---





U.S. Securities and Exchange Commission

Washington, D.C. 20549





FORM 10-K





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



|[   ] | Transition Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 for the Transition Period from _______ to _______
|----- | ------------------------------------------------------------------------------------------------------------------------------------





Commission File Number: 1-10559





CHINA FRUITS CORP.

(Exact name of small business issuer as specified
in its charter)





|Nevada                          | 58-2027283                       
|------------------------------- | ---------------------------------
|(State or other jurisdiction of | (IRS Employer Identification No.)
|incorporation or organization)  |                                  



Fu Xi Technology & Industry Park, Nan
Feng County

Jiang Xi Province, P. R. China

(Address of principal executive offices)



(86794) 326-6199

(Issuer's telephone number)





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



|Title of each class |  | Name of each exchange
        on which registered
|------------------- |  | -------------------------------------------------
|                    |  |                                                  
|None                |  | Not Applicable                                   



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



Common Stock, $.001 par value

(Title of Class)





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

Yes [ ]	No [x]



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

Yes [ ]	No [x]



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

Yes [x]	No [ ]



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

Yes [ ]	No [ ]



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

Yes [ ]	No [x]

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

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



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

Yes [ ] 	No [x]



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



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



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

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

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

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





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Table of Contents




DOCUMENTS INCORPORATED BY REFERENCE



None







CAUTIONARY STATEMENT REGARDING FORWARD LOOKING
INFORMATION



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

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Table of Contents




TABLE OF CONTENTS



|PART I: |                           | Page
|------- | ------------------------- | ----
|        |                           |     
|Item 1  | Business                  | 4   
|Item 1A | Risk Factors              | 7   
|Item 1B | Unresolved Staff Comments | 12  
|Item 2  | Properties                | 12  
|Item 3  | Legal Proceedings         | 12  
|Item 4  | (Removed and Reserved)    | 12  











|            |                                                                                                              |   
|----------- | ------------------------------------------------------------------------------------------------------------ | --
|PART II:    |                                                                                                              |   
|            |                                                                                                              |   
|Item 5      | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 13
|Item 6      | Selected Financial Data                                                                                      | 15
|Item 7      | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 15
|Item 7A     | Quantitative and Qualitative Disclosures About Market Risk                                                   | 19
|Item 8      | Financial Statements and Supplementary Data                                                                  | 20
|Item 9      | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         | 37
|Item 9A     | Controls and Procedures                                                                                      | 37
|Item 9A(T)  | Controls and Procedures                                                                                      | 38
|Item 9B     | Other Information                                                                                            | 38
|            |                                                                                                              |   
|PART III:   |                                                                                                              |   
|            |                                                                                                              |   
|Item 10     | Directors, Executive Officers and Corporate Governance                                                       | 39
|Item 11     | Executive Compensation                                                                                       | 40
|Item 12     | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               | 41
|Item 13     | Certain Relationships and Related Transactions, and Director Independence                                    | 42
|Item 14     | Principal Accounting Fees and Services                                                                       | 42
|            |                                                                                                              |   
|PART IV:    |                                                                                                              |   
|            |                                                                                                              |   
|Item 15     | Exhibits, Financial Statement Schedules                                                                      | 44
|            |                                                                                                              |   
|SIGNATURES: |                                                                                                              | 45
|            |                                                                                                              |   







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Table of Contents




ITEM 1. BUSINESS



History



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



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



As of April 1, 2006, we entered into a Plan
of Exchange (the “Agreement”), between and among us, Jiang Xi Tai Na Guo Ye You Xian Gong Si, a corporation organized
and existing under the laws of the Peoples’ Republic of China (“PRC”), which changed its corporate name to Jiangxi
Taina Nanfeng Orange Co., Ltd. in February of 2007 (collectively referred to herein as “Tai Na”), the shareholders
of Tai Na (the “Tai Na Shareholders”) and our Majority Shareholder.



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



Business Description of the Issuer



Since the reverse merger was consummated, we
have continued operations of Tai Na, a company which is principally engaged in manufacturing, trading and distributing fresh tangerine
and other fresh fruits in the PRC. Tai Na is located in Nan Feng County, Jiang Xi Province, the well known agricultural area for
tangerine in China. The geographic advantage benefits us with respect to the control of manufacturing cost and product quality.
We have self-owned property in Nan Feng County with a total area of 742,901 square feet, including manufacturing plants of 238,609
square feet and office building of 70,350 square feet. In order to effectively maintain the quality of tangerine, we have a set
of temperature and humidity auto-control equipments with capacity of 1,500 tons. We also have two automatic product lines to select
fruits, the hourly process capacity of which is 10 ton/hour and 15 ton/hour, respectively. We expect the production capacity will
reach 3,000 tons in 2011.



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



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



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Overview of Our Market Area



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



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



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



|* | Increasing Fresh Fruits Consumption. Currently, the average consumption for fresh fruit is 61.4 kg per person per year in the world, of which fruit consumption of 55.4 kg per person per year in the developing countries, and 83.3 kg per person per year in the developed countries. In China, the average fruit consumption is 45.6 kg per person per year, deceased by 18% and 45%, compared to the developing countries and developed countries, respectively. Therefore, the fresh fruit market in China is still growing.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



Marketing Strategies



Expanding Retail Fruit Stores Network



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



Improving Management Systems



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



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Seeking for Opportunities to Develop International Markets



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



Seeking for Opportunities to Develop e-Commerce Business



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





Seeking for Strategic partners



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



• 	Enhance manufacturing capacities;



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



• 	Diversify the fresh fruit sold
in the franchise stores;



• 	Expand the sales network;



• 	Increase sales revenue; and



• 	Successfully build brand identity.



Enhancing Manufacture Capacity



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



Increasing Expenses in Marketing



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



Competition



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



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



Government Regulation





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



Employees



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



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ITEM 1A. RISK FACTORS



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





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



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



• 	 Enhance manufacturing
capacities;

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

• 	Diversify the fresh
fruit sold in the franchise stores;



• 	Expand the sales network;



• 	Increase sales revenue; and



• 	Successfully build brand identity.



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



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



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



Adverse weather conditions could reduce the demand for our
products.



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



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



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



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



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



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



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



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



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



Political and economic risks



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



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



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



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



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



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Declining economic conditions could negatively impact our
business



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



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



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





We face risks related to health epidemics
and other outbreaks.



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



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



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



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



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



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



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



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



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



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



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



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



Our corporate actions are substantially
controlled by a single stockholder.



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



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



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



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



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



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



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ITEM 1B. UNRESOLVED STAFF COMMENTS



None.



ITEM 2. PROPERTIES



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



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



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



ITEM 3. LEGAL PROCEEDINGS



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



ITEM 4. (REMOVED AND RESERVED)



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PART II



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



Trading Market for Common Equity



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





|Interim
    Period                      |   | Low   |   | High 
|--------------------------------------- | - | ----- | - | -----
|Interim
    Period ended March 31, 2011 | $ | 0.03  | $ | 0.03 
|                                        |   |       |   |      
|Fiscal
    2010                         |   |       |   |      
|Quarter ended
    March 31, 2010        | $ | 0.055 | $ | 0.055
|Quarter ended
    June 30, 2010         | $ | 0.045 | $ | 0.045
|Quarter ended
    September 30, 2010    | $ | 0.032 | $ | 0.032
|Quarter ended
    December 31, 2010     | $ | 0.035 | $ | 0.035
|                                        |   |       |   |      
|Fiscal
    2009                         |   |       |   |      
|Quarter ended
    March 31, 2009        | $ | 0.04  | $ | 0.12 
|Quarter ended
    June 30, 2009         | $ | 0.06  | $ | 0.165
|Quarter ended
    September 30, 2009    | $ | 0.07  | $ | 0.17 
|Quarter ended
    December 31, 2009     | $ | 0.05  | $ | 0.095



Dividends



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



Preferred Stock



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



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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.



Number of Holders



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



Securities Authorized for Issuance Under Equity Compensation
Plans



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



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



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



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



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



None.



Transfer Agent



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



ITEM 6. SELECTED FINANCIAL DATA



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



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



Forward Looking Statements



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



Critical Accounting Policies



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Revenue recognition



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



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



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





Inventory



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



Property, Plant, and Equipment



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



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



Expenditure for maintenance and repairs is
expensed as incurred.





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



Revenues



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



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



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Income / Loss



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



There can be no assurance that we will achieve
or maintain profitability, or that any revenue growth will take place in the future.







Expenses



Operating expenses for the years ended December
31, 2010 and 2009 were $880,958 and $1,055,341, respectively. The decrease by $174,383 in 2010 was due primarily to the decrease
in general and administrative expenses as result of effective cost control. We adjusted our expenses budget periodically during
the year according to the revenues. The decrease in sales revenues pushed us to cut down the unnecessary expenses, such as travels,
entertainment and bonus.



Cost of Goods Sold



Cost of goods sold included expenses directly
related to the manufacturing and selling our products. Product delivery and direct labor would be examples of cost of goods sold
items. During the year ended December 31, 2010, we had $1,485,643 in cost of goods sold, or 82.2% of sales revenue. During the
year ended December 31, 2009, we had $1,329,385 in cost of goods sold, or 69.8% of sales revenue. The higher cost of goods sold
as a percentage of revenue during 2010 was due to the increase in our purchase cost as result of inflation. The gross margin of
fresh fruits products typically ranges between 5-10%.



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



Liquidity and Capital Resources





Cash
flows used in operating activities were $99,224 and $351,713 for the years ended December 31, 2010 and 2009, respectively. Negative
cash flows from operations in 2010 were due primarily to the net loss of $347,241, plus the increase in inventories by $155,496,
and the decrease in account payables by $156,011, partially offset by the collection in accounts receivable by $246,948 and the
increase in other payables and accrued liabilities in the amount of $151,992.



Negative
cash flows from operations in 2009 were due primarily to the net loss of $344,080 from continuing operation, plus the increase
in accounts receivable by $38,865, the increase in prepaid expenses and other current assets by $421,018, and the decrease in
other payables and accrued liabilities by $131,107, partially offset by the decrease in inventory by $145,818 and the increase
in accounts payable and tax payable, which were $151,736 and $242,408, respectively.



Cash
flows used in investing activities were $248,427 during the year ended December 31, 2010 due primarily to the purchase of property
and equipment in the amount of $152,214, and construction in progress of $100,235, slightly offset by the proceeds of $4,022 from
disposal of property and equipment. Comparatively, cash flows used in investing activities were $426,438 during the year ended
December 31, 2009, due primarily to the purchase of property and equipment in the amount of $439,291, offset by the proceeds of
$12,853 from disposal of property and equipment.









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



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







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



Overall, we have funded our cash needs from
inception through December 31, 2010 with a series of debt and equity transactions, primarily with related parties. If we are unable
to receive additional cash from our related parties, we may need to rely on financing from outside sources through debt or equity
transactions. Our related parties are under no legal obligation to provide us with capital infusions. Failure to obtain such financing
could have a material adverse effect on operations and financial condition.



We had cash of $312,218 on hand and a working
capital of $1,112,937 as of December 31, 2010. Currently, we have enough cash to fund our operations for about six months. This
is based on current cash flows from financing activities and projected revenues. Also, if the projected revenues fall short of
needed capital we may not be able to sustain our capital needs. We will then need to obtain additional capital through equity or
debt financing to sustain operations for an additional year. Our current level of operations would require capital of approximately
$500,000 to sustain operations through year 2011 and approximately $700,000 per year thereafter. Modifications to our business
plans may require additional capital for us to operate. For example, if we are unable to raise additional capital in the future
we may need to curtail our number of product offers or limit our marketing efforts to the most profitable geographical areas. This
may result in lower revenues and market share for us. In addition, there can be no assurance that additional capital will be available
to us when needed or available on terms favorable to us.



On a long-term basis, liquidity is dependent
on continuation and expansion of operations, receipt of revenues, and additional infusions of capital and debt financing. Our current
capital and revenues are insufficient to fund such expansion. If we choose to launch such an expansion campaign, we will require
substantially more capital. The funds raised from this offering will also be used to market our products and services as well as
expand operations and contribute to working capital. However, there can be no assurance that we will be able to obtain additional
equity or debt financing in the future, if at all. If we are unable to raise additional capital, our growth potential will be adversely
affected and we will have to significantly modify our plans. For example, if we unable to raise sufficient capital to develop our
business plan, we may need to:



• Curtail new product launches



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



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



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



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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK



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



Foreign Exchange Rates



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



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



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



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



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



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ITEM 8. FINANCIAL STATEMENTS



Financial Summary Information



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



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









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



** Less than $.01





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





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM



To the Board of Directors and
Stockholders of China Fruits Corporation



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



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



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



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



/s/Lake & Associates CPA’s
LLC

Lake & Associates CPA’s LLC

April 14, 2010





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|China Fruits Corpration And Subsidiaries                                                
|----------------------------------------------------------------------------------------
|Condensed Consolidated Balance Sheets                                                   
|As of December 31, 2010 and 2009                                                        
|(Expresed in US Dollars, except for number of shares)                                   
|                                                                                        
|ASSETS                                                                                  
|                                                                                        
|CURRENT ASSETS                                                                          
|Cash and cash equivalents                                                               
|Accounts receivable, trade                                                              
|Receivable from third parties                                                           
|Inventories                                                                             
|Prepayment and Deferred expense                                                         
|Refundable VAT tax                                                                      
|Refundable income tax                                                                   
|TOTAL CURRENT ASSETS                                                                    
|                                                                                        
|PLANT AND EQUIPMENT, NET                                                                
|                                                                                        
|OTHER ASSETS                                                                            
|                                                                                        
|                                                                                        
|TOTAL ASSETS                                                                            
|                                                                                        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                    
|                                                                                        
|CURRENT LIABILITIES                                                                     
|Accounts payable                                                                        
|Loan and related party payable                                                          
|Notes payable-current portion                                                           
|Customer deposit                                                                        
|Accrued liabilities and payroll tax liabilities                                         
|                                                                                        
|TOTAL CURRENT LIABILITIES                                                               
|                                                                                        
|LONG-TERM LIABILITIES                                                                   
|Note Payable-Long term                                                                  
|Due to stockholders                                                                     
|TOTAL LONG-TERM LIABILITIES                                                             
|                                                                                        
|STOCKHOLDERS' EQUITY                                                                    
|Preferred stock, 200,000,000 shares authorized, designated as Series A and Series B     
|Series A; par value $.001; 2,000,000 shares authorized,                                 
|13,150 shares issued and outstanding                                                    
|Series B; par value $0.001, voting; 50,000,000 shares authorized,                       
|12,100,000 shares issued and outstanding                                                
|Common stock, par value $.001, 100,000,000 shares authorized,                           
|38,779,689 shares issued and outstanding                                                
|Additional paid-in capital                                                              
|Statutory reserve                                                                       
|Accumulated other comprehensive income                                                  
|Accumulated (deficit)                                                                   
|TOTAL STOCKHOLDERS' EQUITY                                                              
|                                                                                        
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                              
|                                                                                        
|                                                                                        
|The accompanying notes are an integral part of these  consolidated  financial statements
|                                                                                        





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|China Fruits Corpration And Subsidiaries                                               |  |   |                    |  
|-------------------------------------------------------------------------------------- |  | - | ------------------ | -
|Audited Condensed Consolidated Statements of Operations                                |  |   |                    |  
|For The Years Ended December 31, 2010 and 2009                                         |  |   |                    |  
|(Expresed in US Dollars, except for number of shares)                                  |  |   |                    |  
|                                                                                       |  |   |                    |  
|                                                                                       |  |   | For the year ended |  
|                                                                                       |  |   | 12/31/2010         |  
|REVENUES:                                                                              |  |   |                    |  
|Sales                                                                                  |  | $ | 1,807,471          |  
|Cost of goods sold                                                                     |  |   | 1,485,643          |  
|GROSS PROFIT                                                                           |  |   | 321,828            |  
|                                                                                       |  |   |                    |  
|OPERATING EXPENSES:                                                                    |  |   |                    |  
|Selling and marketing                                                                  |  |   | 327,756            |  
|Professional and legal expenses                                                        |  |   | 101,419            |  
|General and administrative                                                             |  |   | 451,783            |  
|TOTAL OPERATING EXPENSES                                                               |  |   | 880,958            |  
|                                                                                       |  |   |                    |  
|(LOSS) FROM CONTINUING OPERATIONS                                                      |  |   | (559,130           | )
|                                                                                       |  |   |                    |  
|OTHER INCOME (EXPENSE):                                                                |  |   |                    |  
|Interest income                                                                        |  |   | —                  |  
|Interest expenses                                                                      |  |   | (28,749            | )
|Government & other grant                                                               |  |   | 253,212            |  
|Other                                                                                  |  |   | (5,760             | )
|TOTAL OTHER INCOME (EXPENSES)                                                          |  |   | 218,703            |  
|                                                                                       |  |   |                    |  
|INCOME(LOSS) FROM CONTINUING OPERATIONS BEFOR INCOME TAXES                             |  | $ | (340,427           | )
|                                                                                       |  |   |                    |  
|Income tax expense                                                                     |  |   | 6,814              |  
|                                                                                       |  |   |                    |  
|NET (LOSS) FROM CONTINUING OPERATIONS                                                  |  | $ | (347,241           | )
|                                                                                       |  |   |                    |  
|NET INCOME FROM DISCONTINUED OPERATIONS                                                |  | $ | —                  |  
|                                                                                       |  |   |                    |  
|NET (LOSS)                                                                             |  | $ | (347,241           | )
|                                                                                       |  |   |                    |  
|Other comprehensive income                                                             |  |   |                    |  
|- Foreign currency translation gain                                                    |  |   | 83,936             |  
|                                                                                       |  |   |                    |  
|COMPREHENSIVE (LOSS)                                                                   |  | $ | (263,305           | )
|                                                                                       |  |   |                    |  
|(LOSS) per common share:                                                               |  |   |                    |  
|Basic                                                                                  |  |   | **                 |  
|                                                                                       |  |   |                    |  
|Weighted average number of common shares outstanding during the year - basic           |  |   | 38,750,010         |  
|                                                                                       |  |   |                    |  
|** Less than $0.01                                                                     |  |   |                    |  
|The accompanying notes are an integral part of these consolidated financial statements







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



The accompanying notes are an integral part of these consolidated financial statements



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|
|



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



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CHINA FRUITS CORPORATION AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009

(Expressed in USD)



1. ORGANIZATION AND BUSINESS BACKGROUND



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



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



The stock exchange transaction involved two
simultaneous transactions:



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



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



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



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



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



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

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



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



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CHINA FRUITS CORPORATION AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009

(Expressed in USD)





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



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



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



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



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



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



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



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



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



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



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



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



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



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





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CHINA FRUITS CORPORATION AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009

(Expressed in USD)





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



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



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



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



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



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



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



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



Expenditure for maintenance and repairs is
expensed as incurred.





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



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



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



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



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



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



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



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



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



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



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



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CHINA FRUITS CORPORATION AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009

(Expressed in USD)





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



| | Retirement plan costs
| | ---------------------



Contributions to retirement schemes (which
are defined contribution plans) are charged to general and administrative expenses in the consolidated statements of income and
comprehensive income as and when the related employee service is provided.



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



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



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



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



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



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



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



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



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

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





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



Credit Quality of
Financing Receivables and the Allowance for Credit Losses



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



Fair Value Measurements
and Disclosures



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



Variable Interest
Entities (VIEs)



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





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Table of Contents




CHINA FRUITS CORPORATION AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009

(Expressed in USD)





3. ACCOUNTS RECEIVABLE, NET



The majority of the Company’s sales is
cash on delivery, or secured by customer deposits. A small portion of our revenues is on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The Company evaluates the need of an allowance for doubtful
accounts based on specifically identified amounts that management believes to be uncollectible. If actual collections experience
changes, revisions to the allowance may be required. The Company did not experience significant losses from uncollectible accounts
in the past; accordingly, the management has determined that no allowance was considered necessary as of December 31, 2010 and
2009, respectively.



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





4. RECEIVABLE FROM THIRD PARTIES



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



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





5. INVENTORIES



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



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





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



The spoilage will be written-off directly to
the profit and loss when it occurs. The spoilage rate is approximately 1%0 of average
inventory. The Company did not record an allowance for spoilage as of December 31, 2010 and 2009, respectively.



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Table of Contents






CHINA FRUITS CORPORATION AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009

(Expressed in USD)



6. PREPAYMENT



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





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







7. PLANT AND EQUIPMENT, NET



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



|                                 |  | As of December 31, |          
|-------------------------------- |  | ------------------ | ---------
|                                 |  | 2010               |          
|                                 |  |                    |          
|                                 |  |                    |          
|                                 |  |                    |          
|                                 |  |                    |          
|Plant and machinery              |  |                    | 2,441,578
|Construction in progress         |  |                    | 106,410  
|Furniture, fixture and equipment |  |                    | 37,803   
|                                 |  |                    | 2,585,791
|Less: accumulated depreciation   |  |                    | (467,933)
|Plant and equipment, net         |  |                    | 2,117,858





Construction in progress is stated at cost,
which includes the cost of construction and other direct costs attributable to the construction.  No provision for depreciation
is made on construction in progress until such time as the relevant assets are completed and put into use.  Construction
in progress as of December 31, 2010 was $106,410, representing buildings under construction.





8. LOAN AND RELATED PARTY PAYABLE



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





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Table of Contents








CHINA FRUITS CORPORATION AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009

(Expressed in USD)





9. NOTES PAYABLE – CURRENT PORTION



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



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





10. CUSTOMER DEPOSIT



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







11. ACCRUED LIABILITIES



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



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







12. NOTE PAYABLE – LONG TERM



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



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



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



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Table of Contents




CHINA FRUITS CORPORATION AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009

(Expressed in USD)



13. AMOUNT DUE TO STOCKHOLDERS



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





14. CAPITAL TRANSACTIONS



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





15. CHINA CONTRIBUTION PLAN



Under the PRC Law, full-time employees of the
Company’s subsidiaries, Tai Na and Tai Na Beijing, are entitled to staff welfare benefits including medical care, welfare
subsidies, unemployment insurance and pension benefits through a China government-mandated multi-employer defined contribution
plan. Tai Na and Tai Na Beijing are required to accrue for these benefits based on certain percentages of the employees’
salaries. The total contributions made for such employee benefits were $32,392 and $34,457 for the years ended December 31, 2010
and 2009, respectively.





16. STATUTORY RESERVES



Under PRC Company Law, the Company’s
subsidiaries, Tai Na and Tai Na Beijing are required to make appropriations to the statutory reserve based on after-tax net income
and determined in accordance with generally accepted accounting principles of the People’s Republic of China (the “PRC
GAAP”). Appropriation to the statutory reserve should be at least 10% of the after-tax net income until the reserve is equal
to 50% of Tai Na’s registered capital.  The statutory reserve is established for the purpose of providing employee
facilities and other collective benefits to the employees and is non-distributable other than in liquidation.



For the years ended December 31, 2010 and 2008,
Tai Na and Tai Na Beijing contributed $0 and $0 respectively to statutory reserve.



17. INCOME TAXES



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



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



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



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



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



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



United States of America



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



As of December 31, 2010, the U.S. operation
had $1,789,053 of net operating losses available for federal tax purposes, which are available to offset future taxable income.  The
net operating loss carry forwards begin to expire in 2030.  The Company has provided for a full valuation allowance for
any future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these
assets will not be realized in the future.



The PRC



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



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





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



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



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



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



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Table of Contents




CHINA FRUITS CORPORATION AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009

(Expressed in USD)





17. INCOME TAXES (CONT’D)



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







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





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





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



18. GOVERNMENT & OTHER GRANTS



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



19. NET LOSS PER SHARE



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



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



|                                             |  | 2010 |            |   | 2009 |  
|-------------------------------------------- |  | ---- | ---------- | - | ---- | -
|Numerator:                                   |  |      |            |   |      |  
|- Net loss                                   |  | $    | (347,241   | ) |      | $
|                                             |  |      |            |   |      |  
|Denominator:                                 |  |      |            |   |      |  
|- Weighted average common shares outstanding |  |      | 38,750,010 |   |      |  
|                                             |  |      |            |   |      |  
|Basic net loss per share                     |  | $    | **         |   |      | $
|                                             |  |      |            |   |      |  



** Less than $.01



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Table of Contents






CHINA FRUITS CORPORATION AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009

(Expressed in USD)





20. CONCENTRATION AND RISK



(a) Major customers



For the years ended December 31, 2010 and 2009,
100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues and purchases were derived
from customers and vendors located in the PRC.



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



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



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



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

(b) Credit risk



Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company
performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.



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Table of Contents






CHINA FRUITS CORPORATION AND SUBSIDIARIES

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND
2009

(Expressed in USD)





21. COMMITMENT AND CONTINGENCIES



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



|Year ended December 31 | Lease payment
|---------------------- | -------------
|2011                   | 180,235      
|2012                   | 123,374      
|2013                   | 100,974      
|2014                   | 84,235       
|2015                   | 22,069       
|Total                  | 510,887      



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



22. GOING CONCERN UNCERTAINTIES



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



As of December 31, 2010, the Company had an
accumulated deficit of $1,551,555. Management has taken certain action and continues to implement changes designed to improve the
Company’s financial results and operating cash flows.  The actions involve certain cost-saving initiatives and
growing strategies, including (a) reductions in headcount and corporate overhead expenses; and (b) expansion into new market.  Management
believes that these actions will enable the Company to improve future profitability and cash flow in its continuing operations
through December 31, 2011.  As a result, the financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result
from the outcome of the Company’s ability to continue as a going concern.





23. RESTATEMENT



Subsequent to the filing of our December 31, 2009 financial statements,
management determined that the consolidated statement of cash flows were not properly presented according to ASC 230, Statement
of Cash Flows, regarding cash flows from discontinued operation.  Accordingly, the 2009 consolidated statement of cash flows
financial statements have been restated to reflect the correction of these errors. The result of this restatement was to present
cash flows from operating, investing and financing activities of the discontinued operations not within the operating cash flow
category. Management believes these changes did not have a material effect on the Company’s interim financial statements
and results of operations for the periods ended March 31, June 30 and September 30, 2010.





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Table of Contents




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



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



ITEM 9A. CONTROLS AND PROCEDURES



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



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



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



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



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



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



Changes in Internal Control Over Financial Reporting



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



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



(37)


Table of Contents




ITEM 9A(T). CONTROLS
AND PROCEDURES



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



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



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



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



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



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



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



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



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



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



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



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



ITEM 9B. OTHER INFORMATION



None.

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PART III



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



Directors and Executive Officers



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



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



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



Mr. Chen, Quan Long, 51, obtained a Master
of Business Administration degree at Beijing University. His prior work experience is primarily in corporate. He was chairman of
Fei Huan Group, a corporation organized and existing under the laws of the Peoples' Republic of China ("Fei Huan Group"),
from October 1988 to December 2001. Since January 2002, he was Chairman of Fei Huan Wine, Inc., an affiliate of Fei Huan Group.
Mr. Chen’s duties with Fei Huan Group included management of their beverage processing and distribution. Mr. Chen is a member
of the Chinese Entrepreneurial Association.



Li, Lin Feng - Chief Financial Officer



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



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



Family Relationships.



None.



Legal Proceedings.



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



Audit Committee



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



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Code of Ethics



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



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

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

•	Compliance with applicable governmental laws, rules and
regulations

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

•	Accountability for adherence to the code



Section 16(a) Beneficial Ownership Reporting Compliance



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



ITEM 11. EXECUTIVE COMPENSATION



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



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





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



Stock Option Plan



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



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



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



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



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



** Represents less than 1%



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



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



Changes in Control



None.



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



None.



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES



Fees Billed For Audit and Non-Audit Services



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



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



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



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



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



| | (4) | Audit-Related Fees. These are fees for the assurance and related services reasonably related to the performance of the audit or the review of our financial statements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | Tax Fees. These are fees for professional services with respect to tax compliance, tax advice, and tax planning.
| | --- | ----------------------------------------------------------------------------------------------------------------



| | (6) | All Other Fees. These are fees for permissible work that does not fall within any of the other fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax Fees.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------





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Pre-Approval Policy for Audit and Non-Audit Services



We do not have a standing audit committee,
and the full Board performs all functions of an audit committee, including the pre-approval of all audit and non-audit services
before we engage an accountant. All of the services rendered to us by Lake & Associates CPA’s LLC were pre-approved by
our Board of Directors.



We are presently working with its legal counsel
to establish formal pre-approval policies and procedures for future engagements of our accountants. The new policies and procedures
will be detailed as to the particular service, will require that the Board or an audit committee thereof be informed of each service,
and will prohibit the delegation of pre-approval responsibilities to management. It is currently anticipated that our new policy
will provide (i) for an annual pre-approval, by the Board or audit committee, of all audit, audit-related and non-audit services
proposed to be rendered by the independent auditor for the fiscal year, as specifically described in the auditor's engagement letter,
and (ii) that additional engagements of the auditor, which were not approved in the annual pre-approval process, and engagements
that are anticipated to exceed previously approved thresholds, will be presented on a case-by-case basis, by the President or Controller,
for pre-approval by the Board or audit committee, before management engages the auditors for any such purposes. The new policy
and procedures may authorize the Board or audit committee to delegate, to one or more of its members, the authority to pre-approve
certain permitted services, provided that the estimated fee for any such service does not exceed a specified dollar amount
(to be determined). All pre-approvals shall be contingent on a finding, by the Board, audit committee, or delegate, as the case
may be, that the provision of the proposed services is compatible with the maintenance of the auditor's independence in the conduct
of its auditing functions. In no event shall any non-audit related service be approved that would result in the independent auditor
no longer being considered independent under the applicable rules and regulations of the Securities and Exchange Commission.



(a) On December 31,
2010, our Chief Executive Officer and Chief Financial Officer made an evaluation of our disclosure controls and procedures. In
our opinion, the disclosure controls and procedures are adequate because the systems of controls and procedures are designed to
assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are
recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition,
results of operations and cash flows for the respective periods being presented. Moreover, the evaluation did not reveal any significant
deficiencies or material weaknesses in our disclosure controls and procedures.



(b) There have been
no significant changes in our internal controls or in other factors that could significantly affect these controls since the last
evaluation.



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PART IV



ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES





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



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



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

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

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

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

Notes to Financial Statements



2. Exhibits





|      |                                                                   
|----- | ------------------------------------------------------------------
|14.1  | Code of Ethics *                                                  
|31.1. | Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive
Officer
|31.2. | Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer
|32.1. | Section 1350 Certifications of Chief Executive Officer            
|32.2. | Section 1350 Certifications of Chief Financial Officer            







* Filed previously.



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



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



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



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



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

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SIGNATURES



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



|                     | China Fruits Corporation
|-------------------- | ------------------------
|Date: April 12, 2011 | /s/ Chen, Quan Long     
|                     | Chen, Quan Long         
|                     | President               
|                     |                         





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|Exhibits |                                                                   
|-------- | ------------------------------------------------------------------
|14.1     | Code of Ethics *                                                  
|31.1.    | Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer
|31.2.    | Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer
|32.1.    | Section 1350 Certifications of Chief Executive Officer            
|32.2.    | Section 1350 Certifications of Chief Financial Officer            







*Previously Filed