U.S.
Securities and Exchange Commission

Washington,
D.C. 20549





FORM
10-K/A

Amendment
No. 1





|[X] | Annual
    Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2010
|--- | ------------------------------------------------------------------------------------------------------------------------------



|[
      ] | 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 registered
|----------------------- |  | -----------------------------------------------------------------
|                        |  |                                                                  
|None                    |  | Not
    Applicable                                               



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



Common
Stock, $.001 par value

(Title
of Class)



Indicate
by check mark if the registrant is a well-know seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes
[ ]	No [x]



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes
[ ]	No [x]



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes
[x]	No [ ]



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding
12 months (or such shorter period that the registrant was required to submit and post such files).

Yes
[ ]	No [ ]



Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this Chapter) is not contained
herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy of information statements
incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K.

Yes
[ ]	No [x]



Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.



|Large accelerated filer   | £                                              
|------------------------- | -----------------------------------------------
|Non-accelerated filer     | £(Do not check if a smaller reporting company)
|Accelerated filer         | £                                              
|Smaller reporting company | x                                              



Indicate
by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the exchange act).

Yes
[ ] 	No [x]



The
Registrant’s revenues for its fiscal year ended December 31, 2010 were $1,807,471.



The
aggregate market value of the voting stock on April 12, 2011 (consisting of Common Stock, $0.001 par value per share) held by
non-affiliates was approximately $762,285 based upon the most recent sales price ($0.02) for such Common Stock on said date April
12, 2011, there were 38,779,689 shares of our Common Stock issued and outstanding, of which approximately 38,114,273 shares were
held by non-affiliates.



Number
of shares of common stock, par value $.001, outstanding as of April 12, 2011: 38,779,689

Number
of shares of preferred stock outstanding as of April 12, 2011:

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

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





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Table of Contents






DOCUMENTS
INCORPORATED BY REFERENCE



None

EXPLANATORY
NOTE



This
Annual Report on Form 10-K/A is being filed as Amendment No. 1 to our Annual Report on Form 10-K/A for the fiscal year ended December
31, 2010.  The Form 10-K was originally filed with the Securities and Exchange Commission on April 15, 2011.



On
April 15, 2011, our management concluded that the audited consolidated financial statements for the fiscal year ended December
31, 2009 could no longer be relied upon due to improper presentation in the consolidated statements of operations and the consolidated
statements of cash flows regarding the issues from discontinued operations. Specifically, the expenses from discontinued
operation should not be within the operating expenses from continued operation for the year ended December 31, 2009 according
to ASC 205-20, Discontinued Operations, and cash flows from operating, investing and financing activities of the discontinued
operations should not be within the operating cash flow category for the year ended December 31, 2009 according to ASC 230, Statement
of Cash Flows. On April 28 2011, we filed a Current Report on Form 8-K disclosing the need to restate our financials and the reasons
for the restatement.



In
addition, this Amendment No. 1 is being filed to incorporate certain changes to our financial statements and corresponding amendments
to the Item entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”





CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION



The
discussion contained in this 10-K/A under the Securities Exchange Act of 1934, as amended, contains forward-looking statements
that involve risks and uncertainties. The issuer's actual results could differ significantly from those discussed herein. These
include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases
such as "anticipate," "expect," "intend," "plan," "will," "we believe,"
"the Company believes," "management believes" and similar language, including those set forth in the discussions
under "Notes to Financial Statements" and "Management's Discussion and Analysis or Plan of Operation" as well
as those discussed elsewhere in this Form 10-K/A. We base our forward-looking statements on information currently available to
us, and we assume no obligation to update them. Statements contained in this Form 10-K/A 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.





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Table of Contents








TABLE
OF CONTENTS





|PART I:  |                           |   
|-------- | ------------------------- | --
|
|Item 1.  | Business                  | 5 
|Item 1A. | Risk Factors              | 9 
|Item 1B. | Unresolved Staff Comments | 13
|Item 2.  | Properties                | 13
|Item 3.  | Legal Proceedings         | 13
|Item 4.  | (Removed and Reserved)    | 13
|         |                           |   



|PART II:    |                                                                                                                  |   
|----------- | ---------------------------------------------------------------------------------------------------------------- | --
|Item 5.     | Market for Registrant’s Common
    Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 14
|Item 6.     | Selected Financial Data                                                                                          | 16
|Item 7.     | Management’s Discussion and Analysis of Financial
    Condition and Results of Operations                        | 16
|Item 7A.    | Quantitative and Qualitative Disclosures About Market Risk                                                       | 19
|Item 8.     | Financial Statements and Supplementary Data                                                                      | 20
|Item 9.     | Changes in and Disagreements with Accountants on Accounting
    and Financial Disclosure                         | 38
|Item 9A.    | Controls and Procedures                                                                                          | 38
|Item 9A(T). | Controls and Procedures                                                                                          | 38
|Item 9B.    | Other Information                                                                                                | 38
|            |                                                                                                                  |   





|PART III: |                                                                                                    |   
|--------- | -------------------------------------------------------------------------------------------------- | --
|Item 10.  | Directors, Executive Officers and Corporate
    Governance                                         | 39
|Item 11.  | Executive Compensation                                                                             | 40
|Item 12.  | Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters | 40
|Item 13.  | Certain Relationships and Related Transactions, and Director
    Independence                      | 41
|Item 14.  | Principal Accounting Fees and Services                                                             | 41
|          |                                                                                                    |   





|PART IV: |                                         |   
|-------- | --------------------------------------- | --
|Item 15. | Exhibits, Financial Statement Schedules | 42







|SIGNATURES: | 43
|----------- | --
|            |   



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Table of Contents








ITEM
1. BUSINESS



History



As
used herein the terms "We", the "Company", "CHFR", the "Registrant," or the "Issuer"
refers to China Fruits Corporation, its subsidiary and predecessors, unless indicated otherwise. We were incorporated in the State
of Delaware on January 6, 1993, as Vaxcel, Inc. On December 19, 2000, we changed our name to eLocity Networks Corporation. On
August 6, 2002, we changed our name to Diversified Financial Resources Corporation. In May 2006, our board decided to redomicile
from the State of Delaware to the State of Nevada. Their decision was approved by the holders of a majority of the voting rights
and common stock. On August 18, 2006, we changed our name to China Fruits Corporation.



We
began operating as a holding company in 2005. The primary objectives involved creating and managing a comprehensive portfolio
of companies in key industry sectors. We did not meet our primary objectives in 2005.  As a result, during 2005 we decided
to 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 (“PRC”),
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 and other fresh fruits 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 self-owned property in Nan Feng County with a total area of 742,901 square feet, including manufacturing
plants of 238,609 square feet and office building of 70,350 square feet. In order to effectively maintain the quality of tangerine,
we have a set of temperature and humidity auto-control equipments with capacity of 1,500 tons. We also have two automatic product
lines to select fruits, the hourly process capacity of which is 10 ton/hour and 15 ton/hour, respectively. We expect the production
capacity will reach 3,000 tons in 2011.



Since
2007, we have expanded our sales network by setting up the franchise retail stores for fresh fruits and related products. We also
relocated our headquarters to Beijing, which we believe will have a positive effect on our corporate image and marketing strategy.
In order to create our brand identity efficiently, we plan to acquire or form joint venture with the existing profitable and middle-size
retail stores. We provide the stores with our standard management systems, supplies, as well as remodeling to unify store display,
color and sign pursuant to the franchise requirements. As of December 31, 2010, there were four wholly-owned franchise retail
stores in Beijing area. In addition to the original store located in Panjia Garden Beijing, we had three stores opened during
the third quarter of 2010, which were located at Feng Tai District, He Ping Li and Xi Zhi Men area, Beijing.



The
franchise retail stores build up the direct channel between the end users and us, which facilitates the process from our manufacturing
plants to the markets, benefits us in adjusting our business strategies when market changes. In addition to our own products,
we also work with our strategic partners to diversify the fruits in our store and ensure the prompt delivery. We believe we can
expand our market shares through an effective and efficient franchise retail network. We expect more market shares via brand recognition
in the near future.



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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:



|* | Changes
    in Market Shares. Before the 1990s, approximately 70% of total citrus output was tangerine, 20% of the total were oranges. The
    percentages were changed to 55% for tangerine and 30% for orange in the past decade due to the improved quality of oranges with
    respect to size, outlook and taste.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|* | Concentration
    on Chinese Market. Citrus products are primarily marketed in China. Approximately 2% of total citrus products are exported to
    different countries.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|* | 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.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



In
general, citrus output increased tremendously in China in the past decades due to the increases in orchards. However, compared
to the world's market, the citrus industry in China is undeveloped in terms of quality, output, manufacture and efficiency. There
are four barriers in China's citrus industry: a) small manufacturing magnitude, primarily based on household; b) lack of technology
input, primarily based on nature growth; c) undeveloped commercial systems, particularly in storage and transportation; d) no
clear segments in the industry, particular in household base. It is a long-term goal to rid us of all these barriers. After China
entered the World Trade Organization ("WTO"), the sales channels for citrus products should be more facilitated due
to the open markets. In the long run, the export of Chinese citrus will increase constantly, for both fresh fruits and processed
products.



Marketing
Strategies



Expanding
Retail Fruit Stores Network



We
believe franchise retail stores will benefit us in our business expansion. We plan to expand our sales network by opening up to
30 franchise retail stores for fresh fruit and related products in 2011, of which 10 stores will be directly owned and operated,
and 20 stores will be operated in form of joint ventures with the existing profitable and middle-size retail stores. We provide
the stores with our standard management systems, supplies, as well as remodeling to unify store display, color, and sign pursuant
to the franchise requirements. As of December 31, 2010, there were four wholly-owned franchise retail stores in Beijing area.
In addition to the original store located in Panjia Garden Beijing, we had three stores opened during the third quarter of 2010,
which were located at Feng Tai District, He Ping Li and Xi Zhi Men area, Beijing. The franchise retail stores will help build
a direct channel between the end users and us, which will facilitate the process of moving product from our plants to the markets,
and benefitting us in adjusting our business strategies when markets change.



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Improving
Management Systems



We
have run retail fruit stores since 2007, experiencing economic boom and financial crisis, from which we summarize three key success
factors, including good location, prompt delivery system and sophisticated leader. If good location is predetermined, prompt delivery
and sophisticated leader will be significantly related to our management system. We will standardize our operating system; provide
our employees with clear indicators in connection with sales skill, products display, storage, delivery, and marketing promotion.
We will set up different modules to evaluate the store performance and employee performance. We believe an effective operating
system will improve efficiency and encourage our employees.



Seeking
for Opportunities to Develop International Markets



Our
tangerines, known as "Nan Feng tangerine", are popular in the market due to the high quality, benefitting from the natural
resources in Nan Feng County, which is a well known agricultural area for tangerines in China. Currently, we primarily market
in China and hold a leading position in the Chinese market. However, this position is challenged since China’s accession
to WTO in 2001. We believe the open-market policies will lower the barriers to entry, both in Chinese markets and global markets.
WTO membership brought with it the opportunity to take advantage of new market access opportunities and new protections now available
to China under the rules-based system of the WTO. In order to develop our international markets, we set up a department in charge
of oversea markets in 2010, which included 4 full-time employees and 2 part-time employees. Our target markets including Europe,
Middle-east, and Southeast Asia. In 2010, we sold approximately 25 tons of tangerine to Dubai, which was good start for our international
trade. We believe there is great growth potential in international markets and we will keep looking for the opportunities oversea.



Seeking
for Opportunities to Develop e-Commerce Business



The
Internet and Internet-related markets in China are rapidly evolving. There are many companies in the domestic and international
markets that distribute online content, online shopping, and value-added telecommunications services targeting Chinese users.
We believe e-commerce will be one of our opportunities to increase our sales revenues. Accordingly, we set up an IT department
in 2010, which is devoted to develop, maintain and upgrade our website (www.guoq.cn) for e-Commerce. We expect the total budget
for website development, marketing and promotion will be approximately $40,000 and generate revenues of approximately $150,000
in 2011.



Seeking
for Strategic partners



For
Nan Feng tangerine, other fresh fruit and certain related products, we intend to enter into collaborative arrangements with third
parties. These collaborations may be necessary in order for us to:



•
	Enhance manufacturing capacities;



•	Setup
franchise retail stores in our target markets located in North China, East China and South China;



•
	Diversify the fresh fruit sold in the franchise stores;



•
	Expand the sales network;



•
	Increase sales revenue; and



•
	Successfully build brand identity.





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Enhancing
Manufacture Capacity



We
have self-owned property in Nan Feng County with a total area of 742,901 square feet, including manufacturing plants of 238,609
square feet and office building of 70,350 square feet. In order to effectively maintain the quality of tangerine, we have a set
of temperature and humidity auto-control equipments with capacity of 1,500 tons. We also have two automatic product lines to select
fruits, the hourly process capacity of which is 10 ton/hour and 15 ton/hour, respectively. We expect the production capacity will
reach 3,000 tons in 2011.



Increasing
Expenses in Marketing



We
plan to increase the budget in advertising to support our franchise retail stores, which will cover our target markets including
Beijing - North China, Haining, Hangzhou - East China, and Dongguang, Humen - South China. In addition, we retain professional
consultants to integrate our marketing strategies. We believe their expertise will benefit us in connection with target markets
definition, corporate image, brand identity and media preference.



Competition



The
domestic and international markets for the citrus industry are intensely competitive and require us to compete against some companies
possessing greater financial, marketing and other resources than ours. These include firms that compete in multiple geographic
areas as well as firms that are primarily local in their operation. Competitive products include different fruits planted in domestic
market and those imported from Southeast Asia, Japan, Taiwan, Europe, US and Canada. Competitive factors impacting our business
include pricing, advertising, sales promotions, product innovation, increased efficiency in production techniques, the introduction
of new packaging, and brand/trademark development and protection.



Our
competitive strengths include good quality with a high level of consumer acceptance; a national distribution network; sophisticated
marketing capabilities; and a talented group of dedicated employees. However, we cannot be certain that efforts in marketing will
be successful.



Government
Regulation



The
production, distribution and sale in the Chinese market of our products are subject to the PRC State Food, Drug, and Cosmetic
Act, state consumer protection laws, the Occupational Safety and Health Act, various environmental statutes; and various other
state and local statutes and regulations applicable to the production, transportation, sale, safety, advertising, labeling and
ingredients of such products.



Employees



We
have to make a rational allocation and use of personnel due to the global financial crisis. As of December 31, 2010, we had 74
full-time employees, of which 35 are experienced personnel in franchising management, export trading and purchasing.





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ITEM
1A. RISK FACTORS



In
addition to the other information set forth in this report, you should carefully consider the following factors, which could materially
affect our business, financial condition or future results. The risks described below are not the only risks facing us. Additional
risks and uncertainties not currently known to us or that we currently deems to be immaterial also may materially adversely affect
our business, financial condition or results of operations.





We
rely on its strategic partners for a significant portion of its business. If we are unable to maintain good relationships with
its strategic partners, our business could suffer



For
Nan Feng tangerine, other fresh fruit and certain related products, we intend to enter into collaborative arrangements with third
parties. These collaborations may be necessary in order for us to:



•
	Enhance manufacturing capacities;



•	Setup
franchise retail stores in our target markets located in North China, East China and South China;



•
	Diversify the fresh fruit sold in the franchise stores;



•
	Expand the sales network;



•
	Increase sales revenue; and



•
	Successfully build brand identity.



We
cannot assure that we will be able to enter into collaborative agreements with partners on terms favorable to us, or at all, and
any future agreement may expose us to risks that our partner might fail to fulfill its obligations and delay commercialization
of our products. We also could become involved in disputes with partners, which could lead to delays in or terminations of our
development and commercialization programs and time consuming and expensive litigation or arbitration. Our inability to enter
into additional collaborative arrangements with other partners, or our failure to maintain such arrangements, would limit the
number of product candidates which we could develop and ultimately, decrease our sources of any future revenues.



Increase
in cost, disruption of supply or shortage of raw materials could harm our business.



The
output of tangerine significantly relies on the local climate. The shortage of tangerine would increase our operating costs and
could reduce our profitability. Increases in the prices of our finished products resulting from higher raw material costs could
affect affordability in some markets and reduce our sales. An increase in the cost or a sustained interruption in the supply or
shortage of the tangerine that may be caused by natural disasters could negatively impact our net revenues and profits.



Adverse
weather conditions could reduce the demand for our products.



The
sales of our products are influenced to some extent by weather conditions in the markets in which we operate. Unusually cold weather
during the summer months may have a temporary effect on the demand for our products and contribute to lower sales, which could
have an adverse effect on our results of operations for those periods.



If
we are unable to maintain brand identity and product quality, our business may suffer.



Our
success depends on our ability to maintain brand identity for our "Nan Feng Tangerine". We cannot assure you, however,
that additional expenditures and our renewed commitment to advertising and marketing will have the desired impact on our products'
brand image and on consumer preferences. Product quality issues, real or imagined, or allegations of product contamination, could
tarnish the image of the affected brands and may cause consumers to choose other products.



Changes
in accounting standards and taxation requirements could affect our financial results.



New
accounting standards or pronouncements that may become applicable to us from time to time, or changes in the interpretation of
existing standards and pronouncements, could have a significant effect on our reported results for the affected periods. We are
also subject to income tax in China in which we generate net operating revenues. In addition, our products are subject to sales
and value-added taxes in China. Increases in income tax rates could reduce our after-tax income from affected jurisdictions, while
increases in indirect taxes could affect our products' affordability and therefore reduce demand for our products.



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.



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Political
and economic risks



China
is a developing country with a young market economic system overshadowed by the state. Its political and economic systems are
very different from the more developed countries and are still in the stage of change. China also faces many social, economic
and political challenges that may produce major shocks and instabilities and even crises, in both its domestic arena and in its
relationship with other countries, including but not limited to the United States. Such shocks, instabilities and crises may in
turn significantly and adversely affect our performance.



Risks
related to interpretation of China laws and regulations which involves significant uncertainties



China’s
legal system is based on written statutes and their interpretation by the Supreme People’s Court. Prior court decisions
may be cited for reference but have limited value as precedents. Since 1979, the Chinese government has been developing a comprehensive
system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters
such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, because these laws and
regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack
of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. In addition,
as the Chinese legal system develops, we cannot assure that changes in such laws and regulations, and their interpretation or
their enforcement will not have a material adverse effect on our business operations.



Fluctuations
in the exchange rate could have a material adverse effect upon our business.



We
conduct our business in the Renminbi. The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and
is affected by, among other things, changes in political and economic conditions. On July 21, 2005, the PRC government changed
its decade old policy of pegging its currency to the U.S. currency. Under the current policy, the Renminbi is permitted to fluctuate
within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an approximately
6.5% appreciation of the Renminbi against the U.S. dollar between July 21, 2005 and August 31, 2007. However, there remains
significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in
a further and more significant appreciation of the RMB against the U.S. dollar. To the extent our future revenues are denominated
in currencies other the United States dollars, we would be subject to increased risks relating to foreign currency exchange rate
fluctuations which could have a material adverse affect on our financial condition and operating results since our operating results
are reported in United States dollars and significant changes in the exchange rate could materially impact our reported earnings.



Declining
economic conditions could negatively impact our business



Our
operations are affected by local, national and worldwide economic conditions.  Markets in the United States and elsewhere
have been experiencing extreme volatility and disruption for more than 12 months, due in part to the financial stresses affecting
the liquidity of the banking system and the financial markets generally.  In recent weeks, this volatility and disruption
has reached unprecedented levels.  The consequences of a potential or prolonged recession may include a lower level
of economic activity and uncertainty regarding energy prices and the capital and commodity markets. While the ultimate outcome
and impact of the current economic conditions cannot be predicted, a lower level of economic activity might result in a decline
in energy consumption, which may adversely affect the price of oil, liquidity and future growth.  Instability in the
financial markets, as a result of recession or otherwise, also may affect the cost of capital and our ability to raise capital.



You
may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in
China based on United States or other foreign laws against us, our management or the experts named in this current report.



We
conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, most
of our senior executive officers reside within China. As a result, it may not be possible to effect service of process within
the United States or elsewhere outside of China upon our senior executive officers, including with respect to matters arising
under U.S. federal securities laws or applicable state securities laws. Moreover, our PRC counsel has advised us that the PRC
does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement
of judgment of courts.





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We
face risks related to health epidemics and other outbreaks.



Our
business could be adversely affected by the effects of SARS or another epidemic or outbreak. China reported a number of cases
of SARS in April 2004. Any prolonged recurrence of SARS or other adverse public health developments in China may have a material
adverse effect on our business operations. For instance, health or other government regulations adopted in response may require
temporary closure of our production facilities or of our offices. Such closures would severely disrupt our business operations
and adversely affect our results of operations. We have not adopted any written preventive measures or contingency plans to combat
any future outbreak of SARS or any other epidemic.



To
date, we have not paid any cash dividends and no cash dividends will be paid in the foreseeable future.



We
do not anticipate paying cash dividends on our common stock in the foreseeable future and we may not have sufficient funds legally
available to pay dividends. Even if the funds are legally available for distribution, we may nevertheless decide not to pay any
dividends. We intend to retain all earnings from our operations.



The
application of the "penny stock" rules could adversely affect the market price of our common stock and increase your
transaction costs to sell those shares.



As
long as the trading price of our common shares is below $5 per share, the open-market trading of our common shares will be subject
to the "penny stock" rules. The "penny stock" rules impose additional sales practice requirements on broker-dealers
who sell securities to persons other than established customers and accredited investors (generally those with assets in excess
of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules,
the broker-dealer must make a special suitability determination for the purchase of securities and have received the purchaser's
written consent to the transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt,
the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed by the Securities and Exchange Commission
relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and
the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent
price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers may restrict the ability
or decrease the willingness of broker-dealers to sell our common shares, and may result in decreased liquidity for our common
shares and increased transaction costs for sales and purchases of our common shares as compared to other securities.



Our
common shares are thinly traded and, you may be unable to sell at or near ask prices or at all if you need to sell your shares
to raise money or otherwise desire to liquidate your shares.



Our
common shares have historically been sporadically or "thinly-traded" on the “Over-the-Counter Bulletin Board”,
meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively
small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which
is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate
or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be
reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we
became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will
generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or
more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.



The
market price for our common stock is particularly volatile given our status as a relatively small company with a small and thinly
traded “float” and lack of current revenues that could lead to wide fluctuations in our share price. The price at
which you purchase our common stock may not be indicative of the price that will prevail in the trading market. You may be unable
to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.



The
market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect
that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our
share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and/or thinly traded.
As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately
influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in
the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned
issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or "risky"
investment due to our lack of revenues or profits to date and uncertainty of future market acceptance for our current and potential
products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their
investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly
and at greater discounts than would be the case with the stock of a seasoned issuer. The following factors may add to the volatility
in the price of our common shares: actual or anticipated variations in our quarterly or annual operating results; adverse outcomes,
additions or departures of our key personnel, as well as other items discussed under this "Risk Factors" section, as
well as elsewhere in this Current Report. Many of these factors are beyond our control and may decrease the market price of our
common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing
market price for our common shares will be at any time, including as to whether our common shares will sustain their current market
prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the
prevailing market price.



Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns
of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and
misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5)
the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level,
along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the
abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical
limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns
or practices could increase the volatility of our share price.



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Volatility
in our common share price may subject us to securities litigation.



The
market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect
that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs
have often initiated securities class action litigation against a company following periods of volatility in the market price
of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management's attention and resources.



Our
corporate actions are substantially controlled by a single stockholder.



Chen,
Quan Long currently owns approximately 100% of our outstanding Series A and B Preferred shares, representing a majority of our
voting power. This stockholder could exert substantial influence over matters such as electing directors and approving mergers
or other business combination transactions. In addition, because of the percentage of ownership and voting concentration in the
principal stockholder, elections of our board of directors will generally be within the control of this stockholder. While all
of our shareholders are entitled to vote on matters submitted to our shareholders for approval, the concentration of shares and
voting control presently lies with this principal stockholder. As such, it would be extremely difficult for shareholders to propose
and have approved proposals not supported by the Chen, Quan Long. There can be no assurances that matters voted upon by the Chen,
Quan Long will be viewed favorably by all shareholders of our company.



We
may need additional capital, and the sale of additional shares or other equity securities could result in additional dilution
to our shareholders.



We
may require additional cash resources due to changed business conditions or other future developments, including any investments
or acquisitions we may decide to pursue. If our resources are insufficient to satisfy our cash requirements, we may seek to sell
additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional
dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result
in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available
in amounts or on terms acceptable to us, if at all.



PRC
laws and regulations governing our business are uncertain. If we are found to be in violation, we could be subject to sanctions.
In addition, changes in such PRC laws and regulations may materially and adversely affect our business.



There
are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited
to, the laws and regulations governing our business. We are considered a foreign person or foreign invested enterprise under PRC
law. As a result, we are subject to PRC law limitations on foreign ownership of Chinese companies. These laws and regulations
are relatively new and may be subject to change, and their official interpretation and enforcement may involve substantial uncertainty.
The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign
investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.



The
PRC government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business
and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us
by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the
interpretation of existing or new PRC laws or regulations on our businesses. We cannot assure you that our current ownership and
operating structure would not be found in violation of any current or future PRC laws or regulations. As a result, we may be subject
to sanctions, including fines, and could be required to restructure our operations or cease to provide certain services. Any of
these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial portion
of our business operations, which could materially and adversely affect our business, financial condition and results of operations.





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ITEM
1B. UNRESOLVED STAFF COMMENTS



None.



ITEM
2. PROPERTIES



We
are headquartered in Beijing, PRC which has office area of 2,260 square feet. Our office is under a three-year lease agreement
with annual rental payment of approximately $35,000. This space is adequate for our present operations. No other businesses operate
from this office. We also lease 4 stores and 1 warehouse in Beijing area for retail business, of which the total store area is
6,800 square feet with annual rental payment of approximately $196,000, and the warehouse area is 1,300 square feet with annual
rental payment of approximately $3,000.



Our
main operation is located in the Fu Xi Technology & Industry Park, Nan Feng County, Jiang Xi Province, People’s Republic
of China, which is self-owned property with a total area of 742,901 square feet, including manufacturing plants with total area
of 238,609 square feet and office building with total area of 70,350 square feet. This space is adequate for our present operations.
No other businesses operate from this office.



There
is no private ownership of land in China; all land ownership is held by the government of China, its agencies and collectives.
Land use rights are obtained from government for periods ranging from 50 to 70 years, and are typically renewable. Land use rights
can be transferred upon approval by the land administrative authorities of China (State Land Administration Bureau) upon payment
of the required transfer fee.



ITEM 3.
LEGAL PROCEEDINGS



We
may be subject to, from time to time, various legal proceedings relating to claims arising out of our operations in the ordinary
course of our business. We are not currently a party to any legal proceedings, the adverse outcome of which, individually or in
the aggregate, would have a material adverse effect on the business, financial condition, or results of operations of the Company.



ITEM 4.
(REMOVED AND RESERVED)





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PART
II



ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES



Trading
Market for Common Equity



Our
common stock is quoted on the Electronic Bulletin Board under the symbol, CHFR. Trading of our common stock in the over-the-counter
market has been limited and sporadic and the quotations set forth below are not necessarily indicative of actual market conditions.
Further, these prices reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily reflect
actual transactions. The following tables set forth the high and low sale prices for our common stock as reported on the Electronic
Bulletin Board for the periods indicated.



|Interim
    Period                      |  | Low |       | High
|--------------------------------------- |  | --- | ----- | ----
|Interim
    Period ended March 31, 2011 |  | $   | 0.03  |     
|                                        |  |     |       |     
|Fiscal
    2010                         |  |     |       |     
|Quarter ended March 31, 2010            |  | $   | 0.055 |     
|Quarter ended June 30, 2010             |  | $   | 0.045 |     
|Quarter ended September 30, 2010        |  | $   | 0.032 |     
|Quarter ended December 31, 2010         |  | $   | 0.035 |     
|                                        |  |     |       |     
|Fiscal
    2009                         |  |     |       |     
|Quarter ended March 31, 2009            |  | $   | 0.04  |     
|Quarter ended June 30, 2009             |  | $   | 0.06  |     
|Quarter ended September 30, 2009        |  | $   | 0.07  |     
|Quarter ended December 31, 2009         |  | $   | 0.05  |     





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. A Certificate
of Designation was filed with the Nevada Secretary of State accordingly.



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.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Number
of Holders



As of
April 12, 2011, we had 3,630 common shareholders of record.



Securities
Authorized for Issuance Under Equity Compensation Plans



As
of the date of this Report, we have not authorized any equity compensation plan, nor has our Board of Directors authorized the
reservation or issuance of any securities under any equity compensation plan.



Recent
Sales of Unregistered Securities; Use of Proceeds from Registered Securities



As
of January 12, 2010, the Company entered into an Offshore Subscription Agreement with Mr. Huang, Junjie (“Mr. Huang”),
in order to subscribe to and purchase nine hundred thousand shares (900,000) of restricted common stock of CHFR (the “Huang
Shares”). Mr. Huang agreed to purchase the Huang Shares at a purchase price of twenty cents (US$.20) per share (aggregate
sum of $180,000).



Pursuant
to the Offshore Subscription Agreement, we issued 900,000 common shares to Mr. Huang, Junjie at $0.20 per share for an aggregate
price of $180,000.  We will use the proceeds from this offering for working capital purposes.  We relied on
exemptions provided by Section 4(2) of the Securities Act of 1933, as amended. We made this offering based on the following facts:
(1) the issuance was an isolated private transaction which did not involve a public offering; (2) there was only one offeree,
(3) the offeree has agreed to the imposition of a restrictive legend on the face of the stock certificate representing the shares
indicating the stock cannot be resold unless registered or an exemption from registration is available; (4) the offeree was a
sophisticated investor familiar with our company and stock-based transactions; (5) there were no subsequent or contemporaneous
public offerings of the stock; (6) the stock was not broken down into smaller denominations; and (7) the negotiations for the
sale of the stock took place directly between the offeree and our management.



Purchases
of Equity Securities by the Small Business Issuer and Affiliated Purchasers



None.



Transfer
Agent



Our
transfer agent is Guardian Registrar & Transfer, Inc. located at 7951 SW 6th Street, Suite 216, Plantation, Florida 33324.



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ITEM
6. SELECTED FINANCIAL DATA



If
the registrant qualifies as a smaller reporting company as defined by Rule 229.10(f)(1), it is not required to provide the information
required by this Item.



ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION



Forward
Looking Statements



Certain
statements in this report, including statements of our expectations, intentions, plans and beliefs, including those contained
in or implied by "Management's Discussion and Analysis" and the Notes to Consolidated Financial Statements, are "forward-looking
statements", within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that are subject to certain events, risks and uncertainties that may be outside our control. The words “believe”,
“expect”, “anticipate”, “optimistic”, “intend”, “will”, and similar
expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements.
These forward-looking statements include statements of management's plans and objectives for our future operations and statements
of future economic performance, information regarding our expansion and possible results from expansion, our expected growth,
our capital budget and future capital requirements, the availability of funds and our ability to meet future capital needs, the
realization of our deferred tax assets, and the assumptions described in this report underlying such forward-looking statements.
Actual results and developments could differ materially from those expressed in or implied by such statements due to a number
of factors, including, without limitation, those described in the context of such forward-looking statements, our expansion strategy,
our ability to achieve operating efficiencies, our dependence on distributors, capacity, suppliers, industry pricing and industry
trends, evolving industry standards, domestic and international regulatory matters, general economic and business conditions,
the strength and financial resources of our competitors, our ability to find and retain skilled personnel, the political and economic
climate in which we conduct operations and the risk factors described from time to time in our other documents and reports filed
with the Securities and Exchange Commission (the "Commission"). Additional factors that could cause actual results to
differ materially from the forward-looking statements include, but are not limited to: 1) our ability to successfully develop
and deliver our products on a timely basis and in the prescribed condition; 2) our ability to compete effectively with other companies
in the same industry; 3) our ability to raise sufficient capital in order to effectuate our business plan; and 4) our ability
to retain our key executives.



Critical
Accounting Policies



Revenue
recognition



The
Company derives revenues from the resale of tangerine and other fresh fruits purchased from third parties, net of value added
taxes (“VAT”).  The Company is subject to VAT which is levied on the majority of the products of the Company
at the rate of 13% on the invoiced value of sales.  Output VAT is borne by customers in addition to the invoiced value
of sales and input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export
sales.



In
accordance with guidance issued by the FASB, the Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectability is
reasonably assured.  The Company’s sales arrangements are not subject to warranty.



The
Company recognizes revenue from the sale of products upon delivery to the customers and the transfer of title and risk of loss.
The Company did not record any product returns for the year ended December 31, 2010.



Inventory



Inventories
consist of finished goods and are valued at lower of cost or market value, cost being determined on the first-in, first-out method.  The
Company periodically reviews historical sales activity to determine excess, slow moving items and potentially obsolete items and
also evaluates the impact of any anticipated changes in future demand.  The Company provides inventory allowances based
on excess and obsolete inventories determined principally by customer demand.  The spoilage will be written-off directly
to the profit and loss when it occurs. As of December 31, 2010 and 2009, the Company did not record an allowance for obsolete
or spoiled inventories.



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Property,
Plant, and Equipment



Plant
and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated
on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after
taking into account their estimated residual values:



|                                     | Depreciable
    life |  | Residual
    value
|------------------------------------ | -------------------- |  | ------------------
|Plant
    and machinery              | 10-12
    years      |  | 5%                
|Furniture,
    fixture and equipment | 5-6
    years        |  | 5%                



Expenditure
for maintenance and repairs is expensed as incurred.





RESULTS
OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009



Revenues



Gross
revenues were $1,807,471 and $1,905,030 for the years ended December 31, 2010 and 2009, respectively, due primarily to sales of
fresh fruits and related products, including our signature tangerine. We recognize revenue when persuasive evidence of a sale
exists, transfer of title has occurred, the selling price is fixed or determinable and collectability is reasonably assured. Our
sales arrangements are not subject to warranty. We did not record any product returns for the year ended December 31, 2010. The
decrease in gross revenues by $97,559 in 2010 was due primarily to the decrease in tangerine output affected by the severe weather
in Nan Feng area. The temperature dropped significantly in the winter of 2010, which was the harvest period of our tangerine.



We
expect sales to increase during 2011 as our moves toward implementing our business plan, including the increase in franchise retail
stores, the increase in marketing budgets. We had three new stores opened in Beijing area during the third quarter of 2010. We
expect to open total 30 franchise retail stores in 2011 and expect to boost our revenues due to the increasing traffic.



Income
/ Loss



We
had net loss of $347,241 and $246,361 for the years ended December 31, 2010 and 2009, respectively. The increase in net loss by
$100,880 during the year of 2010 was due to the decrease in sales revenues in 2010. On the other hand, our cost of goods sold
increased as result of inflation. It is hard for us to increase the sales price against inflation due to the intensive competition
in the market.



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, 2010 and 2009 were $880,958 and $880,388, respectively. The operating expenses during
both years were approximately the same due primarily to the increase in selling and marketing expense in 2010 offset by the decrease
in general and administrative expenses. We adjusted our expenses budget periodically during the year according to the revenues.
The decrease in sales revenues pushed us to cut down the unnecessary expenses, such as travels, entertainment and bonus.



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, 2010, we had $1,485,643 in cost of goods sold,
or 82.2% of sales revenue. During the year ended December 31, 2009, we had $1,329,385 in cost of goods sold, or 69.8% of sales
revenue. The higher cost of goods sold as a percentage of revenue during 2010 was due to the increase in our purchase cost as
result of inflation. The gross margin of fresh fruits products typically ranges between 5-10%.



We
expect to reduce the cost of goods sold through collaboration with more non-related suppliers, which will also help us to reduce
the risk of concentration.



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Liquidity
and Capital Resources



Cash
flows used in operating activities were $99,224 and $176,760 for the years ended December 31, 2010 and 2009, respectively.
Negative cash flows from operations in 2010 were due primarily to the net loss of $347,241, plus the increase in inventories by
$155,496, and the decrease in account payables by $156,011, partially offset by the collection in accounts receivable by $246,948
and the increase in other payables and accrued liabilities in the amount of $151,992.



Negative
cash flows from operations in 2009 were due primarily to the net loss of $170,438 from continuing operation, plus the increase
in accounts receivable by $38,865, the increase in prepaid expenses and other current assets by $421,018, and the decrease in
other payables and accrued liabilities by $131,107, partially offset by the decrease in inventory by $145,818 and the increase
in accounts payable and tax payable, which were $151,736 and $242,408, respectively.



Cash
flows used in investing activities were $261,301 during the year ended December 31, 2010 due primarily to the purchase of property
and equipment in the amount of $25,810, and construction in progress of $238,077, slightly offset by the proceeds of $2,586 from
disposal of property and equipment. Comparatively, cash flows used in investing activities were $426,438 during the year ended
December 31, 2009, due primarily to the purchase of property and equipment in the amount of $439,291, offset by the proceeds of
$12,853 from disposal of property and equipment.



Cash
flows provided by financing activities were $193,862 and $496,089 for the years ended December 31, 2010 and 2009, respectively.
Cash flows from financing activities in 2010 were due primarily to the proceeds from notes payable of total $1,033,912, including
a note of $295,403 (RMB 2,000,000) bearing annual interest of 5.841% and due on September 5, 2011, and a note of $738,509 (RMB
5,000,000) bearing annual interest of 5.838% and due on October 25, 2011, partially offset by the advance to third party and payments
on notes payable in amount of $697,595 and $443,105, respectively. In addition, we had proceeds of $180,000 from the sales of
our common stock, which was priced at $.20 per share.



Cash
flows from financing activities in 2009 were due primarily to the third party loans of total $900,676, which consisted of a local
bank in total amount of $439,354 (RMB 3,000,000) bearing annual interest 5.841% and due on July 20, 2010, and four loans in total
amount of $461,322 (RMB 3,150,000) from local government, bearing no interest and paid back before November 30, 2012 and November
30, 2013, respectively, partially offset by the advance to third party and payments on notes payable in amount of $413,462 and
$549,342, respectively. In addition, we had proceeds of $350,000 from the sales of our common stock, which was priced at $.20
per share.



We
project that we will need additional capital to fund operations over the next 12 months. We anticipate we will need an additional
$500,000 in working capital during 2010 and $700,000 for the two years thereafter.



Overall,
we have funded our cash needs from inception through December 31, 2010 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 $312,218 on hand and a working capital of $1,112,937 as of December 31, 2010. 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 2011 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 in general,
and general economic conditions, which are cyclical in nature. Inasmuch as a major portion of our activities is the receipt of
revenues from the sales of our products, our business operations may be adversely affected by our competitors and prolonged recession
periods.



Our
success will be dependent upon implementing our plan of operations and the risks associated with our business plans. We manufacture,
trade and distribute fresh fruits, including our signature tangerine, to retail consumers and wholesale buyers. We plan to strengthen
our position in these markets. We also plan to expand our operations through aggressively marketing our products and our concept.



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ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We
do not use derivative financial instruments in our investment portfolio and has no foreign exchange contracts. Our financial instruments
consist of cash and cash equivalents, trade accounts receivable, accounts payable and long-term obligations. We consider investments
in highly liquid instruments purchased with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents.
However, in order to manage the foreign exchange risks, we may engage in hedging activities to manage our financial exposure related
to currency exchange fluctuation. In these hedging activities, we might use fixed-price, forward, futures, financial swaps and
option contracts traded in the over-the-counter markets or on exchanges, as well as long-term structured transactions when feasible.



Foreign
Exchange Rates



All
of our sales are denominated in Renminbi (“RMB”). As a result, changes in the relative values of U.S. Dollars and
RMB affect our reported levels of revenues and profitability as the results are translated into U.S. Dollars for reporting purposes.
Fluctuations in exchange rates between the U.S. dollar and RMB affect our gross and net profit margins and could result in
foreign exchange and operating losses.



Our
results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are
translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. Translation adjustments
resulting from this process are included in accumulated other comprehensive income in our statement of shareholders’ equity.
We recorded net foreign currency gains of $83,936 in fiscal 2010. We have not used any forward contracts, currency options or
borrowings to hedge our exposure to foreign currency exchange risk. We cannot predict the impact of future exchange rate fluctuations
on our results of operations and may incur net foreign currency losses in the future.



Our
financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiary is RMB. The value
of your investment in our stock will be affected by the foreign exchange rate between U.S. dollars and RMB. To the extent
we hold assets denominated in U.S. dollars, including the net proceeds to us from this offering, any appreciation of the
RMB against the U.S. dollar could result in a change to our statement of operations and a reduction in the value of our U.S. dollar
denominated assets. On the other hand, a decline in the value of RMB against the U.S. dollar could reduce the U.S. dollar
equivalent amounts of our financial results, the value of your investment in our company and the dividends we may pay in the future,
if any, all of which may have a material adverse effect on the price of our stock.



The
exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements
or otherwise stated in this MD&A were as follows:



|                                                                                                                                                                                 |  |  | 2010                                                        |  |  |  |                                                             | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ----------------------------------------------------------- |  |  |  | ----------------------------------------------------------- | 
|                                                                                                                                                                                 |  |  |                                                             |  |  |  |                                                             | 
|Balance sheet
    items, except for the registered and paid-up capital as of December 31, 2010 and 2009                                                                          |  |  | USD
                                            0.151:RMB 1 |  |  |  | USD
                                            0.146:RMB 1 | 
|Amounts included
    in the statement of operations, statement of changes in stockholders’ equity and statement of cash flows for the years ended
    December 31, 2010 and 2009 |  |  | USD
                                            0.148:RMB 1 |  |  |  | USD
                                            0.146:RMB 1 | 



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ITEM 8.
FINANCIAL STATEMENTS



Financial
Summary Information



Because
this is only a financial summary, it does not contain all the financial information that may be important to you. It should be
read in conjunction with the consolidated financial statements and related notes presented in this section.



Audited
Financial Summary Information for the Years Ended December 31, 2010 and 2009





|Statements of Operations  |  | For the year ended December
    31,
|------------------------- |  | -----------------------------------
|                          |  | 2010                               
|Revenues                  |  | $                                  
|Cost of Sales             |  | $                                  
|Gross profit              |  | $                                  
|Operating expenses        |  | $                                  
|(Loss) from operations    |  | $                                  
|Interest expense          |  | $                                  
|Net income (loss)         |  | $                                  
|Net loss per common share |  |                                    
|                          |  |                                    



** Less
than $.01





|Balance
    Sheet                          |  | As
    of December 31, 2010
|------------------------------------------ |  | ---------------------------
|                                           |  |                            
|Cash                                       |  | $                          
|Total current assets                       |  | $                          
|Other assets                               |  | $                          
|Total Assets                               |  | $                          
|Current liabilities                        |  | $                          
|Long term liabilities                      |  | $                          
|Stockholders’ equity                       |  | $                          
|Total liabilities and stockholders’ equity |  | $                          
|                                           |  |                            





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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the
Board of Directors and
Stockholders of China Fruits Corporation



We
have audited the accompanying consolidated balance sheets of China Fruits Corporation and Subsidiaries (the “Company”)
as of December 31, 2010 and 2009 and related statements of consolidated operations, stockholders’ deficit, comprehensive
income and cash flows for the years ending December 31, 2010 and 2009. These financial statements are the responsibility of the
company’s management. Our responsibility is to express an opinion on these financial statements based on our audit



We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.



In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of China
Fruits Corporation and Subsidiaries as of December 31, 2010 and 2009 and the results of its operations and its cash flows for
years ended December 31, 2010 and 2009 in conformity with accounting principles generally accepted in the United States of America.



The
accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note
22, the Company has suffered accumulated deficit and negative cash flow from operations that raises substantial doubt about its
ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.



/s/Lake
& Associates CPA’s LLC

Lake
& Associates CPA’s LLC

Schaumburg,
IL

April
14, 2011







(21)


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|China
    Fruits Corpration And Subsidiaries             
|---------------------------------------------------------
|Audited
    Consolidated Balance Sheets                  
|As
    of December 31, 2010 and 2009                     
|(Expresed
    in US Dollars, except for number of shares)
|                                                         







|ASSETS                                                                                      
|--------------------------------------------------------------------------------------------
|                                                                                            
|CURRENT
    ASSETS                                                                          
|                                                                                            
|                                                                                            
|Cash and cash equivalents                                                                   
|Accounts receivable, trade                                                                  
|Receivable from third parties                                                               
|Inventories                                                                                 
|Prepayment and Deferred expense                                                             
|Refundable VAT tax                                                                          
|Refundable income tax                                                                       
|TOTAL CURRENT
    ASSETS                                                                    
|                                                                                            
|PLANT AND EQUIPMENT, NET                                                                    
|                                                                                            
|OTHER ASSETS                                                                                
|                                                                                            
|                                                                                            
|TOTAL
    ASSETS                                                                            
|                                                                                            
|LIABILITIES
    AND STOCKHOLDERS' EQUITY                                                    
|                                                                                            
|CURRENT LIABILITIES                                                                         
|Accounts payable                                                                            
|Loan and related party payable                                                              
|Notes payable-current portion                                                               
|Customer deposit                                                                            
|Accrued liabilities
    and payroll tax liabilities                                         
|                                                                                            
|TOTAL CURRENT
    LIABILITIES                                                               
|                                                                                            
|LONG-TERM LIABILITIES                                                                       
|Note Payable-Long term                                                                      
|Due to stockholders                                                                         
|TOTAL LONG-TERM
    LIABILITIES                                                             
|                                                                                            
|STOCKHOLDERS' EQUITY                                                                        
|Preferred stock,
    200,000,000 shares authorized, designated as Series A and Series B     
|Series
    A; par value $.001; 2,000,000 shares authorized,                                 
|13,150 shares
    issued and outstanding                                                    
|Series
    B; par value $0.001, voting; 50,000,000 shares authorized,                       
|12,100,000 shares
    issued and outstanding                                                
|Common
    stock, par value $.001, 100,000,000 shares authorized,                           
|38,779,689
    shares issued and outstanding                                                
|Additional paid-in capital                                                                  
|Statutory reserve                                                                           
|Accumulated other comprehensive
    income                                                  
|Accumulated
    (deficit)                                                                   
|TOTAL STOCKHOLDERS'
    EQUITY                                                              
|                                                                                            
|TOTAL LIABILITIES
    AND STOCKHOLDERS' EQUITY                                              
|                                                                                            
|                                                                                            
|The accompanying notes
    are an integral part of these  consolidated  financial statements





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|China
    Fruits Corpration And Subsidiaries             
|---------------------------------------------------------
|Audited
    Consolidated Statements of Operations        
|For
    The Years Ended December 31, 2010 and 2009       
|(Expresed
    in US Dollars, except for number of shares)
|                                                         











|                                                                                            
|--------------------------------------------------------------------------------------------
|                                                                                            
|                                                                                            
|REVENUES:                                                                                   
|Sales                                                                                       
|Cost of goods
    sold                                                                      
|GROSS PROFIT                                                                                
|                                                                                            
|OPERATING EXPENSES:                                                                         
|Selling and marketing                                                                       
|Professional and legal expenses                                                             
|General and
    administrative                                                              
|TOTAL OPERATING
    EXPENSES                                                                
|                                                                                            
|(LOSS) FROM
    CONTINUING OPERATIONS                                                       
|                                                                                            
|OTHER INCOME (EXPENSE):                                                                     
|Interest income                                                                             
|Interest expenses                                                                           
|Gain (loss) on disposal of equipment                                                        
|Government & other grant                                                                    
|Other                                                                                       
|TOTAL OTHER
    INCOME (EXPENSES)                                                           
|                                                                                            
|INCOME(LOSS) FROM CONTINUING OPERATIONS BEFOR INCOME TAXES                                  
|                                                                                            
|Income tax expense                                                                          
|                                                                                            
|NET (LOSS)
    FROM CONTINUING OPERATIONS                                                   
|                                                                                            
|NET INCOME FROM DISCONTINUED OPERATIONS                                                     
|                                                                                            
|NET (LOSS)                                                                                  
|                                                                                            
|Other comprehensive income                                                                  
|- Foreign
    currency translation gain                                                     
|                                                                                            
|COMPREHENSIVE
    (LOSS)                                                                    
|                                                                                            
|Earnings(loss) per share:                                                                   
|Continuing
    operations- basic and diluted                                                
|                                                                                            
|Discontinued
    operations- basic and diluted                                              
|                                                                                            
|Weighted average number of common
    shares outstanding during the year - basic and diluted
|                                                                                            
|**Less than $0.01                                                                           
|The accompanying
    notes are an integral part of these consolidated financial statements  









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|
|
|
|



|China
    Fruits Corpration And Subsidiaries                                              
|------------------------------------------------------------------------------------------
|Audited
    Consolidated Statements of Cash Flows                                         
|For
    the Years Ended December 31, 2010 and 2009                                        
|(Expresed
    in US Dollars)                                                              
|                                                                                          
|                                                                                          
|                                                                                          
|CASH
    FLOWS FROM OPERATING ACTIVITIES:                                                 
|Net (loss)                                                                                
|(Add) deduct
    (loss) earnings from discontinued operations                             
|Net (loss) from continuing operations                                                     
|                                                                                          
|Adjustments to reconcile net income
    to net                                            
|Cash provided by (used in) operating
    activities:                                      
|Depreciation                                                                              
|Loss (gain) from sale of property
    and equipment                                       
|(Increase) decrease in operating
    assets:                                              
|Accounts receivable                                                                       
|Account receivable-
    related party                                                     
|Inventories                                                                               
|Other assets                                                                              
|Prepaid expenses and other current
    assets                                             
|Increase (decrease) in operating
    liabilities:                                         
|Accounts payable                                                                          
|Other payables and accrued liabilities                                                    
|Tax payable                                                                               
|NET CASH (USED
    IN) PROVIDED BY OPERATING ACTIVITIES                                   
|                                                                                          
|CASH FLOWS FROM INVESTING ACTIVITIES                                                      
|                                                                                          
|Construction in progress                                                                  
|Purchase of property and equipment                                                        
|Proceeds from
    disposal of property and equipment                                      
|NET CASH PROVIDED
    (USED IN) INVESTING ACTIVITIES                                      
|                                                                                          
|CASH FLOWS FROM FINANCING ACTIVITIES                                                      
|increase in regerster
    capital                                                         
|Loan from related
    party                                                               
|Advance from
    (to) a third party                                                       
|Proceeds from
    Notes Payable                                                           
|Payments on Notes
    Payable                                                             
|Proceeds from
    issuance of note payable-related party                                  
|Proceeds from issuance of shares                                                          
|Due to stockholders                                                                       
|NET CASH PROVIDED 
    BY FINANCING ACTIVITIES                                            
|                                                                                          
|Net cash transferred from (to) discontinued operation                                     
|                                                                                          
|Foreign currency translation adjustment                                                   
|                                                                                          
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                                 
|                                                                                          
|CASH AND CASH EQUIVALENTS:                                                                
|Beginning
    of period                                                                   
|                                                                                          
|End of period                                                                             
|                                                                                          
|Supplemental disclosures of cash flow information:                                        
|Cash
    paid for interest                                                                
|Cash
    paid for income taxes                                                            
|                                                                                          
|Cash flow from discontinued operation:                                                    
|Net cash provided by ( used in)
    operating activities                                  
|Net cash provided by ( used in)
    investing activities                                  
|Net cash transferred from ( to
    ) continuing operations                                
|Effect of
    exchange rates on cash and cash equivalents                                 
|Net change in cash and cash equivalents                                                   
|from discontinued operation                                                               
|Cash and cash equivalents of discontinued
    operation at:                               
|Beginning
    of period                                                                   
|End of period                                                                             
|                                                                                          
|                                                                                          
|The accompanying notes
    are an integral part of these consolidated financial statements







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|China
    Fruits Corpration And Subsidiaries                                              
|------------------------------------------------------------------------------------------
|Audited
    Consolidated Statements of Stockholders Equity                                
|For
    The Years Ended December 31, 2010 and 2009                                        
|(Expresed
    in US Dollars, except for number of shares)                                 
|                                                                                          
|                                                                                          
|Balances as of December
    31, 2008                                                      
|                                                                                          
|Proceeds from sale of shares                                                              
|Foreign currency adjustment                                                               
|Net (loss)                                                                                
|Balances as of December 31, 2009                                                          
|                                                                                          
|Proceeds from sale of shares                                                              
|Foreign currency adjustment                                                               
|Net (loss)                                                                                
|Balances as of December 31, 2010                                                          
|                                                                                          
|The
    accompanying notes are an integral part of these consolidated financial statements











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CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)







1.
ORGANIZATION AND BUSINESS BACKGROUND



China
Fruits Corporation (the “Company” or “CHFR”) was incorporated in the State of Delaware on January 6, 1993
as Vaxcel, Inc. On December 19, 2000, CHFR changed its name to eLocity Networks Corporation.  On August 6, 2002, CHFR
further changed its name to Diversified Financial Resources Corporation.  The principal activities of CHFR at that time
was seeking and consummating a merger or acquisition opportunity with a business entity.  On May 12, 2006, CHFR was
re-domiciled to the State of Nevada.



On
May 31, 2006, CHFR completed a stock exchange transaction with Jiangxi Taina Guo Ye Yon Xian Gong Si (“Tai Na”).  Tai
Na was incorporated as a limited liability company in the People’s Republic of China (“PRC”) on October 28,
2005 with its principal place of business in Nanfeng Town, Jiangxi Province, the PRC.  Tai Na is principally engaged
in manufacturing, trading, and distributing of Nanfeng tangerine, and operating franchise retail stores for fresh fruits through
its wholly-owned subsidiary, Tai Na International Fruits (Beijing) Co. Ltd. (“Tai Na Beijing”)



The
stock exchange transaction involved two simultaneous transactions:



The
majority shareholder of CHFR delivered the 13,150 convertible Series A preferred shares and 12,100,000 non-convertible Series
B preferred shares of CHFR to Tai Na’s owners in exchange for total payments of $500,000 in cash and;



CHFR
issued to Tai Na’s owners an amount equal to 30,000,000 new investment shares of common stock of CHFR pursuant to Regulation
S under the Securities Act of 1933, as amended, in exchange for all of the registered capital of Tai Na.



Upon
completion of the exchange, Tai Na and its wholly-owned subsidiary, Tai Na Beijing, became wholly-owned subsidiaries of CHFR and
the former owners of Tai Na then owned 99% of the issued and outstanding shares of the Company.



On
August 18, 2006, CHFR changed its name to its current name “China Fruits Corporation”.



The
stock exchange transaction has been accounted for as a reverse acquisition and recapitalization of the CHFR whereby Tai Na is
deemed to be the accounting acquirer (legal acquiree) and CHFR to be the accounting acquiree (legal acquirer).  The
accompanying consolidated financial statements are in substance those of Tai Na and Tai Na Beijing, with the assets and liabilities,
and revenues and expenses, of CHFR being included effective from the date of stock exchange transaction.  CHFR is deemed
to be a continuation of the business of Tai Na.  Accordingly, the accompanying consolidated financial statements include
the following:



(1)           The
balance sheet consists of the net assets of the accounting acquirer at historical cost and the net assets of the accounting acquiree
at historical cost;

(2)           The
financial position, results of operations, and cash flows of the accounting acquirer for all periods presented as if the recapitalization
had occurred at the beginning of the earliest period presented and the operations of the accounting acquiree from the date of
stock exchange transaction.



CHFR,
Tai Na and Tai Na Beijing are hereinafter referred to as (the “Company”).



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CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)











2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



| | Basis
    of presentation
| | -------------------------



These
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America.



| | Use
    of estimates
| | --------------------



In
preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts
of assets and liabilities in the balance sheets and revenues and expenses during the year reported.  Actual results
may differ from these estimates.



| | Basis
    of consolidation
| | --------------------------



The
consolidated financial statements include the financial statements of the Company and its subsidiaries.



All
significant inter-company balances and transactions within the Company and subsidiary have been eliminated upon consolidation.



| | Revenue
    recognition
| | -----------------------



The
Company derives revenues from the resale of tangerine and other fresh fruits purchased from third parties, net of value added
taxes (“VAT”).  The Company is subject to VAT which is levied on the majority of the products of the Company
at the rate of 17% on the invoiced value of sales.  Output VAT is borne by customers in addition to the invoiced value
of sales and input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export
sales.



In
accordance with guidance issued by the FASB, the Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectability is
reasonably assured.  The Company’s sales arrangements are not subject to warranty.



The
Company recognizes revenue from the sale of products upon delivery to the customers and the transfer of title and risk of loss.
The Company did not record any product returns for the year ended December 31, 2010.



| | Cost
    of revenue
| | -------------------



Cost
of revenues consists primarily of material costs, direct labor, depreciation and overheads, which are directly attributable to
the manufacture of products and the provision of services.







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CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)







2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)



| | Accounts
    receivable
| | -----------------------



Accounts
receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers
in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due
accounts. An allowance for doubtful accounts is established and determined based on managements’ assessment of known requirements,
aging of receivables, payment history, the customer’s current credit worthiness and the economic environment. As of December
31, 2010 and 2009, the Company did not record an allowance for uncollectible accounts.



| | Inventories
| | -----------



Inventories
consist of finished goods and are valued at lower of cost or market value, cost being determined on the first-in, first-out method.  The
Company periodically reviews historical sales activity to determine excess, slow moving items and potentially obsolete items and
also evaluates the impact of any anticipated changes in future demand.  The Company provides inventory allowances based
on excess and obsolete inventories determined principally by customer demand.  The spoilage will be written-off directly
to the profit and loss when it occurs. As of December 31, 2010 and 2009, the Company did not record an allowance for obsolete
or spoiled inventories.



| | Plant
    and equipment, net
| | ----------------------------



Plant
and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated
on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after
taking into account their estimated residual values:



|                                     | Depreciable
    life |  | Residual
    value
|------------------------------------ | -------------------- |  | ------------------
|Plant
    and machinery              | 10-12
    years      |  | 5%                
|Furniture,
    fixture and equipment | 5-6
    years        |  | 5%                



Expenditure
for maintenance and repairs is expensed as incurred.





| | Impairment of
    long lived assets
| | -----------------------------------



In
accordance with guidance issued by the FASB, long-lived assets and certain identifiable intangible assets held and used by the
Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.  Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount
of assets to estimated discounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of
the assets.





| | Comprehensive
    income (loss)
| | -------------------------------



FASB
ASC 220, “Reporting Comprehensive Income”, establishes standards for reporting and display of comprehensive
income, its components and accumulated balances.  Comprehensive income as defined includes all changes in equity during
the year from non-owner sources. Accumulated comprehensive income, as presented in the accompanying consolidated statement of
stockholders’ equity consists of changes in unrealized gains and losses on foreign currency translation.  This
comprehensive income is not included in the computation of income tax expense or benefit.



| | Income taxes
| | ------------



The
Company accounts for income tax using FASB ASC 740 “Accounting for Income Taxes”, which requires the asset
and liability approach for financial accounting and reporting for income taxes. Under this approach, deferred income taxes are
provided for the estimated future tax effects attributable to temporary differences between financial statement carrying amounts
of assets and liabilities and their respective tax bases, and for the expected future tax benefits from loss carry-forwards and
provisions, if any. Deferred tax assets and liabilities are measured using the enacted tax rates expected in the years of recovery
or reversal and the effect from a change in tax rates is recognized in the consolidated statement of operations and comprehensive
income in the period of enactment. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered
more likely than not that some portion of, or all of the deferred tax assets will not be realized.



| | Net loss per share
| | ------------------



The
Company calculates net loss per share in accordance with FASB ASC 260, “Earnings per Share”.  Basic
loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding. No diluted loss
per share is required to be represented.



| | Foreign currencies
    translation
| | ----------------------------------



The
reporting currency of the Company is the United States dollar (“U.S. dollars”).  Transactions denominated
in currencies other than U.S. dollar are calculated at the average rate for the period.  Monetary assets and liabilities
denominated in currencies other than U.S. dollar are translated into U.S. dollar at the rates of exchange ruling at the balance
sheet date.  The resulting exchange differences are recorded in the other comprehensive income/expenses in the consolidated
statement of operations and comprehensive income.



The
Company’s subsidiary maintains its books and records in its local currency, the Renminbi Yuan (“RMB”), which
is functional currency as being the primary currency of the economic environment in which its operations are conducted.  In
general, for consolidation purposes, the Company translates the subsidiary’s assets and liabilities into U.S. dollars using
the applicable exchange rates prevailing at the balance sheet date, and the statement of operations is translated at average exchange
rates during the reporting period.  Adjustments resulting from the translation of the subsidiary’s financial statements
are recorded as accumulated other comprehensive income/expenses.



(28)


Table of Contents




CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)









2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)



| | 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.



| | Related parties
| | ---------------



Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial and operating decisions.
Companies are also considered to be related if they are subject to common control or common significant influence. A material
related party transaction has been identified in Note 11 in the financial statements.



| | Fair value of
    financial instruments
| | ---------------------------------------



The
Company values its financial instruments as required by FASB ASC 825, “Disclosures about Fair Value of Financial Instruments”.  The
estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation
methodologies.  The estimates presented herein are not necessarily indicative of amounts that the Company could realize
in a current market exchange.



The
Company’s financial instruments primarily include cash and cash equivalents, accounts receivable, advance to a third party,
inventories, VAT and income tax recoverable, accounts payable, other payables and accrued liabilities.



As
of the balance sheet date, the estimated fair values of financial instruments were not materially different from their carrying
values as presented due to short maturities of these instruments.



| | Subsequent Events
| | -----------------



The
Company evaluated for subsequent events through the issuance date of the Company’s financial statements.



| | Recently
        issued accounting standards
| | --------------------------------------------

The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption
of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated
results of its operations.



(29)


Table of Contents








CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)









2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

| | Recently
        issued accounting standards (cont’d)
| | -----------------------------------------------------

Credit
Quality of Financing Receivables and the Allowance for Credit Losses



In
July 2010, the Financial Accounting Standards Board (“FASB”) amended the requirements for Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit Losses. As a result of these amendments, an entity is
required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about
its financing receivables and related allowance for credit losses. The new disclosures as of the end of the reporting period are
effective for the fiscal year ending December 31, 2010, while the disclosures about activity that occurs during a reporting period
are effective for the first fiscal quarter of 2011. The adoption of this guidance will not impact the Company’s consolidated
results of operations or financial position.



Fair
Value Measurements and Disclosures



In
January 2010, the FASB issued authoritative guidance regarding fair value measures and disclosures. The guidance requires
disclosure of significant transfers between level 1 and level 2 fair value measurements along with the reason for the
transfer. An entity must also separately report purchases, sales, issuances and settlements within the level 3 fair value
roll forward. The guidance further provides clarification of the level of disaggregation to be used within the fair value measurement
disclosures for each class of assets and liabilities and clarified the disclosures required for the valuation techniques and inputs
used to measure level 2 or level 3 fair value measurements. This new authoritative guidance is effective for the Company
in fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this
guidance will not impact the Company’s consolidated results of operations or financial position.



Variable
Interest Entities (VIEs)



In
June 2009, the FASB issued authoritative guidance changing the approach to determine a VIE’s primary beneficiary and requiring
ongoing assessments of whether an enterprise is the primary beneficiary of a VIE. This guidance also requires additional disclosures
about a company’s involvement with VIEs and any significant changes in risk exposure due to that involvement. This guidance
was adopted January 1, 2010, and did not have an impact on the Company’s consolidated financial position, results of operations
or cash flows.





3.
ACCOUNTS RECEIVABLE, NET



The
majority of the Company’s sales is cash on delivery, or secured by customer deposits. A small portion of our revenues is
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. The Company did not experience
significant losses from uncollectible accounts in the past; accordingly, the management has determined that no allowance was considered
necessary as of December 31, 2010 and 2009, respectively.



|                                          |  | As
    of December 31, |        
|----------------------------------------- |  | ---------------------- | -------
|                                          |  | 2010                   |        
|                                          |  |                        |        
|Accounts
    receivable, gross            |  |                        | 120,126
|Less: allowance
    for doubtful accounts |  |                        | -0-    
|Accounts receivable,
    net              |  |                        | 120,126



(30)


Table of Contents






CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)









4.
RECEIVABLE FROM THIRD PARTIES



The
Company advances money to several third parties during business operation, of which $724,780 in connection with tangerine base
construction, $306,974 as deposit for tangerine purchase. These receivables bear no interest and due on demand, except otherwise
noted. As of December 31, 2010 and 2009, the balances of receivable from third parties consisted of the following:



|                                  |  | As
    of December 31, |          
|--------------------------------- |  | ---------------------- | ---------
|                                  |  | 2010                   |          
|                                  |  |                        |          
|Third
    party advances          |  |                        | 1,456,266
|Bank security
    deposit         |  |                        | 30,199   
|Receivable from
    third parties |  |                        | 1,486,465





5.
INVENTORIES



Inventories
as of December 31, 2010 and 2009 consisted of the following:



|                  |  | As
    of December 31, |        
|----------------- |  | ---------------------- | -------
|                  |  | 2010                   |        
|                  |  |                        |        
|Raw
    materials |  |                        | 45,291 
|Finished goods    |  |                        | 244,992
|                  |  |                        | 290,283





The
Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. Accordingly,
the Company did not record an allowance for obsolete inventories as of December 31, 2010 and 2009, respectively, nor have there
been any write-offs during the years ended December 31, 2010 and 2009, respectively.



The
spoilage will be written-off directly to the profit and loss when it occurs. The spoilage rate is approximately 1 ‰ of
average inventory. The Company did not record an allowance for spoilage as of December 31, 2010 and 2009, respectively.





6.
PREPAYMENT



As
of December 31, 2010 and 2009, the Company had prepayment of $363,562 and $477,862, respectively, consisted of the following:





|                                 |  | As
    of December 31, |        
|-------------------------------- |  | ---------------------- | -------
|                                 |  | 2010                   |        
|                                 |  |                        |        
|Paid
    in advance (production) |  |                        | 279,440
|Prepaid rent                     |  |                        | 84,122 
|                                 |  |                        | 363,562





(31)









CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)







7.
PLANT AND EQUIPMENT, NET



Plant
and equipment, net as of December 31, 2010 and 2009 consisted of the following:



|                                     |  | As
    of December 31,
|------------------------------------ |  | ----------------------
|                                     |  | 2010                  
|                                     |  |                       
|                                     |  |                       
|Plant and machinery                  |  |                       
|Construction
    in progress         |  |                       
|Furniture, fixture
    and equipment |  |                       
|                                     |  |                       
|Less: accumulated
    depreciation   |  |                       
|Plant and equipment, net             |  |                       





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, 2010 was $106,410, representing buildings under construction.





8.
LOAN AND RELATED PARTY PAYABLE



As
of December 31, 2010 and 2009, the Company had loans payable to related party of $37,749 and $95,194, respectively. These loans
bear no interest and are due within one year.







9.
NOTES PAYABLE – CURRENT PORTION



As
of December 31, 2010 and 2009, the Company had short-term loan of $1,056,971 and $439,354, respectively, from various local banks.
The detailed terms were set forth as follows:



|                                                                                              |  | As
    of December 31, |          
|--------------------------------------------------------------------------------------------- |  | ---------------------- | ---------
|                                                                                              |  | 2010                   |          
|Industrial
        and Commercial Bank of China, 5.841% annual interest, due on July 20, 2010 |  |                        |          
|                                                                                              |  |                        |          
|Industrial
    and Commercial Bank of China, 5.841% annual interest, due on September 5, 2011 |  |                        | 301.992  
|                                                                                              |  |                        |          
|Bank of China,
    5.838% annual interest, due on October 25, 2011                            |  |                        | 754,979  
|                                                                                              |  |                        | 1,056,971





(32)







CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)





10.
CUSTOMER DEPOSIT



As
of December 31, 2010 and 2009, the Company had customer deposits of $298,818 and $83,111, respectively, representing payments
received for orders not yet shipped.



11.
ACCRUED LIABILITIES



Accrued
liabilities as of December 31, 2010 and 2009 consisted of following:



|                               |  | As
    of December 31, |        
|------------------------------ |  | ---------------------- | -------
|                               |  | 2010                   |        
|                               |  |                        |        
|Salary
    and welfare payable |  |                        | 26,858 
|Accrued expenses               |  |                        | 99,079 
|                               |  |                        | 125,937





12.
NOTE PAYABLE – LONG TERM



Long-term
notes payable as of December 31, 2010 and 2009 consisted of following:



|                                                                            |  | As
    of December 31, |        
|--------------------------------------------------------------------------- |  | ---------------------- | -------
|                                                                            |  | 2010                   |        
|                                                                            |  |                        |        
|Note payable to
    related party, zero interest, due on May 19, 2012       |  |                        | 60,398 
|Local Government,
    zero interest, due on no later than November 30, 2013 |  |                        | 475,637
|                                                                            |  |                        | 536,035



The
note payable of $60,398 to related party was reclassified as long-term liabilities as of December 31, 2010 due to the extension
of maturity date to May 19, 2012.







13.
AMOUNT DUE TO STOCKHOLDERS



The
shareholder paid all necessary overseas consulting and advising fees, lawyer fees, and accounting fees from period to period out
of his own personal bank accounts in the United States due to the strict laws and regulations imposed by the Chinese government
on out-going foreign currency wire transfers. The amount outstanding as of December 31, 2010 and 2009 was $455,796 and $335,146,
respectively. The balance due to stockholders was not evidenced by a promissory note, but rather is an oral agreement between
the shareholder and the Company.





14.
CAPITAL TRANSACTIONS



On
January 12, 2010, pursuant to an Offshore Stock Purchase Agreement dated January 12, 2010, the Company issued 900,000 restricted
shares of common stock at a purchase price of total $180,000, or $0.20 per share.





15.
CHINA CONTRIBUTION PLAN



Under
the PRC Law, full-time employees of the Company’s subsidiaries, Tai Na and Tai Na Beijing, 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 and Tai Na Beijing are required to accrue for these benefits based on certain
percentages of the employees’ salaries. The total contributions made for such employee benefits were $32,392 and $34,457
for the years ended December 31, 2010 and 2009, respectively.





16.
STATUTORY RESERVES



Under
PRC Company Law, the Company’s subsidiaries, Tai Na and Tai Na Beijing are 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 years ended December 31, 2010 and 2008, Tai Na and Tai Na Beijing contributed $0 and $0 respectively to statutory reserve.







(33)







CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)



17.
INCOME TAXES



The
Company conducts all its operating business through its subsidiaries in China. The subsidiaries are governed by the income tax
laws of the PRC and do not have any deferred tax assets or deferred tax liabilities under the income tax laws of the PRC because
there are no temporary differences between financial statement carrying amounts and the tax bases of existing assets and liabilities.
The Company by itself does not have any business operating activities in the United States and is therefore not subject to United
States income tax.



The
Company’s subsidiaries are governed by the Income Tax Law of the People’s Republic of China (PRC) concerning Foreign
Investment Enterprises and Foreign Enterprises and various local income tax laws (the Income Tax Laws). Beginning January 1, 2008,
the new Enterprise Income Tax (“EIT”) law has replaced the previous laws for Domestic Enterprises (“DEs”)
and Foreign Invested Enterprises (“FIEs”). The new standard EIT rate of 25% has replaced the 33% rate previously applicable
to both DEs and FIEs.



Prior
to 2008, under the Chinese Income Tax Laws, FIEs generally were subject to an income tax at an effective rate of 33% (30% state
income taxes plus 3% local income taxes) on income as reported in their statutory financial statements after appropriate tax adjustments
unless the enterprise was located in specially designated regions for which more favorable effective tax rates apply. Beginning
January 1, 2008, China has unified the corporate income tax rate on foreign invested enterprises and domestic enterprises. The
unified corporate income tax rate is 25%.



The
Company generated substantially its net income from its PRC operation and has recorded income tax provision for the years ended
December 31, 2010 and 2009.



The
components of (loss) income before income taxes separating U.S. and PRC operations are as follows:



|                                           |  | 2010 |          |   | 2009 |  
|------------------------------------------ |  | ---- | -------- | - | ---- | -
|                                           |  |      |          |   |      |  
|Loss
    subject to U.S. operation         |  | $    | (101,496 | ) |      | $
|Income (loss)
    subject to PRC operation |  |      | (238,931 | ) |      |  
|Income (loss)
    before income taxes      |  | $    | (340,427 | ) |      | $



United
States of America



The
Company is registered in the State of Nevada and is subject to United States of America tax law.



As
of December 31, 2010, the U.S. operation had $1,789,053 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 2030.  The
Company has provided for a full valuation allowance for any future tax benefits from the net operating loss carryforwards as the
management believes it is more likely than not that these assets will not be realized in the future.



The
PRC



The
reconciliation of income tax rate to the effective income tax rate based on income before income taxes stated in the consolidated
statement of operations for the year ended December 31, 2010 and 2009 is as follows:



|                                              |  | 2010 |          |   | 2009 |  
|--------------------------------------------- |  | ---- | -------- | - | ---- | -
|                                              |  |      |          |   |      |  
|                                              |  |      |          |   |      |  
|Income
    (loss) before income taxes         |  | $    | (238,931 | ) |      | $
|Statutory income
    tax rate                 |  |      | 25       | % |      |  
|                                              |  |      |          |   |      |  
|Expenses not deductible
    for tax purposes: |  |      | 6,814    |   |      |  
|- Provisions                                  |  |      |          |   |      |  
|Effect of tax
    losses                      |  |      | -        |   |      |  
|                                              |  |      |          |   |      |  
|Income tax expense                            |  | $    | 6,814    |   |      | $





(34)







CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)





17.
INCOME TAXES (CONT’D)







The
following table sets forth the significant components of the aggregate net deferred tax assets of the Company as of December 31,
2010 and 2009:



|                                       |  | 2010 |          |   | 2009 |  
|-------------------------------------- |  | ---- | -------- | - | ---- | -
|                                       |  |      |          |   |      |  
|Deferred tax assets:                   |  |      |          |   |      |  
|-
    Net operating loss carryforwards |  | $    | 608,278  |   |      | $
|Less: valuation
    allowance          |  |      | (608,278 | ) |      |  
|Deferred tax assets                    |  | $    | -        |   |      | $



For
the year ended December 31, 2010 and 2009, valuation allowances of $608,278 and $573,769 were provided to the deferred tax assets
due to the uncertainty surrounding their realization.



The
following table reconciles the U.S. statutory rate to the Company’s effective tax rate:



|                                         |  | 2010 |     |   | 2009 |  
|---------------------------------------- |  | ---- | --- | - | ---- | -
|                                         |  |      |     |   |      |  
|U.S.
    Statutory rate                  |  |      | 34  | % |      |  
|Foreign income
    not recognized in USA |  |      | (34 | ) |      |  
|China income taxes                       |  |      | 25  |   |      |  
|China exemption                          |  |      | (25 | ) |      |  
|Total provision
    for income taxes     |  | $    | -   |   |      | $



The
Company applies FASB ASC 740-10, “Accounting for Income Taxes”, which requires recognition of deferred income tax
liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial
reporting basis of assets and liabilities. Provision for income taxes consist of taxes currently due plus deferred taxes. Because
the Company has no operations within the United States, there is no provision for US income taxes and there are no deferred tax
amounts as of December 31, 2010 and 2009.



The
charge for taxation is based on the results for the year as adjusted for items that are non-assessable or disallowed. It is calculated
using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred taxes are accounted for using
the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit.
In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized
to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be
utilized.



Deferred
taxes are calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is
settled. Deferred taxes are charged or credited in the income statement, except when they relate to items credited or charged
directly to equity, in which case the deferred taxes are also recorded in equity. Deferred tax assets and liabilities are offset
when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets
and liabilities on a net basis. The Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes”
(“FIN 48”), as of January 1, 2007. A tax position is recognized as a benefit only if it is “more likely than
not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The
amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax
positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption of FIN 48 had no affect
on the Company’s financial







(35)









CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)





18.
GOVERNMENT & OTHER GRANTS



In
the year of 2010, the Company received grants and rewards from local government and other resources due to its efforts on modern
agricultural development, the total amount of which was $244,350 (RMB 1,654,346). These grants were interest-free and bear no
repayment requirements.



19.
NET LOSS PER SHARE



Basic
net loss per share is computed using the weighted average number of the ordinary shares outstanding during the year.  There
were no dilutive common stock equivalents as of December 31, 2010 and 2009, respectively, due to net losses during the years.



The
following table sets forth the computation of basic net loss per share for the years indicated:



|                                                 | 2010 |  | 2009
|------------------------------------------------ | ---- |  | ----
|Numerator:                                       |      |  |     
|- Net loss                                       |      |  |     
|                                                 |      |  |     
|Denominator:                                     |      |  |     
|- Weighted average common shares
    outstanding |      |  |     
|                                                 |      |  |     
|Basic net loss per share                         |      |  |     
|                                                 |      |  |     



**
Less than $.01





20.
CONCENTRATION AND RISK



(a)
Major customers



For
the years ended December 31, 2010 and 2009, 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, 2010, major customers and vendors with their revenues and purchases are presented as follows:



|Customers      |       |  | Revenues |         |  |  |  |    |   | Accounts
        Receivable | 
|-------------- | ----- |  | -------- | ------- |  |  |  | -- | - | --------------------------- | 
|Customer
    F |       |  | $        | 314,657 |  |  |  | 17 | % |                             | 
|Customer G     |       |  |          | 302,867 |  |  |  | 17 | % |                             | 
|Customer H     |       |  |          | 50,441  |  |  |  | 3  | % |                             | 
|Customer I     |       |  |          | 39,364  |  |  |  | 2  | % |                             | 
|Customer J     |       |  |          | 37,791  |  |  |  | 2  | % |                             | 
|               | Total |  | $        | 745,120 |  |  |  | 41 | % | Total:                      | 







(36)







CHINA
FRUITS CORPORATION AND SUBSIDIARIES

NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Expressed
in USD)







20.
CONCENTRATION AND RISK (CONT’D)



For
the year ended December 31, 2009, major customers and vendors with their revenues and purchases are presented as follows:



|Customers  |       |  | Revenues |         |  |  |  |    |   | Accounts
        Receivable | 
|---------- | ----- |  | -------- | ------- |  |  |  | -- | - | --------------------------- | 
|Customer A |       |  | $        | 174,203 |  |  |  | 9  | % |                             | 
|Customer B |       |  |          | 156,716 |  |  |  | 8  | % |                             | 
|Customer C |       |  |          | 147,194 |  |  |  | 7  | % |                             | 
|Customer D |       |  |          | 142,583 |  |  |  | 7  | % |                             | 
|Customer E |       |  |          | 84,020  |  |  |  | 4  | % |                             | 
|           | Total |  | $        | 704,716 |  |  |  | 35 | % | Total:                      | 

(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.





21.
COMMITMENT AND CONTINGENCIES



The
Company rented plant, office, and retailing spaces under a non-cancelable operating lease agreement.  Based on the current
rental lease agreement, the future five years minimum rental payments required as of December 31 are as follows:



|Year
    ended December 31 |  | Lease
    payment
|-------------------------- |  | -----------------
|2011                       |  |                  
|2012                       |  |                  
|2013                       |  |                  
|2014                       |  |                  
|2015                       |  |                  
|Total                      |  |                  



For
the years ended December 31, 2010 and 2009, rental expense was $140,988 and $20,641.



22.
GOING CONCERN UNCERTAINTIES



These
consolidated financial statements have been prepared assuming that Company will continue as a going concern, which contemplates
the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.



As
of December 31, 2010, the Company had an accumulated deficit of $1,551,555. Management has taken certain action and continues
to implement changes designed to improve the Company’s financial results and operating cash flows.  The actions
involve certain cost-saving initiatives and growing strategies, including (a) reductions in headcount and corporate overhead expenses;
and (b) expansion into new market.  Management believes that these actions will enable the Company to improve future
profitability and cash flow in its continuing operations through December 31, 2011.  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.



23.
RESTATEMENT



Subsequent
to the filing of our December 31, 2009 financial statements, management determined that the consolidated statement of operations
and cash flows were not properly presented according to GAAP. , Specifically, we previously misclassified some expenses from discontinued
operation in the operating expenses from continued operation. We also presented cash flows from discontinued operations within
the cash flows from continued operations that should have been presented separately. Management believes these changes did not
have a material effect on the Company’s interim financial statements and results of operations for the periods ended March
31, June 30 and September 30, 2010.



The
following tables illustrate the effects of the restatement on the consolidated statement of operations and cash flows for the
years ended December 31, 2009:



|                                                              |  | For
    the year ended       |           | For
    the year ended
|------------------------------------------------------------- |  | ---------------------------- | --------- | ----------------------
|                                                              |  | 12/31/2009                   |           | 12/31/2009            
|                                                              |  | (As
    previously reported) |           | (As
    restated)     
|Consolidated
    Statement of Operations:                     |  |                              |           |                       
|OPERATING
    EXPENSES:                                       |  |                              |           |                       
|General
    and administrative                                |  |                              | 683,603   |                       
|TOTAL
    OPERATING EXPENSES                                  |  |                              | 1,055,341 |                       
|                                                              |  |                              |           |                       
|OTHER INCOME
    (EXPENSE):                                   |  |                              |           |                       
|Gain
    (loss) on disposal of equipment                      |  |                              |           |                       
|TOTAL
    OTHER INCOME (EXPENSES)                             |  |                              | 147,831   |                       
|                                                              |  |                              |           |                       
|NET INCOME(LOSS)
    FROM CONTINUING OPERATIONS               |  |                              | (344,080  | )                     
|NET INCOME(LOSS)
    FROM DISCONTINUED OPERATIONS             |  |                              | 97,719    |                       
|                                                              |  |                              |           |                       
|Consolidated
    Statement of Cash Flows:                     |  |                              |           |                       
|CASH FLOWS
    FROM OPERATING ACTIVITIES:                     |  |                              |           |                       
|(Add)
    deduct (loss) earnings from discontinued operations |  |                              | 97,719    |                       
|Loss (gain)
    from sale of property and equipment           |  |                              |           |                       
|Operating
    cash flow from discontinued operations          |  |                              | 97,719    |                       
|NET
    CASH PROVIDED (USED) BY OPERATING ACTIVITIES          |  |                              | (253,994  | )                     
|                                                              |  |                              |           |                       
|CASH FLOWS
    FROM INVESTING ACTIVITIES                      |  |                              |           |                       
|Proceeds
    from disposal of property and equipment          |  |                              | 545,321   |                       
|NET
    CASH PROVIDED (USED) BY INVESTING ACTIVITIES          |  |                              | 106,030   |                       
|                                                              |  |                              |           |                       
|Net
    cash transferred from (to) discontinued operation     |  |                              |           |                       
|                                                              |  |                              |           |                       
|Foreign
    currency translation adjustment                   |  |                              | 7,745     |                       





(37)









ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



There
have been no changes in and disagreements with accountants on accounting and financial disclosure in the past two fiscal years.



ITEM
9A. CONTROLS AND PROCEDURES



We
maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under
the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the specified
time periods. Our Chief Executive Officer and our Chief Financial Officer (collectively, the “Certifying Officers”)
are responsible for maintaining our disclosure controls and procedures. The controls and procedures established by us are designed
to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s
rules and forms.



To
evaluate the effectiveness of our internal controls over financial reporting, we have adopted the framework prescribed by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).  We believe that this framework will assist
in the provision of reasonable assurance of the effectiveness and efficiency of operations, the reliability of financial reporting,
and compliance with applicable laws and regulations.  In adopting the COSO framework, we maintain a control environment,
perform risk assessments, carry out control activities, emphasize quality information and effective communication, and perform
monitoring.  In the maintenance of a control environment, we are committed to integrity and ethical values as well as
to competence.  We strive to assign authority and responsibility in a manner that supports our internal controls, and
we also maintain human resources policies and procedures designed to support our internal controls.  Our risk assessments
are designed to ensure the achievement of company-wide and process-level objectives as well as to identify and analyze risks while
managing change.  We believe that all of these components together form a foundation for sound internal control through
directed leadership, shared values and a culture that emphasizes accountability for control.



As
of the end of the period covered by this report, the Certifying Officers evaluated the effectiveness of our disclosure controls
and procedures. Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were effective
to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms,
and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely
decisions regarding required disclosure.



The
Certifying Officers have also concluded, based on our evaluation of our controls and procedures that as of December 31, 2010,
our internal controls over financial reporting are effective and provide a reasonable assurance of achieving their objective.



Due
to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements under all potential
conditions. Therefore, effective internal control over financial reporting provides only reasonable, and not absolute, assurance
that a restatement of our financial statements would be prevented or detected.



This
annual report does not include an attestation report of our registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant
to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual
report.



Changes
in Internal Control Over Financial Reporting



There
were no changes in the our internal control over financial reporting that occurred during the period covered by this report that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



This
annual report does not include an attestation report of our registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant
to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual
report.



ITEM
9A(T).CONTROLS AND PROCEDURES



(a) Conclusions
regarding disclosure controls and procedures. Disclosure controls and procedures are the Company’s controls and
other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that the
Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files
under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management is responsible
for establishing and maintaining adequate internal control over financial reporting.



Under
the supervision and with the participation of our management, including our principal executive officer and principal financial
officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated
under the Exchange Act as of December 31, 2010, and, based on their evaluation, as of the end of such period, the our disclosure
controls and procedures were effective as of the end of the period covered by the Annual Report,



(b) Management’s
Report On Internal Control Over Financial Reporting. It is management’s responsibilities to establish and maintain
adequate internal controls over the Company’s financial reporting. Internal control over financial reporting is defined
in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the issuer’s
principal executive and principal financial officers and effected by the issuer’s management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:



•
	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions
of the assets of the issuer; and



•
	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and that receipts and expenditures of the issuer are being made only
in accordance with authorizations of management of the issuer; and



•
	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
issuer’s assets that could have a material effect on the financial statements.



As
of the end of the period covered by the Annual Report, an evaluation was carried out under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal control
over financial reporting.



Management
assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated
Framework.



Based
on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period,
internal controls over financial reporting were effective as of the end of the period covered by the Report.



Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of
internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control
over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore,
it is possible to design into the process safeguards to reduce, though not eliminate, this risk.



This
Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant
to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this
Annual Report.



(c) Changes
in internal control over financial reporting. There were no changes in our internal control over financial reporting identified
in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last
fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.



ITEM
9B. OTHER INFORMATION



None.





(38)









PART
III



ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT



Directors
and Executive Officers



Our directors
are elected at the annual meeting of shareholders and hold office for one year and until their successors are elected and qualified.
Our officers are appointed by the Board of Directors and serve at the pleasure of the Board. We have not entered into any employment
agreements with our executive officers.



|Name            | Age | Position                                            | Date
    to Start
|--------------- | --- | --------------------------------------------------- | -----------------
|Chen, Quan Long | 51  | President, Chief Executive
    Officer and Chairman | June 1, 2006     
|Li, Lin Feng    | 39  | Chief Financial Officer                             | August 31, 2010  



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



Mr.
Chen, Quan Long, 51, 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.



Li,
Lin Feng - Chief Financial Officer



Mr.
Li is a certified public accountant in China. Mr. Li is experienced in Fund management also familiar in mergers and acquisitions
and integration, and capital operation. From July 1990 to July 2009, Mr. Li had worked in China National Petroleum Corporation,
North China Petroleum Administration Bureau; Hua Jian Certified Public Accountants Co.; Beijing Huarong Culture Investment
Company and Beijing Meiying Huada Investment Advisory Co., Ltd. at the positions as more than ten years Financial Manager experience,
Project Manager and more than 3 years Chief Financial Officer experience respectively.



Mr.
Li received his MBA from Beijing University of Technology.



Family
Relationships.



None.



Legal
Proceedings.



No officer,
director, or persons nominated for such positions and no promoter or significant employee has been involved in legal proceedings
that would be material to an evaluation of our management.



Audit
Committee



We
do not have a separately designated standing audit committee. Pursuant to Section 3(a)(58)(B) of the Exchange Act, the entire
Board of Directors acts as an audit committee for the purpose of overseeing the accounting and financial reporting processes,
and audits of our financial statements. The Commission recently adopted new regulations relating to audit committee composition
and functions, including disclosure requirements relating to the presence of an "audit committee financial expert" serving
on its audit committee. In connection with these new requirements, our Board of Directors examined the Commission's definition
of "audit committee financial expert" and concluded that we do not currently have a person that qualifies as such an
expert. We have had minimal operations for the past two (2) years. Presently, there are only four (4) directors serving on our
Board, and us are not in a position at this time to attract, retain and compensate additional directors in order to acquire a
director who qualifies as an "audit committee financial expert", but we intend to retain an additional director who
will qualify as such an expert, as soon as reasonably practicable. While neither of our current directors meets the qualifications
of an "audit committee financial expert", each of our directors, by virtue of his past employment experience, has considerable
knowledge of financial statements, finance, and accounting, and has significant employment experience involving financial oversight
responsibilities. Accordingly, we believe that our current directors capably fulfill the duties and responsibilities of an audit
committee in the absence of such an expert.



Code of
Ethics



We
have adopted a code of ethic (the "Code of Ethics") that applies to our principal chief executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Ethics is
being designed with the intent to deter wrongdoing, and to promote the following:



|• |  | Honest
                                                                                  and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional
                                                                                  relationships
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|• |  | Full,
                                                                                  fair, accurate, timely and understandable disclosure in reports and documents that a small business issuer files with, or submits
                                                                                  to, the Commission and in other public communications made by the small business issuer
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|• |  | Compliance
                                                                                  with applicable governmental laws, rules and regulations
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

|The |  | prompt
                                                                               internal reporting of violations of the code to an appropriate person or persons identified in the code
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|• |  | Accountability
                                                                                  for adherence to the code
|- |  | --------------------------------------------------------------------------------------------------------------------------



Section
16(a) Beneficial Ownership Reporting Compliance



Under
Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than
10% of the common stock of a company that files reports pursuant to Section 12 of the Exchange Act, are required to report the
ownership of such common stock, options, and stock appreciation rights (other than certain cash-only rights) and any changes in
that ownership with the Commission. Specific due dates for these reports have been established, and we are required to report,
in this Form 10-K/A, any failure to comply therewith during the fiscal year ended December 2008. We believe that all of these
filing requirements were satisfied by our executive officers, directors and by the beneficial owners of more than 10% of our common
stock. In making this statement, hawse have relied solely on copies of any reporting forms received by it, and upon any written
representations received from reporting persons that no Form 5 (Annual Statement of Changes in Beneficial Ownership) was required
to be filed under applicable rules of the Commission.



(39)











ITEM
11. EXECUTIVE COMPENSATION



The
following table sets forth certain information regarding the annual and long-term compensation for services in all capacities
to us for the prior fiscal years ended December 31, 2009, 2008, and 2007, of those persons who were either the chief executive
officer during the last completed fiscal year or any other compensated executive officers as of the end of the last completed
fiscal year, and whose compensation exceeded $100,000 for those fiscal periods.



|SUMMARY
    COMPENSATION TABLE               
|---------------------------------------------
|Name
    and principal position (a)          
|Chen, Quan Long President,
    CEO & Chairman
|2009                                         
|2008                                         
|                                             
|Li, Lin Feng Chief Financial Officer         





We
have not entered into any other employment agreements with our employees, Officers or Directors. We have no standard arrangements
to compensate our directors for their services to us.



Stock
Option Plan



We
have not implemented a stock option plan at this time and since inception, have issued no stock options, SARs or other compensation.
We may decide, at a later date, and reserve the right to, initiate such a plan as deemed necessary by the Board.



ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER MATTERS.



As
of April 12, 2011, we had 3,630 stockholders of record and 38,779,689 shares of our Common Stock, 13,150 shares of our Series
A Preferred Stock and 12,100,000 Series B Preferred Stock issued and outstanding. The following table sets forth as of April 12,
2011, certain information with respect to the beneficial ownership of Common Stock by (i) each of our Director, nominee and executive
officer; (i) each person who owns beneficially more than 5% of the common stock; and (iii) all Directors, nominees and executive
officers as a group. The percentage of shares beneficially owned is based on there having been 38,779,689 shares of our Common
Stock, 13,150 shares of our Series A Preferred Stock and 12,100,000 Series B Preferred Stock issued and outstanding as of April
12, 2011.



OFFICERS,
DIRECTORS AND BENEFICIAL OWNERS, AS OF APRIL 12, 2011



|Title
    of Class                                    | Name
    & Address of Beneficial Owner(1)                                                                                           | Amount
    & Nature of Beneficial Owner | %
    of Class(2)
|----------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | -----------------
|                                                      |                                                                                                                                     |                                         |                  
|Series A Preferred Stock, $.001 par value             | Chen,
        Quan Long
        Room
        503,Building 53,QianXi District, DaDao Road, NanFeng County, JiangXi, P.R.China 344500 | 13,150                                  | 100%             
|Series A Preferred Stock, $.001 par value             | All directors and executive officers as a group (one person)                                                                        | 13,150                                  | 100%             
|                                                      |                                                                                                                                     |                                         |                  
|Series B Preferred Stock, $.001 par value             | Chen,
        Quan Long
        Room
        503,Building 53,QianXi District,DaDao Road, NanFeng County, JiangXi,P.R.China 344500   | 12,100,000                              | 100%             
|Series B Preferred Stock, $.001 par value             | All directors and executive officers as a group (one person)                                                                        | 12,100,000                              | 100%             
|                                                      |                                                                                                                                     |                                         |                  
|Common
        Stock,
        $.001
        par value | Chen,
        Quan Long
        Room
        503,Building 53,QianXi District,DaDao Road, NanFeng County, JiangXi,P.R.China 344500   | 665,416                                 | 2%               
|                                                      |                                                                                                                                     |                                         |                  
|Common
        Stock
        $.001
        par value  | All directors and
    executive officers as a group (three persons)                                                                 | 665,416                                 | 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.



(40)









ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE



None.



ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES



Fees Billed
For Audit and Non-Audit Services



The
following table represents the aggregate fees billed for professional audit services rendered to the independent auditor, Lake
& Associates CPA’s LLC (“Lake”), for our audit of the annual financial statements for the years ended December
31, 2010 and 2009. Audit fees and other fees of auditors are listed as follows:



|Year
    Ended December 31         |  | 2010(2) |  | 2009(3) |        | 
|---------------------------------- |  | ------- |  | ------- | ------ | 
|                                   |  |         |  |         |        | 
|Audit Fees (1)                     |  | $46,000 |  | $       | 66,000 | 
|Audit-Related Fees (4)             |  | --      |  |         | --     | 
|Tax Fees (5)                       |  | --      |  |         | --     | 
|All Other
    Fees (6)             |  | --      |  |         | --     | 
|Total Accounting Fees and Services |  | $46,000 |  | $       | 66,000 | 
|                                   |  |         |  |         |        | 



| | (1) | Audit
    Fees. These are fees for professional services for the audit of our annual financial statements, and for the review of the financial
    statements included in our filings on Form 10-Q, and for services that are normally provided in connection with statutory and
    regulatory filings or engagements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | The
    amounts shown in 2010 relate to (i) the audit of our annual financial statements for the fiscal year ended December 31, 2010,
    and (ii) the review of the financial statements included in our filings on Form 10-Q for the quarters of 2011.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | The
    amounts shown in 2009 relate to (i) the audit of our annual financial statements for the fiscal year ended December 31, 2009,
    and (ii) the review of the financial statements included in our filings on Form 10-Q for the quarters of 2010.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (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, 2010, 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.





(41)











PART
IV



ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES



|(a) | Financial Statements
|--- | --------------------



1. The
following financial statements of China Fruits Corp. are included in Part II, Item 8:



Report
of Independent Registered Public Accounting Firm Balance Sheet at December 31, 2010

Statements
of Operations - for the years ended December 31, 2010 and 2009

Statements
of Cash Flows - for the years ended December 31, 2010 and 2009

Statements
of Stockholders’ Equity - for the years ended December 31, 2010 and 2009

Notes
to Financial Statements



2. Exhibits



14.1 Code
of Ethics *

31.1. Rule
13a-14(a)/15d-14(a) Certifications of Chief Executive Officer

31.2. Rule
13a-14(a)/15d-14(a) Certifications of Chief Financial Officer

32.1. Section
1350 Certifications of Chief Executive Officer

32.2. Section
1350 Certifications of Chief Financial Officer



* Filed
previously.



|(b) | Reports on Form 8-K
|--- | -------------------



(1)
On January 19, 2010, we filed a Current Report on Form 8-K to announce that we entered into an Offshore Subscription Agreement
with Mr. Huang, Junjie (“Mr. Huang”), pursuant to which Mr. Huang subscribed to and purchased nine hundred thousand
(900,000) shares of our restricted common stock at a purchase price of twenty cents (US$.20) per share (aggregate sum of $180,000).



(2)
On July 2, 2010, we filed a current report on Form 8-K to announce the resignation of Ms. Zhao Li Li from her position of Director
of the Company as approved by the Board of Directors, and effective immediately.



(3)
On September 1, 2010, we filed a current report on Form 8-K to announce the appointment of Mr. Li, Lin Feng as Chief Financial
Officer of the Company and the resignation of Mr. Wang, Yong Cheng, former Chief Financial Officer of the Company, as approved
by the Board of Directors, and effective immediately.



(4)
On March 14, 2011, we filed a current report on Form 8-K to announce the reduction in registered capital of Tai Na International
Fruits (Bei Jing) Co. Ltd., one of our wholly-owned subsidiaries.



(42)


Table of Contents








SIGNATURES



In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this report to be signed
on its behalf by the undersigned majority of the Board of Directors, thereunto duly authorized.





|                   |  | China
    Fruits Corporation
|------------------ |  | ----------------------------
|                   | 
|Date: May 17, 2011 |  | /s/
    Chen, Quan Long     
|                   |  | Chen, Quan Long             
|                   |  | President                   







Exhibits



14.1 Code
of Ethics *

31.1.Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer

31.2.Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer

32.1.Section 1350 Certifications of Chief Executive Officer

32.2.Section 1350 Certifications of Chief Financial Officer



*Previously
Filed