UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549







Form
      10-KSB







(Mark
      One)


x
            ANNUAL
                REPORT UNDER SECTION 13
                OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934




For
      the fiscal year ended December 31, 2007




o
            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)









1




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o




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




Check
      whether the issuer (1) 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.
    YesxNoo




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of the registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. x




The
      Registrant’s revenues for its fiscal year ended December 31, 2007 were
      $1,896,887.





The
      aggregate market value of the voting stock on April 4, 2008 (consisting of
      Common Stock, $0.001 par value per share) held by non-affiliates was
      approximately $1,768,449 based upon the most recent sales price for such Common
      Stock on said date ($0.05). On April 4, 2008, there were 36,129,689 shares
      of
      our Common Stock issued and outstanding, of which approximately 35,368,979
      shares were held by non-affiliates.





Number
      of
      shares of common stock, par value $.001, outstanding as of April 4, 2008:
      36,129,689





Number
      of
      shares of preferred stock outstanding as of April 4, 2008:


Series
      A,
      par value $.001 -      13,150


Series
      B,
      par value $.001 - 12,100,000




Transitional
      Small Business Disclosure Format (check one):    oYesxNo





CAUTIONARY
      STATEMENT REGARDING FORWARD LOOKING INFORMATION





The
      discussion contained in this 10-KSB under the Securities Exchange Act of 1934,
      as amended, (the "Exchange Act") 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 discussion under "Description of
      Business," including the "Risk Factors" described in that section, and
      "Management's Discussion and Analysis or Plan of Operation" as well as those
      discussed elsewhere in this Form 10-KSB. 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-KSB 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.




2




TABLE
      OF CONTENTS


PART
                IItem 1
            
            Description
                of
                Business
            
            3Item 2
            
            Description
                of
                Property
            
            6Item 3
            
            Legal
                Proceedings
            
            6Item 4
            
            Submissions
                of
                Matters to a Vote of Security Holders
            
            6PART IIItem 5
            
            Market
                for Common
                Equity, Related Stockholder Matters And Small Business Issuer Purchases
                of
                Equity Securities
            
            7Item 6
            
            Management’s
                Discussion and Analysis or Plan of Operation
            
            8Item 7
            
            Financial
                Statements
            
            11Item 8
            
            Changes
                in and
                Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            25Item 8A
            
            Controls
                and
                Procedures
            
            23Item 8B
            
            Other
                Information
            
            23PART IIIItem 9
            
            Directors,
                Executive
                Officers, Promoters and Control Persons; Compliance With Section
                16(a) of
                the Exchange Act
            
            26Item 10
            
            Executive
                Compensation
            
            27Item 11
            
            Security
                Ownership
                of Certain Beneficial Owners and Management
            
            28Item 12
            
            Certain
                Relationships and Related Transactions
            
            28Item 13
            
            Exhibits,
                Lists and
                Reports on Form 8-K
            
            28Item 14
            
            Principal
                Accountant Fees and Services
            
            29





3
 Table
          of Contents




PART
      I




Item 1.
      Description of 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-story 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 NanFeng Orange Science & Technology Co., Ltd. ("Royal"), our former
      tangerine supplier, in 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 2008.





In
      2008, we plan to expand our sales
      network by setting up the franchise retail stores for fresh fruits and related
      products. Accordingly, we relocate 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. We plan to
      open
      up to 10 franchise retail stores by May of 2008 located in Beijing, Haining,
      Hangzhou, Dongguan and Humen. 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.





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 total was orange. The percentages were changed
                to
                55% for tangerine and 30% for orange in the past decade due to the
                improved quality of orange with respect to size, outlook and
                taste.






v
            Concentration
                on Chinese
                Market. Citrus products are primarily marketing in China. There
                is
                only approximately 2% of total 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
                up.






v
            Preference
                to Fresh
                Fruits. 95% of citrus products in China are consumed as fresh
                fruit. Fruits manufacture is not popular in China, most of which
                is for
                export only. In addition, the orange juice on Chinese market is primarily
                made from the concentrated or non-concentrated juice imported from
                Brazil
                and the United States.




In
      general, citrus output increases
      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 manufacture 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 should be long-term projects to get rid of all these barriers. It
      is
      anticipated that after China enters 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.




4
 Table
          of Contents




Marketing
      Strategies




Seeking
      for Opportunities to Develop International Markets




Our
      tangerine, well known as "Nan Feng
      tangerine", is popular in the market due to the high quality, benefited from
      the
      natural resource in Nan Feng County, which is a well known agricultural area
      for
      tangerine in China. Currently, we are primarily marketing in China and hold
      a
      leading position in Chinese market. However, this position will be challenged
      since China’s accession to WTO in 2001. We believe the open-market policies will
      lower the barriers to market entry, both Chinese market 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 its exports were often the subject of discriminatory treatment in
      overseas markets. In addition, as a country with planned economy to one with
      marketing economy, China often saw its exporting enterprises were subjected
      to
      anti-dumping acts. All will be changed under the protection of WTO. Therefore,
      we expect to take advantages of the fair markets regulated by WTO and seek
      for
      opportunities to develop international markets.




Creating
      Franchise for Retail Fruit Stores




In
      2008, we
      plan to expand our sales network by setting up the franchise retail stores
      for
      fresh fruits and related products. 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. We plan to open up to 10 franchise retail stores
      by
      May of 2008 located in Beijing, Haining, Hangzhou, Dongguan and Humen. Our
      short-term goal is to open 100 franchise retail stores in our target markets
      located in North China, East China and South China. 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.




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
                the 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
                the sales revenue; and•
            successfully
                build up the brand identity.





(i)
            On
                February 6, 2007, we entered into a sales agreement with Liaoning
                Shenyang
                Yunpeng Fruits Limited ("Yunpeng") for the sale of our brand name
                tangerines. Pursuant to the sales agreement, Yunpeng is our exclusive
                distributor of brand name tangerines within three provinces in Northeast
                China. As of December 31, 2007, the sales of Nan Feng tangerine were
                2,600
                tons through Yunpeng.





(ii)
            On
                February 8, 2007, we entered into a sales agreement with Inner Mongolian
                Manchuria Menglin Fruits Limited ("Menglin") for the sale of our
                brand
                name tangerines. Pursuant to the sales agreement, Menglin is our
                general
                distributor in the Russian market and will export 3,000 tons of our
                brand
                name tangerines to Russia in 2007. As of December 31, 2007, the sales
                of
                Nan Feng tangerine were 760 tons through Menglin. The failure to
                meet the
                contract requirement was primarily attributable to the difficulty
                in
                shipping caused by the snow storm. The contract will be extended
                to the
                end of 2008.




(iii)
            On
                February 19, 2007, we entered into an agreement with Royal to acquire
                the
                assets of Royal to assist in further expansion in the tangerine markets.
                As of December 31, 2007, the assets acquired from Royal included
                equipments of approximately $290,000, building of approximately $535,000
                and land of approximately $368,000.




Enhancing
      Manufacture Capacity




The
      acquisition of Royal is one of our strategies to enhance the manufacture
      capacity. Royal was engaged in citrus industry since 2002. After acquisition,
      we
      have additional two-story plant with total area of 66,003 square feet, and
      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 equipments, 90% of which for 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.




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. The total budget for advertising is
      approximately $800,000, of which 50% on television channel, 20% on newspaper,
      5%
      on magazine, 5% on event base promotion, and 20% on others. We believe the
      intensive advertisement will increase our brand recognition. 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 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 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 promotion
      programs, product innovation, increased efficiency in production techniques,
      the
      introduction of new packaging, new vending and dispensing equipment, and brand
      and 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 its efforts to marketing will
      be
      successful.




5
 Table
          of Contents




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




As
      of December 31, 2007, we had 91 full-time employees, including 2 office
      executives, 32 specialists in researching and developing the quality of
      tangerine and related products, and 15 employees devoted to the marketing for
      franchise retail stores.Approximately 9.59% of theemployeeshave bachelor degrees orabove.All employees
      are working
      in our subsidiary located in China.





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.




Changes
      in the nonalcoholic beverages business environment could impact our financial
      results




The
      nonalcoholic beverages business
      environment is rapidly evolving as a result of, among other things, changes
      in
      consumer preferences, changes in consumer lifestyles, increased consumer
      information and competitive product and pricing pressures. If we are unable
      to
      successfully adapt to this rapidly changing environment, our net income, share
      of sales and volume growth could be negatively affected.




Increased
      competition could hurt the our business




The
      nonalcoholic beverages segment of
      the commercial beverages industry is highly competitive. We compete with major
      international beverage companies that operate in multiple geographic areas,
      as
      well as numerous firms that are primarily local in operation. Our ability to
      gain or maintain share of sales or gross margins in the Chinese markets and
      ability to grow the business in global market may be limited as a result of
      actions by competitors.




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
                the manufacturing capacities;•
            Diversify
                the fresh fruit sold in the franchise stores;•
            Expand
                the sales network;•
            Increase
                the sales revenue; and•
            successfully
                build up the brand name.





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.




6
 Table
          of Contents




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.




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.




Item 2.
      Description of Property.





Our
      main operation is located at 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
      are not aware of any pending or threatened legal proceedings,
      in which we are involved. In addition, we are not aware of any pending or
      threatened legal proceedings in which entities affiliated with our officers,
      directors or beneficial owners are involved.




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




None.





7
 Table
          of Contents




PART
      II




Item 5.
      Market for Common Equity, Related Stockholder Matters and
      Small Business Issuer Purchases of Equity Securities.




Trading
      Market
      for Common Equity




Our
      common stock is quoted on the
      Electronic Bulletin Board under the symbol, CHFR.OB (formerly DVFN.OB, DFRL.OB,
      DFRC.OB and ELOC.OB). Trading in the 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.




Year
                  Ended December 31, 2006:
            High
            
            Low3/31/2006
            
            $
            2.13
            
            
            $
            1.506/30/2006
            
            $
            1.26
            
            
            $
            1.269/30/2006
            
            $
            0.55
            
            
            $
            0.5512/31/2006
            
            $
            0.56
            
            
            $
            0.40Year
                  Ended December 31, 2007:
            High
            
            Low3/31/2007
            
            $
            0.41
            
            
            $
            0.376/30/2007
            
            $
            0.23
            
            
            $
            0.239/30/2007
            
            $
            0.12
            
            
            $
            0.1212/31/2007
            
            $
            0.09
            
            
            $
            0.07Year
                  Ended December 31, 2008:
            High
            
            Low3/31/2008
            
            $
            0.05
            
            
            $
            0.04




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
 Table
          of Contents




Number
      of
      Holders




As
      of
      April 8, 2008, we had 3,715 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




None.





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.
      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 and acquisition strategy, our
      ability to achieve operating efficiencies, our dependence on network
      infrastructure, capacity, telecommunications carriers and other suppliers,
      industry pricing and technology 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 manufacture, sell and distribute Nan Feng
      tangerine, non-alcoholic and alcoholic beverage 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





Wederive
      revenues from the resale of non-alcoholic
      and alcoholic
      beveragesandtangerinepurchased
      from third parties, net ofvalue
      added taxes(“VAT”).We
      aresubject 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 byusin
      addition to the invoiced value of
      purchases to the extent not refunded for export
      sales.





In
      accordance with
      theSEC’s
      Staff Accounting Bulletin No. 104,Revenue
      Recognition,werecognize
      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
      collectibility
      is reasonably assured.Oursales
      arrangements are not subject to
      warranty.





Starting
      from October 2006, we commenced
      the trading of tangerine in thePRC.





(a)      Saleof
      products





We
      recognize revenuefromthe
      sale of productsupondeliveryto
      the customersand
      the transfer of title and risk of
      loss.Wedid
      not record any product returns
      for the year s endedDecember
      31,2007 and 2006.





(b)      Interest
      income





Interest
      income is recognized on a time
      apportionment basis, taking into account the principal amounts outstanding
      and
      the interest rates applicable.





Inventory





Inventoriesconsist
      of finished goods and are valuedat lower of cost or market
      value, cost being determined onthe first-in, first-outmethod.Weperiodically
      review 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.
      Weprovide inventory allowances
      based on
      excess and obsolete inventories determined principally by customer demand.As ofDecember
      31, 2007,wedid
      not record an allowance for obsolete
      inventories,nor
      have there been any
      write-offs.





9
 Table
          of Contents




Property,
      Plant, and
      Equipment





Plantand
      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.





Revenues





Gross
      revenues were $1,896,887 and $1,242,705 for the years ended December 31, 2007
      and 2006, respectively, due primarily to sales of tangerine, non-alcoholic
      and
      alcoholic beverages. We recognize revenue when persuasive evidence of a sale
      exists, transfer of title has occurred, the selling price is fixed or
      determinable and collectibility is reasonably assured. Our sales arrangements
      are not subject to warranty. We did not record any product returns for the
      year
      ended December 31, 2007. The increase in gross revenues by $654,182 in 2007
      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 2008 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 $310,146 and $792,052 for the years ended December 31, 2007 and
      2006, respectively. The decrease by $481,906 in net loss in 2007 was due
      primarily to the decrease in non-cash consulting expenses, which was $361,666
      and $752,584 for the years ended December 31, 2007 and 2006, respectively.
      The
      non-cash consulting expenses were the result of the issuance of 3,900,000 shares
      of common stock for services in connection with general management consulting
      and advisory services including, but not limited to, the following:




-
            Advise
                on matters relating to our structure, management, operation and
                subsidiaries;-
            The
                preparation and implementation of a new business plan and a future
                growth
                strategy;-
            Our
                corporate image design and website construction;-
            Advertisements


-
            Advise
                on procedures, regulations, and compliance of a public listed
                company;


-
            Legal
                advise on procedures, regulations, and compliance in
                China;-
            Assistance
                with preparation of applicable filings with the
                SEC;


-
            Assistance
                with preparation of financial statements;-
            EDGAR
                services





The
      shares were valued based on the
      market price on the date of the stock grant or the specific terms of the
      applicable consulting agreements and booked pro rata due to the service periods,
      which was completed as of December 31, 2007.





We
      expect to incur losses from
      operations during fiscal year 2008 until the dramatic increase in sales revenue
      resulting from the maturity of our franchise retail stores. 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, 2007 and 2006 were $956,326 and
      $1,045,297, respectively. The decrease in 2007 was due primarily to the decrease
      in non-cash consulting expenses, which was $361,666 and $752,584 for the years
      ended December 31, 2007 and 2006, respectively, resulting from the issuance
      of
      3,900,000 shares of common stock for services in connection with general
      management consulting and advisory services. The shares were valued based on
      the
      market price on the date of the stock grant or the specific terms of the
      applicable consulting agreements and booked pro rata due to the service periods,
      which was completed as of December 31, 2007.





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, 2007, we had $1,222,193 in cost of goods sold, or 64% of
      sales revenue, none of which from related party. During the year ended December
      31, 2006, we had $967,834 in cost of goods sold, or 78% of sales revenue, of
      which $354,005 from related party. The lower cost of goods sold during 2007
      was
      the result of the commencement of the new plant, through which we had the
      capacity to manufacture and store many of our own items. In addition, we reduced
      the risk of concentration by collaborating with more non-related
      suppliers.





10
 Table
          of Contents




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.





Liquidity
      and Capital
      Resources





Cash
      flows provided by operating
      activities were $265,937 for the year ended December 31, 2007, compared to
      cash
      flows of $143,554 used in operating activities for the year ended December
      31,
      2006. Positive cash flows from operations in 2007 were due primarily to the
      net
      loss offset by stock based compensation of $361,666 and the collection of
      accounts receivable of $229,348. Contrarily, negative cash flows from operations
      in 2006 were due primarily to the net loss of $792,050, the increase in accounts
      receivable by $254,397, partially offset by the increase in accounts payable
      to
      related party of $110,029.





Cash
      flows used in investing activities
      were $1,299,960 and $524,036 for the years ended December 31, 2007 and 2006,
      respectively, which were due primarily to the purchase of property and equipment
      in both years.





Cash
      flows provided by financing
      activities were $1,009,592 and $609,373 for the years ended December 31, 2007
      and 2006, respectively. Cash flows from financing activities in 2007 due
      primarily to a loan of $538,017 from a related party and advance of $576,000
      from a third party, partially offset by the payments of $104,425 to the
      shareholder loans, the principal of which were $994,917unsecured,
      non-interest
      bearing and
      repayableover
      12
      months.Cash flows from
      financing activities in 2006 due primarily to shareholder loans of $994,917,
      whichareunsecured, non-interest bearing and repayableover
      12 months, offset
      by the addition in due from a third party of $576,000, which isunsecured,
      non-interest
      bearing and repayable within12
      months.
      Additionally, we infused $190,456 as additional paid-in capital contributed
      by
      our two shareholders.




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
      2008
      and $700,000 for the two years thereafter.




Overall,
      we
      have funded our cash needs from inception through December 31, 2007 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 $27,695 on hand and a working capital deficit of $564,056 as of December
      31,
      2007. 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 2008 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
      tangerine, non-alcoholic and alcoholic beverages 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
 Table
          of Contents




Item 7.
      Financial Statements.




The
      consolidated financial statements include the accounts of Tai Na, our wholly
      owned subsidiary. The following selected financial data for the years ended
      December 31, 2007 and 2006 is derived from our consolidated financial
      statements, and should be read in conjunction with the consolidated financial
      statements and related notes presented as a separate section commencing on
      page
      F-1.




December 31,2007
            
            
            2006Balance
                SheetTotal
                Assets
            
            $
            1,905,437
            
            
            $
            1,429,202Total
                Liabilities
            
            
            781,089
            
            
            
            1,190,926Total
                Stockholders’ Equity
            
            
            1,124,348
            
            
            
            238,276Total
                Liabilities and Stockholders’ Equity
            
            
            1,905,437
            
            
            
            1,429,202Statements
                of OperationsFor
                years endedDecember 31,2007
            
            
            2006Revenue
            
            $
            1,896,887
            
            
            $
            1,242,705Operating
                Expenses
            
            
            956,326
            
            
            
            1,045,297Other
                Income
            
            
            28,518
            
            
            
            4,583Net
                Loss
            
            
            (310,146
            )
            
            
            (792,050
            )Net
                Loss per Common Share
            
            
            (0.01
            )
            
            
            (0.03
            )Weighted
                Average Common Shares Outstanding
            
            
            36,006,401
            
            
            
            30,525,000





12
 Table
          of Contents




CHINA
        FRUITS CORPORATION
 (Formerly
        Diversified Financial Resources Corporation)
 
 INDEX
        TO CONSOLIDATED FINANCIAL STATEMENTS
  PageReport
                  of Independent Registered Public Accounting
                  Firm
              
              13Consolidated
                  Balance Sheets
              
              14Consolidated
                  Statements of Operations And Comprehensive Loss
              
              15Consolidated
                  Statements of Cash Flows
              
              16Consolidated
                  Statements of Stockholders’ Equity
              
              17Notes
                  to Consolidated Financial Statements
              
              18-22


13
 Table
          of Contents




REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
        the
        Board of Directors and
 Stockholders
        of China Fruits Corp.
 
 We
        have
        audited the accompanying consolidated balance sheet of China Fruits
        Corp.  (the “Company”) and its wholly-owned subsidiary as of December
        31, 2007 and related consolidated statements of operations and comprehensive
        loss, stockholders’ equity and cash flows for the year ending December 31,
        2007.  These financial statements are the responsibility of the
        company’s management.  Our responsibility is to express and opinion on
        these financial statements based on our audits.  The financial
        statements as of December 31, 2006 and for the year ended December 31, 2006
        were
        audited by other auditors whose report dated April 12, 2007 expressed an
        unqualified opinion on those statements.
 
 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 consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of China Fruits Corp. and
        its
        wholly-owned subsidiary as of December 31, 2007 and the results of its
        operations and its cash flows for the year ended December 31, 2007 in conformity
        with accounting principles generally accepted in the United States of
        America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 2 to the consolidated
        financial statements, the Company has incurred substantial losses which raise
        substantial doubt about its ability to continue as a going concern. Management’s
        plans in regard to these matters are also described in Note 2. These
        consolidated 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
 Boca
        Raton, Florida
 April
        3,
        2008


14
 Table
          of Contents




CHINA
                  FRUITS
                  CORPORATIONConsolidated
                  Balance
                  SheetAs
                  of December 31,
                  2007(Expresed
                  in US Dollars, except
                  for number of shares)ASSETSDecember
                  31,
                  2007CURRENT
                  ASSETSCash
                  and cash
                  equivalents
              
              $
              27,695Accounts
                  receivable,
                  trade
              
              
              23,777Inventories
              
              
              83,564TOTAL
                  CURRENT
                  ASSETS
              
              
              135,036PLANT
                  AND EQUIPMENT, NET
              
              
              1,770,401TOTAL
                  ASSETS
              
              $
              1,905,437LIABILITIES
                  AND STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIESAccounts
                  payable, related
                  party
              
              $
              5,415Note
                  Payable-related
                  party
              
              
              538,017Income
                  Taxes
                  Payable
              
              
              49,306Other
                  payables and accrued
                  liabilities
              
              
              106,354TOTAL
                  CURRENT
                  LIABILITIES
              
              
              699,092LONG-TERM
                  LIABILITIESLoan
                  due to
                  stockholders
              
              
              81,997TOTAL
                  LONG_TERM
                  LIABILITIES
              
              
              81,997STOCKHOLDERS'
                  EQUITYPreferred
                  stock, 200,000,000
                  shares authorized, designated as Series A and Series
                  BSeries
                  A; par value $.001; 2,000,000 shares authorized13,150
                  shares issued and
                  outstanding
              
              
              13Series
                  B; par value $0.001, voting; 50,000,000 shares
                  authorized12,100,000
                  shares issued and
                  outstanding
              
              
              12,100Common
                  stock, par value $.001,
                  100,000,000 shares authorized,36,129,689
                  shares issued and
                  outstanding
              
              
              36,129Additional
                  paid-in
                  capital
              
              
              2,324,053Deferred
                  compensation
              
              
              (193,750
              )Statutory
                  reserve
              
              
              16,805Accumulated
                  other comprehensive
                  income (loss)
              
              $
              48,853Accumulated
                  deficits
              
              $
              (1,119,855
              )TOTAL
                  STOCKHOLDERS'
                  EQUITY
              
              
              1,124,348TOTAL
                  LIABILITIES AND
                  STOCKHOLDERS' EQUITY
              
              $
              1,905,437The
                  accompanying notes are an
                  integral part of these  consolidated  financial
                  statements




15
 Table
          of Contents




CHINA
                  FRUITS
                  CORPORATIONConsolidated
                  Statement of
                  OperationsFor
                  The Years Ended December 31,
                  2007 and 2006(Expresed
                  in US Dollars, except
                  for number of shares)Years
                  Ended2007
              
              
              2006REVENUES:Sales
              
              $
              1,896,887
              
              
              $
              1,242,705Cost
                  of goods sold - third
                  party
              
              
              (1,222,193
              )
              
              
              (613,829
              )Cost
                  of goods sold - related
                  party
              
              
              -
              
              
              
              (354,005
              )Total
                  Cost of
                  Revenues
              
              
              (1,222,193
              )
              
              
              (967,834
              )GROSS
                  PROFIT
              
              
              674,694
              
              
              
              274,871OPERATING
                  EXPENSES:Selling
                  and
                  marketing
              
              
              205,955
              
              
              
              83,355Professional
                  and legal
                  expenses
              
              
              424,121
              
              
              
              884,699General
                  and
                  administrative
              
              
              326,250
              
              
              
              77,243TOTAL
                  OPERATING
                  EXPENSES
              
              
              956,326
              
              
              
              1,045,297OPERATING
                  LOSS
              
              
              (281,632
              )
              
              
              (770,426
              )OTHER
                  INCOME:Interest
                  income
              
              
              1,041
              
              
              
              3,102Government
                  grant
              
              
              27,477
              
              
              
              -Other
              
              
              -
              
              
              
              1,481TOTAL
                  OTHER INCOME
                  (EXPENSES)
              
              
              28,518
              
              
              
              4,583(LOSS)
                  INCOME FROM
                  OPERATIONS
              
              $
              (253,114
              )
              
              $
              (765,843
              )Income
                  tax
                  expense
              
              
              57,032
              
              
              
              26,209NET
                  (LOSS)
                  INCOME
              
              $
              (310,146
              )
              
              $
              (792,052
              )Other
                  comprehensive
                  income-
                  Foreign currency translation
                  gain
              
              $
              23,057
              
              
              $
              25,796COMPREHENSIVE
                  (LOSS)
                  INCOME
              
              $
              (287,089
              )
              
              $
              (766,256
              )Net
                  income per common share -
                  basic and diluted
              
              $
              (0.01
              )
              
              $
              (0.03
              )Net
                  income per common share -
                  diluted
              
              $
              (0.01
              )
              
              $
              (0.03
              )Weighted
                  average number of shares
                  outstanding during the period - basic an diluted
              
              
              36,006,401
              
              
              
              30,525,000Weighted
                  average number of shares
                  outstanding during the period - diluted
              
              
              36,006,401
              
              
              
              30,525,000The
                  accompanying notes are an
                  integral part of these consolidated financial
                  statements




16
 Table
          of Contents




CHINA
                  FRUITS
                  CORPORATIONConsolidated
                  Statement of
                  Cash FlowsFor
                  The Years Ended December 31,
                  2007 and 2006Years
                  Ended2007
              
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              (310,146
              )
              
              $
              (792,050
              )Adjustments
                  to reconcile net
                  income to netcash
                  provided by (used in)
                  operating activities:Depreciation
              
              
              47,168
              
              
              
              6,427Stock
                  based
                  compensation
              
              
              361,666
              
              
              
              752,584Allowance
                  for Doubtful
                  Accounts
              
              
              
              
              
              
              1,272Non-cash
                  contributions to paid-in
                  capital
              
              
              3,000
              
              
              
              -(Increase)
                  decrease in operating
                  assets:Accounts
                  receivable
              
              
              229,348
              
              
              
              (254,397
              )Receivable
                  from a third
                  party
              
              
              
              
              
              
              -Inventories
              
              
              (48,211
              )
              
              
              (35,353
              )Vat
                  and Income tax
                  recoverable
              
              
              
              
              
              
              (18,046
              )Prepaid
                  expenses and other current
                  assets
              
              
              -
              
              
              
              -Increase
                  (decrease) in operating
                  liabilities:Accounts
                  payable, related
                  party
              
              
              (104,614
              )
              
              
              110,029Other
                  payables and accrued
                  liabilities
              
              
              20,374
              
              
              
              85,980Customer
                  depositIncome
                  tax
                  payable
              
              
              49,306Value
                  added tax
                  payable
              
              
              18,046
              
              
              
              -NET
                  CASH PROVIDED BY OPERATING
                  ACTIVITIES
              
              
              265,937
              
              
              
              (143,554
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchase
                  of property and
                  equipment
              
              
              (1,299,960
              )
              
              
              (524,036
              )NET
                  CASH USED IN INVESTING
                  ACTIVITIES
              
              
              (1,299,960
              )
              
              
              (524,036
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESProceeds
                  (Payments) on Officer
                  Loans
              
              
              (104,425
              )
              
              
              994,917Issuance
                  of Notes Payable-related
                  party
              
              
              538,017Advance
                  (from) to a third
                  party
              
              
              576,000
              
              
              
              (576,000
              )Addition
                  in paid-in
                  capital
              
              
              -
              
              
              
              190,456NET
                  CASH PROVIDED BY FINANCING
                  ACTIVITIES
              
              
              1,009,592
              
              
              
              609,373Foreign
                  currency translation
                  adjustment
              
              
              23,057
              
              
              
              25,796NET
                  INCREASE IN CASH AND CASH
                  EQUIVALENTS
              
              
              (1,374
              )
              
              
              (32,421
              )CASH
                  AND CASH EQUIVALENTS:Beginning
                  of
                  year
              
              
              29,069
              
              
              
              61,490End
                  of
                  period
              
              $
              27,695
              
              
              $
              29,069135,036
              
              
              
              -149,258Supplemental
                  disclosures of cash
                  flow information:Cash
                  paid for interest
              
              $
              -
              
              
              $
              -Cash
                  paid for income taxes
              
              $
              17,134
              
              
              $
              29,864Supplemental
                  disclosures of
                  non-cash transactions:Foreign
                  translation adjustment -
                  comprehensive income
              
              $
              23,057
              
              
              $
              25,796Common
                  stock issued for
                  services
              
              $
              -
              
              
              $
              752,584The
                  accompanying notes are an
                  integral part of these consolidated financial
                  statements




17
 Table
          of Contents




CHINA
                  FRUITS
                  CORPORATIONConsolidated
                  Statements of Stockholders EquityFor
                  the years
                  ended December 31, 2007 and 2006Expressed
                  in
                  USDNumber
              
              
              Par
              
              
              Series
                  "A"
              
              
              Number
              
              
              Par
              
              
              Series
                  "B"
              
              
              Number
              
              
              Par
              
              
              Common
              
              
              Additional
              
              
              Deferred
              
              
              Accumulated
                  deficit/
              
              
              Statutory
              
              
              
              
              
              Totalof
                  shares
              
              
              Value:
              
              
              Preferred
                  Stock
              
              
              of
                  shares
              
              
              Value:
              
              
              Preferred
                  Stock
              
              
              of
                  shares
              
              
              Value:
              
              
              stock
              
              
              Paid-in
                  Capital
              
              
              compensation
              
              
              retained
                  earnings
              
              
              reserve
              
              
              AOCI(L)
              
              
              EquityBalance
                  as of
                  December 31, 2005
              
              
              13,150
              
              
              
              0
              
              
              
              13
              
              
              
              12,100,000
              
              
              
              0
              
              
              
              12,100
              
              
              
              30,000,000
              
              
              
              0
              
              
              
              30,000
              
              
              
              20,231
              
              
              
              -
              
              
              
              (854
              )
              
              
              -
              
              
              
              -
              
              
              
              61,490.00-Stocks
                  issued to
                  complete reverse acquisition
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              229,689
              
              
              
              0.001
              
              
              
              229
              
              
              
              (1,000,229
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,000,000.00
              )-
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Stocks
                  issued to
                  settle liabilities
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,000,000
              
              
              
              0.001
              
              
              
              2,000
              
              
              
              998,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,000,000.00Capital
                  contribution from owners of Taina
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              190,456
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              190,456.00-Deferred
                  compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              930,000
              
              
              
              (555,416
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              374,584.00-Stocks
                  issued for
                  service
              
              
              
              
              
              
              0.001
              
              
              
              -
              
              
              
              
              
              
              
              0.001
              
              
              
              -
              
              
              
              900,000
              
              
              
              0.001
              
              
              
              900
              
              
              
              377,100
              
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              378,000.00-Foreign
                  currency
                  adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              25,796
              
              
              
              25,796.00-Net
                  loss for the
                  year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (792,050
              )
              
              
              
              
              
              
              
              
              
              
              (792,050.00
              )-Transfer
                  of
                  retained earnings to statutory reserve
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (5,408
              )
              
              
              5,408
              
              
              
              
              
              
              
              --Balance
                  as of
                  December 31, 2006
              
              $
              13,150
              
              
              
              0.001
              
              
              $
              13
              
              
              $
              12,100,000
              
              
              
              0.001
              
              
              $
              12,100
              
              
              $
              33,129,689
              
              
              
              0.001
              
              
              $
              33,129
              
              
              $
              1,515,558
              
              
              $
              (555,416
              )
              
              $
              (798,312
              )
              
              $
              5,408
              
              
              $
              25,796
              
              
              $
              238,276-Stocks
                  issued for
                  service
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,000,000
              
              
              
              0.001
              
              
              
              3,000
              
              
              
              (3,000
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Additional
                  paid-in
                  capital
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              811,495
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              811,495.00Amortization
                  of
                  deferred compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              361,666
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              361,666.00-Foreign
                  currency
                  adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              23,057
              
              
              
              23,057.00Transfer
                  of
                  retained earnings to statutory reserve
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (11,397
              )
              
              
              11,397
              
              
              
              
              
              
              
              -Net
                  Loss for the
                  year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (310,146
              )
              
              
              
              
              
              
              
              
              
              
              (310,146.00
              )Balance
                  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
              
              
              $
              48,853
              
              
              $
              1,124,348The
                  accompanying
                  notes are an integral part of these consolidated financial
                  statements




18
 Table
          of Contents




CHINA
      FRUITS CORPORATION


(Formerly
      Diversified Financial Resources Corporation)


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006


(Currency
      expressed in United States Dollars (“US$”))




1.
      ORGANIZATION AND BUSINESS BACKGROUND


China
        Fruits Corporation(the“Company”or
“CHFR”)was
        incorporated in the State ofDelawareonJanuary
        6, 1993as
        Vaxcel, Inc. OnDecember 19, 2000,CHFRchanged
        its name to eLocity Networks
        Corporation.OnAugust
        6,2002,CHFRfurtherchanged
        its name to Diversified
        Financial Resources Corporation.Theprincipal
        activitiesofCHFRisseeking
        and consummating a merger or
        acquisition opportunity with a business entity.OnMay12,2006,CHFR
        was re-domiciledtothe
        State ofNevada.
 
 OnMay
        31, 2006,CHFRcompletedastock
        exchange transactionwithJiangxi
        Taina Guo Ye Yon Xian Gong
        Si(“Tai
        Na”).Tai
        Nawas incorporated as
        a limited liability
        company in the People’s
        Republic ofChina(“PRC”)
        onOctober 28, 2005with
        its principal place
        of business inNanfeng Town,JiangxiProvince,
        the
        PRC.Tai
        Nais principally engaged
        in
        manufacturing, trading and distributing of non-alcoholic and alcoholic beverages
        in the PRC.
 
 The
        stock exchange transaction involvedtwo simultaneous
        transactions:
 
 1)
              themajorityshareholder
                  ofCHFRdeliveredthe
                  13,150 convertible Series A
                  preferred shares and 12,100,000 non-convertible Series B preferred
                  shares
                  ofCHFRto
                  Tai Na’sownersin
                  exchange for total payments of
                  $500,000 in cash and;
 
 2)
              CHFRissuedto
                  Tai Na’sownersan
                  amount equal to30,000,000
                  new investment shares of
                  common stock ofCHFRpursuant
                  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 Nabecame
        a wholly-owned subsidiary ofCHFR andtheformer
        owners of Tai Na then
        owned 99% of the issued and outstanding shares of theCompany.
 
 Also
        in connection with this stock
        exchange transaction,CHFRappointedMr.
        Chen, Quanlongas
        chiefexecutiveofficeranddirectorandMs.
        Zhao, Li Lias directorandMs.
        Huang, Xiaoyunas
        chieffinancialofficertoCHFR.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.
 
 OnAugust
        18,2006,CHFRchanged
        its name toits current name“China
        FruitsCorporation”.
 
 The
        stock exchange transaction has been
        accounted for as a reverse acquisition and recapitalization
        of theCHFRwherebyTai
        Nais deemed to be the
        accounting acquirer
        (legal acquiree) andCHFRto
        be theaccounting
        acquiree (legal acquirer).The
        accompanying consolidated financial
        statements are in substance
        those ofTai Na,
        with theassets and liabilities,
        and revenues and
        expenses, ofCHFRbeing
        included effective from the date
        of stock exchange transaction.CHFRis
        deemed to be a continuation of thebusinessofTai
        Na.Accordingly,
        the accompanyingconsolidatedfinancial
        statementsinclude
        the
        following:
 
 (1)
              the
                  balance sheet consists of the
                  net assets of theaccountingacquirer
                  at historical cost and
                  the net assets of theaccountingacquiree
                  at historical
                  cost;
 
 (2)
              the
                  financial position, results of
                  operations, and cash flowsofthe
                  acquirerfor all periods
                  presented asif the
                  recapitalization had occurred at the beginning of the earliest
                  period
                  presentedand the
                  operations of theaccounting
                  acquiree from the date
                  of stock exchange transaction.
  CHFRandTai
        Naare hereinafter referred
        to as (the“Company”).
  2. GOING
        CONCERN UNCERTAINTIES
 
 These
        consolidatedfinancial statements
        have been preparedassuming that Company
        will
        continue asa going concern,
        which contemplates the realization of assets and the discharge ofliabilities
        in the normal course of business for
        the foreseeable future.
 
 As
        of
        December 31, 2007, the Company had a positive operating cash flow of $265,937
        and an accumulated deficit of $1,119,855. 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 growing
        strategies, including (a) expansion of the sales networks through setup retail
        stores; 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 September 30, 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
  3. SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES
  l
              Basis
                  of presentation
 
 These
        accompanyingconsolidatedfinancial
        statements have been prepared
        in accordance with generally accepted accounting principles in theUnited States of America.
 
 l
              Use
                  of estimates
 
 In
        preparing theseconsolidatedfinancial
        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.
  19
 Table
            of Contents
 CHINA
              FRUITS CORPORATION
 (Formerly
              Diversified Financial Resources Corporation)
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE YEARS ENDED DECEMBER 31, 2007 AND 2006
 (Currency
              expressed in United States Dollars (“US$”))
  l
              Basis
                  of consolidation
 
 The
        consolidated financial statements
        include the
        financial statements ofthe
        Companyand its
        subsidiary,Tai
        Na.
 
 All
        significant inter-company balances
        and transactions within theCompanyand
        subsidiaryhave been eliminatedupon
        consolidation.
 
 l
              Revenue
                  recognition
 
 The
        Companyderives revenues from
        the resale of non-alcoholic
        and alcoholic
        beveragesandtangerinepurchased
        from third parties, net ofvalue
        added taxes(“VAT”).The
        Company is subject to VAT which is
        levied on the majority of the products ofTai Naat
        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 theSEC’s
        Staff Accounting Bulletin No. 104,Revenue
        Recognition,the
        Companyrecognizes revenue
        when persuasive
        evidence of an arrangement exists, transfer of title has occurred or services
        have been rendered, the selling price isfixed or determinable
        andcollectabilityis
        reasonably assured.The Company’s
        sales arrangements are not subject to
        warranty.
 
 Starting
        from October 2006, the Company
        commenced the trading oftangerinein
        the PRC.
 
 (a)           
        Saleof
        products
 
 The
        Company recognizes revenuefrom
        the sale of productsupondeliveryto
        the customersand
        the transfer of title and risk of
        loss.The
        Company did not record any product
        returns for the
        yearended
        December 31, 2007.
 
 (b)           
        Interest
        income
 
 Interest
        income is recognized ona 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 andoverheads,
        which are directly attributable to themanufactureof
        productsand the provision ofservices.
 
 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.
  20
 Table
            of Contents
 CHINA
              FRUITS CORPORATION
 (Formerly
              Diversified Financial Resources Corporation)
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE YEARS ENDED DECEMBER 31, 2007 AND 2006
 (Currency
              expressed in United States Dollars (“US$”))
  l
              Accounts
                  receivable
 
 Accounts
        receivable are recorded at the
        invoiced amount and do not bear interest. The Company extends unsecured credit
        toits 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
        ofknown
        requirements, aging of receivables,
        payment history, the customer’s
        current credit worthiness and the
        economic environment. As ofDecember 31,
        2007, the Companyhas
        not recorded an allowance for
        uncollectible accounts.
 
 l
              Inventories
 
 Inventoriesconsist
        of finished goods and are valuedat lower of cost or
        market
        value, cost being determined onthe first-in, first-outmethod.  The
        Company
        periodically reviews historical sales activity to determine excess, slow
        moving
        items and potentially obsolete itemsand 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 ofDecember
        31, 2007,
        the Company did not record
        an allowance for obsolete
        inventories,nor
        have there been any write-offs.
 
 l
              Plant
                  and equipment, net
 
 Plantand
        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.
 
 l
              Impairment
                  of long lived assets
 
 In
        accordance with Statement of
        Financial Accounting Standards(“SFAS”)No.
        121,“Accounting
        for the
        impairment of Long-Lived
        Assets and for
        Long-Lived Assets to be Disposed of’,
        a 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 toestimateddiscounted
        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)
 
 SFAS
        No. 130,“Reporting
        Comprehensive Income”,establishes
        standards forreporting and display
        of comprehensive
        income, its components and accumulated balances.Comprehensive
        income as defined includes
        all changes in equity duringthe yearfrom
        non-owner sources. Accumulated
        comprehensive income, as presented in the accompanyingconsolidatedstatement
        ofstockholders’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 SFAS No.
        109“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 theconsolidatedstatement
        of operations and comprehensiveincome
        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 calculatesnetloss
        per share in accordance with SFAS
        No. 128,“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
        theUnited
        Statesdollar (“U.S.
        dollars”).  Transactions
        denominated
        in currencies other than U.S. dollarare calculatedat
        theaveragerate
        for the period.  Monetary
        assets and liabilities denominatedin 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 operationsand
        comprehensive income.
 
 The
        Company’s
        subsidiary maintains its books and
        records in its local currency, theRenminbiYuan(“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 acorporationor
        individual,are
        considered to be related ifthe Companyhas
        the ability, directly or indirectly,
        to control the otherpartyor
        exercise significant influence over
        the otherpartyin
        making financial and operating
        decisions. Companies are also considered to be related if they are subject
        to common control
        or common significant influence.Amaterial
        related party transaction
        hasbeenidentifiedin
        Note 14inthe
        financial
        statements.
 
 l
              Segment
                  reporting
 
 SFAS
        No. 131“Disclosures
        about
        Segments of an Enterprise and Related
        Information”establishes
        standards for reporting information about operating segments on a basis
        consistent with the Company’s
        internal organization structure as
        well as information about geographical areas, business segments and major
        customers in financial
        statements. The Company operates inone reportablesegment.
 
 l
              Fair
                  value of financial instruments
 
 The
        Company values its financial
        instruments as required by SFAS No. 107,“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 couldrealizein
        a current market exchange.
 
 TheCompany’s
        financial instrumentsprimarilyinclude
        cashand cash equivalents,
        accountsreceivable,advance
        to a third party, inventories,VAT and income tax
        recoverable,accounts
        payable, other payablesandaccrued
        liabilities.
 
 As
        of thebalancesheet
        date, the estimatedfair values
        of financial instruments were not
        materially different from their carrying values as presented due toshort maturities of
        these
        instruments.
 
 l
              Equity-based
                  compensation
 
 The
        Company adopts SFAS No. 123R,“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, overthe
        requisite service
        period, which is generally the vesting period.See
        Note13for additional
        information.
 
 l
              Recently
                  issued accounting standards
 
 In
        February 2007, the FASB issued Statement of Financial Accounting Standard
        No.
        159, “The Fair Value Option
        for Financial Assets and Financial Liabilities” (“SFAS No. 159”). This
        statement permits entities to choose to measure many financial instruments
        and
        certain other items at fair value. Companies should report unrealized gains
        and
        losses on items for which the fair value option has been elected in earnings
        at
        each subsequent reporting date. This statement is effective as of the beginning
        of an entity’s first fiscal year that begins after November 15, 2007. The
        Company is currently assessing the potential impact, if any, for the adoption
        of
        SFAS No.159 on its consolidated financial statements.
 
 In
        December 2007, the FASB issued two new statements: (a.) SFAS No. 141(revised
        2007), Business
        Combinations, and (b.) No. 160, Noncontrolling
        Interests in
        Consolidated Financial Statements. These statements are effective for
        fiscal years beginning after December 15, 2008 and the application of these
        standards will improve, simplify and converge internationally the accounting
        for
        business combinations and the reporting of noncontrolling interests in
        consolidated financial statements. The Company is in the process of evaluating
        the impact, if any, on SFAS 141 (R) and SFAS 160 and does not anticipate
        that
        the adoption of these standards will have any impact on its consolidated
        financial statements.
 
 (a.)  SFAS
        No. 141 (R) requires an acquiring entity in a business combination to: (i)
        recognize all (and only) the assets acquired and the liabilities assumed
        in the
        transaction, (ii) establish an acquisition-date fair value as the measurement
        objective for all assets acquired and the liabilities assumed, and (iii)
        disclose to investors and other users all of the information they will need
        to
        evaluate and understand the nature of, and the financial effect of, the business
        combination, and, (iv) recognize and measure the goodwill acquired in the
        business combination or a gain from a bargain purchase.
 
 (b.)
        SFAS
        No. 160 will improve the relevance, comparability and transparency of financial
        information provided to investors by requiring all entities to: (i) report
        noncontrolling (minority) interests in subsidiaries in the same manner, as
        equity but separate from the parent’s equity, in consolidated financial
        statements, (ii) net income attributable to the parent and to the
        non-controlling interest must be clearly identified and presented on the
        face of
        the consolidated statement of income, and (iii) any changes in the parent’s
        ownership interest while the parent retains the controlling financial interest
        in its subsidiary be accounted for consistently.
  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,
        2006.  No allowance was considered necessary as of December 31,
        2007.
 
 2007
              
              
              2006Accounts
                  receivable, gross
              
              $
              254,397
              
              
              $
              254,397Less:
                  allowance for doubtful accounts
              
              
              -0-
              
              
              
              (1,272
              )Accounts
                  receivable, net
              
              $
              253,125
              
              
              $
              253,125
  21
 Table
            of Contents
 CHINA
              FRUITS CORPORATION
 (Formerly
              Diversified Financial Resources Corporation)
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE YEARS ENDED DECEMBER 31, 2007 AND 2006
 (Currency
              expressed in United States Dollars (“US$”))
  5. 
        ADVANCES TO A THIRD PARTY
 
 The
        Company made a temporary advance to a third party company during
        2006.  The balance is unsecured, non-interest bearing and repayable
        within 12 months.  The balance as of December 31, 2006, was
        $448,000.  The advance was repaid to the Company during
        2007.
  6. INVENTORIES
 
 Inventories
        as of December 31, 2007 and 2006 consist of the following:
  2007
              
              
              2006Raw
                  materials
              
              $
              54,204
              
              
              $
              29,507Finished
                  goods
              
              
              29,360
              
              
              
              5,846$
              83,564
              
              
              $
              35,353
 
 For
        the
        year ended December 31, 2007 and 2006, no provision for obsolete inventories
        was
        recorded by the Company.
  7.
        PLANT AND EQUIPMENT, NET
  Plant
        and
        equipment, net as of December 31, 2007 and 2006 consists of the
        following:
 
 2007
              
              
              2006Plant
                  and machinery
              
              $
              1,602,922
              
              
              $
              520,219Construction
                  in progress
              
              
              217,257Furniture,
                  fixture and equipment
              
              
              3,817
              
              
              
              3,8171,823,996
              
              
              
              524,036Less:
                  accumulated depreciation
              
              
              (53,595
              )
              
              
              (6,427
              )Plant
                  and equipment, net
              
              $
              1,770,401
              
              
              $
              517,609
 
 Depreciation
        expense for the year ended December 31, 2007 and 2006 respectively was $47,168
        and $6,427.
 
 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, 2007, represents buildings under construction.
 
 8.
        OTHER PAYABLES AND ACCRUED LIABILITIES
 
 Other
        payables and accrued liabilities as of December 31, 2007 and 2006 consist
        of
        following:
 
 2007
              
              
              2006Rental
                  payable
              
              $
              -0-
              
              
              $
              282Government
                  levies payable
              
              
              1,221
              
              
              
              3,119Salary
                  and welfare payable
              
              
              29,279
              
              
              
              12,278Customer
                  deposits
              
              
              -0-
              
              
              
              692Accrued
                  expenses
              
              
              72,856
              
              
              
              69,609$
              106,356
              
              
              $
              85,980
  9.
        AMOUNT DUE TO STOCKHOLDERS
 
 The
        balances due to stockholders represented unsecured advances which are
        interest-free and repayable in next twelve months.
  10.
        INCOME TAXES
 
 The
        Company is registered in the United States of America and has operations
        in 2
        tax jurisdictions: the United States of America and the PRC.  The
        operation in the United States of America has incurred net operating losses
        for
        income tax purposes.  The Company generated substantially its net
        income from its PRC operation and has recorded income tax provision for the
        years ended December 31, 2007 and 2006.
  The
        components of (loss) income before income taxes separating U.S. and PRC
        operations are as follows:
 
 2007
              
              
              2006Loss
                  subject to U.S. operation
              
              $
              (424,241
              )
              
              $
              (843,982
              )Income
                  (loss) subject to PRC operation
              
              
              171,127
              
              
              
              78,139Loss
                  before income taxes
              
              $
              (253,114
              )
              
              $
              (765,843
              )
 
 United
        States of America
 
 The
        Company is registered in the State of Nevada and is subject to United States
        of
        America tax law.
  22
 Table
            of Contents
 CHINA
              FRUITS CORPORATION
 (Formerly
              Diversified Financial Resources Corporation)
 NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
              THE YEARS ENDED DECEMBER 31, 2007 AND 2006
 (Currency
              expressed in United States Dollars (“US$”))
  As
        of
        December 31, 2007, the U.S. operation had $1,268,223 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
        2027.  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
        Company’s subsidiary, Tai Na is subject to taxes in the PRC.  Pursuant
        to the PRC Income Tax Laws, Tai Na is generally subject to enterprise income
        tax
        (“EIT”) at a statutory rate of 33% (30% national income tax plus 3% local income
        tax).
 
 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, 2007 and 2006 is as follows:
 
 2007
              
              
              2006Income
                  (loss) before income taxes
              
              $
              171,127
              
              
              $
              78,139Statutory
                  income tax rate
              
              
              33
              %
              
              
              33
              %56,471
              
              
              
              25,786Expenses
                  not deductible for tax purposes:-
                  Provisions
              
              
              561
              
              
              
              421Effect
                  of tax losses
              
              
              -
              
              
              
              -Income
                  tax expense
              
              $
              57,032
              
              
              $
              26,207
  The
        following table sets forth the significant components of the aggregate net
        deferred tax assets of the Company as of December 31, 2006:
 
 2007
              
              
              2006Deferred
                  tax assets:-
                  Net operating loss carryforwards
              
              $
              443,878
              
              
              $
              295,394Less:
                  valuation allowance
              
              
              (443,878
              )
              
              
              (295,394
              )Deferred
                  tax assets
              
              $
              -
              
              
              $
              -
 
 For
        the
        year ended December 31, 2007 and 2006, valuation allowances of $443,878 and
        $295,394 were provided to the deferred tax assets due to the uncertainty
        surrounding their realization.
  11.
        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.  Pursuant to stock exchange
        transaction on May 31, 2006, the weighted average number of common stocks
        issued
        and outstanding was adjusted to account for the effects of the stock exchange
        transaction as a reverse acquisition, as more fully described in Note
        1.
 
 The
        Company has retrospectively adjusted the weighted average number of common
        stocks outstanding by deeming that the one-for-twelve point five (1:12.5)
        reverse stock split effected on July 10, 2006 had occurred as of the beginning
        of the earliest period presented.
 
 The
        following table sets forth the computation of basic and diluted net loss
        per
        share for the year indicated:
 
 2007
              
              
              2006Basis
                  and diluted net loss per share calculationNumerator:-
                  Net income in computing basic net loss per share
              
              $
              (310,146
              )
              
              $
              (792,050
              )Denominator:-
                  Weighted average ordinary shares outstanding
              
              
              36,006,401
              
              
              
              29,625,000-
                  Stock issued for services
              
              
              
              
              
              
              900,000-
                  Shares used in computing basic net loss per share
              
              
              36,006,401
              
              
              
              30,525,000Basic
                  and diluted net loss per share
              
              $
              (0.01
              )
              
              $
              (0.03
              )
 
 There
        were no dilutive common stock equivalents as of December 31, 2007 and
        2006.
  12.
        CAPITAL TRANSACTIONS
 
 1)
              On
                  May 31, 2006, 2006, the Company completed a stock exchange transaction
                  with the equity
                  owners of Tai Na and
                  a total of30,000,000
                  shares of common stock
                  were issued (99% ofCompany's
                  then outstanding common
                  stock).
 
 2)
              On
                  June 26, 2006, the Company issued 2,000,000 shares of common stock
                  to
                  Diversified Holdings I, Inc., a Nevada corporation ("DHI") to settle
                  the
                  $1,000,000 purchase price payable incurred due to the acquisition
                  of
                  Wichita Development Corporation in 2003 and any other miscellaneous
                  liabilities to DHI, and to release and discharge any and all claims
                  that
                  exist between the Company and DHI. The purchase price payable had
                  been
                  previously reported in the Company's financial statements in
                  2005.
 
 3)
              On
                  July 12, 2006, the Company 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,
  4)
              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.
  13.
        STOCK BASED COMPENSATION
 
 On
        October 19, 2006, the Company approved a 2006 Non-Qualified Stock Compensation
        Plan (the “Plan”) under which directors, officers, employees and consultants of
        the Group are eligible to receive grants of stock options and common stock
        of
        the Company.
 
 OnOctober
        27, 2006,
        the Companyentered into a business
        consulting
        service agreement with the Consultant A in exchange for1,500,000shares
        of common
        stock.The fair
        value ofthe
        commonstockissuedis
        determined using the fair value ofthe Company’s
        common stock on the grant
        dateat$0.31per
        share.The
        Companycalculateda
        stock based compensationof $465,000 and recognized
        $335,834for the year endedDecember 31,
        2006.The
        balance of 129,166 was expensed
        during the year ended December 31, 2007
 
 OnOctober
        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 ofthe
        commonstock issuedis
        determined using the fair value ofthe Company’s
        common stock on the grant
        dateat$0.31per
        share.The
        Company calculated a stock based
        compensation of $465,000 and recognized $38,750 for the year ended December
        31,
        2006and $232,500
        for the year ended December 31,
        2007.The
        deferred compensation isamortizedon
        the straight-line method over22 monthsbeginning
        on October 31,
        2006.As
        of December 31, 2007,thedeferredcompensationbalance
        was$193,750
  14.
        RELATED PARTY TRANSACTIONS
 
 During
        the year ended December 31, 2007 and 2006, the Company recorded purchases
        of -0-
        and $354,005 respectively from a related company where Mr. Chen Quan Long,
        the
        Chief Executive Officer of the Company, is also the president of the related
        company. As of December 31, 2007 and 2006, the trade balance of accounts
        payable
        of $-0- and $110,029 respectively is due to a related company.  The
        transaction is considered conducted at arm’s length.  Notes payable to
        related parties are due on April 26, 2008.
  As
          of
          December 31, 2007, the assets acquired from the related party included
          equipment
          of approximately $290,000, building of approximately $535,000 and land
          of
          approximately $368,000.
  23
  CHINA
          FRUITS CORPORATION
 (Formerly
          Diversified Financial Resources Corporation)
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
          THE YEARS ENDED DECEMBER 31, 2007 AND 2006
 (Currency
          expressed in United States Dollars (“US$”))
 
 15.
          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 $15,844 and $12,700 for
        the
        years ended December 31, 2007 and 2006,
 respectively.
 
 16.
        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, 2007 and 2006, Tai Na contributed $11,395 and $5,408
        respectively to statutory reserve.
  17.
        CONCENTRATION AND RISK
 
 (a)
        Major
        customers and vendors
 
 For
        the
        years ended December 31, 2007 and 2006, 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, 2007, customers and vendors who account for 10% or
        more
        of revenues and purchases are presented as follows:
 
 Customers
              
              
              Revenues
              
              
              
              
              
              
              Accounts
                ReceivableCustomer
                  A
              
              
              $
              682,342
              
              
              
              34
              %
              
              
              $
              15,814Customer
                  B
              
              
              
              260,120
              
              
              
              13
              %
              
              
              
              -Customer
                  C
              
              
              
              132,342
              
              
              
              6
              %
              
              
              
              -Total:
              
              $
              1,077,805
              
              
              
              53
              %
              Total:
              
              $
              15,814
  For
        the
        year ended December 31, 2006, customers and vendors who account for 10% or
        more
        of revenues and purchases are presented as follows:
 Customers
              
              
              Revenues
              
              
              
              
              
              
              Accounts
                ReceivableCustomer
                  A
              
              
              $
              557,486
              
              
              
              45
              %
              
              
              $
              64,317Customer
                  B
              
              
              
              165,511
              
              
              
              13
              %
              
              
              
              190,080Customer
                  C
              
              
              
              46,175
              
              
              
              4
              %
              
              
              
              -Total:
              
              $
              769,172
              
              
              
              62
              %
              Total:
              
              $
              254,397
  Vendors
                
                Purchases
                
                
                
                
                
                Accounts
                  PayableVendor
                    A
                
                $
                354,005
                
                
                
                37
                %
                
                $
                110,029
  (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.
  18.
        COMMITMENT AND CONTINGENCIES
 
 The
        Company rented a plant and office under a non-cancelable operating lease
        agreement.  Based on the current rental lease agreement, the future
        minimum rental payments required as of December 31, 2007 are as
        follows:
 
 Year
                  ending December 31:2008
              
              $
              42,500
 
 For
        the
        years ended December 31, 2007 and 2006, rental expense was $31,549 and
        $277.
 
 19.
        SUBSEQUENT EVENT
 
 The
        Company
        received an approval from Chinese government in connection with the
        incorporation of a wholly-owned subsidiary, Tai Na International Fruits (Bei
        Jing) Co. Ltd. ("Tai Na International"), which is located in Bei Jing, People's
        Republic of China.
  Tai
        Na
        International will be devoted to creation of a sales network to facilitate
        the
        Registrant's products throughout China. The registered capital of Tai Na
        International is approximately $1,351,000, which will be invested by the
        Company
        as an equity interest in Tai Na International. After completion of the
        incorporation, the Company will relocate their headquarters to Bei
        Jing.


24
 Table
          of Contents




Item 8.
      Changes in and Disagreements with Accountants on Accounting
      and
      Financial Disclosure.





On
      October 20, 2007, our Board of
      Directors made the decision to retain Lake & Associates CPA’s LLC as our
      independent auditor to review our quarterly report for the third quarter of
      2007
      and to audit our financial statements for the year ended December 31, 2007.
      Zhong Yi (Hong Kong) C.P.A. Company Limited resigned from its position as our
      principal independent auditor on September 21, 2007. Zhong Yi had been retained
      in that position in July 2006. We do not have an audit committee.





Prior
      to making the decision to retain
      Lake & Associates CPA’s LLC, We had no prior relationship with Lake &
Associates CPA’s LLC or any of its members.





Zhong
      Yi's audit reports regarding our
      financial statements for the years ended December 31, 2006 and 2005, contained
      no adverse opinion or disclaimer of opinion nor were they qualified or modified
      as to the uncertainty, audit scope or accounting principles, except that their audit
      report
      for the year ended December 31, 2006 contained a going concern
      qualification.





In
      connection with the prior audits for
      the fiscal years ended December 31, 2006 and 2005, and the review for the
      interim period up to September 21, 2007, there have been no disagreements with
      Zhong Yi on any matter of accounting principles or practices, financial
      statement disclosure or auditing scope or procedure, which if not resolved
      to
      the satisfaction of Zhong Yi would have caused it to make reference to the
      subject matter of the disagreement in connection with its report on these
      financial statements for those periods.




Item 8A.
      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.




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, 2007, 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.




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 Commission that permit us to provide only management's
      report in this annual report.




25
 Table
          of Contents




PART
      III




Item 9.
      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
            47
            President,
                Chief Executive Officer and Chairman
            June
                1, 2006Huang,
                Xiao Yun
            38
            Chief
                Financial Officer
            June
                1, 2006Zhao,
                Li Li
            35
            Director
            June
                22, 2006





Chen,
      Quan Long -  President, Chief Executive Officer and
      Chairman





Mr.
      Chen,
      Quan Long, 47, 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.





Huang,
      Xiao Yun - Chief Financial Officer





Ms.
      Huang,
      Xiao Yun, 38, majored in accounting in Jiang Xi Radio Television University.
      She
      was chief accountant of Fei Huan Group from December 1991 to December 2001.
      From
      January 2002, she became Chief Financial Officer of Fei Huan Wine, Inc. Ms.
      Huang’s duties with Fei Huan Group included supervision of the their financial
      statement preparation and accounting systems.





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
      is presently a deputy general manager for Fei Huan Winery Holding Co. in P.
      R.
      China where she has worked for the past four years. Prior work experience
      includes four years at Fei Huan Group where she functioned as a sales
      manager.





Ms.
      Zhao
      gained her Bachelor degree in Jiang Xi Economic Management College for business
      management in 1994.




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





26
 Table
          of Contents





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-KSB, any failure to comply
      therewith during the fiscal year ended December 2007. 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.




Item 10.
      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, 2007, 2006
      and 2005, 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,
                Chief Executive Officer and Chairman
            2007
            0
            0
            0
            0
            0
            0
            0
            02006
            0
            0
            0
            0
            0
            0
            0
            02005
            0
            0
            0
            0
            0
            0
            0
            0Huang,
                Xiao Yun
              Chief
                Executive Officer
            2007
            0
            0
            0
            0
            0
            0
            0
            02006
            0
            0
            0
            0
            0
            0
            0
            02005
            0
            0
            0
            0
            0
            0
            0
            0





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.




27
 Table
          of Contents




Item 11.
      Security Ownership of Certain Beneficial Owners and
      Management




As
      of
      December 31, 2007, we had 3,715 stockholders of record and 36,129,689 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 4, 2008, we had 3,715 stockholders of record and 36,129,689 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 4, 2008, 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 36,129,689
      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 4,
      2008.





OFFICERS,
      DIRECTORS AND BENEFICIAL OWNERS, AS OF APRIL 4, 2008





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 (three
                persons)
            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 (three
                persons)
            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
            Huang,
                Xiao Yun
              Dormitory
                FeiHuan, NanFeng County, JiangXi
                Province,P.R.China   344500
            74,448
            **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 (five 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.





Item 12.
      Certain Relationships and Related Transactions.




As
        of
        December 31, 2007, the assets acquired from the related party included equipment
        of approximately $290,000, building of approximately $535,000 and land of
        approximately $368,000.




Item 13.
      Exhibits.







(a)
            Financial
                Statements




1.
      The
      following financial statements of China Fruits Corp. are included in Part II,
      Item 7:





Independent
      Auditors’ Report..........................................................  13


Balance
      Sheet-December 31, 2007...................................................   14


Statements
      of Operations - for years ended December 31, 2007 and 2006......   
15


Statements
      of Cash Flows - for years ended December 31, 2007 and 2006.....   
16


Statements
      of Stockholders’ Equity - for years ended


December
      31, 2007 and 2006...........................................................  17


Notes
      to
      Financial Statements..........................................................   18-24




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








(b)
            Reports
                on Form 8-K





(1)
            On
                February 19, 2007, we filed a current report on Form 8-K to announce
                that
                we entered into an agreement with Huangjia Nanfeng Tangerine Orange
                Co.
                Ltd. (“Huangjia Nanfeng”), to acquire the assets and businesses of
                Huangjia Nanfeng to assist in further expansion in the orange
                markets.(2)
            On
                March 12, 2007, we filed a current report on Form 8-K to announce
                that we
                entered into a winery agreement and a series of sales agreements
                regarding
                oranges sales in 2007.(3)
            On
                April 12, 2007, we filed an amendment to the 8-K report dated February
                19,
                2007 correcting the description of the acquisition.(4)
            On
                September 28, 2007, we filed a current report on Form 8-K to announce
                the
                resignation of our former principal independent
                auditor.(5)
            On
                October 3, 2007, we filed an amendment to the 8-K report dated September
                28, 2007 in connection with the resignation of our former principal
                independent auditor.


(6)
            On
                October 26, 2007, we filed a current report on Form 8-K to announce
                the
                engagement of our current principal independent
                auditor.(7)
            On
                January 28, 2008, we filed a current report on Form 8-K to announce
                an
                approval from Chinese government in connection with the incorporation
                of a
                wholly-owned subsidiary, Tai Na International Fruits (Bei Jing) Co.
                Ltd.,
                which is located in Bei Jing, People's Republic of
                China.




28
 Table
          of Contents




Item 14.
      Principal Accountant 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, Zhong Yi (Hong Kong) C.P.A. Company Ltd.
      (“Zhong Yi”), for our audit of the annual financial statements for the year
      ended December 31, 2006. We have changed our independent auditor to Lake &
Associates CPA’s LLC (“Lake”) for our audit of the annual financial statements
      for the year ended December 31, 2007. Audit fees and other fees of auditors
      are
      listed as follows:





Year
                Ended December 31
            
            2007
            
            
            
            2006Lake
            
            
            
            Zhong
                YiAudit
                Fees (1)
            
            $
            40,000
            
            
            (3)
            
            $
            45,000
            
            
            (2)Audit-Related
                Fees (4)
            
            
            --
            
            
            
            
            
            --Tax
                Fees (5)
            
            
            --
            
            
            
            
            
            --All
                Other Fees (6)
            
            
            --
            
            
            
            
            
            --Total
                Accounting Fees and Services
            
            $
            40,000
            
            
            
            
            $
            45,000




(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-QSB, and for services that are normally provided
                in
                connection with statutory and regulatory filings or
                engagements.




(2)
            The
                amounts shown for Zhong Yi in 2006 relate to (i) the audit of our
                annual
                financial statements for the fiscal year ended December 31, 2006,
                and (ii)
                the review of the financial statements included in our filings on
                Form
                10-QSB for the second and third quarters of
                2006.




(3)
            The
                amounts shown for Lake in 2007 relate to (i) the audit of our annual
                financial statements for the fiscal year ended December 31, 2007,
                and (ii)
                the review of the financial statements included in our filings on
                Form
                10-QSB for the third quarter of
                2007.




(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, 2007, 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.





29




SIGNATURES




In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      hawse have 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, 2008
            
            /s/
                  Chen, Quan LongChen,
                Quan LongPresident