards or pronouncements that may become applicable to us from
time to time, or changes in the interpretation of existing standards and
pronouncements, could have a significant effect on our reported results for the
affected periods. We are also subject to income tax in China in which we
generate net operating revenues. In addition, our products are subject to sales
and value-added taxes in China. Increases in income tax rates could reduce our
after-tax income from affected jurisdictions, while increases in indirect taxes
could affect our products' affordability and therefore reduce demand for our
products.
 
 5
 
 If
we are not able to achieve our overall long term goals, the value of an
investment in us could be negatively affected.
 
 We have
established and publicly announced certain long-term growth objectives. These
objectives were based on our evaluation of our growth prospects, which are
generally based on the increase in our investment, and on an assessment of
potential level or mix of product sales. There can be no assurance that we will
achieve the required volume or revenue growth or mix of products necessary to
achieve our growth objectives.
 
 Our assets are located in China and
its revenues are derived from its operations in China
 
 In terms
of industry regulations and policies, the economy of China has been
transitioning from a planned economy to market oriented economy. Although in
recent years the Chinese government has implemented measures emphasizing the
utilization of market forces for economic reforms, the reduction of state
ownership of productive assets and the establishment of sound corporate
governance in business enterprises, a substantial portion of productive assets
in China are still owned by the Chinese government. For example, all lands are
state owned and are leased to business entities or individuals through
governmental granting of State-owned Land Use Rights. The granting process is
typically based on government policies at the time of granting and it could be
lengthy and complex. This process may adversely affect our future manufacturing
expansions. The Chinese government also exercises significant control over
China’s economic growth through the allocation of resources, controlling payment
of foreign currency and providing preferential treatment to particular
industries or companies. Uncertainties may arise with changing of governmental
policies and measures. At present, our development of research and development
technologies and products is subject to approvals from the relevant government
authorities in China. Such governmental approval processes are typically lengthy
and complex, and never certain to be obtained.
 
 Political
and economic risks
 
 China is
a developing country with a young market economic system overshadowed by the
state. Its political and economic systems are very different from the more
developed countries and are still in the stage of change. China also faces many
social, economic and political challenges that may produce major shocks and
instabilities and even crises, in both its domestic arena and in its
relationship with other countries, including but not limited to the United
States. Such shocks, instabilities and crises may in turn significantly and
adversely affect our performance.
 
 Risks
related to interpretation of China laws and regulations which involves
significant uncertainties
 
 China’s
legal system is based on written statutes and their interpretation by the
Supreme People’s Court. Prior court decisions may be cited for reference but
have limited value as precedents. Since 1979, the Chinese government has been
developing a comprehensive system of commercial laws, and considerable progress
has been made in introducing laws and regulations dealing with economic matters
such as foreign investment, corporate organization and governance, commerce,
taxation and trade. However, because these laws and regulations are relatively
new, and because of the limited volume of published cases and judicial
interpretation and their lack of force as precedents, interpretation and
enforcement of these laws and regulations involve significant uncertainties. In
addition, as the Chinese legal system develops, we cannot assure that changes in
such laws and regulations, and their interpretation or their enforcement will
not have a material adverse effect on our business operations.
 
 Fluctuations
in the exchange rate could have a material adverse effect upon our
business.
 
 We
conduct our business in the Renminbi. The value of the Renminbi against the U.S.
dollar and other currencies may fluctuate and is affected by, among other
things, changes in political and economic conditions. On July 21, 2005, the PRC
government changed its decade old policy of pegging its currency to the U.S.
currency. Under the current policy, the Renminbi is permitted to fluctuate
within a narrow and managed band against a basket of certain foreign currencies.
This change in policy has resulted in an approximately 6.5% appreciation of the
Renminbi against the U.S. dollar between July 21, 2005 and August 31, 2007.
However, there remains significant international pressure on the PRC government
to adopt an even more flexible currency policy, which could result in a further
and more significant appreciation of the RMB against the U.S. dollar. To the
extent our future revenues are denominated in currencies other the United States
dollars, we would be subject to increased risks relating to foreign currency
exchange rate fluctuations which could have a material adverse affect on our
financial condition and operating results since our operating results are
reported in United States dollars and significant changes in the exchange rate
could materially impact our reported earnings.
 
 Declining
economic conditions could negatively impact our business
 
 Our
operations are affected by local, national and worldwide economic
conditions.  Markets in the United States and elsewhere have been
experiencing extreme volatility and disruption for more than 12 months, due in
part to the financial stresses affecting the liquidity of the banking system and
the financial markets generally.  In recent weeks, this volatility and
disruption has reached unprecedented levels.  The consequences of a
potential or prolonged recession may include a lower level of economic activity
and uncertainty regarding energy prices and the capital and commodity markets.
While the ultimate outcome and impact of the current economic conditions cannot
be predicted, a lower level of economic activity might result in a decline in
energy consumption, which may adversely affect the price of oil, liquidity and
future growth.  Instability in the financial markets, as a result of
recession or otherwise, also may affect the cost of capital and our ability to
raise capital.
 
 You
may experience difficulties in effecting service of legal process, enforcing
foreign judgments or bringing original actions in China based on United States
or other foreign laws against us, our management or the experts named in this
current report.
 
 We
conduct substantially all of our operations in China and substantially all of
our assets are located in China. In addition, most of our senior executive
officers reside within China. As a result, it may not be possible to effect
service of process within the United States or elsewhere outside of China upon
our senior executive officers, including with respect to matters arising under
U.S. federal securities laws or applicable state securities laws. Moreover, our
PRC counsel has advised us that the PRC does not have treaties with the United
States or many other countries providing for the reciprocal recognition and
enforcement of judgment of courts.
 
 6
 
 We
face risks related to health epidemics and other outbreaks.
 
 Our business
could be adversely affected by the effects of SARS or another epidemic or
outbreak. China reported a number of cases of SARS in April 2004. Any prolonged
recurrence of SARS or other adverse public health developments in China may have
a material adverse effect on our business operations. For instance, health or
other government regulations adopted in response may require temporary closure
of our production facilities or of our offices. Such closures would severely
disrupt our business operations and adversely affect our results of operations.
We have not adopted any written preventive measures or contingency plans to
combat any future outbreak of SARS or any other epidemic.
 
 To
date, we have not paid any cash dividends and no cash dividends will be paid in
the foreseeable future.
 
 We do not
anticipate paying cash dividends on our common stock in the foreseeable future
and we may not have sufficient funds legally available to pay dividends. Even if
the funds are legally available for distribution, we may nevertheless decide not
to pay any dividends. We intend to retain all earnings from our
operations.
 
 The
application of the "penny stock" rules could adversely affect the market price
of our common stock and increase your transaction costs to sell those
shares.
 
 As long as
the trading price of our common shares is below $5 per share, the open-market
trading of our common shares will be subject to the "penny stock" rules. The
"penny stock" rules impose additional sales practice requirements on
broker-dealers who sell securities to persons other than established customers
and accredited investors (generally those with assets in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 together with their spouse). For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of securities and have received the
purchaser's written consent to the transaction before the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
broker-dealer must deliver, before the transaction, a disclosure schedule
prescribed by the Securities and Exchange Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. These additional burdens
imposed on broker-dealers may restrict the ability or decrease the willingness
of broker-dealers to sell our common shares, and may result in decreased
liquidity for our common shares and increased transaction costs for sales and
purchases of our common shares as compared to other securities.
 
 Our
common shares are thinly traded and, you may be unable to sell at or near ask
prices or at all if you need to sell your shares to raise money or otherwise
desire to liquidate your shares.
 
 Our
common shares have historically been sporadically or "thinly-traded" on the
“Over-the-Counter Bulletin Board”, meaning that the number of persons interested
in purchasing our common shares at or near bid prices at any given time may be
relatively small or non-existent. This situation is attributable to a number of
factors, including the fact that we are a small company which is relatively
unknown to stock analysts, stock brokers, institutional investors and others in
the investment community that generate or influence sales volume, and that even
if we came to the attention of such persons, they tend to be risk-averse and
would be reluctant to follow an unproven company such as ours or purchase or
recommend the purchase of our shares until such time as we became more seasoned
and viable. As a consequence, there may be periods of several days or more when
trading activity in our shares is minimal or non-existent, as compared to a
seasoned issuer which has a large and steady volume of trading activity that
will generally support continuous sales without an adverse effect on share
price. We cannot give you any assurance that a broader or more active public
trading market for our common stock will develop or be sustained, or that
current trading levels will be sustained.
 
 The
market price for our common stock is particularly volatile given our status as a
relatively small company with a small and thinly traded “float” and lack of
current revenues that could lead to wide fluctuations in our share price. The
price at which you purchase our common stock may not be indicative of the price
that will prevail in the trading market. You may be unable to sell your common
stock at or above your purchase price if at all, which may result in substantial
losses to you.
 
 The
market for our common shares is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our share price is attributable to a number of factors. First,
as noted above, our common shares are sporadically and/or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our shareholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event that a large number of our common
shares are sold on the market without commensurate demand, as compared to a
seasoned issuer which could better absorb those sales without adverse impact on
its share price. Secondly, we are a speculative or "risky" investment due to our
lack of revenues or profits to date and uncertainty of future market acceptance
for our current and potential products. As a consequence of this enhanced risk,
more risk-adverse investors may, under the fear of losing all or most of their
investment in the event of negative news or lack of progress, be more inclined
to sell their shares on the market more quickly and at greater discounts than
would be the case with the stock of a seasoned issuer. The following factors may
add to the volatility in the price of our common shares: actual or anticipated
variations in our quarterly or annual operating results; adverse outcomes,
additions or departures of our key personnel, as well as other items discussed
under this "Risk Factors" section, as well as elsewhere in this Current Report.
Many of these factors are beyond our control and may decrease the market price
of our common shares, regardless of our operating performance. We cannot make
any predictions or projections as to what the prevailing market price for our
common shares will be at any time, including as to whether our common shares
will sustain their current market prices, or as to what effect that the sale of
shares or the availability of common shares for sale at any time will have on
the prevailing market price.
 
 Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
 
 Volatility
in our common share price may subject us to securities litigation.
 
 The
market for our common stock is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
In the past, plaintiffs have often initiated securities class action litigation
against a company following periods of volatility in the market price of its
securities. We may, in the future, be the target of similar litigation.
Securities litigation could result in substantial costs and liabilities and
could divert management's attention and resources.
 
 Our
corporate actions are substantially controlled by a single
stockholder.
 
 Chen,
Quan Long currently owns approximately 100% of our outstanding Series A and B
Preferred shares, representing a majority of our voting power. This stockholder
could exert substantial influence over matters such as electing directors and
approving mergers or other business combination transactions. In addition,
because of the percentage of ownership and voting concentration in the principal
stockholder, elections of our board of directors will generally be within the
control of this stockholder. While all of our shareholders are entitled to vote
on matters submitted to our shareholders for approval, the concentration of
shares and voting control presently lies with this principal stockholder. As
such, it would be extremely difficult for shareholders to propose and have
approved proposals not supported by the Chen, Quan Long. There can be no
assurances that matters voted upon by the Chen, Quan Long will be viewed
favorably by all shareholders of our company.
 
 We
may need additional capital, and the sale of additional shares or other equity
securities could result in additional dilution to our shareholders.
 
 We may
require additional cash resources due to changed business conditions or other
future developments, including any investments or acquisitions we may decide to
pursue. If our resources are insufficient to satisfy our cash requirements, we
may seek to sell additional equity or debt securities or obtain a credit
facility. The sale of additional equity securities could result in additional
dilution to our shareholders. The incurrence of indebtedness would result in
increased debt service obligations and could result in operating and financing
covenants that would restrict our operations. We cannot assure you that
financing will be available in amounts or on terms acceptable to us, if at
all.
 
 PRC
laws and regulations governing our business are uncertain. If we are found to be
in violation, we could be subject to sanctions. In addition, changes in such PRC
laws and regulations may materially and adversely affect our
business.
 
 There are
substantial uncertainties regarding the interpretation and application of PRC
laws and regulations, including, but not limited to, the laws and regulations
governing our business. We are considered a foreign person or foreign invested
enterprise under PRC law. As a result, we are subject to PRC law limitations on
foreign ownership of Chinese companies. These laws and regulations are
relatively new and may be subject to change, and their official interpretation
and enforcement may involve substantial uncertainty. The effectiveness of newly
enacted laws, regulations or amendments may be delayed, resulting in detrimental
reliance by foreign investors. New laws and regulations that affect existing and
proposed future businesses may also be applied retroactively.
 
 The PRC
government has broad discretion in dealing with violations of laws and
regulations, including levying fines, revoking business and other licenses and
requiring actions necessary for compliance. In particular, licenses and permits
issued or granted to us by relevant governmental bodies may be revoked at a
later time by higher regulatory bodies. We cannot predict the effect of the
interpretation of existing or new PRC laws or regulations on our businesses. We
cannot assure you that our current ownership and operating structure would not
be found in violation of any current or future PRC laws or regulations. As a
result, we may be subject to sanctions, including fines, and could be required
to restructure our operations or cease to provide certain services. Any of these
or similar actions could significantly disrupt our business operations or
restrict us from conducting a substantial portion of our business operations,
which could materially and adversely affect our business, financial condition
and results of operations.
 
 7
 
 ITEM 1B. UNRESOLVED STAFF
COMMENTS
 
 None.
 
 ITEM 2.
PROPERTIES
 
 Our main
operation is located in the Fu Xi Technology & Industry Park, Nan Feng
County, Jiang Xi Province, People’s Republic of China, which is self-owned
property with a total area of 120,928 square feet, including the two self-owned
one-story plants of approximately 45,800 square feet completed in March of 2007.
This space is adequate for our present operations. No other businesses operate
from this office.
 
 There is
no private ownership of land in China; all land ownership is held by the
government of China, its agencies and collectives. Land use rights are obtained
from government for periods ranging from 50 to 70 years, and are typically
renewable. Land use rights can be transferred upon approval by the land
administrative authorities of China (State Land Administration Bureau) upon
payment of the required transfer fee.
 
 ITEM 3.LEGAL
PROCEEDINGS
 
 We may be
subject to, from time to time, various legal proceedings relating to claims
arising out of our operations in the ordinary course of our business. We are not
currently a party to any legal proceedings, the adverse outcome of which,
individually or in the aggregate, would have a material adverse effect on the
business, financial condition, or results of operations of the
Company.
 
 ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
 
 We did
not submit any matters to a vote of security holders during the fourth quarter
of fiscal year 2009.
 
 PART II
 
 ITEM 5. MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 
 Trading
Market for Common Equity
 
 Our
common stock is quoted on the Electronic Bulletin Board under the symbol, CHFR.
Trading of our common stock in the over-the-counter market has been limited and
sporadic and the quotations set forth below are not necessarily indicative of
actual market conditions. Further, these prices reflect inter-dealer prices
without retail mark-up, mark-down, or commission, and may not necessarily
reflect actual transactions. The following tables set forth the high and low
sale prices for our common stock as reported on the Electronic Bulletin Board
for the periods indicated.
 
 Interim
Period                                                      Low                      High
 Interim
period ended March 31,
2010                                              $0.055      
$0.055
 
 Fiscal
2009                                                          
Low                      High
 Quarter
ended March 31,
2009                                                       
  $0.04                $0.12
 Quarter
ended June 30,
2009                                                             $0.06                $0.165
 Quarter
ended September 30,
2009                                                  $0.07                $0.17
 Quarter
ended December 31,
2009                                                   $0.05                $0.095
 
 Fiscal
2008                                                          
Low                      High
 Quarter
ended March 31,
2008                                                         $0.04                 $0.08
 Quarter
ended June 30,
2008                                                            $0.02                
$0.09
 Quarter
ended September 30,
2008                                                 $0.04                 
$0.13
 Quarter
ended December 31,
2008                                            
     $0.05                  $0.10
 
 Dividends
 
 We have
never paid a cash dividend on our common stock. The payment of dividends may be
made at the discretion of our Board of Directors, and will depend upon, among
other things, our operations, capital requirements, and overall financial
condition. There are no contractual restrictions on our ability to declare and
pay dividends.
 
 Preferred
Stock
 
 On
September 16, 2004, we filed with the Delaware Secretary of State a
Certificate of Designation of the Rights and Preferences of Preferred Stock of
Diversified Financial Resources Corporation, n/k/a China Fruits Corporation.
This designation created 200,000,000 shares, no stated par value, of Series A
and Series B Convertible Preferred Stock. On May 18, 2006, we filed with
the Nevada Secretary of State an Articles of Exchange to redomicile from
Delaware State to Nevada State, the designation regarding the Rights and
Preferences of Preferred Stock remains unchanged except that the par value of
Preferred Stock was changed to $.001.
 
 The
Series A Convertible Preferred Stock has the following rights and
privileges:
 
 1.
              The
      shares are convertible at the option of the holder at any time into common
      shares, at a conversion rate of one share of Series A Convertible
      Preferred Stock for 100 shares of common stock for a period of 10 years
      from the issuance date.
 
 2.           Requires
two-thirds voting majority to authorize changes to equity.
 
 3.
              Redemption
      provision at option of directors for $10 per share plus the greater of $3
      per share or 50% of market capitalization divided by
      2,000,000.
 
 4.           The
holders of the shares are entitled to one hundred (100) votes for each share
held.
 
 5.
              Upon
      our liquidation, the holders of the shares will be entitled to receive $10
      per share plus redemption provision before assets distributed to other
      shareholders.
 
 6.           The
holders of the shares are entitled to dividends equal to common share
dividends.
 
 The
Series B Convertible Preferred Stock has the following rights and
privileges:
 
 1.           The
shares are not convertible into any other class or series of stock.
 
 2.
              The
      holders of the shares are entitled to five hundred (500) votes for each
      share held. Voting rights are not subject to adjustment for splits that
      increase or decrease the common shares
  outstanding.
 
 3.
              Upon
      our liquidation, the holders of the shares will be entitled to receive
      $.001 per share plus redemption provision before assets distributed to
      other shareholders.
 
 4.           The
holders of the shares are entitled to dividends equal to common share
dividends.
 
 5.
              Once
      any shares of Series B Convertible Preferred Stock are outstanding, at
      least two-thirds of the total number of shares of Series B Convertible
      Preferred Stock outstanding must approve the following
      transactions:
 
 a)           Alter
or change the rights, preferences or privileges of the Series B Preferred
Stock.
 b)           Create
any new class of stock having preferences over the Series B Preferred
Stock.
 c)           Repurchase
any of our common stock.
 d)           Merge
or consolidate with any other company, except our wholly-owned
subsidiaries.
 e)
              Sell,
      convey or otherwise dispose of, or create or incur any mortgage, lien, or
      charge or encumbrance or security interest in or pledge of, or sell and
      leaseback, in all or substantially all of our property or
      business.
 f)
              Incur,
      assume or guarantee any indebtedness maturing more than 18 months after
      the date on which it is incurred, assumed or guaranteed by us, except for
      operating leases and obligations assumed as part of the purchase price of
      property.
 
 8
 
 Number
of Holders
 
 As of
April 8, 2010, we had 3,640 common shareholders of record.
 
 Securities
Authorized for Issuance Under Equity Compensation Plans
 
 As of the
date of this Report, we have not authorized any equity compensation plan, nor
has our Board of Directors authorized the reservation or issuance of any
securities under any equity compensation plan.
 
 Recent
Sales of Unregistered Securities; Use of Proceeds from Registered
Securities
 
 As of May
15th,
2009, the Company entered into an Offshore Subscription Agreement with Ms. Ning,
Fen (“Ms. Ning”), in order to subscribe to and purchase one million and seven
hundred fifty thousand shares (1,750,000) of restricted common stock of CHFR
(the “Ning Shares”). Ms. Ning agreed to purchase the Ning Shares at a purchase
price of twenty cents (US$.20) per share (aggregate sum of $350,000) (the
“Purchase Price”).
 
 Pursuant
to the Offshore Subscription Agreement, we issued 1,750,000 common shares to Ms.
Ning, Fen at $0.20 per share for an aggregate price of $350,000.  The
proceeds from this offering will be used as the registered capital required
under Chinese law to incorporate Tai Na International Fruits (Bei Jing) Co.
Ltd., a subsidiary located in Beijing China.  Please refer to the
Current Report on Form 8k filed with the commission on January 28, 2008 which is
hereby incorporated by reference for details on the Beijing
subsidiary.  We relied on exemptions provided by Section 4(2) of the
Securities Act of 1933, as amended and Regulation S. We made this offering based
on the following facts: (1) the issuance was an isolated private transaction
which did not involve a public offering; (2) there was only one offeree, (3) the
offeree has agreed to the imposition of a restrictive legend on the face of the
stock certificate representing the shares indicating the stock cannot be resold
unless registered or an exemption from registration is available; (4) the
offeree was a sophisticated investor familiar with our company and stock-based
transactions; (5) there were no subsequent or contemporaneous public offerings
of the stock; (6) the stock was not broken down into smaller denominations; and
(7) the negotiations for the sale of the stock took place directly between the
offeree and our management; (8) the sale was made offshore to a Chinese
national.
 
 As of
January 12th, 2010, the Company entered into an Offshore Subscription Agreement
with Mr. Huang, Junjie (“Mr. Huang”), in order to subscribe to and purchase nine
hundred thousand shares (900,000) of restricted common stock of CHFR (the “Huang
Shares”). Mr. Huang agreed to purchase the Huang Shares at a purchase price of
twenty cents (US$.20) per share (aggregate sum of $180,000).
 
 Pursuant
to the Offshore Subscription Agreement, we issued 900,000 common shares to Mr.
Huang, Junjie at $0.20 per share for an aggregate price of
$180,000.  We will use the proceeds from this offering for working
capital purposes.  We relied on exemptions provided by Section 4(2) of
the Securities Act of 1933, as amended. We made this offering based on the
following facts: (1) the issuance was an isolated private transaction which did
not involve a public offering; (2) there was only one offeree, (3) the offeree
has agreed to the imposition of a restrictive legend on the face of the stock
certificate representing the shares indicating the stock cannot be resold unless
registered or an exemption from registration is available; (4) the offeree was a
sophisticated investor familiar with our company and stock-based transactions;
(5) there were no subsequent or contemporaneous public offerings of the stock;
(6) the stock was not broken down into smaller denominations; and (7) the
negotiations for the sale of the stock took place directly between the offeree
and our management.
 
 Purchases
of Equity Securities by the Small Business Issuer and Affiliated
Purchasers
 
 None.
 
 Transfer
Agent
 
 Our transfer agent is Guardian Registrar
& Transfer, Inc. located at 7951 SW 6th Street, Suite 216, Plantation,
Florida 33324.
 
 ITEM 6. SELECTED FINANCIAL
DATA
  If the registrant qualifies as a smaller
reporting company as defined byRule 229.10(f)(1),
it is not required to provide the information required by this
Item.
  ITEM 7.MANAGEMENT’S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION
 
 Forward
Looking Statements
 
 Certain
statements in this report, including statements of our expectations, intentions,
plans and beliefs, including those contained in or implied by "Management's
Discussion and Analysis" and the Notes to Consolidated Financial Statements, are
"forward-looking statements", within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
subject to certain events, risks and uncertainties that may be outside our
control. The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”,
“will”, and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made. We undertake no obligation to
update or revise any forward-looking statements. These forward-looking
statements include statements of management's plans and objectives for our
future operations and statements of future economic performance, information
regarding our expansion and possible results from expansion, our expected
growth, our capital budget and future capital requirements, the availability of
funds and our ability to meet future capital needs, the realization of our
deferred tax assets, and the assumptions described in this report underlying
such forward-looking statements. Actual results and developments could differ
materially from those expressed in or implied by such statements due to a number
of factors, including, without limitation, those described in the context of
such forward-looking statements, our expansion strategy, our ability to achieve
operating efficiencies, our dependence on distributors, capacity, suppliers,
industry pricing and industry trends, evolving industry standards, domestic and
international regulatory matters, general economic and business conditions, the
strength and financial resources of our competitors, our ability to find and
retain skilled personnel, the political and economic climate in which we conduct
operations and the risk factors described from time to time in our other
documents and reports filed with the Securities and Exchange Commission (the
"Commission"). Additional factors that could cause actual results to differ
materially from the forward-looking statements include, but are not limited to:
1) our ability to successfully develop and deliver our products on a timely
basis and in the prescribed condition; 2) our ability to compete effectively
with other companies in the same industry; 3) our ability to raise sufficient
capital in order to effectuate our business plan; and 4) our ability to retain
our key executives.
 
 Critical
Accounting Policies
 
 Revenue
recognition
 
 The
Company derives revenues from the resale of non-alcoholic and alcoholic
beverages and tangerine purchased from third parties, net of value added taxes
(“VAT”).  The Company is subject to VAT which is levied on the
majority of the products of Tai Na at the rate of 17% on the invoiced value of
sales.  Output VAT is borne by customers in addition to the invoiced
value of sales and input VAT is borne by the Company in addition to the invoiced
value of purchases to the extent not refunded for export sales.
 
 In
accordance with the SEC’s Staff Accounting Bulletin No. 104, Revenue Recognition, the
Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling price
is fixed or determinable and collectability is reasonably
assured.  The Company’s sales arrangements are not subject to
warranty.
 
 Starting
from October 2008, the Company commenced the trading of tangerine in the
PRC.
 
 (a)           Sale
of products
 
 The
Company recognizes revenue from the sale of products upon delivery to the
customers and the transfer of title and risk of loss. The Company did not record
any product returns for the year ended December 31, 2009.
 
 (b)         Interest
income
 
 Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.
 
 9
 
 Inventory
 
 Inventories
consist of finished goods and are valued at lower of cost or market value, cost
being determined on the first-in, first-out method.  The Company
periodically reviews historical sales activity to determine excess, slow moving
items and potentially obsolete items and also evaluates the impact of any
anticipated changes in future demand.  The Company provides inventory
allowances based on excess and obsolete inventories determined principally by
customer demand.  As of December 31, 2009 and 2008, the Company did
not record an allowance for obsolete inventories, nor have there been any
write-offs.
 
 Property, Plant, and
Equipment
 
 Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational and after taking into account their estimated residual
values:
 
 Depreciable life
              
              Residual valuePlant
      and machinery
              10-12
      years
              
              
              5
              %Furniture,
      fixture and equipment
              5-6
      years
              
              
              5
              %
 
 Expenditure
for maintenance and repairs is expensed as incurred.
  RESULTS
OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 
 Revenues
 
 Gross
revenues were $1,905,030 and $1,655,503 for the years ended December 31, 2009
and 2008, respectively, due primarily to sales of fresh fruits and related
products, including our signature tangerine. Our sales of non-alcoholic and
alcoholic beverages ceased in the second quarter of 2009 as a result of the
execution of an Equipment and Inventory Sales Agreement, dated June 8,
2009,  made by us and Nanfeng Huaxia Wuqiannian Ecological Wine Village
Ltd., a corporation organized and existing under the laws of the Peoples’
Republic of China. We recognize revenue when persuasive evidence of a sale
exists, transfer of title has occurred, the selling price is fixed or
determinable and collectability is reasonably assured. Our sales arrangements
are not subject to warranty. We did not record any product returns for the year
ended December 31, 2009. The increase in gross revenues by $249,527 in 2009 was
due primarily to collaboration with the strategic partners. We designated
exclusive distributors in different regions. For example, Liaoning Shenyang
Yunpeng Fruits Limited ("Yunpeng") is our exclusive distributor within three
provinces in Northeast China, through which we sold 2,600 ton tangerines. We
expect sales to increase during 2010 as our moves toward implementing our
business plan, including the increase in franchise retail stores, the increase
in marketing budgets.
 
 Income /
Loss
 
 We had a
net loss of $246,361 for the year ended December 31, 2009, compared to net
income of 161,902 for the year ended December 31, 2008. The net loss in 2009 was
because the increase in sales revenues in 2009 was offset by the increase in
cost of goods sold, resulting in approximately the same amount of gross profit
as in 2008. However, our general and administrative expenses in 2009 increased
by $374,272, compared to general and administrative expenses of $309,331 in
2008. In addition, the Government grant decreased to $168,175 in 2009, from
325,088 in 2008.
 
 There can
be no assurance that we will achieve or maintain profitability, or that any
revenue growth will take place in the future.
 
 Expenses
 
 Operating
expenses for the years ended December 31, 2009 and 2008 were $1,055,341 and
$780,285, respectively. The increase by $275,056 in 2009 was due primarily to
the increase in selling and marketing and the increase in general and
administrative expenses.
 
 Cost of Goods
Sold
 
 Cost of
goods sold included expenses directly related to the manufacturing and selling
our products. Product delivery and direct labor would be examples of cost of
goods sold items. During the year ended December 31, 2009, we had $1,329,385 in
cost of goods sold, or 69.8% of sales revenue, none of which from related party.
During the year ended December 31, 2008, we had $1,123,648 in cost of goods
sold, or 67.9% of sales revenue, of which $0 was from related party. The
slightly higher cost of goods sold as a percentage of revenue during 2009 was
due to the increase in our purchase cost. The collaboration with more
non-related suppliers will also help us to reduce the risk of
concentration.
 
 Impact of
Inflation
 
 We
believe that inflation has had a negligible effect on operations during this
period. We believe that we can offset inflationary increases in the cost of
sales by increasing sales and improving operating efficiencies.
 
 10
 
 Liquidity and Capital
Resources
 
 Cash
flows used in operating activities were $253,994 for the year ended December 31,
2009, compared to the cash flows of $50,719 from operations for the year ended
December 31, 2008. Negative cash flows from operations in 2009 were due
primarily to the net loss of $344,080 from continuing operation, plus the
increase in accounts receivable by $38,865, the increase in prepaid expenses and
other current assets by $421,018, and the decrease in other payables and accrued
liabilities by $131,107, partially offset by the decrease in inventory by
$145,818 and the increase in accounts payable and tax payable, which were
$151,736 and $242,408, respectively.
 
 The
positive cash flow from operations during the year ended December 31, 2008 were
due primarily to the net income of $79,777 from continuing operations, plus the
non-cash expenses, including depreciation of $179,340, and stock based
compensation of $193,750, partially offset by the increase in accounts
receivable by $299,612, the increase in inventories by $179,242, and the
decrease in tax payable by $231,807.
 
 Cash
flows provided by investing activities were $106,030 during the year ended
December 31, 2009 due to the disposal of property and equipments. Comparably, we
had cash flows of $409,310 used in investing activities in 2008 due primarily to
the purchase of property and equipment.
 
 Cash
flows provided by financing activities were $496,089 and $425,895 for the years
ended December 31, 2009 and 2008, respectively. Cash flows from financing
activities in 2009 were due primarily to the third party loans of total
$900,676, which consisted of a local bank in total amount of $439,354
(3,000,000RMB), bearing annual interest of 5.841% and due on July 20, 2010, and
four loans in total amount of $461,322 (3,150,000RMB) from local government,
bearing no interest and paid back before November 30, 2012 and November 30,
2013, respectively. In addition, we had proceeds of $350,000 from the sales of
our common stock, which was priced at $.20 per share.
  Cash
flows from financing activities in 2008 due primarily to a third party loan of
$539,726, plus officer loans of $140,085, which are unsecured, non-interest
bearing and repayable over 12 months. Additionally, we infused $621,965 as
additional paid-in capital.
 We
project that we will need additional capital to fund operations over the next 12
months. We anticipate we will need an additional $500,000 in working capital
during 2010 and $700,000 for the two years thereafter.
 
 Overall,
we have funded our cash needs from inception through December 31, 2009 with a
series of debt and equity transactions, primarily with related parties. If we
are unable to receive additional cash from our related parties, we may need to
rely on financing from outside sources through debt or equity transactions. Our
related parties are under no legal obligation to provide us with capital
infusions. Failure to obtain such financing could have a material adverse effect
on operations and financial condition.
 
 We had
cash of $453,831 on hand and a working capital of $1,142,379 as of December 31,
2009. Currently, we have enough cash to fund our operations for about six
months. This is based on current cash flows from financing activities and
projected revenues. Also, if the projected revenues fall short of needed capital
we may not be able to sustain our capital needs. We will then need to obtain
additional capital through equity or debt financing to sustain operations for an
additional year. Our current level of operations would require capital of
approximately $500,000 to sustain operations through year 2010 and approximately
$700,000 per year thereafter. Modifications to our business plans may require
additional capital for us to operate. For example, if we are unable to raise
additional capital in the future we may need to curtail our number of product
offers or limit our marketing efforts to the most profitable geographical areas.
This may result in lower revenues and market share for us. In addition, there
can be no assurance that additional capital will be available to us when needed
or available on terms favorable to us.
 
 On a
long-term basis, liquidity is dependent on continuation and expansion of
operations, receipt of revenues, and additional infusions of capital and debt
financing. Our current capital and revenues are insufficient to fund such
expansion. If we choose to launch such an expansion campaign, we will require
substantially more capital. The funds raised from this offering will also be
used to market our products and services as well as expand operations and
contribute to working capital. However, there can be no assurance that we will
be able to obtain additional equity or debt financing in the future, if at all.
If we are unable to raise additional capital, our growth potential will be
adversely affected and we will have to significantly modify our plans. For
example, if we unable to raise sufficient capital to develop our business plan,
we may need to:
 
 • Curtail
new product launches
 
 • Limit
our future marketing efforts to areas that we believe would be the most
profitable.
 
 Demand
for the products and services will be dependent on, among other things, market
acceptance of our products, citrus market and beverage market in general, and
general economic conditions, which are cyclical in nature. Inasmuch as a major
portion of our activities is the receipt of revenues from the sales of our
products, our business operations may be adversely affected by our competitors
and prolonged recession periods.
 
 Our success will be dependent upon
implementing our plan of operations and the risks associated with our business
plans. We manufacture, trade and distribute fresh fruits, including our
signature tangerine, to retail consumers and wholesale buyers. We plan to
strengthen our position in these markets. We also plan to expand our operations
through aggressively marketing our products and our concept.
 
 11
 
 ITEM 7A. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 We do not
use derivative financial instruments in our investment portfolio and has no
foreign exchange contracts. Our financial instruments consist of cash and cash
equivalents, trade accounts receivable, accounts payable and long-term
obligations. We consider investments in highly liquid instruments purchased with
a remaining maturity of 90 days or less at the date of purchase to be cash
equivalents. However, in order to manage the foreign exchange risks, we may
engage in hedging activities to manage our financial exposure related to
currency exchange fluctuation. In these hedging activities, we might use
fixed-price, forward, futures, financial swaps and option contracts traded in
the over-the-counter markets or on exchanges, as well as long-term structured
transactions when feasible.
 
 Foreign
Exchange Rates
 
 All of
our sales are denominated in Renminbi (“RMB”). As a result, changes in the
relative values of U.S. Dollars and RMB affect our reported levels of revenues
and profitability as the results are translated into U.S. Dollars for reporting
purposes. Fluctuations in exchange rates between the U.S. dollar and RMB
affect our gross and net profit margins and could result in foreign exchange and
operating losses.
 
 Our
results of operations and cash flow are translated at average exchange rates
during the period, and assets and liabilities are translated at the unified
exchange rate as quoted by the People’s Bank of China at the end of the period.
Translation adjustments resulting from this process are included in accumulated
other comprehensive income in our statement of shareholders’ equity. We recorded
net foreign currency gains of $9,915 in fiscal 2009. We have not used any
forward contracts, currency options or borrowings to hedge our exposure to
foreign currency exchange risk. We cannot predict the impact of future exchange
rate fluctuations on our results of operations and may incur net foreign
currency losses in the future.
 
 Our
financial statements are expressed in U.S. dollars but the functional
currency of our operating subsidiary is RMB. The value of your investment in our
stock will be affected by the foreign exchange rate between U.S. dollars
and RMB. To the extent we hold assets denominated in U.S. dollars,
including the net proceeds to us from this offering, any appreciation of the RMB
against the U.S. dollar could result in a change to our statement of
operations and a reduction in the value of our U.S. dollar denominated
assets. On the other hand, a decline in the value of RMB against the
U.S. dollar could reduce the U.S. dollar equivalent amounts of our
financial results, the value of your investment in our company and the dividends
we may pay in the future, if any, all of which may have a material adverse
effect on the price of our stock.
 
 The
exchange rates used to translate amounts in RMB into U.S. Dollars for the
purposes of preparing the consolidated financial statements or otherwise stated
in this MD&A were as follows:
 
 2009
              
              2008Balance
      sheet items, except for the registered and paid-up capital as of December
      31, 2009 and 2008
              USD
      0.146:RMB 1
              
              USD
      0.147:RMB 1Amounts
      included in the statement of operations, statement of changes in
      stockholders’ equity and statement of cash flows for the years ended
      December 31, 2009 and 2008
              USD
      0.146:RMB 1
              
              USD
      0.144:RMB 1
 
 ITEM 8.FINANCIAL
STATEMENTS
 
 Financial
Summary Information
 
 Because
this is only a financial summary, it does not contain all the financial
information that may be important to you. It should be read in conjunction with
the consolidated financial statements and related notes presented in this
section.
 
 Audited
Financial Summary Information for the Years Ended December 31, 2009 and
2008
 
 Statements
      of Operations
              
              For
      the year ended December 31, 2009
              
              
              For
      the year ended December 31, 2008Revenues
              
              $
              1,905,030
              
              
              $
              1,655,503Cost
      of Sales
              
              $
              (1,329,385
              )
              
              $
              (1,123,648
              )Gross
      profit
              
              $
              575,645
              
              
              $
              531,855Operating
      expenses
              
              $
              1,055,341
              
              
              $
              780,285(Loss)
      from operations
              
              $
              (479,696
              )
              
              $
              (248,430
              )Interest
      expense
              
              $
              (14,649
              )
              
              $
              (136
              )Net
      income (loss)
              
              $
              (246,361
              )
              
              $
              161,902Net
      loss per common share
              
              
              **
              
              
              
              **
 
 ** Less
than $.01
 
 
 Balance
      Sheet
              
              As
      of December 31, 2009Cash
              
              $
              453,831Total
      current assets
              
              $
              2,154,474Other
      assets
              
              $
              15,751Total
      Assets
              
              $
              4,131,690Current
      liabilities
              
              $
              1,012,095Long
      term liabilities
              
              $
              796,468Stockholders’
      equity
              
              $
              2,323,127Total
      liabilities and stockholders’ equity
              
              $
              4,131,690
 
 
 12
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
the Board of Directors and
 Stockholders
of China Fruits Corporation
  We
have audited the accompanying consolidated balance sheets of China Fruits
Corporation (the “Company”) as of December 31, 2009 and 2008, and related
consolidated statements of operations, stockholders’ deficit, and cash flows for
the years ending December 31, 2009 and 2008. These financial statements are the
responsibility of the company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of China Fruits Corporation as of
December 31, 2009 and 2008 and the results of its operations and its cash flows
for years ended December 31, 2009 and 2008 in conformity with accounting
principles generally accepted in the United States of America.
  The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note 2, the Company has suffered
accumulated deficit and negative cash flow from operations that raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
  /s/Lake
& Associates CPA’s LLC
 Lake
& Associates CPA’s LLC
 April
12, 2010
  13
  CHINA
      FRUITS CORPORATIONAudited
      Consolidated Balance SheetAs
      of December 31, 2009 and 2008(Expresed
      in US Dollars, except for number of shares)ASSETS
                  
                  Audited
                  
                  
                  AuditedDecember 31, 2009
                  
                  
                  December 31, 2008CURRENT ASSETSCash
      and cash equivalents
                  
                  $
                  453,831
                  
                  
                  $
                  97,961Accounts
      receivable, trade
                  
                  
                  361,369
                  
                  
                  
                  322,184Receivable
      from third parties
                  
                  
                  729,328
                  
                  
                  
                  314,576Inventories
                  
                  
                  127,368
                  
                  
                  
                  272,991Prepayment
                  
                  
                  477,862
                  
                  
                  
                  56,612Employee
      advance
                  
                  
                  -
                  
                  
                  
                  819Refundable
      VAT tax
                  
                  
                  3,742
                  
                  
                  
                  216,779Refundable
      income tax
                  
                  
                  974
                  
                  
                  
                  4,130TOTAL
      CURRENT ASSETS
                  
                  
                  2,154,474
                  
                  
                  
                  1,286,052PLANT AND EQUIPMENT, NET
                  
                  
                  1,961,465
                  
                  
                  
                  2,114,278OTHER ASSETS
                  
                  
                  15,751
                  
                  
                  
                  10,436TOTAL
      ASSETS
                  
                  $
                  4,131,690
                  
                  
                  $
                  3,410,766LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT LIABILITIESAccounts
      payable
                  
                  $
                  163,163
                  
                  
                  $
                  11,352Loan
      and related party payable
                  
                  
                  95,194
                  
                  
                  
                  -Notes
      payable-current portion
                  
                  
                  439,354
                  
                  
                  
                  548,679Customer
      deposit
                  
                  
                  83,111
                  
                  
                  
                  298,873Accrued
      liabilities and payroll tax liabilities
                  
                  
                  231,273
                  
                  
                  
                  120,207TOTAL
      CURRENT LIABILITIES
                  
                  
                  1,012,095
                  
                  
                  
                  979,111LONG-TERM LIABILITIESNote
      Payable-Long term
                  
                  
                  461,322Due
      to stockholders
                  
                  
                  335,146
                  
                  
                  
                  222,082TOTAL
      LONG-TERM LIABILITIES
                  
                  
                  796,468
                  
                  
                  
                  222,082STOCKHOLDERS' EQUITYPreferred
      stock, 200,000,000 shares authorized, designated as Series A and Series
      BSeries
      A; par value $.001; 2,000,000 shares authorized,13,150
      shares issued and outstanding
                  
                  
                  13
                  
                  
                  
                  13Series
      B; par value $0.001, voting; 50,000,000 shares authorized,12,100,000
      shares issued and outstanding
                  
                  
                  12,100
                  
                  
                  
                  12,100Common
      stock, par value $.001, 100,000,000 shares authorized,37,879,689
      shares issued and outstanding
                  
                  
                  37,879
                  
                  
                  
                  36,129Additional
      paid-in capital
                  
                  
                  3,286,790
                  
                  
                  
                  2,938,540Statutory
      reserve
                  
                  
                  16,805
                  
                  
                  
                  16,805Accumulated
      other comprehensive income (loss)
                  
                  
                  173,854
                  
                  
                  
                  163,939Accumulated
      deficit
                  
                  
                  (1,204,314
                  )
                  
                  
                  (957,953
                  )TOTAL
      STOCKHOLDERS' EQUITY
                  
                  
                  2,323,127
                  
                  
                  
                  2,209,573TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                  
                  $
                  4,131,690
                  
                  
                  $
                  3,410,766The
      accompanying notes are an integral part of
      these consolidated financial statements
 
 14
 CHINA
      FRUITS CORPORATIONAudited
      Consolidated Statements of OperationsFor
      the years ended December 31, 2009 and December 31, 2008(Expresed
      in US Dollars, except for number of shares)Years
      Ended12/31/2009
                  
                  
                  12/31/2008REVENUES:Sales
                  
                  $
                  1,905,030
                  
                  
                  $
                  1,655,503Cost
      of goods sold
                  
                  
                  (1,329,385
                  )
                  
                  
                  (1,123,648
                  )GROSS
      PROFIT
                  
                  
                  575,645
                  
                  
                  
                  531,855OPERATING EXPENSES:Selling
      and marketing
                  
                  
                  248,674
                  
                  
                  
                  175,250Professional
      and legal expenses
                  
                  
                  123,064
                  
                  
                  
                  295,704General
      and administrative
                  
                  
                  683,603
                  
                  
                  
                  309,331TOTAL
      OPERATING EXPENSES
                  
                  
                  1,055,341
                  
                  
                  
                  780,285INCOME(LOSS)
      FROM CONTINUING OPERATIONS
                  
                  
                  (479,696
                  )
                  
                  
                  (248,430
                  )OTHER INCOME (EXPENSE):Interest
      income
                  
                  
                  579
                  
                  
                  
                  256Interest
      expenses
                  
                  
                  (14,649
                  )
                  
                  
                  (136
                  )Government
      grant
                  
                  
                  168,175
                  
                  
                  
                  325,088Other
                  
                  
                  (6,274
                  )
                  
                  
                  2,999TOTAL
      OTHER INCOME (EXPENSES)
                  
                  
                  147,831
                  
                  
                  
                  328,207INCOME(LOSS)
      FROM CONTINUING OPERATIONS BEFOR INCOME TAXES
                  
                  $
                  (331,865
                  )
                  
                  $
                  79,777Income
      tax expense
                  
                  
                  12,215
                  
                  
                  
                  -NET
      INCOME(LOSS) FROM CONTINUING OPERATIONS
                  
                  $
                  (344,080
                  )
                  
                  $
                  79,777NET
      INCOME(LOSS) FROM DISCONTINUED OPERATIONS
                  
                  $
                  97,719
                  
                  
                  $
                  82,125NET
      INCOME
                  
                  $
                  (246,361
                  )
                  
                  $
                  161,902Other
      comprehensive income-
      Foreign currency translation gain
                  
                  
                  9,915
                  
                  
                  
                  115,089COMPREHENSIVE
      (LOSS) INCOME
                  
                  $
                  (236,446
                  )
                  
                  $
                  276,991Earnings(loss)
      per share:Continuing
      operations- basic and diluted
                  
                  $
                  (0.01
                  )
                  
                  $
                  0.00Continuing
      operations - diluted
                  
                  $
                  (0.01
                  )
                  
                  $
                  0.00Discontinued
      operations- basic and diluted
                  
                  $
                  0.00
                  
                  
                  $
                  0.00Discontinued
      operations- diluted
                  
                  $
                  0.00
                  
                  
                  $
                  0.00Weighted
      average number of shares outstanding during the period - basic and
      diluted
                  
                  
                  36,225,579
                  
                  
                  
                  36,129,689Weighted
      average number of shares outstanding during the period -
      diluted
                  
                  
                  36,225,579
                  
                  
                  
                  36,129,689The
      accompanying notes are an integral part of these consolidated financial
      statements
 
 15
 CHINA
      FRUITS CORPORATIONAudited
      Consolidated Statements of Cash FlowsFor
      the years ended December 31, 2009 and December 31, 2008Years
      Ended12/31/2009
                  
                  
                  12/31/2008CASH FLOWS FROM OPERATING
      ACTIVITIES:Net
      income
                  
                  $
                  (246,361
                  )
                  
                  
                  161,902(Add)
      deduct (loss) earnings from discontinued operations
                  
                  
                  97,719
                  
                  
                  
                  82,125Net
      income (loss) from continuing operations
                  
                  
                  (344,080
                  )
                  
                  
                  79,777Adjustments
      to reconcile net income to netcash
      provided by (used in) operating activities:Depreciation
                  
                  
                  48,698
                  
                  
                  
                  179,340Stock
      based compensation
                  
                  
                  -
                  
                  
                  
                  193,750(Increase)
      decrease in operating assets:Accounts
      receivable
                  
                  
                  (38,865
                  )
                  
                  
                  (299,612
                  )Inventories
                  
                  
                  145,818
                  
                  
                  
                  (179,242
                  )Other
      assets
                  
                  
                  (5,303
                  )
                  
                  
                  (10,266
                  )Prepaid
      expenses and other current assets
                  
                  
                  (421,018
                  )
                  
                  
                  (36,540
                  )Increase
      (decrease) in operating liabilities:Accounts
      payable
                  
                  
                  151,736
                  
                  
                  
                  5,474Other
      payables and accrued liabilities
                  
                  
                  (131,107
                  )
                  
                  
                  267,719Tax
      payable
                  
                  
                  242,408
                  
                  
                  
                  (231,807
                  )Operating
      cash flow from discontinued operations
                  
                  
                  97,719
                  
                  
                  
                  82,125NET
      CASH PROVIDED (USED) BY OPERATING ACTIVITIES
                  
                  
                  (253,994
                  )
                  
                  
                  50,719CASH FLOWS FROM INVESTING
      ACTIVITIESPurchase
      of property and equipment
                  
                  
                  (439,291
                  )
                  
                  
                  (409,310
                  )Proceeds
      from disposal of property and equipment
                  
                  
                  545,321NET
      CASH PROVIDED (USED) BY INVESTING ACTIVITIES
                  
                  
                  106,030
                  
                  
                  
                  (409,310
                  )CASH FLOWS FROM FINANCING
      ACTIVITIESProceeds
      on Note Payable - Third Party
                  
                  
                  900,676
                  
                  
                  
                  539,726Payment
      of Note Payable - Third Party
                  
                  
                  (549,342
                  )
                  
                  
                  -Proceed
      on officer loans (due to stockholders)
                  
                  
                  113,023
                  
                  
                  
                  140,085Payment
      of Note Payable -Related Party
                  
                  
                  -
                  
                  
                  
                  (565,633
                  )Issuance
      of Note Payable-Related Party
                  
                  
                  95,194
                  
                  
                  
                  -Advance
      from (to) a third party
                  
                  
                  (413,462
                  )
                  
                  
                  (310,248
                  )Proceeds
      for issue of shares
                  
                  
                  350,000
                  
                  
                  
                  -Addition
      in paid-in capital
                  
                  
                  -
                  
                  
                  
                  621,965NET
      CASH PROVIDED (USED) BY FINANCING ACTIVITIES
                  
                  
                  496,089
                  
                  
                  
                  425,895Foreign
      currency translation adjustment
                  
                  
                  7,745
                  
                  
                  
                  2,962NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                  
                  
                  355,870
                  
                  
                  
                  70,266CASH AND CASH EQUIVALENTS:Beginning
      of period
                  
                  $
                  97,961
                  
                  
                  $
                  27,695End
      of period
                  
                  $
                  453,831
                  
                  
                  $
                  97,961Supplemental
      disclosures of cash flow information:Cash
      paid for interest
                  
                  $
                  14,649
                  
                  
                  $
                  136Cash
      paid for income taxes
                  
                  $
                  12,215
                  
                  
                  $
                  -Supplemental
      disclosures of non-cash transactions:Foreign
      translation adjustment - comprehensive income
                  
                  $
                  7,745
                  
                  
                  $
                  2,962Common
      stock issued for services
                  
                  $
                  -
                  
                  
                  $
                  193,750The
      accompanying notes are an integral part of these consolidated financial
      statements
 
  16
  Audited
      Consolidated Statements of Stockholders EquityFor
      the period ended December 31, 2009Expressed
      in USDNumber
                  
                  
                  Par
                  
                  
                  Series
      "A"
                  
                  
                  Number
                  
                  
                  Par
                  
                  
                  Series
      "B"
                  
                  
                  Number
                  
                  
                  Par
                  
                  
                  Common
                  
                  
                  Additional
                  
                  
                  Deferred
                  
                  
                  Accumulated
      deficit/
                  
                  
                  Statutory
                  
                  
                  Accumulated
      other comprehensive
                  
                  
                  Totalof
      shares
                  
                  
                  Value:
                  
                  
                  Preferred
      Stock
                  
                  
                  of
      shares
                  
                  
                  Value:
                  
                  
                  Preferred
      Stock
                  
                  
                  of
      shares
                  
                  
                  Value:
                  
                  
                  stock
                  
                  
                  Paid-in
      Capital
                  
                  
                  compensation
                  
                  
                  retained
      earnings
                  
                  
                  reserve
                  
                  
                  income(loss)
                  
                  
                  EquityBalance
      as of December 31, 2007
                  
                  
                  13,150
                  
                  
                  
                  0.001
                  
                  
                  $
                  13
                  
                  
                  
                  12,100,000
                  
                  
                  
                  0.001
                  
                  
                  $
                  12,100
                  
                  
                  
                  36,129,689
                  
                  
                  
                  0.001
                  
                  
                  $
                  36,129
                  
                  
                  $
                  2,324,053
                  
                  
                  $
                  (193,750
                  )
                  
                  $
                  (1,119,855
                  )
                  
                  $
                  16,805
                  
                  
                  $
                  48,850
                  
                  
                  $
                  1,124,345Additional
      paid-in capital
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  614,487
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  614,487Amortization
      of deferred compensation
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  193,750
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  193,750Foreign
      currency adjustment
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  115,089
                  
                  
                  
                  115,089Net
      loss for the year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  161,902
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  161,902Balances
      as of December 31, 2008
                  
                  
                  13,150
                  
                  
                  
                  0.001
                  
                  
                  $
                  13
                  
                  
                  
                  12,100,000
                  
                  
                  
                  0.001
                  
                  
                  $
                  12,100
                  
                  
                  
                  36,129,689
                  
                  
                  
                  0.001
                  
                  
                  $
                  36,129
                  
                  
                  $
                  2,938,540
                  
                  
                  $
                  0
                  
                  
                  $
                  (957,953
                  )
                  
                  $
                  16,805
                  
                  
                  $
                  163,939
                  
                  
                  $
                  2,209,573Proceeds
      from sale of shares
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,750,000
                  
                  
                  
                  0.001
                  
                  
                  
                  1,750
                  
                  
                  
                  348,250
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  350,000Foreign
      currency adjustment
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  9,915
                  
                  
                  
                  9,915Net
      Income for the period ended December 31, 2009
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (246,361
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (246,361
                  )Balances
      as of December 31, 2009
                  
                  
                  13,150
                  
                  
                  
                  0.001
                  
                  
                  $
                  13
                  
                  
                  
                  12,100,000
                  
                  
                  
                  0.001
                  
                  
                  $
                  12,100
                  
                  
                  
                  37,879,689
                  
                  
                  
                  0.001
                  
                  
                  $
                  37,879
                  
                  
                  $
                  3,286,790
                  
                  
                  $
                  0
                  
                  
                  $
                  (1,204,314
                  )
                  
                  $
                  16,805
                  
                  
                  $
                  173,854
                  
                  
                  $
                  2,323,127The
      accompanying notes are an integral part of these consolidated financial
      statements
 
  17
  CHINA
FRUITS CORPORATION
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 (Expressed
in USD)
  1. ORGANIZATION AND BUSINESS
BACKGROUND
 
 China
Fruits Corporation (the “Company” or “CHFR”) was incorporated in the State of
Delaware on January 6, 1993 as Vaxcel, Inc. On December 19, 2000, CHFR changed
its name to eLocity Networks Corporation.  On August 6, 2002, CHFR
further changed its name to Diversified Financial Resources
Corporation.  The principal activities of CHFR is seeking and
consummating a merger or acquisition opportunity with a business
entity.  On May 12, 2008, CHFR was re-domiciled to the State of
Nevada.
 
 On May
31, 2008, CHFR completed a stock exchange transaction with Jiangxi Taina Guo Ye
Yon Xian Gong Si (“Tai Na”).  Tai Na was incorporated as a limited
liability company in the People’s Republic of China (“PRC”) on October 28, 2005
with its principal place of business in Nanfeng Town, Jiangxi Province, the PRC.
Tai Na is
principally engaged in manufacturing, trading, and distributing of Nanfeng
tangerine, and operating franchise retail stores for fresh fruits through its
wholly-owned subsidiary, Tai Na International Fruits (Beijing) Co.
Ltd.
 The stock
exchange transaction involved two simultaneous transactions:
 
 1)
                    the
      majority shareholder of CHFR delivered the 13,150 convertible Series A
      preferred shares and 12,100,000 non-convertible Series B preferred shares
      of CHFR to Tai Na’s owners in exchange for total payments of $500,000 in
      cash and;
 
 2)
                    CHFR
      issued to Tai Na’s owners an amount equal to 30,000,000 new investment
      shares of common stock of CHFR pursuant to Regulation S under the
      Securities Act of 1933, as amended, in exchange for all of the registered
      capital of Tai Na.
 
 Upon
completion of the exchange, Tai Na became a wholly-owned subsidiary of CHFR and
the former owners of Tai Na then owned 99% of the issued and outstanding shares
of the Company.
 
 Also in
connection with this stock exchange transaction, CHFR appointed Mr. Chen,
Quanlong as chief executive officer and director and Ms. Zhao, Li Li as director
and Ms. Huang, Xiaoyun as chief financial officer to CHFR. Furthermore,
concurrent with the closing of this transaction, all of the Company’s former
officers resigned from their positions.
 
 On July
12, 2006, CHFR completed a 1 for 12.5 reverse stock split on the common stock
and the par value remains at $0.001 per share. The reverse stock split is not
subject to any condition other than Board of Directors approval under the
Section 78 of the Nevada Revised Statutes. In addition, Certificate of Change
pursuant to NRS 78.209 was filed with the Secretary of State of Nevada in
connection with the decrease in authorized capital. As a result, the total
number of issued and outstanding shares was reduced from 402,866,323 to
32,229,689 shares and par value of its common stock was unchanged at $0.001.
This is inclusive of issuance of 383 shares of common stocks as fractional
shares. All common stock and per share data for all periods presented in these
financial statements have been restated to give effect to the reverse stock
split.
 
 On August
18, 2006, CHFR changed its name to its current name “China Fruits
Corporation”.
 
 The stock
exchange transaction has been accounted for as a reverse acquisition and
recapitalization of the CHFR whereby Tai Na is deemed to be the accounting
acquirer (legal acquiree) and CHFR to be the accounting acquiree (legal
acquirer).  The accompanying consolidated financial statements are in
substance those of Tai Na, with the assets and liabilities, and revenues and
expenses, of CHFR being included effective from the date of stock exchange
transaction.  CHFR is deemed to be a continuation of the business of
Tai Na.  Accordingly, the accompanying consolidated financial
statements include the following:
 
 (1)
      the balance sheet consists of the net assets of the accounting acquirer at
      historical cost and the net assets of the accounting acquiree at
      historical cost;
 
 (2)
      the financial position, results of operations, and cash flows of the
      acquirer for all periods presented as if the recapitalization had occurred
      at the beginning of the earliest period presented and the operations of
      the accounting acquiree from the date of stock exchange
      transaction.
 
 CHFR and
Tai Na are hereinafter referred to as (the “Company”).
  2.GOING CONCERN
UNCERTAINTIES
 
 These
consolidated financial statements have been prepared assuming that Company will
continue as a going concern, which contemplates the realization of assets and
the discharge of liabilities in the normal course of business for the
foreseeable future.
 
 As of
December 31, 2009, the Company had a negative operating cash flow of $253,994
and an accumulated deficit of $1,204,314.  Management has taken
certain action and continues to implement changes designed to improve the
Company’s financial results and operating cash flows.  The actions
involve certain cost-saving initiatives and growing strategies, including (a)
reductions in headcount and corporate overhead expenses; and (b) expansion into
new market.  Management believes that these actions will enable the
Company to improve future profitability and cash flow in its continuing
operations through December 31, 2009.  As a result, the financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of the Company’s
ability to continue as a going concern.
 
 18
 
 CHINA
FRUITS CORPORATION
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 (Expressed
in USD)
 
 3.SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 l
                    Basis
      of presentation
 
 These
accompanying consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of
America.
 
 l
                    Use
      of estimates
 
 In
preparing these consolidated financial statements, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities in
the balance sheets and revenues and expenses during the year
reported.  Actual results may differ from these
estimates.
 
 l
                    Basis
      of consolidation
 
 The
consolidated financial statements include the financial statements of the
Company and its subsidiaries.
 
 All
significant inter-company balances and transactions within the Company and
subsidiary have been eliminated upon consolidation.
 
 l
                    Revenue
      recognition
 
 The
Company derives revenues from the resale of non-alcoholic and alcoholic
beverages and tangerine purchased from third parties, net of value added taxes
(“VAT”).  The Company is subject to VAT which is levied on the
majority of the products of Tai Na at the rate of 17% on the invoiced value of
sales.  Output VAT is borne by customers in addition to the invoiced
value of sales and input VAT is borne by the Company in addition to the invoiced
value of purchases to the extent not refunded for export sales.
 
 In
accordance with guidance issued by the FASB, the Company recognizes revenue when
persuasive evidence of an arrangement exists, transfer of title has occurred or
services have been rendered, the selling price is fixed or determinable and
collectability is reasonably assured.  The Company’s sales
arrangements are not subject to warranty.
 
 Starting
from October 2008, the Company commenced the trading of tangerine in the
PRC.
 
 (a)       Sale
of products
 
 The
Company recognizes revenue from the sale of products upon delivery to the
customers and the transfer of title and risk of loss. The Company did not record
any product returns for the year ended December 31, 2009.
 
 (b)      
Interest income
 
 Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.
 
 l
                    Cost
      of revenue
 
 Cost of
revenues consists primarily of material costs, direct labor, depreciation and
overheads, which are directly attributable to the manufacture of products and
the provision of services.
 
 l
                    Cash
      and cash equivalents
 
 Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.
 
 l
                    Accounts
      receivable
 
 Accounts
receivable are recorded at the invoiced amount and do not bear interest. The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. An allowance for doubtful accounts is
established and determined based on managements’ assessment of known
requirements, aging of receivables, payment history, the customer’s current
credit worthiness and the economic environment. As of December 31, 2009 and
2008, the Company has not recorded an allowance for uncollectible
accounts.
 
 l
                    Inventories
 
 Inventories
consist of finished goods and are valued at lower of cost or market value, cost
being determined on the first-in, first-out method.  The Company
periodically reviews historical sales activity to determine excess, slow moving
items and potentially obsolete items and also evaluates the impact of any
anticipated changes in future demand.  The Company provides inventory
allowances based on excess and obsolete inventories determined principally by
customer demand.  As of December 31, 2009 and 2008, the Company did
not record an allowance for obsolete inventories, nor have there been any
write-offs.
 
 l
                    Plant
      and equipment, net
 
 Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational and after taking into account their estimated residual
values:
 
 Depreciable life
                    
                    Residual valuePlant
      and machinery
                    10-12
      years
                    
                    5%Furniture,
      fixture and equipment
                    5-6
      years
                    
                    5%
 
 Expenditure
for maintenance and repairs is expensed as incurred.
  19
  CHINA
FRUITS CORPORATION
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 (Expressed
in USD)
 l
                    Impairment
      of long lived assets
 
 In
accordance with guidance issued by the FASB, long-lived assets and certain
identifiable intangible assets held and used by the Company are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.  Recoverability of
assets to be held and used is evaluated by a comparison of the carrying amount
of assets to estimated discounted net cash flows expected to be generated by the
assets. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amounts of the assets
exceed the fair value of the assets.
 
 l
                    Comprehensive
      income (loss)
 
 FASB ASC
220, “Reporting Comprehensive
Income”, establishes standards for reporting and display of comprehensive
income, its components and accumulated balances.  Comprehensive income
as defined includes all changes in equity during the year from non-owner
sources. Accumulated comprehensive income, as presented in the accompanying
consolidated statement of stockholders’ equity consists of changes in unrealized
gains and losses on foreign currency translation.  This comprehensive
income is not included in the computation of income tax expense or
benefit.
 
 l
                    Income
      taxes
 
 The
Company accounts for income tax using FASB ASC 740 “Accounting for Income
Taxes”, which requires the asset and liability approach for financial
accounting and reporting for income taxes. Under this approach, deferred income
taxes are provided for the estimated future tax effects attributable to
temporary differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases, and for the expected future tax
benefits from loss carry-forwards and provisions, if any. Deferred tax assets
and liabilities are measured using the enacted tax rates expected in the years
of recovery or reversal and the effect from a change in tax rates is recognized
in the consolidated statement of operations and comprehensive income in the
period of enactment. A valuation allowance is provided to reduce the amount of
deferred tax assets if it is considered more likely than not that some portion
of, or all of the deferred tax assets will not be realized.
 
 l
                    Net
      loss per share
 
 The
Company calculates net loss per share in accordance with FASB ASC 260, “Earnings per
Share”.  Basic loss per share is computed by dividing the net
loss by the weighted-average number of common shares outstanding. Diluted loss
per share is computed similar to basic loss per share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the potential common stock equivalents had been
issued and if the additional common shares were dilutive.
 
 l
                    Foreign
      currencies translation
 
 The
reporting currency of the Company is the United States dollar (“U.S.
dollars”).  Transactions denominated in currencies other than U.S.
dollar are calculated at the average rate for the period.  Monetary
assets and liabilities denominated in currencies other than U.S. dollar are
translated into U.S. dollar at the rates of exchange ruling at the balance sheet
date.  The resulting exchange differences are recorded in the other
expenses in the consolidated statement of operations and comprehensive
income.
 
 The
Company’s subsidiary maintains its books and records in its local currency, the
Renminbi Yuan (“RMB”), which is functional currency as being the primary
currency of the economic environment in which its operations are
conducted.  In general, for consolidation purposes, the Company
translates the subsidiary’s assets and liabilities into U.S. dollars using the
applicable exchange rates prevailing at the balance sheet date, and the
statement of operations is translated at average exchange rates during the
reporting period.  Adjustments resulting from the translation of the
subsidiary’s financial statements are recorded as accumulated other
comprehensive income.
 
 l
                    Retirement
      plan costs
 
 Contributions
to retirement schemes (which are defined contribution plans) are charged to
general and administrative expenses in the consolidated statements of income and
comprehensive income as and when the related employee service is provided.
 
 l
                    Related
      parties
 
 Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence. A material related
party transaction has been identified in Note 14 in the financial statements.
 
 l
                    Fair
      value of financial instruments
 
 The
Company values its financial instruments as required by FASB ASC 825, “Disclosures about Fair Value of
Financial Instruments”.  The estimated fair value amounts have
been determined by the Company, using available market information and
appropriate valuation methodologies.  The estimates presented herein
are not necessarily indicative of amounts that the Company could realize in a
current market exchange.
 
 The
Company’s financial instruments primarily include cash and cash equivalents,
accounts receivable, advance to a third party, inventories, VAT and income tax
recoverable, accounts payable, other payables and accrued
liabilities.
 
 As of the
balance sheet date, the estimated fair values of financial instruments were not
materially different from their carrying values as presented due to short
maturities of these instruments.
 
 l
                    Equity-based
      compensation
 
 The
Company adopts FASB ASC 718“Accounting for Stock-Based Compensation” using the fair value
method.  Under SFAS No. 123R, stock-based compensation
expense is measured at the grant date based on the value of the option or
restricted stock and is recognized as expense, less expected forfeitures, over
the requisite service period, which is generally the vesting
period.  See Note 13 for additional information.
 
 l
                    Subsequent
      Events
 
 We
evaluated subsequent events through the date and time our financial statements
were issued on April 12, 2010.
 
 l
                    Recently
      issued accounting standards
 
 In
January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and
Disclosures (Topic 820) - Improving Disclosures about Fair Value
Measurements.” ASU 2010-06 requires new disclosures regarding transfers
in and out of the Level 1 and 2 and activity within Level 3 fair value
measurements and clarifies existing disclosures of inputs and valuation
techniques for Level 2 and 3 fair value measurements. ASU 2010-06 also includes
conforming amendments to employers’ disclosures about postretirement benefit
plan assets. The new disclosures and clarifications of existing disclosures are
effective for interim and annual reporting periods beginning after
December 15, 2009, except for the disclosure of activity within Level 3
fair value measurements, which is effective for fiscal years beginning after
December 15, 2010, and for interim periods within those years. The adoption of this
statement is not expected to have a material impact on our consolidated
financial position or results of operation.
 
 In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally Accepted Accounting Principles - a
replacement of FASB Statement No. 162” (also issued as Accounting Standards Update “ASU”No. 2009-01). This standard establishes the FASB Accounting
Standards Codification as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with generally accepted
accounting principles. This standard is effective for financial statements
issued for interim and annual periods ending after September 15, 2009. The
adoption of ASU No. 2009-5 had no impact on the results of operations or
the financial position of the Company.
 
 In August
2009, the FASB issued ASU No. 2009-5, “Fair Value Measurements and
Disclosures (Topic 820) - Measuring Liabilities at Fair Value.” ASU
No. 2009-5 provides clarification that in circumstances in which a quoted
price in an active market for the identical liability is not available, a
reporting entity is required to measure fair value using a valuation technique
that uses the quoted price of the identical liability when traded as an asset,
quoted prices for similar liabilities or similar liabilities when traded as
assets, or another valuation technique that is consistent with the principles of
ASC Topic 820. ASU No. 2009-5 is effective for the first reporting period
(including interim periods) beginning after issuance. The adoption of ASU
No. 2009-5 did not have a material impact on the results of operations or
financial position of the Company.
 
 In May
2009, the FASB issued a new accounting standard (FASB ASC 855-10) on subsequent
events, which establishes general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. This accounting standard establishes:
1) the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; 2) the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements; and 3) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. This accounting standard also requires
disclosure of the date through which an entity has evaluated subsequent events.
The adoption of this statement is not expected to have a material impact on our
consolidated financial position or results of operation.
 
 In April
2009, the FASB issued FASB Staff Position No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments,” (FASB ASC 320-10-65), which amends the
other-than-temporary impairment guidance in U.S. GAAP for debt securities to
make the guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities in
the financial statements. This Staff Position was effective for interim and
annual reporting periods ending after June 15, 2009. The adoption of this
statement did not have an impact on the results of operations or the financial
position of the Company.
 
 20
 
 CHINA
FRUITS CORPORATION
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 (Expressed
in USD)
 
 4.ACCOUNTS RECEIVABLE, NET
 
 The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible. If
actual collections experience changes, revisions to the allowance may be
required. Based upon the aforementioned criteria, management has determined that
an allowance for doubtful accounts of $1,272 is required as of December 31,
2008.  No allowance was considered necessary as of December 31,
2009.
 
 2009
                    
                    
                    2008Accounts
      receivable, gross
                    
                    $
                    361,369
                    
                    
                    $
                    322,184Less:
      allowance for doubtful accounts
                    
                    
                    -0-
                    
                    
                    
                    -0-Accounts
      receivable, net
                    
                    $
                    361,369
                    
                    
                    $
                    322,184
 
 5.RECEIVABLE FROM THIRD
PARTIES
 
 The
company advances money to several third parties during business operation. These
receivables bear no interest and due on demand. As of December 31, 2009 and
2008, the balances of receivable from third parties are:
 
 2009
                    
                    
                    2008Third
      party advances
                    
                    $
                    685,393
                    
                    
                    $
                    314,576Bank
      security deposit
                    
                    
                    43,935
                    
                    
                    
                    -0-Receivable
      from third parties
                    
                    $
                    729,328
                    
                    
                    $
                    314,576
  6.INVENTORIES
 
 Inventories
as of December 31, 2009 and 2008 consist of the following:
 2009
                    
                    
                    2008Raw
      materials
                    
                    $
                    58,255
                    
                    
                    $
                    201,846Finished
      goods
                    
                    
                    69,113
                    
                    
                    
                    71,145$
                    127,368
                    
                    
                    $
                    272,991
 
 For the
year ended December 31, 2009 and 2008, no provision for obsolete inventories was
recorded by the Company.
  7.PLANT AND EQUIPMENT, NET
 
 Plant and
equipment, net as of December 31, 2009 and 2008 consists of the
following:
 
 2009
                    
                    
                    2008Plant
      and machinery
                    
                    $
                    2,217,568
                    
                    
                    $
                    2,243,095Construction
      in progress
                    
                    
                    3,821
                    
                    
                    
                    118,591Furniture,
      fixture and equipment
                    
                    
                    40,256
                    
                    
                    
                    3,8172,261,645
                    
                    
                    
                    2,365,503Less:
      accumulated depreciation
                    
                    
                    (300,180
                    )
                    
                    
                    (251,225
                    )Plant
      and equipment, net
                    
                    $
                    1,961,465
                    
                    
                    $
                    2,114,278
 
 Depreciation
expense for the year ended December 31, 2009 and 2008 respectively was $48,698
and $179,340.
 
 Construction
in progress is stated at cost, which includes the cost of construction and other
direct costs attributable to the construction.  No provision for
depreciation is made on construction in progress until such time as the relevant
assets are completed and put into use.  Construction in progress as of
December 31, 2009, represents buildings under construction.
 
 8.OTHER PAYABLES AND ACCRUED
LIABILITIES
 
 Other
payables and accrued liabilities as of December 31, 2009 and 2008 consist of
following:
 
 2009
                    
                    
                    2008Salary
      and welfare payable
                    
                    
                    64,100
                    
                    
                    
                    52,585Accrued
      expenses
                    
                    
                    167,173
                    
                    
                    
                    67,622$
                    231,273
                    
                    
                    $
                    120,207
  21
  CHINA
FRUITS CORPORATION
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 (Expressed
in USD)
  9.AMOUNT DUE TO STOCKHOLDERS
 
 The
balances due to stockholders represented unsecured advances which are
interest-free and repayable in next twelve months. As of December 31, 2009 and
2008, the balances of due to stockholders are $335,146 and
$222,082.
  10.NOTE PAYABLE TO THIRD
PARTIES
 
 On July
20, 2009, the Company borrowed from a local bank in total amount of $439,354
(3,000,000RMB), the note bears annual interest 5.841% and is due on July 20,
2010.
 
 In 2009,
the company borrowed four loans in total amount of $461,322 (3,150,000RMB) from
local government. These loans bear no interest and will be paid back before
November 30, 2012 and November 30, 2013, respectively.
  11.NOTE PAYABLE- RELATED
PARTY
 
 On May
15, 2009, the Company borrowed two loans from one related party in total amount
of $95,194 (650,000RMB), these notes bear no interest and are payable on May 14,
2010.
  12.INCOME TAXES
 
 The
Company conducts all its operating business through its subsidiary in China. The
subsidiary is governed by the income tax laws of the PRC and do not have any
deferred tax assets or deferred tax liabilities under the income tax laws of the
PRC because there are no temporary differences between financial statement
carrying amounts and the tax bases of existing assets and liabilities. The
Company by itself does not have any business operating activities in the United
States and is therefore not subject to United States income tax.
 
 The
Company’s subsidiaries are governed by the Income Tax Law of the People’s
Republic of China (PRC) concerning Foreign Investment Enterprises and Foreign
Enterprises and various local income tax laws (the Income Tax Laws). Beginning
January 1, 2008, the new Enterprise Income Tax (“EIT”) law has replaced the
previous laws for Domestic Enterprises (“DEs”) and Foreign Invested Enterprises
(“FIEs”). The new standard EIT rate of 25% has replaced the 33%
 rate
previously applicable to both DEs and FIEs.
 
 Prior to
2008, under the Chinese Income Tax Laws, FIEs generally were subject to an
income tax at an effective rate of 33% (30% state income taxes plus 3% local
income taxes) on income as reported in their statutory financial statements
after appropriate tax adjustments unless the enterprise was located in specially
designated regions for which more favorable effective tax rates apply. Beginning
January 1, 2008, China has unified the corporate income tax rate on foreign
invested enterprises and domestic enterprises. The unified corporate income tax
rate is 25%.
 
 The
Company generated substantially its net income from its PRC operation and has
recorded income tax provision for the years ended December 31, 2009 and
2008.
 
 The
components of (loss) income before income taxes separating U.S. and PRC
operations are as follows:
 
 2009
                    
                    
                    2008Loss
      subject to U.S. operation
                    
                    $
                    (123,173
                    )
                    
                    $
                    (296,161
                    )Income
      (loss) subject to PRC operation
                    
                    
                    (123,188
                    )
                    
                    
                    458,063Income
      (loss) before income taxes
                    
                    $
                    (246,361
                    )
                    
                    $
                    161,902
 
 United
States of America
 
 The
Company is registered in the State of Nevada and is subject to United States of
America tax law.
 
 As of
December 31, 2009, the U.S. operation had $1,687,557 of net operating losses
available for federal tax purposes, which are available to offset future taxable
income.  The net operating loss carry forwards begin to expire in
2029.  The Company has provided for a full valuation allowance for any
future tax benefits from the net operating loss carryforwards as the management
believes it is more likely than not that these assets will not be realized in
the future.
 
 The
PRC
 
 The
reconciliation of income tax rate to the effective income tax rate based on
income before income taxes stated in the consolidated statement of operations
for the year ended December 31, 2009 and 2008 is as follows:
 
 2009
                    
                    
                    2008Income
      (loss) before income taxes
                    
                    $
                    (110,973
                    )
                    
                    $
                    458,063Statutory
      income tax rate
                    
                    
                    25
                    %
                    
                    
                    25
                    %-
                    
                    
                    
                    114,515Expenses
      not deductible for tax purposes:
                    
                    
                    12,215-
      Provisions
                    
                    
                    
                    
                    
                    
                    (114,515
                    )Effect
      of tax losses
                    
                    
                    -
                    
                    
                    
                    -Income
      tax expense
                    
                    $
                    12,215
                    
                    
                    $
                    -
 
 
 The
following table sets forth the significant components of the aggregate net
deferred tax assets of the Company as of December 31, 2009 and
2008:
 
 2009
                    
                    
                    2008Deferred
      tax assets:-
      Net operating loss carryforwards
                    
                    $
                    573,769
                    
                    
                    $
                    531,890Less:
      valuation allowance
                    
                    
                    (573,769
                    )
                    
                    
                    (531,890
                    )Deferred
      tax assets
                    
                    $
                    -
                    
                    
                    $
                    -
 
 For the
year ended December 31, 2009 and 2008, valuation allowances of $573,769 and
$531,890 were provided to the deferred tax assets due to the uncertainty
surrounding their realization.
 
 The
following table reconciles the U.S. statutory rate to the Company’s effective
tax rate:
 
 2009
                    
                    
                    2008U.S.
      Statutory rate
                    
                    
                    34
                    %
                    
                    
                    34
                    %Foreign
      income not recognized in USA
                    
                    
                    (34
                    )
                    
                    
                    (34
                    )China
      income taxes
                    
                    
                    25
                    
                    
                    
                    25China
      exemption
                    
                    
                    (25
                    )
                    
                    
                    (25
                    )Total
      provision for income taxes
                    
                    $
                    -
                    
                    
                    $
                    -
 
 The
Company applies FASB ASC 740-10, “Accounting for Income Taxes”, which requires
recognition of deferred income tax liabilities and assets for the expected
future tax consequences of temporary differences between the income tax basis
and financial reporting basis of assets and liabilities. Provision for income
taxes consist of taxes currently due plus deferred taxes. Because the Company
has no operations within the United States, there is no provision for US income
taxes and there are no deferred tax amounts as of December 31, 2009 and
2008.
 
 The
charge for taxation is based on the results for the year as adjusted for items
that are non-assessable or disallowed. It is calculated using tax rates that
have been enacted or substantively enacted by the balance sheet date. Deferred
taxes are accounted for using the balance sheet liability method in respect of
temporary differences arising from differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding tax
basis used in the computation of assessable tax profit. In principle, deferred
tax liabilities are recognized for all taxable temporary differences, and
deferred tax assets are recognized to the extent that it is probable that
taxable profit will be available against which deductible temporary differences
can be utilized.
 
 Deferred
taxes are calculated at the tax rates that are expected to apply to the period
when the asset is realized or the liability is settled. Deferred taxes are
charged or credited in the income statement, except when they relate to items
credited or charged directly to equity, in which case the deferred taxes are
also recorded in equity. Deferred tax assets and liabilities are offset when
they relate to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on a net basis.
The Company adopted FASB Interpretation 48, “Accounting for Uncertainty in
Income Taxes” (“FIN 48”), as of January 1, 2007. A tax position is recognized as
a benefit only if it is “more likely than not” that the tax position would be
sustained in a tax examination, with a tax examination being presumed to occur.
The amount recognized is the largest amount of tax benefit that is greater than
50% likely of being realized on examination. For tax positions not meeting the
“more likely than not” test, no tax benefit is recorded. The adoption of FIN 48
had no affect on the Company’s financial
  22
 
 CHINA
FRUITS CORPORATION
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 (Expressed
in USD)
 13.NET LOSS PER SHARE
 
 Basic net
loss per share is computed using the weighted average number of the ordinary
shares outstanding during the year.  Diluted net loss per share is
computed using the weighted average number of ordinary shares and ordinary share
equivalents outstanding during the year.
 
 The
following table sets forth the computation of basic and diluted net loss per
share for the year indicated:
 
 2009
                    
                    
                    2008Basis
      and diluted net loss per share calculationNumerator:-
      Net income in computing basic net loss per share
                    
                    $
                    (246,361
                    )
                    
                    $
                    161,902Denominator:-
      Weighted average ordinary shares outstanding
                    
                    
                    36,225,579
                    
                    
                    
                    36,129,689-
      Stock issued for services-
      Shares used in computing basic net loss per share
                    
                    
                    36,225,579
                    
                    
                    
                    36,129,689Basic
      and diluted net loss per share
                    
                    $
                    (0.01
                    )
                    
                    $
                    0.01
 
 There
were no dilutive common stock equivalents as of December 31, 2009 and 2008.
  14.CAPITAL TRANSACTIONS
 
 1)
                    On
      January 11, 2008, the Company received a contribution to paid in capital
      of $256,707
 
 2)
                    On
      March 18, 2008, the Company received a contribution to paid in capital of
      $14,988
 
 3)
                    On
      December 11, 2009, pursuant to an Offshore Stock Purchase Agreement dated
      May 15, 2009, the Company issued 1,750,000 restricted shares of common
      stock at a purchase price of $0.20 per share (aggregate sum of
      $350,000).
 
 15.STOCK BASED COMPENSATION
 
 On
October 27, 2006, the Company entered into a business consulting service
agreement with the Consultant A in exchange for 1,500,000 shares of common
stock.  The fair value of the common stock issued is determined using
the fair value of the Company’s common stock on the grant date at $0.31 per
share. The Company calculated a stock based compensation of $465,000 and
recognized $335,834 for the year ended December 31, 2006.  The balance
of 129,166 was expensed during the year ended December 31, 2007.
 
 On
October 31, 2006, the Company entered into a website construction service
agreement with the Consultant B in exchange for 1,500,000 shares of common
stock.  The fair value of the common stock issued is determined using
the fair value of the Company’s common stock on the grant date at $0.31 per
share. The Company calculated a stock based compensation of $465,000 and
recognized $38,750 for the year ended December 31, 2006 and $232,500 for the
year ended December 31, 2007. The balance of $193,750 was expensed during the
year ended December 31, 2008.
 
 16.RELATED PARTY TRANSACTIONS
 
 On May
15, 2009, the Company borrowed two loans from one related party in total amount
of $95,194 (650,000RMB), these notes bear no interest and are payable on May 14,
2010.
 
 No
related party transactions occurred during 2008.
 
 17.CHINA CONTRIBUTION PLAN
 
 Under the
PRC Law, full-time employees of the Company’s subsidiary, Tai Na are entitled to
staff welfare benefits including medical care, welfare subsidies, unemployment
insurance and pension benefits through a China government-mandated
multi-employer defined contribution plan. Tai Na is required to accrue for these
benefits based on certain percentages of the employees’ salaries. The total
contributions made for such employee benefits were $34,457 and $4,194 for the
years ended December 31, 2009 and 2008, respectively.
  18.STATUTORY RESERVES
 
 Under PRC
Company Law, the Company’s subsidiary, Tai Na is required to make appropriations
to the statutory reserve based on after-tax net income and determined in
accordance with generally accepted accounting principles of the People’s
Republic of China (the “PRC GAAP”). Appropriation to the statutory reserve
should be at least 10% of the after-tax net income until the reserve is equal to
50% of Tai Na’s registered capital.  The statutory reserve is
established for the purpose of providing employee facilities and other
collective benefits to the employees and is non-distributable other than in
liquidation.
 
 For the
year ended December 31, 2009 and 2008, Tai Na contributed $0 and $0 respectively
to statutory reserve.
  23
 
 CHINA
FRUITS CORPORATION
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 (Expressed
in USD)
 19.CONCENTRATION AND RISK
 
 (a)Major customers
 
 For the
years ended December 31, 2009 and 2008, 100% of the Company’s assets were
located in the PRC and 100% of the Company’s revenues and purchases were derived
from customers and vendors located in the PRC.
 
 For the
year ended December 31, 2009, major customers and vendors with their revenues
and purchases are presented as follows:
 
 Customers
                    
                    
                    Revenues
                    
                    
                    
                    
                    
                    
                    Accounts
                      ReceivableCustomer
      A
                    
                    
                    $
                    174,203
                    
                    
                    
                    9
                    %
                    
                    
                    $
                    174,277Customer
      B
                    
                    
                    
                    156,716
                    
                    
                    
                    8
                    %
                    
                    
                    
                    18,866Customer
      C
                    
                    
                    
                    147,194
                    
                    
                    
                    7
                    %
                    
                    
                    
                    14,572Customer
      D
                    
                    
                    
                    142,583
                    
                    
                    
                    7
                    %
                    
                    
                    
                    142,643Customer
      E
                    
                    
                    
                    84,020
                    
                    
                    
                    4
                    %
                    
                    
                    
                    -Total
                    
                    $
                    1,077,805
                    
                    
                    
                    53
                    %
                    Total:
                    
                    $
                    15,814
 
 
 For the
year ended December 31, 2008, major customers and vendors with their revenues
and purchases are presented as follows:
 Customers
                    
                    
                    Revenues
                    
                    
                    
                    
                    
                    
                    Accounts
                      ReceivableCustomer
      A
                    
                    
                    $
                    606,218
                    
                    
                    
                    26
                    %
                    
                    
                    $
                    234,396Customer
      B
                    
                    
                    
                    143,926
                    
                    
                    
                    6
                    %
                    
                    
                    
                    87,789Customer
      C
                    
                    
                    
                    28,969
                    
                    
                    
                    1
                    %
                    
                    
                    
                    -Total:
                    
                    $
                    779,113
                    
                    
                    
                    62
                    %
                    Total:
                    
                    $
                    322,185
 
 (b)Credit risk
 
 Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and trade accounts receivable. The
Company performs ongoing credit evaluations of its customers' financial
condition, but does not require collateral to support such receivables.
  20.COMMITMENT AND
CONTINGENCIES
 
 The
Company rented plant, office, and retailing spaces under a non-cancelable
operating lease agreement.  Based on the current rental lease
agreement, the future minimum rental payments required as of December 31, 2009
are as follows:
 
 Year
      ending December 31:2009
                    
                    $
                    14,264
 
 For the
years ended December 31, 2009 and 2008, rental expense was $14,264 and $46,600.
  21.     DISCONTINUED
OPERATION
 
 In June
8, 2009, the company entered an agreement with a third party to sell the
company’s wine production line. Pursuant to the agreement, the wine production
line was sold in amount of $450,826 (3,080,000 RMB), with $99,537 (680,000RMB)
in cash as the first installment paid before June 13, 2009 and the rest be paid
before August 31, 2009. The company’s historical consolidated financial
statements have been recast to account for this discontinued operations for all
periods presented. The following table summarizes the results of operations
related to the discontinued operations for the nine year ended December 31,
2009:
 
 2009
                    
                    
                    2008Revenue
                    
                    $
                    274,229
                    
                    
                    $
                    734,077Cost
      and expenses
                    
                    
                    (180,108
                    )
                    
                    
                    (651,952
                    )Gain
      from disposal of property and equipment
                    
                    
                    3,598Income
      (loss) from discontinued operations, net of income taxes
                    
                    $
                    97,719
                    
                    
                    $
                    82,125
  22.     SUBSEQUENT
EVENT
 
 On
January 12, 2010, the Company entered into an Offshore Subscription Agreement
between the Company and an individual, pursuant to which the individual will
purchase 900,000 shares of restricted common stock of the Company at a purchase
price of $0.20 per share (aggregate sum of $180,000).
 24
 
 ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
 
 There
have been no changes in and disagreements with accountants on accounting and
financial disclosure in the past two fiscal years.
 
 ITEM 9A. CONTROLS AND
PROCEDURES
 
 We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in reports filed under the Securities Exchange Act of
1934 (“Exchange Act”) is recorded, processed, summarized and reported within the
specified time periods. Our Chief Executive Officer and our Chief Financial
Officer (collectively, the “Certifying Officers”) are responsible for
maintaining our disclosure controls and procedures. The controls and procedures
established by us are designed to provide reasonable assurance that information
required to be disclosed by the issuer in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Commission’s rules and forms.
 
 To
evaluate the effectiveness of our internal controls over financial reporting, we
have adopted the framework prescribed by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).  We believe that this
framework will assist in the provision of reasonable assurance of the
effectiveness and efficiency of operations, the reliability of financial
reporting, and compliance with applicable laws and regulations.  In
adopting the COSO framework, we maintain a control environment, perform
risk assessments, carry out control activities, emphasize quality information
and effective communication, and perform monitoring.  In the
maintenance of a control environment, we are committed to integrity and ethical
values as well as to competence.  We strive to assign authority and
responsibility in a manner that supports our internal controls, and we also
maintain human resources policies and procedures designed to support our
internal controls.  Our risk assessments are designed to ensure the
achievement of company-wide and process-level objectives as well as to identify
and analyze risks while managing change.  We believe that all of these
components together form a foundation for sound internal control through
directed leadership, shared values and a culture that emphasizes accountability
for control.
 
 As of the
end of the period covered by this report, the Certifying Officers evaluated the
effectiveness of our disclosure controls and procedures. Based on the
evaluation, the Certifying Officers concluded that our disclosure controls and
procedures were effective to provide reasonable assurance that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the applicable rules and forms, and that it is accumulated
and communicated to our management, including the Certifying Officers, as
appropriate to allow timely decisions regarding required
disclosure.
 
 The
Certifying Officers have also concluded, based on our evaluation of our controls
and procedures that as of December 31, 2009, our internal controls over
financial reporting are effective and provide a reasonable assurance of
achieving their objective.
 
 Due to
its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements under all potential conditions. Therefore,
effective internal control over financial reporting provides only reasonable,
and not absolute, assurance that a restatement of our financial statements would
be prevented or detected.
 
 This
annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in this
annual report.
 
 Changes
in Internal Control Over Financial Reporting
 
 There
were no changes in the our internal control over financial reporting that
occurred during the period covered by this report that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
 
 This annual report does not include an
attestation report of our registered public accounting firm regarding
internal control over financial reporting. Management's report was not subject
to attestation by our registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit us to
provide only management's report in this annual report.
 
 ITEM
9A(T).CONTROLS
AND PROCEDURES
 
 (a) Conclusions
regarding disclosure controls and procedures. Disclosure controls and
procedures are the Company’s controls and other procedures that are designed to
ensure that information required to be disclosed by the Company in the reports
that the Company files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it files
under the Exchange Act is accumulated and communicated to the Company’s
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
Management is responsible for establishing and maintaining adequate internal
control over financial reporting.
 
 Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-14(c) promulgated under the Exchange Act as of December 31, 2009,
and, based on their evaluation, as of the end of such period, the our disclosure
controls and procedures were effective as of the end of the period covered by
the Annual Report,
 
 (b) Management’s
Report On Internal Control Over Financial Reporting. It is management’s
responsibilities to establish and maintain adequate internal controls over the
Company’s financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a
process designed by, or under the supervision of, the issuer’s principal
executive and principal financial officers and effected by the issuer’s
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:
 
 •           Pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the issuer;
and
 
 •           Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the issuer are being
made only in accordance with authorizations of management of the issuer;
and
 
 •           Provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the issuer’s assets that could have a
material effect on the financial statements.
 
 As of the
end of the period covered by the Annual Report, an evaluation was carried out
under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of
our internal control over financial reporting.
 
 Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2009. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework.
 
 Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, internal controls over financial
reporting were effective as of the end of the period covered by the
Report.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. All internal control systems, no matter
how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Because of the inherent
limitations of internal control, there is a risk that material misstatements may
not be prevented or detected on a timely basis by internal control over
financial reporting. However, these inherent limitations are known features of
the financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
 
 This
Annual Report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this Annual
Report.
 
 (c) Changes in
internal control over financial reporting. There were no changes in our
internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that
occurred during our last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
 
 ITEM 9B. OTHER
INFORMATION
 
 None.
 
 25
 
 PART
III
 
 ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT
 
 Directors
and Executive Officers
 
 Our
directors are elected at the annual meeting of shareholders and hold office for
one year and until their successors are elected and qualified. Our officers are
appointed by the Board of Directors and serve at the pleasure of the Board. We
have not entered into any employment agreements with our executive
officers.
 
 Name
              Age
              Position
              Date
      to StartChen,
      Quan Long
              50
              President,
      Chief Executive Officer and Chairman
              June
      1, 2006Wang,
      Yongcheng
              31
              Chief
      Financial Officer
              August
      24, 2009Zhao,
      Li Li
              38
              Director
              June
      22, 2006
 
 Chen,
Quan Long - President, Chief Executive Officer and Chairman
 
 Mr. Chen,
Quan Long, 50, obtained a Master of Business Administration degree at Beijing
University. His prior work experience is primarily in corporate. He was chairman
of Fei Huan Group, a corporation organized and existing under the laws of the
Peoples' Republic of China ("Fei Huan Group"), from October 1988 to December
2001. Since January 2002, he was Chairman of Fei Huan Wine, Inc., an affiliate
of Fei Huan Group. Mr. Chen’s duties with Fei Huan Group included management of
their beverage processing and distribution. Mr. Chen is a member of the Chinese
Entrepreneurial Association.
 
 Wang,
Yongcheng - Chief Financial Officer
 
 Mr. Wang
is a certified public accountant in China and Australia. Mr. Wang is experienced
in financial management with outstanding comprehensive skills and management
skills. From April 2005 to March 2009, Mr. Wang worked in BOE Technology Group,
Ericsson (China) Communications Co., Ltd., and Schenker China Ltd. at the
positions as accountant, general ledger accountant and financial supervisor,
etc. Mr. Wang was a team member in auditing LG CNS China, China Aviation Fuel
Corporation and TCL Corporation when he worked in Beijing Yuehua Accounting Firm
and Beijing Mingguang Accounting Firm from January 2004 to July
2004.
 
 Mr. Wang
received his master degree from the Capital University of Economics and Business
in 2005.
 
 Zhao,
Li Li - Director
 
 Ms. Zhao,
Li Li has approximately 10 years of experience in sales management. Her
experience includes sales management, corporate restructuring, and human
resources management.
 
 Ms. Zhao was a deputy general manager
for Fei Huan Winery Holding Co. in P. R. China where she had worked for the
period from 2003 to 2006. Prior work experience includes four years at Fei Huan
Group where she functioned as a sales manager. Currently, Ms. Zhao is the
General Manager of Taina
International Fruits (Beijing) Co., Ltd.
 
 Ms. Zhao
gained her Bachelor degree in Jiang Xi Economic Management College for business
management in 1994. Ms. Zhao was awarded the Fuzhou Excellent Entrepreneur of
the Year 2007,  also during 2008 and 2009, she has awarded Jiangxi
Provincial Women's Federation for Outstanding Women Entrepreneurs and the first
model workers in Nanfeng County.
 
 Family Relationships.
 
 None.
 
 Legal
Proceedings.
 
 No
officer, director, or persons nominated for such positions and no promoter or
significant employee has been involved in legal proceedings that would be
material to an evaluation of our management.
 
 Audit
Committee
 
 We do not
have a separately designated standing audit committee. Pursuant to Section
3(a)(58)(B) of the Exchange Act, the entire Board of Directors acts as an audit
committee for the purpose of overseeing the accounting and financial reporting
processes, and audits of our financial statements. The Commission recently
adopted new regulations relating to audit committee composition and functions,
including disclosure requirements relating to the presence of an "audit
committee financial expert" serving on its audit committee. In connection with
these new requirements, our Board of Directors examined the Commission's
definition of "audit committee financial expert" and concluded that we do not
currently have a person that qualifies as such an expert. We have had minimal
operations for the past two (2) years. Presently, there are only four (4)
directors serving on our Board, and us are not in a position at this time to
attract, retain and compensate additional directors in order to acquire a
director who qualifies as an "audit committee financial expert", but we intend
to retain an additional director who will qualify as such an expert, as soon as
reasonably practicable. While neither of our current directors meets the
qualifications of an "audit committee financial expert", each of our directors,
by virtue of his past employment experience, has considerable knowledge of
financial statements, finance, and accounting, and has significant employment
experience involving financial oversight responsibilities. Accordingly, we
believe that our current directors capably fulfill the duties and
responsibilities of an audit committee in the absence of such an
expert.
 
 Code of
Ethics
 
 We have
adopted a code of ethic (the "Code of Ethics") that applies to our principal
chief executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. The Code of
Ethics is being designed with the intent to deter wrongdoing, and to promote the
following:
 
 •
              Honest
      and ethical conduct, including the ethical handling of actual or apparent
      conflicts of interest between personal and professional
      relationships
 •
              Full,
      fair, accurate, timely and understandable disclosure in reports and
      documents that a small business issuer files with, or submits to, the
      Commission and in other public communications made by the small business
      issuer
 •           Compliance
with applicable governmental laws, rules and regulations
 The
prompt internal reporting of violations of the code to an appropriate person or
persons identified in the code
 •           Accountability
for adherence to the code
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 Under
Section 16(a) of the Exchange Act, all executive officers, directors, and each
person who is the beneficial owner of more than 10% of the common stock of a
company that files reports pursuant to Section 12 of the Exchange Act, are
required to report the ownership of such common stock, options, and stock
appreciation rights (other than certain cash-only rights) and any changes in
that ownership with the Commission. Specific due dates for these reports have
been established, and we are required to report, in this Form 10-K, any failure
to comply therewith during the fiscal year ended December 2008. We believe that
all of these filing requirements were satisfied by our executive officers,
directors and by the beneficial owners of more than 10% of our common stock. In
making this statement, hawse have relied solely on copies of any reporting forms
received by it, and upon any written representations received from reporting
persons that no Form 5 (Annual Statement of Changes in Beneficial Ownership) was
required to be filed under applicable rules of the Commission.
 
 26
 
 ITEM 11. EXECUTIVE
COMPENSATION
 
 The
following table sets forth certain information regarding the annual and
long-term compensation for services in all capacities to us for the prior fiscal
years ended December 31, 2009, 2008, and 2007, of those persons who were either
the chief executive officer during the last completed fiscal year or any other
compensated executive officers as of the end of the last completed fiscal year,
and whose compensation exceeded $100,000 for those fiscal periods.
 
 SUMMARY
      COMPENSATION TABLEName
      and principal position
                (a)
              Year
                (b)
              Salary
      ($)
                (c)
              Bonus
      ($)
                (d)
              Stock
      Awards ($)
                (e)
              Option
      Awards ($)
                (f)
              Non-Equity
      Incentive Plan Compensation ($)
                (g)
              Nonqualified
      Deferred Compensation Earnings ($)
                (h)
              All
      Other Compensation ($)
                (i)
              Total
      ($)
                (j)Chen,
      Quan Long
                President,
      CEO & Chairman
              2009
              5,123
              0
              0
              0
              0
              0
              0
              5,1232008
              2,823
              0
              0
              0
              0
              0
              0
              2,8232007
              0
              0
              0
              0
              0
              0
              0
              0Zhao,
      Li Li
                Director
              2009
              3,823
              0
              0
              0
              0
              0
              0
              3,8232008
              2,823
              0
              0
              0
              0
              0
              0
              2,8232007
              0
              0
              0
              0
              0
              0
              0
              0Wang,
      Yongcheng Chief Financial Officer
              2009
              4,512
              0
              0
              0
              0
              0
              0
              4,512
 
 
 We have
not entered into any other employment agreements with our employees, Officers or
Directors. We have no standard arrangements to compensate our directors for
their services to us.
 
 Stock
Option Plan
 
 We have
not implemented a stock option plan at this time and since inception, have
issued no stock options, SARs or other compensation. We may decide, at a later
date, and reserve the right to, initiate such a plan as deemed necessary by the
Board.
 
 ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER
MATTERS.
 
 As of April 8, 2010, we had 3,640 stockholders
of record and 38,779,689 shares of our Common Stock, 13,150 shares of our Series
A Preferred Stock and 12,100,000 Series B Preferred Stock issued and
outstanding. The following table sets forth as of April 8, 2010, certain
information with respect to the beneficial ownership of Common Stock by (i) each
of our Director, nominee and executive officer; (i) each person who owns
beneficially more than 5% of the common stock; and (iii) all Directors, nominees
and executive officers as a group. The percentage of shares beneficially owned
is based on there having been 38,779,689 shares of our Common Stock, 13,150
shares of our Series A Preferred Stock and 12,100,000 Series B Preferred Stock
issued and outstanding as of April 8, 2010
 
 OFFICERS,
DIRECTORS AND BENEFICIAL OWNERS, AS OF APRIL 8, 2010
 
 Title
      of Class
              Name
      & Address of Beneficial Owner(1)
              Amount
      & Nature of Beneficial Owner
              %
      of Class(2)Series
      A Preferred Stock, $.001 par value
              Chen,
      Quan Long
                Room
      503,Building 53,QianXi District, DaDao Road, NanFeng County, JiangXi,
      P.R.China 344500
              13,150
              100%Series
      A Preferred Stock, $.001 par value
              All
      directors and executive officers as a group (one person)
              13,150
              100%Series
      B Preferred Stock, $.001 par value
              Chen,
      Quan Long
                Room
      503,Building 53,QianXi District,DaDao Road, NanFeng County,
      JiangXi,P.R.China 344500
              12,100,000
              100%Series
      B Preferred Stock, $.001 par value
              All
      directors and executive officers as a group (one person)
              12,100,000
              100%Common
      Stock,
                $.001
      par value
              Chen,
      Quan Long
                Room
      503,Building 53,QianXi District,DaDao Road, NanFeng County,
      JiangXi,P.R.China 344500
              665,416
              2%Common
      Stock,
                $.001
      par value
              Zhao,
      Li Li
                223
      Xin Zhong St., Xin Jian, Jin Yun County, Zhe Jiang,
    P.R.China
              20,846
              **Class
      A Common Stock
              All
      directors and executive officers as a group (three
persons)
              760,710
              2%
 
 ** Represents
less than 1%
 
 (1)  Unless
stated otherwise, the business address for each person named is c/o China Fruits
Corp.
 
 (2)  Calculated
pursuant to Rule 13d-3(d) (1) of the Securities Exchange Act of 1934. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants, rights
or conversion privileges exercisable within 60 days are deemed outstanding for
the purpose of calculating the number and percentage owned by a person, but not
deemed outstanding for the purpose of calculating the percentage owned by each
other person listed. We believe that each individual or entity named has sole
investment and voting power with respect to the shares of common stock indicated
as beneficially owned by them (subject to community property laws where
applicable) and except where otherwise noted.
 
 Changes
in Control
 
 None.
 
 27
 
 ITEM 13.CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
 None.
 
 ITEM 14. PRINCIPAL
ACCOUNTING FEES AND SERVICES
 
 Fees
Billed For Audit and Non-Audit Services
 
 The
following table represents the aggregate fees billed for professional audit
services rendered to the independent auditor, Lake & Associates CPA’s LLC
(“Lake”), for our audit of the annual financial statements for the years ended
December 31, 2009 and 2008. Audit fees and other fees of auditors are listed as
follows:
 
 Year Ended December 31
              2009(2)
              
              2008(3)Audit
      Fees (1)
              $66,000
              
              $
              64,000Audit-Related
      Fees (4)
              --
              
              
              --Tax
      Fees (5)
              --
              
              
              --All
      Other Fees (6)
              --
              
              
              --Total
      Accounting Fees and Services
              $66,000
              
              $
              64,000
 
 (1)
              Audit Fees. These are
      fees for professional services for the audit of our annual financial
      statements, and for the review of the financial statements included in our
      filings on Form 10-Q, and for services that are normally provided in
      connection with statutory and regulatory filings or
      engagements.
 
 (2)
              The
      amounts shown in 2009 relate to (i) the audit of our annual financial
      statements for the fiscal year ended December 31, 2009, and (ii) the
      review of the financial statements included in our filings on Form 10-Q
      for the quarters of 2010.
 
 (3)
              The
      amounts shown in 2008 relate to (i) the audit of our annual financial
      statements for the fiscal year ended December 31, 2008, and (ii) the
      review of the financial statements included in our filings on Form 10-Q
      for the quarters of 2009.
 
 (4)
              Audit-Related Fees.
      These are fees for the assurance and related services reasonably related
      to the performance of the audit or the review of our financial
      statements.
 
 (5)
              Tax Fees. These are
      fees for professional services with respect to tax compliance, tax advice,
      and tax planning.
 
 (6)
              All Other Fees. These
      are fees for permissible work that does not fall within any of the other
      fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax
      Fees.
 
 
 Pre-Approval
Policy for Audit and Non-Audit Services
 
 We do not
have a standing audit committee, and the full Board performs all functions of an
audit committee, including the pre-approval of all audit and non-audit services
before we engage an accountant. All of the services rendered to us by Lake &
Associates CPA’s LLC were pre-approved by our Board of Directors.
 
 We are
presently working with its legal counsel to establish formal pre-approval
policies and procedures for future engagements of our accountants. The new
policies and procedures will be detailed as to the particular service, will
require that the Board or an audit committee thereof be informed of each
service, and will prohibit the delegation of pre-approval responsibilities to
management. It is currently anticipated that our new policy will provide (i) for
an annual pre-approval, by the Board or audit committee, of all audit,
audit-related and non-audit services proposed to be rendered by the independent
auditor for the fiscal year, as specifically described in the auditor's
engagement letter, and (ii) that additional engagements of the auditor, which
were not approved in the annual pre-approval process, and engagements that are
anticipated to exceed previously approved thresholds, will be presented on a
case-by-case basis, by the President or Controller, for pre-approval by the
Board or audit committee, before management engages the auditors for any such
purposes. The new policy and procedures may authorize the Board or audit
committee to delegate, to one or more of its members, the authority to
pre-approve certain permitted services, provided that the estimated
fee for any such service does not exceed a specified dollar amount (to be
determined). All pre-approvals shall be contingent on a finding, by the Board,
audit committee, or delegate, as the case may be, that the provision of the
proposed services is compatible with the maintenance of the auditor's
independence in the conduct of its auditing functions. In no event shall any
non-audit related service be approved that would result in the independent
auditor no longer being considered independent under the applicable rules and
regulations of the Securities and Exchange Commission.
 
 (a)
On December 31, 2009, our Chief Executive Officer and Chief Financial Officer
made an evaluation of our disclosure controls and procedures. In our opinion,
the disclosure controls and procedures are adequate because the systems of
controls and procedures are designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows for the respective periods being presented. Moreover,
the evaluation did not reveal any significant deficiencies or material
weaknesses in our disclosure controls and procedures.
 
 (b)
There have been no significant changes in our internal controls or in other
factors that could significantly affect these controls since the last
evaluation.
 
 PART
IV
 
 ITEM 15.EXHIBITS, FINANCIAL
STATEMENT SCHEDULES
 
 (a)
              Financial
      Statements
 
 1. The
following financial statements of China Fruits Corp. are included in Part II,
Item 8:
 
 Report of
Independent Registered Public Accounting Firm Balance Sheet at December 31,
2009
 Statements
of Operations - for the years endedDecember 31, 2009 and
2008
 Statements
of Cash Flows - for the years ended December 31, 2009 and 2008
 Statements of Stockholders’ Equity -
for the years ended December 31, 2009 and
2008
 Notes to Financial
Statements
 
 2.
Exhibits
 
 14.1 Code
of Ethics *
 31.1. Rule
13a-14(a)/15d-14(a) Certifications of Chief Executive Officer
 31.2. Rule
13a-14(a)/15d-14(a) Certifications of Chief Financial Officer
 32.1. Section
1350 Certifications of Chief Executive Officer
 32.2. Section
1350 Certifications of Chief Financial Officer
 
 * Filed
previously.
 
 (b)
              Reports
      on Form 8-K
 
 (1)           On
May 20, 2009, we filed a current report on Form 8-K to announce an Offshore
Subscription Agreement with Ms. Ning, Fen  in connection with a
purchase of one million and seven hundred fifty thousand shares (1,750,000) of
restricted common stock of the Company.
 
 (2)           On
June 12, 2009, we filed a current report on Form 8-K to announce an Equipment
and Inventory Sales Agreement with Nanfeng Huaxia Wuqiannian Ecological Wine
Village Ltd., a corporation organized and existing under the laws of the
Peoples’ Republic of China to discontinue our alcoholic beverage production
business.
 
 (3)           On
June 15, 2009, we filed an amendment to current report on Form 8-K/A to amend
the current report in Form 8-K filed on June 12, 2009.
 
 (4)           On
August 24, 2009, we filed a current report on Form 8-K to announce that Mr. Wang
Zhi Xiong resigned as Chief Financial Officer and the appointment by the Board
of Directors of Mr. Wang, Yongcheng as Chief Financial Officer, effective
immediately.
 
 28
 
 SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned majority of the Board of Directors, thereunto duly
authorized.
 China
      Fruits CorporationDate:
      April 14, 2010
              
              /s/ Chen, Quan LongChen,
      Quan LongPresident
 
 
 Exhibits
 
 14.1 Code
of Ethics *
 31.1. Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive
Officer
 31.2. Rule 13a-14(a)/15d-14(a) Certifications of Chief
Financial Officer
 32.1. Section 1350 Certifications of Chief Executive
Officer
 32.2. Section 1350 Certifications of Chief Financial
Officer
 
 *Previously
Filed