**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**









**Form
      10-KSB**









**(Mark
      One)**




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




**For the fiscal year ended December 31, 2006**




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




**For the transition period from** **** **to** **** ****




**Commission
      File Number:** **1-10559**







**CHINA
      FRUITS CORP.**


**F/K/A** **DIVERSIFIED
      FINANCIAL RESOURCES 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)**







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




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




Check
      whether the issuer (1) filed all reports required to be filed by
      Section 13 or 15 (d) of the Exchange Act during the past 12 months (or
      for such shorter period that the registrant was required to file such reports),
      and (2) has been subject to such filing requirements for the past 90 days. **Yes** **x** **No** **o**




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




The
      Registrant’s revenues for its fiscal year ended December 31, 2006 were
      $1,242,705.





The
      aggregate market value of the voting stock on April 13, 2007 (consisting of
      Common Stock, $0.001 par value per share) held by non-affiliates was
      approximately $12,379,143 based upon the most recent sales price for such Common
      Stock on said date ($0.35). On April 13, 2007, there were 36,129,689 shares
      of
      our Common Stock issued and outstanding, of which approximately 35,368,979
      shares were held by non-affiliates.





Number
      of
      shares of common stock, par value $.001, outstanding as of April 13, 2007:
      36,129,689





Number
      of
      shares of preferred stock outstanding as of April 13, 2007:


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


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




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




1
 *Table
          of Contents*




CAUTIONARY
      STATEMENT REGARDING FORWARD LOOKING INFORMATION





The
      discussion contained in this 10-KSB under the Securities Exchange Act of 1934,
      as amended, (the "Exchange Act") contains forward-looking statements that
      involve risks and uncertainties. The issuer's actual results could differ
      significantly from those discussed herein. These include statements about our
      expectations, beliefs, intentions or strategies for the future, which we
      indicate by words or phrases such as "anticipate," "expect," "intend," "plan,"
      "will," "we believe," "the Company believes," "management believes" and similar
      language, including those set forth in the discussion under "Description of
      Business," including the "Risk Factors" described in that section, and
      "Management's Discussion and Analysis or Plan of Operation" as well as those
      discussed elsewhere in this Form 10-KSB. We base our forward-looking statements
      on information currently available to us, and we assume no obligation to update
      them. Statements contained in this Form 10-KSB that are not historical facts
      are
      forward-looking statements that are subject to the "safe harbor" created by
      the
      Private Securities Litigation Reform Act of 1995.





2




**TABLE
      OF CONTENTS**




**PART
                I**Item 1
            
            Description
                of Business
            
            4Item 2
            
            Description
                of Property
            
            10Item 3
            
            Legal
                Proceedings
            
            11Item 4
            
            Submissions
                of Matters to a Vote of Security Holders
            
            11**PART II**Item 5
            
            Market
                for Common Equity, Related Stockholder Matters And Small Business
                Issuer
                Purchases of Equity Securities
            
            11Item 6
            
            Management’s
                Discussion and Analysis or Plan of Operation
            
            13Item 7
            
            Financial
                Statements
            
            18Item 8
            
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            39Item 8A
            
            Controls
                and Procedures
            
            39Item 8B
            
            Other
                Information
            
            40**PART III**Item 9
            
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance With
                Section
                16(a) of the Exchange Act
            
            11Item 10
            
            Executive
                Compensation
            
            42Item 11
            
            Security
                Ownership of Certain Beneficial Owners and Management
            
            43Item 12
            
            Certain
                Relationships and Related Transactions
            
            44Item 13
            
            Exhibits,
                Lists and Reports on Form 8-K
            
            45Item 14
            
            Principal
                Accountant Fees and Services
            
            46








3
 *Table
          of Contents*




**PART
      I**




**Item 1.
      Description of Business.**




***History***





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





We
      began
      operating as a holding company in 2005. The primary objectives involved creating
      and managing a comprehensive portfolio of companies in key industry sectors.
      We
      did not meet our primary objectives in 2005. As a result, during 2005 we decided
      to try and sell all of our real estate properties, and discontinued the
      operations of all of our subsidiaries. In the first quarter of 2006, our
      operations from continuing activities consisted of its investment in an oil
      and
      gas property in Texas, which was disposed during the second quarter of
      2006.




As
      of April 1, 2006, we entered into a Plan of Exchange (the “Agreement”), between
      and among us, Jiang Xi Tai Na Guo Ye You Xian Gong Si, a corporation organized
      and existing under the laws of the Peoples’ Republic of China (“Tai Na”), the
      shareholders of Tai Na (the “Tai Na Shareholders”) and our Majority
      Shareholder.




Pursuant
      to the terms of the Agreement, two simultaneous transactions were consummated
      at
      closing, as follows: (i) our Majority Shareholder delivered 13,150 of our
      convertible Series A preferred shares and 12,100,000 non-convertible Series
      B
      preferred shares to the Tai Na Shareholders in exchange for total payments
      of
      $500,000 in cash and (ii) we issued to the Tai Na Shareholders an amount equal
      to 30,000,000 new investment shares of our common stock pursuant to Regulation
      S
      under the Securities Act of 1933, as amended, in exchange for all of their
      shares of registered capital of Tai Na. Upon completion of the exchange, Tai
      Na
      became our wholly-owned subsidiary. All of these conditions to closing have
      been
      met, and we, Tai Na, the Tai Na Shareholders and our Majority Shareholders
      declared the exchange transaction consummated on May 31, 2006. The transaction
      was treated for accounting purposes as a capital transaction and
      recapitalization by the accounting acquirer and as a re-organization by the
      accounting acquiree.





***Business
      Description of the Issuer***





Since
      the
      reverse merger was consummated, we have continued operations of Tai Na, a
      company which is principally engaged in manufacturing, trading and distributing
      fresh tangerine, non-alcoholic and alcoholic beverages in the PRC. Tai Na is
      located in Nan Feng County, Jiang Xi Province, a well known agricultural area
      for tangerine in China. We plan to market and development new tangerine-related
      product lines, such as tangerine juice and tangerine wine. Our main tangerine
      supplier, Royal
      NanFeng Orange Science & Technology Co., Ltd. ("Royal") ,
      has
      over 593 acres of orchards. We hope to achieve a product capacity of 3,000
      tons
      of fruit wine and 3,000 tons of juice over the next two years. On February
      19,
      2007, we entered into an agreement with Royal to
      acquire the assets and businesses of Royal to
      assist in further expansion in the tangerine markets. The assets and businesses
      of Royal ,
      including over 593 acres of orchards, 395 acres of land with a reservoir, a
      manufacturing plant situated on over 33 acres, and the distribution network
      of
      the Royal. The
      acquisition should be completed by December 31, 2007. After completion of the
      acquisition, we will own all of Royal ’s
      plants, orchards, and fruit wine and soft drink production lines.




4
 *Table
          of Contents*





***Overview
      of Our Market Area***




China's
      citrus industry currently experiences transition from quantity concentration
      to
      quality concentration, from production only to diversified business segments
      covering pre-production to post-production. Citrus production in China has
      the
      following features:




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




v
            *Concentration
                on Chinese Market*.
                Citrus products are primarily marketing in China. There is only
                approximately 2% of total exported to different countries.




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




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




***Marketing
      Strategies***




**Seeking
      for Opportunities to Develop International Markets**




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




**Seeking
      for Strategic partners**




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


•
            Enhance
                the manufacturing capacities;•
            Expand
                the sales network;•
            Increase
                the sales revenue; and•
            successfully
                build up the brand name.




5
 *Table
          of Contents*




(i)
            As
                of January 23, 2007, we entered into a winery agreement with Shenzhen
                Loulan Red Wine Company Ltd (“Loulan”), pursuant to which we will ferment
                wine for Loulan for a total value of not less than $3,750,000. The
                agreement commenced on February 1, 2007 and will end on February
                1, 2008.





(ii)
            On
                February 6, 2007, we entered into a sales agreement with Liaoning
                Shenyang
                Yunpeng Fruits Limited ("Yunpeng") for the sale of our brand name
                oranges.
                Pursuant to the sales agreement, Yunpeng will be our exclusive distributor
                of brand name oranges within three provinces in Northeast
                China.





(iii)
            On
                February 8, 2007, we entered into a sales agreement with Inner Mongolian
                Manchuria Menglin Fruits Limited ("Menglin") for the sale of our
                brand
                name oranges. Pursuant to the sales agreement, Menglin will export
                3,000
                tons of our brand name oranges to Russia, in 2007. Menglin will be
                our
                general distributor in the Russian
                market.




(iv)
            On
                February 19, 2007, we entered into an agreement withRoyalto
                acquire the assets and businesses ofRoyalto
                assist in further expansion in the tangerine markets. The assets
                and
                businesses ofRoyal,
                including over 593 acres of orchards, 395 acres of land with a reservoir,
                a manufacturing plant situated on over 33 acres, and the distribution
                network of theRoyal.The
                acquisition should be completed by December 31, 2007. After completion
                of
                the acquisition, we will own all ofRoyal’s
                plants, orchards, and fruit wine and soft drink production
                lines.




(v)
            In
                February of 2007, we entered into a series of sales agreements with
                two
                unrelated companies pursuant to which we shall provide total orange
                sales
                of not less than 6,000 tons in 2007.




**Enhance
      Manufacture Capacity**




The
      acquisition of Royal is one of our strategies to enhance the manufacture
      capacity. Royal was engaged in citrus industry since 2002, owned over 593 acres
      of orchards, 395 acres of land with a reservoir, a manufacturing plant situated
      on over 33 acres, and sophisticated distribution network.
      After
      acquisition, we will have additional two-story plant with total area of 127,832
      square feet, and one-story plant with total area of 9,246 square feet. In
      addition, we invested approximately $300,000 inmachinery,
      office equipment, transportation facilities and other equipments, 90% of which
      for fruit wine production line. We also invest approximately $220,000 in two
      one-story new plants with total area of 45,280 square feet. The construction
      was
      completed in March of 2007.





***Competition*** **





The
      domestic and international markets for citrus industry are intensely competitive
      and require us to compete against some companies possessing greater financial,
      marketing and other resources than ours. In addition, we compete in the
      nonalcoholic beverages segment of the commercial beverages industry. The
      nonalcoholic beverages segment of the commercial beverages industry is highly
      competitive, consisting of numerous firms. These include firms that compete
      in
      multiple geographic areas as well as firms that are primarily local in
      operation. Competitive products include numerous nonalcoholic sparkling
      beverages; various water products, including packaged water; juices and nectars;
      fruit drinks and dilutables (including syrups and powdered drinks); coffees
      and
      teas; energy and sports drinks; and various other nonalcoholic beverages. These
      competitive beverages are sold to consumers in both ready-to-drink and
      not-ready-to-drink form. Competitive factors impacting our business include
      pricing, advertising, sales promotion programs, product innovation, increased
      efficiency in production techniques, the introduction of new packaging, new
      vending and dispensing equipment, and brand and trademark development and
      protection.




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




6
 *Table
          of Contents*




***Government
      Regulation*** **





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





***Employees*** **




As
      of
      December 31, 2006, we had 76 full-time employees, including 2 office executives,
      32 specialists in researching and developing the quality of tangerine and
      related products.Approximately 9.59% of the employees have bachelor degrees or above.All
      employees are working in our subsidiary located in China.





***Risk
      Factors***




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




***Water
      scarcity and poor quality could negatively impact our production costs and
      capacity***




Water
      is
      the main ingredient in substantially all of our beverage products. It is also
      a
      limited resource in many parts of the world, facing unprecedented challenges
      from overexploitation, increasing pollution and poor management. As demand
      for
      water continues to increase in China and as the quality of available water
      deteriorates, our system may incur increasing production costs or face capacity
      constraints which could adversely affect our profitability or net operating
      revenues in the long run.




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




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




***Increased
      competition could hurt the our business***




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




7
 *Table
          of Contents*




***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***




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


•
            Enhance
                the manufacturing capacities;•
            Expand
                the sales network;•
            Increase
                the sales revenue; and•
            successfully
                build up the brand name.




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




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




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




***Adverse
      weather conditions could reduce the demand for our products.***




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




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




Our
      success depends on our ability to maintain brand image 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.




8
 *Table
          of Contents*




***If
      we are not able to achieve our overall long term goals, the value of an
      investment in us could be negatively affected.***




We
      have
      established and publicly announced certain long-term growth objectives. These
      objectives were based on our evaluation of our growth prospects, which are
      generally based on the increase in our investment, and on an assessment of
      potential level or mix of product sales. There can be no assurance that we
      will
      achieve the required volume or revenue growth or mix of products necessary
      to
      achieve our growth objectives.




***Our
      assets are located in China and its revenues are derived from its operations
      in
      China***




In
      terms of
      industry regulations and policies, the economy of China has been transitioning
      from a planned economy to market oriented economy. Although in recent years
      the
      Chinese government has implemented measures emphasizing the utilization of
      market forces for economic reforms, the reduction of state ownership of
      productive assets and the establishment of sound corporate governance in
      business enterprises, a substantial portion of productive assets in China are
      still owned by the Chinese government. For example, all lands are state owned
      and are leased to business entities or individuals through governmental granting
      of State-owned Land Use Rights. The granting process is typically based on
      government policies at the time of granting and it could be lengthy and complex.
      This process may adversely affect our future manufacturing expansions. The
      Chinese government also exercises significant control over China’s economic
      growth through the allocation of resources, controlling payment of foreign
      currency and providing preferential treatment to particular industries or
      companies. Uncertainties may arise with changing of governmental policies and
      measures. At present, our development of research and development technologies
      and products is subject to approvals from the relevant government authorities
      in
      China. Such governmental approval processes are typically lengthy and complex,
      and never certain to be obtained.





***Political
      and economic risks***




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




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




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




***Currency
      conversion and exchange rate volatility could adversely affect our financial
      condition.***




The
      PRC
      government imposes control over the conversion of Renminbi into foreign
      currencies. Under the current unified floating exchange rate system, the
      People’s Bank of China publishes an exchange rate, which we refer to as the PBOC
      exchange rate, based on the previous day’s dealings in the inter-bank foreign
      exchange market. Financial institutions authorized to deal in foreign currency
      may enter into foreign exchange transactions at exchange rates within an
      authorized range above or below the PBOC exchange rate according to market
      conditions.




9
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          of Contents*




Pursuant
      to the Foreign Exchange Control Regulations of the PRC issued by the State
      Council which came into effect on April 1, 1996, and the Regulations on the
      Administration of Foreign Exchange Settlement, Sale and Payment of the PRC
      which
      came into effect on July 1, 1996, regarding foreign exchange control, conversion
      of Renminbi into foreign exchange by Foreign Investment Enterprises, or FIEs
      for
      use on current account items, including the distribution of dividends and
      profits to foreign investors, is permissible. FIEs are permitted to convert
      their after-tax dividends and profits to foreign exchange and remit such foreign
      exchange to their foreign exchange bank accounts in the PRC.




Conversion
      of Renminbi into foreign currencies for capital account items, including direct
      investment, loans, and security investment, is still subject to certain
      restrictions. On January 14, 1997, the State Council amended the Foreign
      Exchange Control Regulations and added, among other things, an important
      provision, which provides that the PRC government shall not impose restrictions
      on recurring international payments and transfers under current account
      items.




Enterprises
      in PRC (including FIEs) which require foreign exchange for transactions relating
      to current account items, may, without approval of the State Administration
      of
      Foreign Exchange, or SAFE, effect payment from their foreign exchange account
      or
      convert and pay at the designated foreign exchange banks by providing valid
      receipts and proofs.




Convertibility
      of foreign exchange in respect of capital account items, such as direct
      investment and capital contribution, is still subject to certain restrictions,
      and prior approval from the SAFE or its relevant branches must be
      sought.




We
      are a
      FIE to which the Foreign Exchange Control Regulations are applicable. There
      can
      be no assurance that we will be able to obtain sufficient foreign exchange
      to
      pay dividends or satisfy other foreign exchange requirements in the
      future.




Since
      1994, the exchange rate for Renminbi against the United States dollars has
      remained relatively stable, most of the time in the region of approximately
      RMB8.28 to US$1.00. However, in 2005, the Chinese government announced that
      would begin pegging the exchange rate of the Chinese Renminbi against a number
      of currencies, rather than just the U.S. dollar. As our operations are primarily
      in China, any significant revaluation of the Chinese Renminbi may materially
      and
      adversely affect our cash flows, revenues and financial condition. For example,
      to the extent that we need to convert United States dollars into Chinese
      Renminbi for our operations, appreciation of this currency against the United
      States dollar could have a material adverse effect on our business, financial
      condition and results of operations. Conversely, if we decide to convert Chinese
      Renminbi into United States dollars for other business purposes and the United
      States dollar appreciates against this currency, the United States dollar
      equivalent of the Chinese Renminbi we convert would be reduced.




**Item 2.
      Description of Property.**





Our
      main
      operation is located at Fu
      Xi
      Technology & Industry Park, Nan Feng County, Jiang Xi Province ,
      People’s Republic of China, which is leased from Royal and has a total area of
      9,774 square feet. The lease covers 10 years period from 2005 to 2015 with
      annul
      payment of $308. This space is adequate for our present operations. No other
      businesses operate from this office.





In
      addition, we are building up two self-owned one-story plants at the same
      location, total area of which is approximately 45,280 square feet. The
      construction was completed in March of 2007. We expect our revenue will increase
      after the new plant start operating.





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.




10
 *Table
          of Contents*




**Item 3.
      Legal Proceedings.**




We
      and our
      former president were named as respondents in a complaint filed by the
      Securities and Exchange Commission ("SEC"). The civil suit, SEC v. Wolfson,
      et.
      al., case number 2:03 CV 0914K, was filed in the United States District Court
      for the District of Utah. The complaint alleged that we and our president failed
      to accurately and fully disclose the nature of our relationship with the Sukumo
      Group, Inc. and to timely disclose the execution of the Offshore Purchase
      Agreement. The complaint further alleged that our president took actions in
      2003
      to manipulate the price of our stock in the marketplace. The proposed settlement
      ordered our president to pay a civil penalty of $120,000 in installments over
      a
      one year term and prohibits him from serving as an officer or director of any
      publicly held company and from participating in the issuance of any penny stock.
      The proposed settlement was accepted by the U.S. District Court on or about
      April 18, 2005 and the payment of $120,000 was during the quarter ended June
      30,
      2006.




As
      required
      by the final agreement, Mr. Chapman resigned from the Board of Directors and
      from his positions as President and Chief Executive Officer effective May 6,
      2005. Dennis Thompson, a member of the Board of Directors, was named as
      President and Chief Executive Officer to replace Mr. Chapman. We filed a Form
      8-K dated May 6, 2005 to report these events.




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




None.




**PART
      II**




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




***Trading
      Market for Common Equity***




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




**Year
                Ended December 31, 2005:**
            
            **High**
            
            **Low**3/31/2005
            
            $
            5.00
            
            $
            2.506/30/2005
            
            $
            2.50
            
            $
            2.509/30/2005
            
            $
            0.38
            
            $
            0.3512/31/2005
            
            $
            0.50
            
            $
            0.38**Year
                Ended December 31, 2006:**
            
            
            **High**
            
            
            **Low**3/31/2006
            
            $
            2.13
            
            $
            1.506/30/2006
            
            $
            1.26
            
            $
            1.269/30/2006
            
            $
            0.55
            
            $
            0.5512/31/2006
            
            $
            0.56
            
            $
            0.40**Year
                Ended December 31, 2007:**
            
            
            **High**
            
            
            **Low**3/31/2007
            
            $
            0.45
            
            $
            0.35





On
      July
      12, 2006, we completed a 1 for 12.5 reverse stock split on the common stock
      and
      the par value remains at $0.001 per share. The reverse stock split is not
      subject to any condition other than Board of Directors approval under the
      Section 78 of the Nevada Revised Statutes. In addition, Certificate of Change
      pursuant to NRS 78.209 was filed with the Secretary of State of Nevada in
      connection with the decrease in authorized capital.




11
 *Table
          of Contents*





***Dividends***





Since
      the
      year end December 31, 2003, we have not declared any cash
      dividends.





On
      April
      30, 2002, shareholders of record on that date became entitled to receive a
      stock
      dividend of one share of eLocity, Inc., for every share of our stock they held.
      The spin-off shares are being held in escrow with eLocity, Inc., and will not
      be
      distributed until eLocity, Inc. completes a registration statement.





We
      have
      never paid a cash dividend on our common stock. The payment of dividends may
      be
      made at the discretion of our Board of Directors, and will depend upon, among
      other things, our operations, capital requirements, and overall financial
      condition. There are no contractual restrictions on our ability to declare
      and
      pay dividends.





***Preferred
      Stock***





On
      September 16, 2004, we filed with the Delaware Secretary of State a
      Certificate of Designation of the Rights and Preferences of Preferred Stock
      of
      Diversified Financial Resources Corporation, n/k/a China Fruits Corporation.
      This designation created 200,000,000 shares, no stated par value, of Series
      A
      and Series B Convertible Preferred Stock. On May 18, 2006, we filed with
      the Nevada Secretary of State an Articles of Exchange to redomicile from
      Delaware State to Nevada State, the designation regarding the Rights and
      Preferences of Preferred Stock remains unchanged except that the par value
      of
      Preferred Stock was changed to $.001.





The
      Series A Convertible Preferred Stock has the following rights and
      privileges:


1.
            The
                shares are convertible at the option of the holder at any time into
                common
                shares, at a conversion rate of one share of Series A Convertible
                Preferred Stock for 100 shares of common stock for a period of 10
                years
                from the issuance date.2.
            Requires
                two-thirds voting majority to authorize changes to
                equity.


3.
            Redemption
                provision at option of directors for $10 per share plus the greater
                of $3
                per share or 50% of market capitalization divided by
                2,000,000.4.
            The
                holders of the shares are entitled to one hundred (100) votes for
                each
                share held.


5.
            Upon
                our liquidation, the holders of the shares will be entitled to receive
                $10
                per share plus redemption provision before assets distributed to
                other
                shareholders.6.
            The
                holders of the shares are entitled to dividends equal to common share
                dividends.





The
      Series B Convertible Preferred Stock has the following rights and
      privileges:




1.
            The
                shares are not convertible into any other class or series of
                stock.


2.
            The
                holders of the shares are entitled to five hundred (500) votes for
                each
                share held. Voting rights are not subject to adjustment for splits
                that
                increase or decrease the common shares
                outstanding.


3.
            Upon
                our liquidation, the holders of the shares will be entitled to receive
                $.001 per share plus redemption provision before assets distributed
                to
                other shareholders.


4.
            The
                holders of the shares are entitled to dividends equal to common share
                dividends.


5.
            Once
                any shares of Series B Convertible Preferred Stock are outstanding,
                at
                least two-thirds of the total number of shares of Series B Convertible
                Preferred Stock outstanding must approve the following
                transactions:




a)
            Alter
                or change the rights, preferences or privileges of the Series B Preferred
                Stock.




b)
            Create
                any new class of stock having preferences over the Series B Preferred
                Stock.




c)
            Repurchase
                any of our common stock.




d)
            Merge
                or consolidate with any other company, except our wholly-owned
                subsidiaries.




e)
            Sell,
                convey or otherwise dispose of , or create or incur any mortgage,
                lien, or
                charge or encumbrance or security interest in or pledge of, or sell
                and
                leaseback, in all or substantially all of our property or
                business.




f)
            Incur,
                assume or guarantee any indebtedness maturing more than 18 months
                after
                the date on which it is incurred, assumed or guaranteed by us, except
                for
                operating leases and obligations assumed as part of the purchase
                price of
                property.




12
 *Table
          of Contents*




***Number
      of Holders***




As
      of
      April 13, 2007, we had 3,715 common shareholders of record.





***Securities
      Authorized for Issuance Under Equity Compensation
      Plans***




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




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





(a)
            
            On
                May 31, 2006, we issued to the Tai Na Shareholders an amount equal
                to
                30,000,000 new investment shares of our common stock in exchange
                for all
                of their shares of registered capital of Tai Na owned by Tai Na
                Shareholders, pursuant to Plan of Exchange, dated April 1,
                2006.




The
      foregoing transactions were private transactions not involving a public offering
      and were exempt from registration provisions of the Securities Act of 1933,
      as
      amended, or the “Act”, pursuant to Section 4(2) thereof. The sale of the
      securities was without the use of an underwriter, and the certificates
      representing the shares of common stock bear a restrictive legend permitting
      transfer only upon registration or under an exemption from registration under
      the Act.





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




None.




***Transfer
      Agent***




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




**Item 6.
      Management’s Discussion and Analysis or Plan of Operation.**




FORWARD
      LOOKING STATEMENTS




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




13
 *Table
          of Contents*





CRITICAL
      ACCOUNTING POLICIES





**Revenue
      recognition**





We
      derive
      revenues from the resale of non-alcoholic and alcoholic beverages and tangerine
      purchased from third parties, net of value added taxes (“VAT”). We are subject
      to VAT which is levied on the majority of the products of Tai Na at the rate
      of
      17% on the invoiced value of sales. Output VAT is borne by customers in addition
      to the invoiced value of sales and input VAT is borne by us in addition to
      the
      invoiced value of purchases to the extent not refunded for export sales.





In
      accordance with the SEC’s Staff Accounting Bulletin No. 104, *Revenue
      Recognition* ,
      we
      recognize revenue when persuasive evidence of an arrangement exists, transfer
      of
      title has occurred or services have been rendered, the selling price is fixed
      or
      determinable and collectibility is reasonably assured. Our sales arrangements
      are not subject to warranty.





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





(a)   Sale
      of
      products





We
      recognize revenue from the sale of products upon delivery to the customers
      and
      the transfer of title and risk of loss. We did not record any product returns
      for the year ended December 31, 2006.





(b)  Interest
      income





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





**Inventory**





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. We periodically review
      historical sales activity to determine excess, slow moving items and potentially
      obsolete items and also evaluates the impact of any anticipated changes in
      future demand. We provide inventory allowances based on excess and obsolete
      inventories determined principally by customer demand. As of December 31, 2006,
      we did not record an allowance for obsolete inventories, nor have there been
      any
      write-offs.





**Property,
      Plant, and Equipment**





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





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





Expenditure
      for maintenance and repairs is expensed as incurred.




14
 *Table
          of Contents*





Revenues





Gross
      revenues were $1,242,705 and $0 for the years ended December 31, 2006 and 2005,
      respectively, due primarily to sales of tangerine, non-alcoholic and alcoholic
      beverages. We recognize revenue when persuasive evidence of a sale exists,
      transfer of title has occurred, the selling price is fixed or determinable
      and
      collectibility is reasonably assured. Our sales arrangements are not subject
      to
      warranty. We did not record any product returns for the year ended December
      31,
      2006. There were no comparable operations during the same period in 2005 due
      to
      the inception in October 2005. We expect sales to increase during 2006 as our
      moves toward developing our business plan, including the investment in a new
      plant.





Income
      / Loss





We
      had a
      net loss of $792,050 for the year ended December 31, 2006, due primarily to
      the
      increase in the cost of goods sold in this period, and non-cash consulting
      expenses of $752,584 for the year ended December 31, 2006. The non-cash
      consulting expenses were the result of the issuance of 3,900,000 shares of
      common stock for services in connection with general management consulting
      and
      advisory services including, but not limited to, the following:




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


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


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


-
            Assistance
                with preparation of financial statements;-
            EDGAR
                services





The
      shares were valued based on the market price on the date of the stock grant
      or
      the specific terms of the applicable consulting agreements and booked pro rata
      due to the service periods, which was completed as of December 31, 2006.





We
      had a
      net loss of $854 for the year ended December 31, 2005 due to the inception
      in
      October 2005. We expect to incur losses from operations during fiscal year
      2007
      until the operations of the new plant commences. There can be no assurance
      that
      we will achieve or maintain profitability, or that any revenue growth will
      take
      place in the future.




15
 *Table
          of Contents*





Expenses




Operating
      expenses for the years ended December 31, 2006 and 2005 were $1,045,297 and
      $854, respectively. The high operating expenses during 2006 were due primarily
      to accrued Selling, General and Administrative expenses of $160,598 and non-cash
      consulting expenses of $752,584 resulting from the issuance of 3,900,000 shares
      of common stock for services in connection with general management consulting
      and advisory services. The shares were valued based on the market price on
      the
      date of the stock grant or the specific terms of the applicable consulting
      agreements and booked pro rata due to the service periods, which was completed
      as of December 31, 2006.





Cost
      of Revenue




Cost
      of
      revenue included expenses directly related to the manufacturing and selling
      our
      products. Product delivery and direct labor would be examples of cost of revenue
      items. During the year ended December 31, 2006, we had $967,834 in cost of
      revenue, of which $354,005 from related party. Cost of revenue as a percentage
      of revenue was approximately 78%, which was higher during 2006 due to purchasing
      some of our ingredients through third parties resulting in small price markups.
      These markups typically range between 5-10%. We expect to lower the cost of
      sales after the commencement of the new plant as we will have the capacity
      to
      manufacture and store many of its own items. In addition, we are seeking more
      non-related suppliers to reduce the risk of concentration.




There
      were no
      comparable operations during the same period in 2005 due to the inception in
      October 2005.





Impact
      of Inflation





We
      believe that inflation has had a negligible effect on operations during this
      period. We believe that we can offset inflationary increases in the cost of
      sales by increasing sales and improving operating efficiencies.





Liquidity
      and Capital Resources





Cash
      flows used in operating activities were $143,554 for the year ended December
      31,
      2006. Negative cash flows from operations were due primarily to the net loss
      of
      $792,050, the increase in accounts receivable by $254,397, partially offset
      by
      the increase in accounts payable to related party of $110,029 in the year of
      2006.





Cash
      flows used in investing activities were $524,036 for the year ended December
      31,
      2006, which were due primarily to the purchase of property and equipment in
      the
      year of 2006.





Cash
      flows provided by financing activities were $609,373 for the year ended December
      31, 2006 due primarily to shareholder loans of $994,917, which are
      unsecured, non-interest bearing and repayable over 12 months, offset by the
      addition in due from a third party of $576,000, which is unsecured, non-interest
      bearing and repayable within 12 months. Additionally, we infused $190,456 as
      additional paid-in capital contributed by our two shareholders. Cash flows
      provided by financing activities were $62,344 for the year ended December 31,
      2005 due primarily to the registered capital required by the Chinese government,
      contributed by our two shareholders.




16
 *Table
          of Contents*




We
      project
      that we will need additional capital to fund operations over the next 12 months.
      We anticipate we will need an additional $250,000 in working capital during
      2007
      and $200,000 for the two years thereafter.




Overall,
      we
      have funded our cash needs from inception through December 31, 2006 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 $29,069 on hand and a working capital of $715,584 as of December 31, 2006.
      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 $250,000
      to sustain operations through year 2007 and approximately $200,000 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:





ཙ
            Curtail
                new product launches





ཙ
            Limit
                our future marketing efforts to areas that we believe would be the
                most
                profitable.




Demand
      for
      the products and services will be dependent on, among other things, market
      acceptance of our products, citrus market and beverage market in general, and
      general economic conditions, which are cyclical in nature. Inasmuch as a major
      portion of our activities is the receipt of revenues from the sales of our
      products, our business operations may be adversely affected by our competitors
      and prolonged recession periods.




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




**FORWARD
      LOOKING STATEMENTS**




The
      information herein contains certain forward looking statements within the
      meaning of §27A of the Securities Act of 1933, as amended and § 21E of the
      Securities Exchange Act of 1934, as amended, which are intended to be covered
      by
      the safe harbors created thereby. Investors are cautioned that all forward
      looking statements involve risks and uncertainty, including without limitation,
      our ability to continue our current expansion strategy, labor and employee
      benefits, as well as general market conditions, competition and pricing.
      Although we believe that the assumptions underlying the forward looking
      statements contained herein are reasonable, any of the assumptions could be
      inaccurate, and therefore, there can be no assurance that the forward look
      statements included in this Form 10-QSB will prove to be accurate. In view
      of
      the significant uncertainties inherent in the forward looking statements
      included herein, the inclusion of such information should not be regarded as
      a
      representation by us or any other person that our objectives and plans will
      be
      achieved.




17
 *Table
          of Contents*




**Item 7.
      Financial Statements.**




The
      consolidated financial statements include the accounts of Tai Na, our wholly
      owned subsidiary. The following selected financial data for the years ended
      December 31, 2006 and 2005 is derived from our consolidated financial
      statements, and should be read in conjunction with the consolidated financial
      statements and related notes presented as a separate section commencing on
      page
      F-1.




**December 31,****2006**
            
            
            **2005*****Balance
                Sheet***Total
                Assets
            $
            1,429,202
            
            $
            61,490Total
                Liabilities
            
            1,190,926
            
            
            -0-Total
                Stockholders’ Equity
            
            238,276
            
            
            61,429Total
                Liabilities and Stockholders’ Equity
            
            1,429,202
            
            
            61,490




***Statements
                of Operations*****For
                years ended****December 31,****2006**
            
            
            **2005**Revenue
            $
            1,242,705
            
            $
            -0-Operating
                Expenses
            
            1,045,297
            
            
            854Other
                Income
            
            4,583
            
            
            -0-Net
                Loss
            
            (792,050
            )
            
            (854
            )Net
                Loss per Common Share
            
            (0.03
            )
            
            **Weighted
                Average Common Shares Outstanding
            
            30,525,000
            
            
            30,000,000




**
      Less
      than $.01




18
 *Table
          of Contents*


**ZHONG
        YI (HONG KONG) C.P.A. COMPANY LIMITED**
 
 ***Certified
        Public Accountants***
 **CHINA
        FRUITS CORPORATION**
 **(Formerly
        Diversified Financial Resources Corporation)**
 
 **INDEX
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 
 **Page**Report
                  of Independent Registered Public Accounting Firm
              
              F-2ConsolidatedBalance
                  Sheets
              
              F-3ConsolidatedStatementsof
                  Operations And Comprehensive Loss
              
              F-4ConsolidatedStatements
                  of Cash Flows
              
              F-5ConsolidatedStatements
                  of Stockholders’ Equity
              
              F-6Notes
                  to Consolidated Financial Statements
              
              F-7
                  to F-20
 
 
 F-1
 *Table
            of Contents*
 
 **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 The
        Board
        of Directors and Stockholders of
 **China
        Fruits Corporation**
 (Formerly
        Diversified Financial Resources Corporation)
 
 We
        have
        audited the accompanying consolidated balance sheets of China Fruits Corporation
        and Subsidiaries (“the Company”) as of December 31, 2006 and 2005 and the
        related consolidated statements of operations and comprehensive loss,
        stockholders’ equity and cash flows for the years ended December 31, 2006 and
        2005. The financial statements are the responsibility of the Company’s
        management. Our responsibility is to express an opinion on these financial
        statements based on our audits.
 
 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 audits include consideration of internal control
        over
        financial reporting as a basis for designing audit procedures that are
        appropriate in the circumstances, but not for the purpose of expressing an
        opinion on the effectiveness of the Company’s internal control over financial
        reporting. Accordingly, we express no such opinion. An audit also includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements, assessing the accounting principles used and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of China Fruits Corporation
        (formerly Diversified Financial Resources Corporation) as of December 31,
        2006
        and 2005 and the results of operations and cash flows for the years ended
        December 31, 2006 and 2005 and in conformity with accounting principles
        generally accepted in the United States of America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 2 to the consolidated
        financial statements, the Company has incurred substantial losses which raise
        substantial doubt about its ability to continue as a going concern. Management’s
        plans in regard to these matters are also described in Note 2. These
        consolidated financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
 
 
 /s/
        Zhong Yi (Hong Kong) C.P.A. Company Limited
 Zhong
        Yi
        (Hong Kong) C.P.A. Company Limited
 Certified
        Public Accountants
 Hong
        Kong, China
 April
        12,
        2007
  F-2
 *Table
            of Contents*
 
 **CHINA
                  FRUITS CORPORATION**
                **(Formerly
                  Diversified Financial Resources Corporation)**
                **CONSOLIDATED
                  BALANCE SHEETS**
                **AS
                  OF DECEMBER 31, 2006 AND 2005**
                **(Currency
                  expressed in United States Dollars (“US$”), except for number of
                  shares)****2006**
              
              **2005****ASSETS**
              
              
              
              (Restated)Current
                  assets:Cash
                  and cash equivalents
              
              $
              29,069
              
              $
              61,490Accounts
                  receivable, net
              
              
              253,125
              
              
              -Advance
                  to a third party
              
              
              576,000
              
              
              -Inventories
              
              
              35,353
              
              
              -VAT
                  and income tax recoverable
              
              
              18,046
              
              
              -Total
                  current assets
              
              
              911,593
              
              
              61,490Plant
                  and equipment, net
              
              
              517,609
              
              
              -**TOTAL
                  ASSETS**
              
              $
              1,429,202
              
              $
              61,490**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Current
                  liabilities:Accounts
                  payable, related party
              
              $
              110,029
              
              $
              -Other
                  payables and accrued liabilities
              
              
              85,980
              
              
              -Total
                  current liabilities
              
              
              196,009
              
              
              -Non-current
                  liabilities:Amount
                  due to stockholders
              
              
              994,917
              
              
              -**TOTAL
                  LIABILITIES**
              
              
              1,190,926
              
              
              -Stockholders’
                  equity:Preferred
                  stock, 200,000,000 shares authorized, designated as Series A and
                  Series BSeries
                  A; par value $.001; 2,000,000 shares authorized
                13,150
                  shares issued and outstanding
              
              
              13
              
              
              13Series
                  B; par value $.001, voting; 50,000,000 shares authorized 12,100,000
                  shares
                  issued and outstanding
              
              
              12,100
              
              
              12,100Common
                  stock, $0.001 par value; 100,000,000 shares authorized; 33,129,693
                  and
                  30,000,000 shares issued and outstanding
              
              
              33,129
              
              
              30,000Additional
                  paid-in capital
              
              
              1,515,558
              
              
              20,231Deferred
                  compensation
              
              
              (555,416
              )
              
              -Statutory
                  reserve
              
              
              5,408
              
              
              -Accumulated
                  other comprehensive income
              
              
              25,796
              
              
              -Accumulated
                  deficits
              
              
              (798,312
              )
              
              (854
              )Total
                  stockholders’ equity
              
              
              238,276
              
              
              61,490**TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY**
              
              $
              1,429,202
              
              $
              61,490
  See
        accompanying notes to consolidated financial statements.
  F-3
 *Table
            of Contents*
  **CHINA
                  FRUITS CORPORATION**
                **(Formerly
                  Diversified Financial Resources Corporation)**
                **CONSOLIDATED
                  STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS**
                **FOR
                  THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
                **(Currency
                  expressed in United States Dollars (“US$”), except for number of
                  shares)****2006**
              
              **2005**(Restated)**NET
                  REVENUES**
              
              $
              1,242,705
              
              $
              -**COST
                  OF REVENUES:**Cost
                  of revenue
              
              
              613,829
              
              
              -Cost
                  of revenue- related party
              
              
              354,005
              
              
              -Total
                  cost of revenues
              
              
              967,834
              
              
              -**GROSS
                  PROFIT**
              
              
              274,871
              
              
              -**OPERATING
                  EXPENSES:**Selling
                  and marketing
              
              
              83,355
              
              
              -Consulting
                  and professional fees
              
              
              884,699
              
              
              -General
                  and administrative
              
              
              77,243
              
              
              854**TOTAL
                  OPERATING EXPENSES**
              
              
              1,045,297
              
              
              854**OTHER
                  INCOME:**Other
                  income
              
              
              1,481
              
              
              -Interest
                  income
              
              
              3,102
              
              
              -Total
                  other income
              
              
              4,583
              
              
              -**LOSS
                  BEFORE TAX**
              
              
              (765,843
              )
              
              (854
              )Income
                  tax expense
              
              
              26,207
              
              
              -**NET
                  LOSS**
              
              $
              (792,050
              )
              $
              (854
              )Accumulated
                  other comprehensive income:-
                  Foreign currency translation gain
              
              
              25,796
              
              
              -**COMPREHENSIVE
                  LOSS**
              
              $
              (766,254
              )
              $
              (854
              )Net
                  loss per share - Basic and diluted
              
              $
              (0.03
              )
              $
              (0.00
              )Weighted
                  average number of shares outstanding during the year - Basic and
                  diluted
              
              
              30,525,000
              
              
              30,000,000
  See
        accompanying notes to consolidated financial statements.
  F-4
 *Table
            of Contents*
 
 **CHINA
                  FRUITS CORPORATION**
                **(Formerly
                  Diversified Financial Resources Corporation)**
                **CONSOLIDATED
                  STATEMENTS OF CASH FLOWS**
                **FOR
                  THE YEARS ENDED DECEMBER 31, 2006 and 2005**
                **(Currency
                  expressed in United States Dollars (“US$”))****2006**
              
              **2005**(Restated)**Cash
                  flows from operating activities:**Net
                  loss
              
              $
              (792,050
              )
              $
              (854
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
              
              
              6,427
              
              
              -Stock
                  based compensation
              
              
              752,584
              
              
              -Allowance
                  for doubtful accounts
              
              
              1,272
              
              
              -(Increase)
                  decrease in operating assets and liabilities:Accounts
                  receivable
              
              
              (254,397
              )
              
              -Inventories
              
              
              (35,353
              )
              
              -VAT
                  and income tax recoverable
              
              
              (18,046
              )
              
              -Accounts
                  payable, related party
              
              
              110,029
              
              
              -Other
                  payables and accrued liabilities
              
              
              85,980
              
              
              -Net
                  cash used in operating activities
              
              
              (143,554
              )
              
              (854
              )**Cash
                  flows from investing activities:**Purchase
                  of plant and equipment
              
              
              (524,036
              )
              
              -Net
                  cash used in investing activities
              
              
              (524,036
              )**Cash
                  flows from financing activities:**Advance
                  to a third party
              
              
              (576,000
              )
              
              -Loan
                  from stockholders
              
              
              994,917
              
              
              -Capital
                  contribution from stockholders
              
              
              190,456
              
              
              62,344Net
                  cash provided by financing activities
              
              
              609,373
              
              
              62,344**Foreign
                  currency translation adjustment**
              
              
              25,796
              
              
              -**NET
                  CHANGE IN CASH AND CASH EQUIVALENTS**
              
              
              (32,421
              )
              
              61,490**CASH
                  AND CASH EQUIVALENTS, BEGINNING OF YEAR**
              
              
              61,490
              
              
              -**CASH
                  AND CASH EQUIVALENTS, END OF YEAR**
              
              $
              29,069
              
              $
              61,490**SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                  paid for income taxes
              
              $
              29,864
              
              $
              -Cash
                  paid for interest expenses
              
              $
              -
              
              $
              -**SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH TRANSACTIONS:**Stocks
                  issued for service rendered
              
              $
              752,584
              
              $
              -
 
 See
        accompanying notes to consolidated financial statements.
  F-5
 *Table
            of Contents*
  **CHINA
                  FRUITS CORPORATION**
                **(Formerly
                  Diversified Financial Resources Corporation)**
                **CONSOLDIATED
                  STATEMENTS OF STOCKHOLDERS’ EQUITY**
                **FOR
                  THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
                **(Currency
                  expressed in United States Dollars
                  (“US$”))**
  Series
                  “A” Preferred Stock
              
              
              Series
                  “B”
                Preferred
                  Stock
              
              
              Common
                  stockNo.
                  of share
              
              
              Amount
              
              
              No.
                  of share
              
              
              Amount
              
              
              No.
                  of share
              
              
              Amount
              
              
              Additional
                paid-in
                  capital
              
              
              Deferred
                Compensation
              
              
              Accumulated
                other
                comprehensive
                income
              
              
              Statutory
                reserve
              
              
              Accumulated
                deficits
              
              
              Total
                EquityBalance
                  as of January 1, 2005 (restated)
              
              
              13,150
              
              $
              13
              
              
              12,100,000
              
              $
              12,100
              
              
              30,000,000
              
              $
              30,000
              
              $
              20,231
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              62,344Net
                  loss for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (854
              )
              
              (854
              )Balance
                  as of December 31, 2005
              
              
              13,150
              
              $
              13
              
              
              12,100,000
              
              $
              12,100
              
              
              30,000,000
              
              $
              30,000
              
              $
              20,231
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              (854
              )
              $
              61,490Shares
                  issued to complete reverse acquisition
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              229,689
              
              
              229
              
              
              (1,000,229
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,000,000
              )Shares
                  issued to settle liabilities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,000,000
              
              
              2,000
              
              
              998,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,000,000Capital
                  contribution from stockholders
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              190,456
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              190,456Deferred
                  compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              930,000
              
              
              (555,416
              )
              
              -
              
              
              -
              
              
              -
              
              
              374,584Shares
                  issued for service
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              900,000
              
              
              900
              
              
              377,100
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              378,000Foreign
                  currency adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              25,796
              
              
              -
              
              
              -
              
              
              25,796Net
                  loss for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (792,050
              )
              
              (792,050
              )Transfer
                  of retained earnings to statutory reserve
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5,408
              
              
              (5,408
              )
              
              -Balance
                  as of December 31, 2006
              
              
              13,150
              
              $
              13
              
              
              12,100,000
              
              $
              12,100
              
              
              33,129,689
              
              $
              33,129
              
              $
              1,515,558
              
              $
              (555,416
              )
              $
              25,796
              
              $
              5,408
              
              $
              (798,312
              )
              $
              238,276
  See
        accompanying notes to consolidated financial statements.
  F-6
 *Table
            of Contents*
 
 **CHINA
        FRU** **ITS
        CORPORATION**
 **(Formerly
        Diversified Financial Resources Corporation)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
        expressed in United States Dollars (“US$”))**
 
  **1.**  **ORGANIZATION
        AND BUSINESS BACKGROUND**
  China
        Fruits Corporation (the “Company” or “CHFR”) was incorporated in the State of
        Delaware on January 6, 1993 as Vaxcel, Inc. On December 19, 2000, CHFR changed
        its name to eLocity Networks Corporation. On August 6, 2002, CHFR further
        changed its name to Diversified Financial Resources Corporation. The principal
        activities of CHFR is seeking and consummating a merger or acquisition
        opportunity with a business entity. On May 12, 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
        non-alcoholic and alcoholic beverages in the PRC.
 
 The
        stock
        exchange transaction involved two simultaneous transactions:
 
 1)
              the
                  majority shareholder of CHFR delivered the 13,150 convertible Series
                  A
                  preferred shares and 12,100,000 non-convertible Series B preferred
                  shares
                  of CHFR to Tai Na’s owners in exchange for total payments of $500,000 in
                  cash and;
 
 2)
              CHFR
                  issued to Tai Na’s owners an amount equal to 30,000,000 new investment
                  shares of common stock of CHFR pursuant to Regulation S under the
                  Securities Act of 1933, as amended, in exchange for all of the
                  registered
                  capital of Tai Na.
 
 Upon
        completion of the exchange, Tai Na became a wholly-owned subsidiary of CHFR
        and
        the former
        owners of Tai Na then owned 99% of the issued and outstanding
        shares of the Company.
 
 Also
        in
        connection with this stock exchange transaction, CHFR appointed Mr. Chen,
        Quanlong as chief executive officer and director and Ms. Zhao, Li Li as director
        and Ms. Huang, Xiaoyun as chief financial officer to CHFR. Furthermore,
        concurrent with the closing of this transaction, all of the Company’s former
        officers resigned from their positions.
 
 On
        July
        12, 2006, CHFR completed a 1 for 12.5 reverse stock split on the common stock
        and the par value remains at $0.001 per share. The reverse stock split is
        not
        subject to any condition other than Board of Directors approval under the
        Section 78 of the Nevada Revised Statutes. In addition, Certificate of Change
        pursuant to NRS 78.209 was filed with the Secretary of State of Nevada in
        connection with the decrease in authorized capital. As a result, the total
        number of issued and outstanding shares was reduced from 402,866,323 to
        32,229,689 shares and par value of its common stock was unchanged at $0.001.
        This is inclusive of issuance of 383 shares of common stocks as fractional
        shares. All common stock and per share data for all periods presented in
        these
        financial statements have been restated to give effect to the reverse stock
        split.
 
 On
        August
        18, 2006, CHFR changed its name to its current name “China Fruits
        Corporation”.
  F-7
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 The
        stock
        exchange transaction has been accounted for as a reverse acquisition and
        recapitalization of the CHFR whereby Tai Na is deemed to be the accounting
        acquirer (legal acquiree) and CHFR to be the accounting acquiree (legal
        acquirer). The accompanying consolidated financial statements are in substance
        those of Tai Na, with the assets and liabilities, and revenues and expenses,
        of
        CHFR being included effective from the date of stock exchange transaction.
        CHFR
        is deemed to be a continuation of the business of Tai Na. Accordingly, the
        accompanying consolidated financial statements include the
        following:
 
 (1)  the
        balance sheet consists of the net assets of the accounting acquirer at
        historical cost and the net assets of the accounting acquiree at historical
        cost;
  (2)  the
        financial position, results of operations, and cash flows of the acquirer
        for
        all periods presented as if the recapitalization had occurred at the beginning
        of the earliest period presented and the operations of the accounting acquiree
        from the date of stock exchange transaction.
  CHFR
        and
        Tai Na are hereinafter referred to as (the “ Company”).
 
 **2.**  **GOING
        CONCERN UNCERTAINTIES**
 
 These
        consolidated financial statements have been prepared assuming that Company
        will
        continue as a going concern, which contemplates the realization of assets
        and
        the discharge of liabilities in the normal course of business for the
        foreseeable future.
 
 As
        of
        December 31, 2006, the Company had a negative operating cash flow of $143,554
        and an accumulated deficits of $798,312. 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,
        2007. As a result, the financial statements do not include any adjustments
        to
        reflect the possible future effects on the recoverability and classification
        of
        assets or the amounts and classification of liabilities that may result from
        the
        outcome of the Company’s ability to continue as a going concern.
 
 **3.**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES**
  l
              Basis
                  of presentation
 
 These
        accompanying consolidated financial statements have been prepared in accordance
        with generally accepted accounting principles in the United States of
        America.
 
 l
              Use
                  of estimates
 
 In
        preparing these consolidated financial statements, management makes estimates
        and assumptions that affect the reported amounts of assets and liabilities
        in
        the balance sheets and revenues and expenses during the year reported. Actual
        results may differ from these estimates.
 
 l
              Basis
                  of consolidation
 
 The
        consolidated financial statements include the financial statements of the
        Company and its subsidiary, Tai Na.
 
 All
        significant inter-company balances and transactions within the Company and
        subsidiary have been eliminated upon consolidation.
 
 **l**
              Revenue
                  recognition
  F-8
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 The
        Company derives revenues from the resale of non-alcoholic and alcoholic
        beverages and tangerine purchased from third parties, net of value added
        taxes
        (“VAT”). The Company is subject to VAT which is levied on the majority of the
        products of Tai Na at the rate of 17% on the invoiced value of sales. Output
        VAT
        is borne by customers in addition to the invoiced value of sales and input
        VAT
        is borne by the Company in addition to the invoiced value of purchases to
        the
        extent not refunded for export sales.
 
 In
        accordance with the SEC’s Staff Accounting Bulletin No. 104, *Revenue
        Recognition* ,
        the
        Company recognizes revenue when persuasive evidence of an arrangement exists,
        transfer of title has occurred or services have been rendered, the selling
        price
        is fixed or determinable and collectibility is reasonably assured. The Company’s
        sales arrangements are not subject to warranty.
 
 Starting
        from October 2006, the Company commenced the trading of tangerine in the
        PRC.
 
 (a)   Sale
        of
        products
 
 The
        Company recognizes revenue from the sale of products upon delivery to the
        customers and the transfer of title and risk of loss. The Company did not
        record
        any product returns for the year ended December 31, 2006.
 
 (b)  Interest
        income
 
 Interest
        income is recognized on a time apportionment basis, taking into account the
        principal amounts outstanding and the interest rates applicable.
 
 l
              Cost
                  of revenue
 
 Cost
        of
        revenues consists primarily of material costs, direct labor, depreciation
        and
        overheads, which are directly attributable to the manufacture of products
        and
        the provision of services.
 
 l
              Cash
                  and cash equivalents
 
 Cash
        and
        cash equivalents are carried at cost and represent cash on hand, demand deposits
        placed with banks or other financial institutions and all highly liquid
        investments with an original maturity of three months or less as of the purchase
        date of such investments.
 
 l
              Accounts
                  receivable
  Accounts
        receivable are recorded at the invoiced amount and do not bear interest.
        The
        Company extends unsecured credit to its customers in the ordinary course
        of
        business but mitigates the associated risks by performing credit checks and
        actively pursuing past due accounts. An allowance for doubtful accounts is
        established and determined based on managements’ assessment of known
        requirements, aging of receivables, payment history, the customer’s current
        credit worthiness and the economic environment. As of December 31, 2006,
        the
        Company recorded an allowance for doubtful accounts of $1,272.
  F-9
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 l
              Inventories
 
 Inventories
        consist of finished goods and are valued at lower of cost or market value,
        cost
        being determined on the first-in, first-out method. The Company periodically
        reviews historical sales activity to determine excess, slow moving items
        and
        potentially obsolete items and also evaluates the impact of any anticipated
        changes in future demand. The Company provides inventory allowances based
        on
        excess and obsolete inventories determined principally by customer demand.
        As of
        December 31, 2006, the Company did not record an allowance for obsolete
        inventories, nor have there been any write-offs.
 
 l
              Plant
                  and equipment, net
 
 Plant
        and
        equipment are stated at cost less accumulated depreciation and accumulated
        impairment losses, if any. Depreciation is calculated on the straight-line
        basis
        over the following expected useful lives from the date on which they become
        fully operational and after taking into account their estimated residual
        values:
 
 Depreciable
                  life
              
              Residual
                  valuePlant
                  and machinery
              10-12
                  years
              
              5%Furniture,
                  fixture and equipment
              5-6
                  years
              
              5%
 
 Expenditure
        for maintenance and repairs is expensed as incurred.
 
 l
              Impairment
                  of long lived assets
 
 In
        accordance with Statement of Financial Accounting Standards (“SFAS”) No. 121, *“Accounting
        for the impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
        of’* ,
        a
        long-lived assets and certain identifiable intangible assets held and used
        by
        the Company are reviewed for impairment whenever events or changes in
        circumstances indicate that the carrying amount of an asset may not be
        recoverable. Recoverability of assets to be held and used is evaluated by
        a
        comparison of the carrying amount of assets to estimated discounted net cash
        flows expected to be generated by the assets. If such assets are considered
        to
        be impaired, the impairment to be recognized is measured by the amount by
        which
        the carrying amounts of the assets exceed the fair value of the assets.
 
 l
              Comprehensive
                  income (loss)
 
 SFAS
        No. 130, *“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.
  F-10
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
  l
              Income
                  taxes
 
 The
        Company accounts for income tax using SFAS No. 109 *“Accounting
        for Income Taxes”* ,
        which
        requires the asset and liability approach for financial accounting and reporting
        for income taxes. Under this approach, deferred income taxes are provided
        for
        the estimated future tax effects attributable to temporary differences between
        financial statement carrying amounts of assets and liabilities and their
        respective tax bases, and for the expected future tax benefits from loss
        carry-forwards and provisions, if any. Deferred tax assets and liabilities
        are
        measured using the enacted tax rates expected in the years of recovery or
        reversal and the effect from a change in tax rates is recognized in the
        consolidated statement of operations and comprehensive income in the period
        of
        enactment. A valuation allowance is provided to reduce the amount of deferred
        tax assets if it is considered more likely than not that some portion of,
        or all
        of the deferred tax assets will not be realized.
 
 l
              Net
                  loss per share
 
 The
        Company calculates net loss per share in accordance with SFAS No. 128, *“Earnings
        per Share”* .
        Basic
        loss per share is computed by dividing the net loss by the weighted-average
        number of common shares outstanding. Diluted loss per share is computed similar
        to basic loss per share except that the denominator is increased to include
        the
        number of additional common shares that would have been outstanding if the
        potential common stock equivalents had been issued and if the additional
        common
        shares were dilutive.
 
 l
              Foreign
                  currencies translation
 
 The
        reporting currency of the Company is the United States dollar (“U.S. dollars”).
        Transactions denominated in currencies other than U.S. dollar are calculated
        at
        the average rate for the period. Monetary assets and liabilities denominated
        in
        currencies other than U.S. dollar are translated into U.S. dollar at the
        rates
        of exchange ruling at the balance sheet date. The resulting exchange differences
        are recorded in the other expenses in the consolidated statement of operations
        and comprehensive income.
 
 The
        Company’s subsidiary maintains its books and records in its local currency, the
        Renminbi Yuan (“RMB”), which is functional currency as being the primary
        currency of the economic environment in which its operations are conducted.
        In
        general, for consolidation purposes, the Company translates the subsidiary’s
        assets and liabilities into U.S. dollars using the applicable exchange rates
        prevailing at the balance sheet date, and the statement of operations is
        translated at average exchange rates during the reporting period. Adjustments
        resulting from the translation of the subsidiary’s financial statements are
        recorded as accumulated other comprehensive income.
 
 l
              Retirement
                  plan costs
 
 Contributions
        to retirement schemes (which are defined contribution plans) are charged
        to
        general and administrative expenses in the consolidated statements of income
        and
        comprehensive income as and when the related employee service is provided.
  F-11
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 
 l
              Related
                  parties
 
 Parties,
        which can be a corporation or individual, are considered to be related if
        the
        Company has the ability, directly or indirectly, to control the other party
        or
        exercise significant influence over the other party in making financial and
        operating decisions. Companies are also considered to be related if they
        are
        subject to common control or common significant influence. A material related
        party transaction has been identified in Note 14 in the financial statements.
 
 l
              Segment
                  reporting
 
 SFAS
        No.
        131 *“Disclosures
        about Segments of an Enterprise and Related Information”* establishes standards for reporting information about operating segments
        on a
        basis consistent with the Company’s internal organization structure as well as
        information about geographical areas, business segments and major customers
        in
        financial statements. The Company operates in one reportable
        segment.
 
 l
              Fair
                  value of financial instruments
 
 The
        Company values its financial instruments as required by SFAS No. 107, *“Disclosures
        about Fair Value of Financial Instruments”* .
        The
        estimated fair value amounts have been determined by the Company, using
        available market information and appropriate valuation methodologies. The
        estimates presented herein are not necessarily indicative of amounts that
        the
        Company could realize in a current market exchange.
 
 The
        Company’s financial instruments primarily include cash and cash equivalents,
        accounts receivable, advance to a third party, inventories, VAT and income
        tax
        recoverable, accounts payable, other payables and accrued
        liabilities.
 
 As
        of the
        balance sheet date, the estimated fair values of financial instruments were
        not
        materially different from their carrying values as presented due to short
        maturities of these instruments.
 
 l
              Equity-based
                  compensation
 
 The
        Company adopts SFAS No. 123R, *“Accounting
        for Stock-Based Compensation”* using
        the fair value method. Under
        SFAS No. 123R, stock-based compensation expense is measured at the
        grant date based on the value of the option or restricted stock and is
        recognized as expense, less expected forfeitures, over the requisite service
        period, which is generally the vesting period. See Note 13 for additional
        information.
 
 l
              Recently
                  issued accounting standards
 
 In
        May
        2005, the FASB issued SFAS No. 154, *“Accounting
        Changes and Error Corrections”* (“SFAS
        154”), which replaces Accounting Principles Board Opinions No. 20, “Accounting
        Changes” and SFAS No. 3, “Reporting Accounting changes in Interim Financial
        Statements—An Amendment of APB Opinion No. 28”. SFAS 154 provides guidance on
        the accounting for and reporting of accounting changes. It establishes
        retrospective application, or the latest practicable date, as the required
        method for reporting a change in accounting principle and the reporting of
        a
        correction of an error. SFAS 154 is effective for accounting changes and
        corrections of errors made in fiscal years beginning after December 15, 2005.
        The adoption of this statement did not have a material effect on the Company’s
        financial position or results of operations.
  F-12
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 In
        September 2005, the FASB’s Emerging Issues Task Force (“EITF”) reached a final
        consensus on Issue 04-13, *“Accounting
        for Purchases and Sales of Inventory with the Same
        Counterparty”* (“EITF
        04-13”). EITF 04-13 requires that two or more legally separate exchange
        transactions with the same counterparty be combined and considered a single
        arrangement for purposes of applying APB Opinion No. 29, *“Accounting
        for Nonmonetary Transactions”* ,
        when
        the transactions are entered into in contemplation of one another. EITF 04-13
        is
        effective for new arrangements entered into, or modifications or renewals
        of
        existing arrangements, in interim or annual periods beginning after March
        15,
        2006. The Company does not expect that the adoption of this statement would
        have
        a material effect on the Company’s financial position or results of
        operations.
 
 In
        February 2006, the FASB issued SFAS No. 155, *“Accounting
        for Certain Hybrid Instruments-an amendment of FASB Statements 133 and
        140”* ,
        which
        is effective for all financial instruments acquired or issued after the
        beginning of an entity’s first fiscal year that begins after September 15, 2006.
        The statement improves financial reporting by eliminating the exemption from
        applying SFAS No. 133 to interests in securitized financial assets so that
        similar instruments are accounted for similarly regardless of the form of
        the
        instruments. The Statement also improves financial reporting by allowing
        a
        preparer to elect fair value measurement at acquisition, at issuance, or
        when a
        previously recognized have to bifurcated, if the holder elects to account
        for
        the whole instrument-by-instrument basis, in cases in which a derivative
        would
        otherwise have to bifurcated, if the holder elects to account for the whole
        instrument on a fair value basis. The Company does not expect that the adoption
        of this statement would have a material effect on the Company’s financial
        position or results of operations.
 
 In
        July
        2006, the FASB issued FIN 48, *“Accounting
        for Uncertainty in Income Taxes—an Interpretation of FASB Statement No.
        109”* ,
        which
        clarifies the accounting for uncertainty in tax positions. This Interpretation
        requires that the Company recognizes in its consolidated financial statements
        the impact of a tax position if that position is more likely than not of
        being
        sustained on audit, based on the technical merits of the position. The
        provisions of FIN 48 are effective for the Company on January 1, 2007, with
        the
        cumulative effect of the change in accounting principle, if any, recorded
        as an
        adjustment to opening retained earnings. The Company is currently evaluating
        the
        impact of adopting FIN 48 on its consolidated financial statements.
 
 In
        September 2006, the SEC released SAB No. 108, *“Considering
        the Effects of Prior Year Misstatements when Quantifying Misstatements in
        Current Year Financial Statements”* (“SAB
        108”). SAB 108 provides interpretive guidance on the SEC’s views on how the
        effects of the carryover or reversal of prior year misstatements should be
        considered in quantifying a current year misstatement. The provision of SAB
        108
        is effective for the Company in the current fiscal year ended December 31,
        2006.
        The Company is currently evaluating the impact of SAB 108 but does not believe
        that the application of SAB 108 would have a material effect on its financial
        position, cash flows nor results of operations.
 
 In
        September 2006, the FASB issued SFAS No.157, *“Fair
        Value Measurements”* (“SFAS
        157”), which defines fair value, establishes guidelines for measuring fair value
        and expands disclosures regarding fair value measurements. SFAS 157 does
        not
        require any new fair value measurements but rather eliminates inconsistencies
        in
        guidance found in various prior accounting pronouncements. SFAS 157 will
        be
        effective for the Company starting January 1, 2008. Earlier adoption is
        permitted, provided the company has not yet issued financial statements,
        including for interim periods, for that fiscal year. The Company is currently
        evaluating the impact of SFAS 157 on its consolidated financial position,
        cash
        flows and results of operations.
  F-13
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 **4.**  **ACCOUNTS
        RECEIVABLE, NET**
 
 The
        majority of the Company’s sales are on open credit terms and in accordance with
        terms specified in the contracts governing the relevant transactions. The
        Company evaluates the need of an allowance for doubtful accounts based on
        specifically identified amounts that management believes to be uncollectible.
        If
        actual collections experience changes, revisions to the allowance may be
        required. Based upon the aforementioned criteria, management has determined
        that
        an allowance for doubtful accounts of $1,272 is required as of December 31,
        2006.
  2006
              
              2005(restated)Accounts
                  receivable, gross
              
              $
              254,397
              
              $
              -Less:
                  allowance for doubtful accounts
              
              
              (1,272
              )
              
              -Accounts
                  receivable, net
              
              $
              253,125
              
              $
              -
 
 **5.**  **ADVANCES
        TO A THIRD PARTY**
 
 The
        Company made a temporary advance to a third party company. The balance is
        unsecured, non-interest bearing and repayable within 12 months. Subsequent
        to
        December 31, 2006, $448,000 was repaid to the Company.
 
 **6.**  **INVENTORIES**
 
 Inventories
        as of December 31, 2006 and 2005 consist of the following:
 2006
              
              2005(restated)Raw
                  materials
              
              $
              29,507
              
              $
              -Finished
                  goods
              
              
              5,846$
              35,353
              
              $
              -
 
 For
        the
        year ended December 31, 2006, no provision for obsolete inventories was recorded
        by the Company.
  F-14
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 
 **7.**  **PLANT
        AND EQUIPMENT, NET**
  Plant
        and
        equipment, net as of December 31, 2006 and 2005 consists of the
        following:
 
 2006
              
              2005(restated)Plant
                  and machinery
              
              $
              520,219
              
              $
              -Furniture,
                  fixture and equipment
              
              
              3,817
              
              
              -524,036
              
              
              -Less:
                  accumulated depreciation
              
              
              (6,427
              )
              
              -Plant
                  and equipment, net
              
              $
              517,609
              
              $
              -
 
 Depreciation
        expense for the year ended December 31, 2006 was $6,427.
 
 **8.**  **OTHER
        PAYABLES AND ACCRUED LIABILITIES**
 
 Other
        payables and accrued liabilities as of December 31, 2006 and 2005 consist
        of
        following:
 
 2006
              
              2005(restated)Rental
                  payable
              
              $
              282
              
              $
              -Government
                  levies payable
              
              
              3,119
              
              
              -Salary
                  and welfare payable
              
              
              12,278
              
              
              -Customer
                  deposits
              
              
              692
              
              
              -Accrued
                  expenses
              
              
              69,609
              
              
              -$
              85,980
              
              $
              -
 
 **9.**  **AMOUNT
        DUE TO STOCKHOLDERS**
 
 The
        balances due to stockholders represented unsecured advances which are
        interest-free and repayable in next twelve months.
 
 **10.**  **INCOME
        TAXES**
 
 The
        Company is registered in the United States of America and has operations
        in 2
        tax jurisdictions: the United States of America and the PRC. The operation
        in
        the United States of America has incurred net operating losses for income
        tax
        purposes. The Company generated substantially its net income from its PRC
        operation and has recorded income tax provision for the year ended December
        31,
        2006.
  F-15
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 
 The
        components of (loss) income before income taxes separating U.S. and PRC
        operations are as follows:
 
 2006
              
              2005(restated)Loss
                  subject to U.S. operation
              
              $
              (843,982
              )
              $
              -Income
                  (loss) subject to PRC operation
              
              
              78,139
              
              
              (854
              )Loss
                  before income taxes
              
              $
              (765,843
              )
              $
              (854
              )
 
 *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, 2006, the U.S. operation had $843,982 of net operating losses
        available for federal tax purposes, which are available to offset future
        taxable
        income. The net operating loss carry forwards begin to expire in 2027. The
        Company has provided for a full valuation allowance for any future tax benefits
        from the net operating loss carryforwards as the management believes it is
        more
        likely than not that these assets will not be realized in the
        future.
 
 *The
        PRC*
 
 The
        Company’s subsidiary, Tai Na is subject to taxes in the PRC. Pursuant to the PRC
        Income Tax Laws, Tai Na is generally subject to enterprise income tax (“EIT”) at
        a statutory rate of 33% (30% national income tax plus 3% local income
        tax).
 
 The
        reconciliation of income tax rate to the effective income tax rate based
        on
        income before income taxes stated in the consolidated statement of operations
        for the year ended December 31, 2006 and 2005 is as follows:
 
 2006
              
              2005(restated)Income
                  (loss) before income taxes
              
              $
              78,139
              
              $
              (854
              )Statutory
                  income tax rate
              
              
              33
              %
              
              33
              %25,786
              
              
              (282
              )Expenses
                  not deductible for tax purposes:-
                  Provisions
              
              
              421
              
              
              -Effect
                  of tax losses
              
              
              -
              
              
              282Income
                  tax expense
              
              $
              26,207
              
              $
              -
 
 F-16
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 
 The
        following table sets forth the significant components of the aggregate net
        deferred tax assets of the Company as of December 31, 2006:
 
 2006
              
              2005(restated)Deferred
                  tax assets:-
                  Net operating loss carryforwards
              
              $
              295,394
              
              $
              282Less:
                  valuation allowance
              
              
              (295,394
              )
              
              (282
              )Deferred
                  tax assets
              
              $
              -
              
              $
              -
 
 For
        the
        year ended December 31, 2006 and 2005, valuation allowances of $295,394 and
        $282
        were provided to the deferred tax assets due to the uncertainty surrounding
        their realization.
 
 **11.**  **NET
        LOSS PER SHARE**
 
 Basic
        net
        loss per share is computed using the weighted average number of the ordinary
        shares outstanding during the year. Diluted net loss per share is computed
        using
        the weighted average number of ordinary shares and ordinary share equivalents
        outstanding during the year. Pursuant to stock exchange transaction on May
        31,
        2006, the weighted average number of common stocks issued and outstanding
        was
        adjusted to account for the effects of the stock exchange transaction as
        a
        reverse acquisition, as more fully described in Note 1.
 
 The
        Company has retrospectively adjusted the weighted average number of common
        stocks outstanding by deeming that the one-for-twelve point five (1:12.5)
        reverse stock split effected on July 10, 2006 had occurred as of the beginning
        of the earliest period presented.
 
 The
        following table sets forth the computation of basic and diluted net loss
        per
        share for the year indicated:
 
 2006
              
              2005Basis
                  and diluted net loss per share calculation
              
              
              
              (restated)Numerator:-
                  Net income in computing basic net loss per share
              
              $
              (792,050
              )
              $
              (854
              )Denominator:-
                  Weighted average ordinary shares outstanding
              
              
              29,625,000
              
              
              30,000,000-
                  Stock issued for services
              
              
              900,000
              
              
              --
                  Shares used in computing basic net loss per share
              
              
              30,525,000
              
              
              30,000,000Basic
                  and diluted net loss per share
              
              $
              (0.03
              )
              $
              (0.00
              )
 
 There
        were no dilutive common stock equivalents as of December 31, 2006 and 2005.
  F-17
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 
 **12.**  **CAPITAL
        TRANSACTIONS**
 
 1)
              On
                  May 31, 2006, 2006, the Company completed a stock exchange transaction
                  with theequity
                  ownersofTai
                  Na and a total of 30,000,000 shares of common stock were issued
                  (99% of
                  Company's then outstanding common
                  stock).
 
 2)
              On
                  June 26, 2006, the Company issued 2,000,000 shares of common stock
                  to
                  Diversified Holdings I, Inc., a Nevada corporation ("DHI") to settle
                  the
                  $1,000,000 purchase price payable incurred due to the acquisition
                  of
                  Wichita Development Corporation in 2003 and any other miscellaneous
                  liabilities to DHI, and to release and discharge any and all claims
                  that
                  exist between the Company and DHI. The purchase price payable had
                  been
                  previously reported in the Company's financial statements in
                  2005.
 
 3)
              On
                  July 12, 2006, the Company completed a 1 for 12.5 reverse stock
                  split on
                  the common stock and the par value remains at $0.001 per share.
                  The
                  reverse stock split is not subject to any condition other than
                  Board of
                  Directors approval under the Section 78 of the Nevada Revised Statutes.
                  In
                  addition, Certificate of Change pursuant to NRS 78.209 was filed
                  with the
                  Secretary of State of Nevada in connection with the decrease in
                  authorized
                  capital. As a result, the total number of issued and outstanding
                  shares
                  was reduced from 402,866,323 to 32,229,689 shares and par value
                  of its
                  common stock was unchanged at $0.001. This is inclusive of issuance
                  of 383
                  shares of common stocks as fractional shares. All common stock
                  and per
                  share data for all periods presented in these financial statements
                  have
                  been restated to give effect to the reverse stock
                  split.
 
 **13.**  **STOCK
        BASED COMPENSATION**
 
 On
        October 19, 2006, the Company approved a 2006 Non-Qualified Stock Compensation
        Plan (the “Plan”) under which directors, officers, employees and consultants of
        the Group are eligible to receive grants of stock options and common stock
        of
        the Company.
 
 On
        October 27, 2006, the Company entered into a business consulting service
        agreement with the Consultant A in exchange for 1,500,000 shares of common
        stock. The fair value of the common stock issued is determined using the
        fair
        value of the Company’s common stock on the grant date at $0.31 per share. The
        Company calculated a stock based compensation of $465,000 and recognized
        $335,834 for the year ended December 31, 2006. As of December 31, 2006, a
        deferred compensation is amounted to $129,166 and amortized on the straight-line
        method over 8.6 months.
 
 On
        October 31, 2006, the Company entered into a website construction service
        agreement with the Consultant B in exchange for 1,500,000 shares of common
        stock. The fair value of the common stock issued is determined using the
        fair
        value of the Company’s common stock on the grant date at $0.31 per share. The
        Company calculated a stock based compensation of $465,000 and recognized
        $38,750
        for the year ended December 31, 2006. As of December 31, 2006, a deferred
        compensation is amounted to $426,250 and amortized on the straight-line method
        over 22 months.
 
 On
        December 14, 2006, the Company issued 900,000 restricted shares of common
        stock
        for business advisory services to Consultant C. The fair value of each
        restricted stock issuance is determined using the fair value of the Company’s
        common stock on the grant date, at
        a
        price of $0.42 per share. The
        Company recognized a stock based compensation of $378,000 for the year ended
        December 31, 2006.
  F-18
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 **14.**  **RELATED
        PARTY TRANSACTIONS**
 
 During
        the year ended December 31, 2006, the Company recorded purchase of $354,005
        from
        a related company where Mr. Chen Quan Long, the Chief Executive Officer of
        the
        Company, is also the president of the related company. As of December 31,
        2006,
        the trade balance of accounts payable of $110,029 is due to a related company.
        The transaction is considered conducted at arm’s length.
 
 There
        were no related party transactions for the year ended December 31,
        2005.
 
 **15.**  **CHINA
        CONTRIBUTION PLAN**
 
 Under
        the
        PRC Law, full-time employees of the Company’s subsidiary, Tai Na are entitled to
        staff welfare benefits including medical care, welfare subsidies, unemployment
        insurance and pension benefits through a China government-mandated
        multi-employer defined contribution plan. Tai Na is required to accrue for
        these
        benefits based on certain percentages of the employees’ salaries. The total
        contributions made for such employee benefits were $12,700 and $Nil for the
        years ended December 31, 2006 and 2005, respectively.
 
 **16.**  **STATUTORY
        RESERVES**
 
 Under
        PRC
        Company Law, the Company’s subsidiary, Tai Na is required to make appropriations
        to the statutory reserve based on after-tax net income and determined in
        accordance with generally accepted accounting principles of the People’s
        Republic of China (the “PRC GAAP”). Appropriation to the statutory reserve
        should be at least 10% of the after-tax net income until the reserve is equal
        to
        50% of Tai Na’s registered capital. The statutory reserve is established for the
        purpose of providing employee facilities and other collective benefits to
        the
        employees and is non-distributable other than in liquidation.
 
 For
        the
        year ended December 31, 2005, there was no appropriation to statutory reserve
        since Tai Na incurred an operating loss during 2005.
 
 For
        the
        year ended December 31, 2006, Tai Na contributed $5,408 to statutory reserve.
 
 **17.**  **CONCENTRATION
        AND RISK**
 
 (a) Major
        customers and vendors
 
 For
        the
        years ended December 31, 2006, 100% of the Company’s assets were located in the
        PRC and 100% of the Company’s revenues and purchases were derived from customers
        and vendors located in the PRC.
 
 F-19
 *Table
            of Contents*
 **CHINA
          FRU** **ITS
          CORPORATION**
 **(Formerly
          Diversified Financial Resources Corporation)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **(Currency
          expressed in United States Dollars (“US$”))**
 
 For
        the
        year ended December 31, 2006, customers and vendors who account for 10% or
        more
        of revenues and purchases are presented as follows:
 Customers
              
              Revenues
              
              
              
              
              
              Accounts
                ReceivableCustomer
                  A
              
              $
              557,486
              
              
              45%
              
              
              
              
              $
              64,317Customer
                  B
              
              
              165,511
              
              
              13%
              
              
              
              
              
              190,080Customer
                  C
              
              
              46,175
              
              
              4%
              
              
              
              
              
              -Total:
              
              $
              769,172
              
              
              62%
              
              
              Total:
              
              $
              254,397Vendors
              
              
              Purchases
              
              
              
              
              
              
              
              
              Accounts
                PayableVendor
                  A
              
              $
              354,005
              
              
              37%
              
              
              
              
              $
              110,029
 
 (b)  Credit
        risk
 
 Financial
        instruments that potentially subject the Company to significant concentrations
        of credit risk consist principally of cash and trade accounts receivable.
        The
        Company performs ongoing credit evaluations of its customers' financial
        condition, but does not require collateral to support such receivables.
 
 **18.**  **COMMITMENT
        AND CONTINGENCIES**
 
 The
        Company rented a plant under a non-cancelable operating lease agreement.
        Based
        on the current rental lease agreement, the future minimum rental payments
        required as of December 31, 2006 are as follows:
 
 Year
                  ending December 31:2007
              
              $
              307
 
 For
        the
        years ended December 31, 2006 and 2005, rental expense was $277 and $Nil.
 
 **19.****SUBSEQUENT
        EVENT**
  (i)
              As
                  of January 23, 2007, the Company entered into a winery agreement
                  with
                  Shenzhen Loulan Red Wine Company Ltd (“Loulan”), pursuant to which Company
                  will ferment wine for Loulan for a total value of not less than
                  $3,750,000. The agreement commenced on February 1, 2007 and will
                  end on
                  February 1, 2008.
  (ii)
              On
                  February 6, 2007, the Company entered into a sales agreement with
                  Liaoning
                  Shenyang Yunpeng Fruits Limited ("Yunpeng") for the sale of the
                  Company's
                  brand name oranges. Pursuant to the sales agreement, Yunpeng will
                  be the
                  exclusive distributor of the Company's brand name oranges within
                  three
                  provinces in Northeast China.
  (iii)
              On
                  February 8, 2007, the Company entered into a sales agreement with
                  Inner
                  Mongolian Manchuria Menglin Fruits Limited ("Menglin") for the
                  sale of the
                  Company's brand name oranges. Pursuant to the sales agreement,
                  Menglin
                  will export 3,000 tons of the Company's brand name oranges to Russia,
                  in
                  2007. Menglin will be the general distributor of the Company in
                  the
                  Russian market.
  (iv)
              On
                  February 19, 2007, the Company entered into an agreement with Royal
                  NanFeng Orange Science & Technology Co., Ltd. ("Royal"), to acquire
                  the assets and businesses of Royal to assist in further expansion
                  in the
                  orange markets. The assets and businesses of Royal, including over
                  593
                  acres of orchards, 395 acres of land with a reservoir, a manufacturing
                  plant situated on over 33 acres, and the distribution network of
                  the
                  Royal. The acquisition should be completed by December 31, 2007.
                  After
                  completion of the acquisition, the Company will own all of Royal’s plants,
                  orchards, and fruit wine and drink production
                  lines.
  (v)
              In
                  February of 2007, the Company entered into a series of sales agreements
                  with two unrelated companies pursuant to which the Company shall
                  provide
                  total orange sales of not less than 6,000 tons in 2007.


F-20
 *Table
          of Contents*




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




On
      July
      3, 2006, our Board of Directors made the decision to retain Zhong Yi (Hong
      Kong)
      C.P.A. Company Ltd. as our independent auditor to review our quarterly reports
      for the second and third quarter of 2006 and to audit our financial statements
      for the year ended December 31, 2006. Mendoza Berger & Company LLP
      ("Mendoza"), our former independent auditor was dismissed. We do not have an
      audit committee.





Prior
      to
      making the decision to retain Zhong Yi (Hong Kong) C.P.A. Company Ltd., We
      had
      no prior relationship with Zhong Yi (Hong Kong) C.P.A. Company Ltd. or any
      of
      its members.





Mendoza
      Berger & Company LLP's audit reports regarding our financial statements for
      the year ended December 31, 2004 and 2005, contained no adverse opinion or
      disclaimer of opinion nor were they qualified or modified as to the uncertainty,
      audit scope or accounting principles, **except** that
      their audit report for the year ended December 31, 2005 contained a going
      concern qualification.





In
      connection with the prior audits for the fiscal year ended December 31, 2004
      and
      2005, and the review for the interim period up to July 3, 2006, there have
      been
      no disagreements with Mendoza Berger & Company LLP on any matter of
      accounting principles or practices, financial statement disclosure or auditing
      scope or procedure, which if not resolved to the satisfaction of Mendoza Berger
      & Company LLP would have caused it to make reference to the subject matter
      of the disagreement in connection with its report on these financial statements
      for those periods.




**Item 8A.
      Controls and Procedures.**





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




As
      of the
      end of the period covered by this report, our 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 their evaluation of our
      controls and procedures that as of December 31, 2006, our internal controls
      over
      financial reporting are effective and provide a reasonable assurance of
      achieving their objective.




The
      Certifying Officers have also concluded that there was no change in our internal
      controls over financial reporting identified in connection with the evaluation
      that occurred during our fourth fiscal quarter that has materially affected,
      or
      is reasonably likely to materially affect, our internal control over financial
      reporting.




39
 *Table
          of Contents*




**PART
      III**




**Item 9.
      Directors, Executive Officers, Promoters and Control Persons; Compliance with
      Section 16(a) of the Exchange Act.**




***Directors
      and Executive Officers***




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





**Name**
            **Age**
            **Position**
            **Date
                to Start**Chen,
                Quan Long
            46
            President,
                Chief Executive Officer and Chairman
            June
                1, 2006Huang,
                Xiao Yun
            37
            Chief
                Financial Officer
            June
                1, 2006Zhao,
                Li Li
            34
            Director
            June
                22, 2006





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





Mr.
      Chen,
      Quan Long, 46, obtained a Master of Business Administration degree at Beijing
      University. His prior work experience is primarily in corporate. He was chairman
      of Fei Huan Group, a corporation organized and existing under the laws of the
      Peoples' Republic of China ("Fei Huan Group"), from October 1988 to December
      2001. Since January 2002, he was Chairman of Fei Huan Wine, Inc., an affiliate
      of Fei Huan Group. Mr. Chen’s duties with Fei Huan Group included management of
      their beverage processing and distribution. Mr. Chen is a member of the Chinese
      Entrepreneurial Association.





**Huang,
      Xiao Yun - Chief Financial Officer**





Ms.
      Huang, Xiao Yun, 37, majored in accounting in Jiang Xi Radio Television
      University. She was chief accountant of Fei Huan Group from December 1991 to
      December 2001. From January 2002, she became Chief Financial Officer of Fei
      Huan
      Wine, Inc. Ms. Huang’s duties with Fei Huan Group included supervision of the
      their financial statement preparation and accounting systems.





**Zhao,
      Li Li - Director**





Ms.
      Zhao,
      Li Li has approximately 10 years of experience in sales management. Her
      experience includes sales management, corporate restructuring, and human
      resources management.





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





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




40
 *Table
          of Contents*




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 A draft of the
      Code of Ethics is in Exhibit 14.1 hereto. The Code of Ethics is being designed
      with the intent to deter wrongdoing, and to promote the following:





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




འ
            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




ཉ
            Compliance
                with applicable governmental laws, rules and
                regulations




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




ཉ
            Accountability
                for adherence to the code





41
 *Table
          of Contents*





Section
      16(a) Beneficial Ownership Reporting Compliance




Under
      Section
      16(a) of the Exchange Act, all executive officers, directors, and each person
      who is the beneficial owner of more than 10% of the common stock of a company
      that files reports pursuant to Section 12 of the Exchange Act, are required
      to
      report the ownership of such common stock, options, and stock appreciation
      rights (other than certain cash-only rights) and any changes in that ownership
      with the Commission. Specific due dates for these reports have been established,
      and we are required to report, in this Form 10-KSB, any failure to comply
      therewith during the fiscal year ended December 2005. We believe that all of
      these filing requirements were satisfied by our executive officers, directors
      and by the beneficial owners of more than 10% of our common stock. In making
      this statement, hawse have relied solely on copies of any reporting forms
      received by it, and upon any written representations received from reporting
      persons that no Form 5 (Annual Statement of Changes in Beneficial Ownership)
      was
      required to be filed under applicable rules of the Commission.




**Item 10.
      Executive Compensation**




The
      following
      table sets forth certain information regarding the annual and long-term
      compensation for services in all capacities to us for the prior fiscal years
      ended December 31, 2006, 2005 and 2004, 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.





**SUMMARY
                COMPENSATION TABLE**Name
                and principal position
              (a)
            Year
              (b)
            Salary
                ($)
              (c)
            Bonus
                ($)
              (d)
            Stock
                Awards ($)
              (e)
            Option
                Awards ($)
              (f)
            Non-Equity
                Incentive Plan Compensation ($)
              (g)
            Nonqualified
                Deferred Compensation Earnings ($)
              (h)
            All
                Other Compensation ($)
              (i)
            Total
                ($)
              (j)Chen,
                Quan Long
              
              President,
                Chief Executive Officer and Chairman
            2006
            0
            0
            0
            0
            0
            0
            0
            02005
            0
            0
            0
            0
            0
            0
            0
            02004
            0
            0
            0
            0
            0
            0
            0
            0Huang,
                Xiao Yun
              
              Chief
                Executive Officer
            2006
            0
            0
            0
            0
            0
            0
            0
            02005
            0
            0
            0
            0
            0
            0
            0
            02004
            0
            0
            0
            0
            0
            0
            0
            0





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




42
 *Table
          of Contents*




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 11.
      Security Ownership of Certain Beneficial Owners and
      Management**







As
      of
      December 31, 2006, we had 3,700 stockholders of record and 33,129,689 shares
      of
      our Common Stock, 13,150 shares of our Series A Preferred Stock and 12,100,000
      Series B Preferred Stock issued and outstanding.




As
      of
      April 13, 2007, we had 3,715 stockholders of record and 36,129,689 shares of
      our
      Common Stock, 13,150 shares of our Series A Preferred Stock and 12,100,000
      Series B Preferred Stock issued and outstanding. The following table sets forth
      as of April 13, 2007, certain information with respect to the beneficial
      ownership of Common Stock by (i) each of our Director, nominee and executive
      officer; (i) each person who owns beneficially more than 5% of the common stock;
      and (iii) all Directors, nominees and executive officers as a group. The
      percentage of shares beneficially owned is based on there having been 36,129,689
      shares of our Common Stock, 13,150 shares of our Series A Preferred Stock and
      12,100,000 Series B Preferred Stock issued and outstanding as of April 13,
      2007.





OFFICERS,
      DIRECTORS AND BENEFICIAL OWNERS, AS OF APRIL 13, 2007





Title
                of Class
            Name
                & Address of Beneficial Owner(1)
            Amount
                & Nature of Beneficial Owner
            %
                of Class(2)Series
                A Preferred Stock, $.001 par value
            Chen,
                Quan Long
              Room
                503,Building 53,QianXi District, DaDao Road, NanFeng County, JiangXi,
                P.R.China 344500
            13,150
            100%Series
                A Preferred Stock, $.001 par value
            All
                directors and executive officers as a group (three
                persons)
            13,150
            100%Series
                B Preferred Stock, $.001 par value
            Chen,
                Quan Long
              Room
                503,Building 53,QianXi District,DaDao Road, NanFeng County,
                JiangXi,P.R.China 344500
            12,100,000
            100%Series
                B Preferred Stock, $.001 par value
            All
                directors and executive officers as a group (three
                persons)
            12,100,000
            100%Common
                Stock,
              $.001
                par value
            Chen,
                Quan Long
              Room
                503,Building 53,QianXi District,DaDao Road, NanFeng County,
                JiangXi,P.R.China 344500
            665,416
            2%Common
                Stock,
              $.001
                par value
            Huang,
                Xiao Yun
              Dormitory
                FeiHuan, NanFeng County, JiangXi Province,P.R.China 344500
            74,448
            **Common
                Stock,
              $.001
                par value
            Zhao,
                Li Li
              223
                Xin Zhong St., Xin Jian, Jin Yun County, Zhe Jiang,
                P.R.China
            20,846
            **Class
                A Common Stock
            All
                directors and executive officers as a group (five persons)
            760,710
            2%





**
      Represents less than 1%





(1)
      Unless stated otherwise, the business address for each person named is c/o
      China
      Fruits Corp.





(2)
      Calculated pursuant to Rule 13d-3(d) (1) of the Securities Exchange Act of
      1934.
      Under Rule 13d-3(d), shares not outstanding which are subject to options,
      warrants, rights or conversion privileges exercisable within 60 days are deemed
      outstanding for the purpose of calculating the number and percentage owned
      by a
      person, but not deemed outstanding for the purpose of calculating the percentage
      owned by each other person listed. We believe that each individual or entity
      named has sole investment and voting power with respect to the shares of common
      stock indicated as beneficially owned by them (subject to community property
      laws where applicable) and except where otherwise noted.




43
 *Table
          of Contents*





Changes
      in Control





Pursuant
      to and at the closing of the Plan of Exchange, which occurred as of May 31,
      2006, we authorized Guardian Registrar & Transfer, Inc., its transfer agent,
      to issue to the shareholders of Tai Na (the “Tai Na Shareholders”), 30,000,000
      shares of our common stock pursuant to Regulation S under the Securities Act
      of
      1933, as amended, in exchange for a 100% interest in Tai Na owned by the Tai
      Na
      Shareholders. As a result of the transactions consummated at the closing, shares
      representing 99% of our post-issuance outstanding shares of common stock were
      issued to the Tai Na shareholders, and all of the registered capital of Tai
      Na
      was acquired by us. Upon completion of the physical exchange of the share
      certificates, Tai Na became our wholly-owned subsidiary.





As
      a
      result of the transactions consummated at the closing, there has been a change
      in control of the ownership of the outstanding shares of our common stock.
      There
      has also been a change in control of a majority of our Board of Directors,
      and
      an Information Statement on Schedule 14F-1 regarding the biographies of the
      new
      management was filed with Securities and Exchange Commission on July 3, 2006,
      and was mailed to the shareholders of record as of the record
      date.





**Item 12.
      Certain Relationships and Related Transactions.**





On
      May
      31, 2006, 2006, we completed a stock exchange transaction with the equity
      owners of Tai
      Na
      and a total of 30,000,000 shares of common stock were issued (99% of our then
      outstanding common stock).





On
      June
      26, 2006, we issued 2,000,000 shares of common stock to Diversified Holdings
      I,
      Inc., a Nevada corporation ("DHI") to settle the $1,000,000 purchase price
      payable incurred due to the acquisition of Wichita Development Corporation
      in
      2003 and any other miscellaneous liabilities to DHI, and to release and
      discharge any and all claims that exist between us and DHI. The purchase price
      payable had been previously reported in our financial statements in
      2005.





On
      July
      12, 2006, we completed a 1 for 12.5 reverse stock split on the common stock
      and
      the par value remains at $0.001 per share. The reverse stock split is not
      subject to any condition other than Board of Directors approval under the
      Section 78 of the Nevada Revised Statutes. In addition, Certificate of Change
      pursuant to NRS 78.209 was filed with the Secretary of State of Nevada in
      connection with the decrease in authorized capital. As a result, the total
      number of issued and outstanding shares was reduced from 402,866,323 to
      32,229,689 shares and par value of its common stock was unchanged at $0.001.
      This is inclusive of issuance of 383 shares of common stocks as fractional
      shares. All common stock and per share data for all periods presented in these
      financial statements have been restated to give effect to the reverse stock
      split.





On
      October 19, 2006, we approved a 2006 Non-Qualified Stock Compensation Plan
      (the
“Plan”) under which directors, officers, employees and consultants of the Group
      are eligible to receive grants of stock options and our common stock.





On
      October 27, 2006, we entered into a business consulting service agreement with
      the Consultant A in exchange for 1,500,000 shares of common stock. The fair
      value of the common stock issued is determined using the fair value of our
      common stock on the grant date at $0.31 per share. We calculated a stock based
      compensation of $465,000 and recognized $335,834 for the year ended December
      31,
      2006. As of December 31, 2006, a deferred compensation is amounted to $129,166
      and amortized on the straight-line method over 8.6 months.





On
      October 31, 2006, we entered into a website construction service agreement
      with
      the Consultant B in exchange for 1,500,000 shares of common stock. The fair
      value of the common stock issued is determined using the fair value of our
      common stock on the grant date at $0.31 per share. We calculated a stock based
      compensation of $465,000 and recognized $38,750 for the year ended December
      31,
      2006. As of December 31, 2006, a deferred compensation is amounted to $426,250
      and amortized on the straight-line method over 22 months.




44
 *Table
          of Contents*





On
      December 14, 2006, we issued 900,000 restricted shares of common stock for
      business advisory services to Consultant C. The fair value of each restricted
      stock issuance is determined using the fair value of our common stock on the
      grant date, at
      a
      price of $0.42 per share. We
      recognized a stock based compensation of $378,000 for the year ended December
      31, 2006.





During
      the year ended December 31, 2006, we recorded purchase of $354,005 from a
      related company where Mr. Chen Quan Long, our Chief Executive Officer, is also
      the president of the related company. As of December 31, 2006, the trade balance
      of accounts payable of $110,029 is due to a related company. The transaction
      is
      considered conducted at arm’s length.




**Item 13.
      Exhibits.**




(a)
            Financial
                Statements




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





Independent
      Auditors’ Report..........................................................  F-2


Balance
      Sheet-December 31, 2006...................................................   F-3


Statements
      of Operations - for years ended December 31, 2006 and 2005......   
F-4


Statements
      of Cash Flows - for years ended December 31, 2006 and 2005.....   
F-5


Statements
      of Stockholders’ Equity - for years ended


December
      31, 2006 and 2005...........................................................  F-6


Notes
      to
      Financial Statements..........................................................   F-7 to F-20




2.
      Exhibits




14.1.  Code
      of Ethics


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


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


32.1.   Section
      1350 Certifications of Chief Executive
      Officer


32.2.  Section
      1350 Certifications of Chief Financial
      Officer





(b)
            Reports
                on Form 8-K




Reports
      on Form 8-K Filed in Last Quarter of Fiscal Year 2006




None.




45
 *Table
          of Contents*




Reports
      on Form 8-K filed subsequent to the end of Fiscal Year 2006




(1)
            On
                February 19, 2007, we filed a current report on Form 8-K to announce
                that
                we entered into an agreement with Huangjia Nanfeng Tangerine Orange
                Co.
                Ltd. (“Huangjia Nanfeng”), to acquire the assets and businesses of
                Huangjia Nanfeng to assist in further expansion in the orange
                markets.(2)
            On
                March 12, 2007, we filed a current report on Form 8-K to announce
                that we
                entered into a winery agreement and a series of sales agreements
                regarding
                oranges sales in 2007.




**Item 14.
      Principal Accountant Fees and Services.**





Fees
      Billed For Audit and Non-Audit Services





The
      following table represents the aggregate fees billed for professional audit
      services rendered to the independent auditor, Mendoza Berger & Company LLP
      ("Mendoza"), for our audit of the annual financial statements for the year
      ended
      December 31, 2005. We have changed our independent auditor to Zhong Yi (Hong
      Kong) C.P.A. Company Ltd. (“Zhong Yi”) for our audit of the annual financial
      statements for the year ended December 31, 2006. Audit fees and other fees
      of
      auditors are listed as follows:





Year
                Ended December 31
            
            2006
            
            
            
            2005Zhong
                Yi
            
            
            
            MendozaAudit
                Fees(1)
            
            $
            45,000
            
            
            (3)
            
            $
            61,000
            
            
            (2)Audit-Related
                Fees(4)
            
            
            --
            
            
            
            
            
            --Tax
                Fees(5)
            
            
            --
            
            
            
            
            
            --All
                Other Fees(6)
            
            
            --
            
            
            
            
            
            --Total
                Accounting Fees and Services
            
            $
            45,000
            
            
            
            
            $
            61,000




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




(2)
            The
                amounts shown for Mendoza in 2005 relate to professional services
                for the
                audit of our annual financial statements, for the review of the financial
                statements included in our filing on Form 10-QSB and for services
                that are
                normally provided in connection with statutory and regulatory filings
                or
                engagements.




(3)
            The
                amounts shown for Zhong Yi in 2006 relate to (i) the audit of our
                annual
                financial statements for the fiscal year ended December 31, 2006,
                and (ii)
                the review of the financial statements included in our filings on
                Form
                10-QSB for the second and third quarters of
                2006.




(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.




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          of Contents*




**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 Zhong
      Yi
      (Hong Kong) C.P.A. Company Ltd. 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, 2006, 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.





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          of Contents*





**SIGNATURES**




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




**China
                Fruits Corporation**Date:
                April 13, 2007
            
            /s/
                Chen, Quan LongChen,
                Quan LongPresident










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