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EXCEL - IDEA: XBRL DOCUMENT - China Fruits Corp | Financial_Report.xls |
EX-31.2 - China Fruits Corp | ex31_2.htm |
EX-32.1 - China Fruits Corp | ex32_1.htm |
EX-32.2 - China Fruits Corp | ex32_2.htm |
EX-31.1 - China Fruits Corp | ex31_1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2011
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____to _____
Commission File Number: 000-22373
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)
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 if 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-Q or any amendments to this Form 10-Q.
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]
Number of shares of common stock, par value $.001, outstanding as of August 9, 2011: 49,951,223
Number of shares of preferred stock outstanding as of August 9, 2011:
Series A, par value $.001 - 13,150
Series B, par value $.001 - 12,100,000
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
The discussion contained in this 10-Q 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 Consolidated Financial Statements" and "Management's Discussion and Analysis or Plan of Operation" as well as those discussed elsewhere in this Form 10-Q. 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-Q 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.
(1) |
TABLE OF CONTENTS | |
PART I. FINANCIAL INFORMATION | |
ITEM 1. FINANCIAL STATEMENTS | 3 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 12 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 15 |
ITEM 4. CONTROLS AND PROCEDURES
ITEM 4T. CONTROLS AND PROCEDURES |
15
15 |
PART II. OTHER INFORMATION | |
ITEM 1. LEGAL PROCEEDINGS | 16 |
ITEM 1A. RISK FACTORS | 16 |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 16 |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES | 16 |
ITEM 4. REMOVED AND RESERVED | |
16 | |
ITEM 6. EXHIBITS | 17 |
SIGNATURES | 18 |
INDEX TO EXHIBITS | 19 |
(2) |
China Fruits Corpration And Subsidiaries | ||||||||||||||
Unaudited Condensed Consolidated Balance Sheets | ||||||||||||||
As of June 30, 2011 and December 31, 2010 | ||||||||||||||
(Expresed in US Dollars, except for number of shares) | ||||||||||||||
ASSETS | June 30,2011 | December 31. 2010 | ||||||||||||
CURRENT ASSETS | ||||||||||||||
Cash and cash equivalents | $ | 153,127 | $ | 312,218 | ||||||||||
Accounts receivable, trade | 4,636 | 120,126 | ||||||||||||
Receivable from third parties | 2,367,485 | 1,486,465 | ||||||||||||
Inventories | 87,886 | 290,283 | ||||||||||||
Prepayment and Deferred expense | 635,600 | 363,562 | ||||||||||||
Refundable VAT tax | 60,127 | 68,494 | ||||||||||||
TOTAL CURRENT ASSETS | 3,308,861 | 2,641,148 | ||||||||||||
PLANT AND EQUIPMENT, NET | 2,216,476 | 2,117,858 | ||||||||||||
OTHER ASSETS | 878 | 858 | ||||||||||||
TOTAL ASSETS | $ | 5,526,215 | $ | 4,759,864 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
CURRENT LIABILITIES | ||||||||||||||
Accounts payable | $ | 927 | $ | 8,736 | ||||||||||
Loan and related party payable | 38,615 | 37,749 | ||||||||||||
Notes payable - current portion | 1,854,256 | 1,056,971 | ||||||||||||
Customer deposit | 249,625 | 298,818 | ||||||||||||
Accrued liabilities and payroll tax liabilities | 72,715 | 125,937 | ||||||||||||
TOTAL CURRENT LIABILITIES | 2,216,138 | 1,528,211 | ||||||||||||
LONG-TERM LIABILITIES | ||||||||||||||
Note payable - long term | 698,436 | 536,035 | ||||||||||||
Due to stockholders | 203,983 | 455,796 | ||||||||||||
TOTAL LONG-TERM LIABILITIES | 902,419 | 991,831 | ||||||||||||
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 | 13 | ||||||||||||
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 | 12,100 | 12,100 | ||||||||||||
Common stock, par value $.001, 100,000,000 shares authorized, 49,951,223 and 38,779,689 shares issued and outstanding | 49,951 | 38,779 | ||||||||||||
Additional paid-in capital | 3,789,864 | 3,465,890 | ||||||||||||
Statutory reserve | 16,805 | 16,805 | ||||||||||||
Accumulated other comprehensive income | 319,255 | 257,790 | ||||||||||||
Accumulated (deficit) | (1,780,330 | ) | (1,551,555 | ) | ||||||||||
TOTAL STOCKHOLDERS' EQUITY | 2,407,658 | 2,239,822 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 5,526,215 | $ | 4,759,864 | ||||||||||
The accompanying notes are an integral part of these consolidated financials statements
(3) |
China Fruits Corpration And Subsidiaries | ||||||||||||||||||||||||
Unaudited Condensed Consolidated Statements of Operations | ||||||||||||||||||||||||
For The Three and Six Months Ended June 30, 2011 and 2010 | ||||||||||||||||||||||||
(Expresed in US Dollars, except for number of shares) | ||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||
June 30, 2011 | June 30, 2010 | June 30, 2011 | June 30, 2010 | |||||||||||||||||||||
REVENUES: | ||||||||||||||||||||||||
Sales | $ | 492,718 | $ | 147,951 | $ | 1,166,694 | $ | 927,192 | ||||||||||||||||
Cost of goods sold | 420,843 | 133,036 | 1,046,614 | 857,771 | ||||||||||||||||||||
GROSS PROFIT | 71,875 | 14,915 | 120,080 | 69,421 | ||||||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||||
Selling and marketing | 100,268 | 43,445 | 220,047 | 99,900 | ||||||||||||||||||||
Professional and legal expenses | 21,114 | 21,319 | 41,664 | 41,869 | ||||||||||||||||||||
General and administrative | 128,081 | 120,055 | 248,813 | 231,496 | ||||||||||||||||||||
TOTAL OPERATING EXPENSES | 249,463 | 184,819 | 510,524 | 373,265 | ||||||||||||||||||||
(LOSS) FROM CONTINUING OPERATIONS | (177,588 | ) | (169,904 | ) | (390,444 | ) | (303,844 | ) | ||||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||||||
Interest income | 42 | 329 | 42 | 554 | ||||||||||||||||||||
Interest expenses | (28,978 | ) | (6,564 | ) | (55,291 | ) | (12,981 | ) | ||||||||||||||||
Gain on disposal(PPE) | - | 1,654 | - | 1,654 | ||||||||||||||||||||
Government & other grant | 207,630 | 30,780 | 222,818 | 73,259 | ||||||||||||||||||||
Other | 321 | 588 | (5,900 | ) | 8,137 | |||||||||||||||||||
TOTAL OTHER INCOME (EXPENSES) | 179,015 | 26,787 | 161,669 | 70,623 | ||||||||||||||||||||
INCOME(LOSS) FROM CONTINUING OPERATIONS BEFOR INCOME TAXES | $ | 1,427 | $ | (143,117 | ) | $ | (228,775 | ) | $ | (233,221 | ) | |||||||||||||
Income tax expense | — | 6,759 | — | 6,759 | ||||||||||||||||||||
NET (LOSS) FROM CONTINUING OPERATIONS | $ | 1,427 | $ | (149,876 | ) | $ | (228,775 | ) | $ | (239,980 | ) | |||||||||||||
NET (LOSS) | $ | 1,427 | $ | (149,876 | ) | $ | (228,775 | ) | $ | (239,980 | ) | |||||||||||||
Other comprehensive income | ||||||||||||||||||||||||
- Foreign currency translation gain | 34,833 | $ | 14,420 | 61,465 | $ | 14,831 | ||||||||||||||||||
COMPREHENSIVE (LOSS) | $ | 36,260 | $ | (135,456 | ) | $ | (167,310 | ) | $ | (225,149 | ) | |||||||||||||
(LOSS) per common share: | ||||||||||||||||||||||||
Basic | ** | ** | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||||||||||
Weighted average number of common shares outstanding during the year - basic | 38,779,689 | 38,779,689 | 38,779,689 | 38,724,689 | ||||||||||||||||||||
**Less than $0.01 |
The accompanying notes are an integral part of these consolidated financial statements
(4) |
China Fruits Corpration And Subsidiaries | ||||||||
Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||
For the Six Months Ended June 30, 2011 and 2010 | ||||||||
(Expresed in US Dollars) | ||||||||
For The Six Months Ended | ||||||||
June 30, 2011 | June 30, 2010 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net (loss) | (228,775 | ) | (239,980 | ) | ||||
Adjustments to reconcile net income to net | ||||||||
Cash provided by (used in) operating activities: | ||||||||
Depreciation | 71,717 | 79,439 | ||||||
(Increase) decrease in operating assets: | ||||||||
Accounts receivable | 117,004 | 358,603 | ||||||
Inventories | 206,891 | 60,024 | ||||||
Other assets | — | 7,083 | ||||||
Prepaid expenses and other current assets | (251,090 | ) | (43,330 | ) | ||||
Increase (decrease) in operating liabilities: | ||||||||
Accounts payable | (7,925 | ) | (163,237 | ) | ||||
Other payables and accrued liabilities | (113,536 | ) | 543 | |||||
Tax payable | 2,840 | (32,252 | ) | |||||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | (202,874 | ) | 26,893 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Construction in progress | (57,920 | ) | ||||||
Purchase of property and equipment | (62,428 | ) | (141,047 | ) | ||||
NET CASH PROVIDED (USED IN) INVESTING ACTIVITIES | (120,348 | ) | (141,047 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Loan from related party | 83,333 | 102,000 | ||||||
Advance from (to) a third party | (837,078 | ) | (417,576 | ) | ||||
Proceeds from notes payable | 764,175 | — | ||||||
Proceeds from issuance of note payable-related party | 148,250 | — | ||||||
Proceeds from issuance of shares | — | 180,000 | ||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 158,680 | (135,576 | ) | |||||
Foreign currency translation adjustment | 5,451 | 1,283 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | (159,091 | ) | (248,446 | ) | ||||
CASH AND CASH EQUIVALENTS: | ||||||||
Beginning of period | $ | 312,218 | $ | 453,831 | ||||
End of period | $ | 153,127 | $ | 205,385 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for interest | $ | 55,142 | $ | 12,981 | ||||
Cash paid for income taxes | $ | 3,247 | $ | 6,759 | ||||
Non-cash transactions: | ||||||||
Common stock issued to settle related party loan | $ | 335,146 | $ | 0 | ||||
The accompanying notes are an integral part of these consolidated financial statements
(5) |
CHINA FRUITS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial information, and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
The unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to the Company’s annual audited consolidated financial statements for the preceding fiscal year. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the years ended December 31, 2010 and 2009 thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2010.
2. 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”.
(6) |
CHINA FRUITS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(UNAUDITED)
2. ORGANIZATION AND BUSINESS BACKGROUND (CONT’D)
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”).
3. 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.
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 did 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 did not impact the Company’s consolidated results of operations or financial position.
4. 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 governed by the terms specified in the contracts. 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 June 30, 2011and December 31, 2010, respectively.
| As of | |||||||
6/30/2011 | 12/31/2010 | |||||||
Accounts receivable, gross | 4, 636 | 120,126 | ||||||
Less: allowance for doubtful accounts | -0- | -0- | ||||||
Accounts receivable, net | 4, 636 | 120,126 |
5. RECEIVABLE FROM THIRD PARTIES
The Company advances money to several third parties during business operation, of which $1,548,303 in connection with tangerine base construction, $766,426 as deposit for tangerine purchase. These receivables bear no interest and due on demand, except otherwise noted. As of June 30, 2011 and December 31, 2010, the balances of receivable from third parties consisted of the following:
As of | ||||||||
6/30/2011 | 12/31/2010 | |||||||
Third party advances | 2,336,581 | 1,456,266 | ||||||
Bank security deposit | 30,904 | 30,199 | ||||||
Receivable from third parties | 2,367,485 | 1,486,465 |
6. INVENTORIES
Inventories as of June 30, 2011 and December 31, 2010 consisted of the following:
As of | ||||||||
6/30/2011 | 12/31/2010 | |||||||
Raw materials | 76,256 | 45,291 | ||||||
Finished goods | 11,630 | 244,992 | ||||||
8 7,886 | 290,283 |
(7) |
CHINA FRUITS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(UNAUDITED)
6. INVENTORIES (CONT’D)
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 June 30, 2011 and December 31, 2010, respectively, nor have there been any write-offs during six months ended June 30, 2011.
The spoilage will be written-off directly to the profit and loss when it occurs. The spoilage rate is approximately 1 ‰ of average inventory. The Company did not record an allowance for spoilage as of June 30, 2011 and December 31, 2010, respectively.
7. PREPAYMENT
As of June 30, 2011 and December 31, 2010, the Company had prepayment of $635,600 and $363,562, respectively, consisted of the following:
As of | ||||||||
6/30/2011 | 12/31/2010 | |||||||
Paid in advance (production) | 600,843 | 279,440 | ||||||
Prepaid rent | 34,757 | 84,122 | ||||||
635,600 | 363,562 |
8. PLANT AND EQUIPMENT, NET
Plant and equipment, net as of June 30, 2011 and December 31, 2010 consisted of the following:
As of | ||||||||
6/30/2011 | 12/31/2010 | |||||||
Plant and machinery | 2,721,571 | 2,441,578 | ||||||
Construction in progress | 288 | 106,410 | ||||||
Furniture, fixture and equipment | 45,982 | 37,803 | ||||||
2,767,841 | 2,585,791 | |||||||
Less: accumulated depreciation | (551,365 | ) | (467,933 | ) | ||||
Plant and equipment, net | 2, 216,476 | 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 June 30, 2011 was $288, representing buildings under construction.
(8) |
CHINA FRUITS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(UNAUDITED)
9. LOAN AND RELATED PARTY PAYABLE
As of June 30, 2011 and December 31, 2010, the Company had loans payable to related party of $38,615 and $37,749, respectively. These loans bear no interest and are due within one year.
10. NOTES PAYABLE – CURRENT PORTION
As of June 30, 2011 and December 31, 2010, the Company had short-term loan of $1,854,256 and $1,056,971, respectively, from various local banks. The detailed terms were set forth as follows:
As of | ||||||||
6/30/2011 | 12/31/2010 | |||||||
Bank of China, 6.1005% annual interest, due on January 7, 2012 |
772,606 | - | ||||||
Industrial and Commercial Bank of China, 5.841% annual interest, due on September 5, 2011 | 309,044 | 301.992 | ||||||
Bank of China, 5.838% annual interest, due on October 25, 2011 | 772,606 | 754,979 | ||||||
1,854,256 | 1,056,971 |
11. CUSTOMER DEPOSIT
As of June 30, 2011 and December 31, 2010, the Company had customer deposits of $249,625 and $298,818, respectively, representing payments received for orders not yet shipped.
12. ACCRUED LIABILITIES
Accrued liabilities as of June 30, 2011 and December 31, 2010 consisted of following:
As of | ||||||||
6/30/2011 | 12/31/2010 | |||||||
Salary and welfare payable | 9,541 | 14,566 | ||||||
Tax payable | 15,319 | 12,292 | ||||||
Accrued expenses | 47,855 | 99,079 | ||||||
72,715 | 125,937 |
(9) |
CHINA FRUITS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(UNAUDITED)
13. NOTE PAYABLE – LONG TERM
Long-term notes payable as of June 30, 2011 and December 31, 2010 consisted of following:
As of | ||||||||
6/30/2011 | 12/31/2010 | |||||||
Note payable to related party, zero interest, due on February 28, 2013 (1) | 149,885 | - | ||||||
Note payable to related party, zero interest, due on May 19, 2012 (2) | 61,809 | 60,398 | ||||||
Local Government, zero interest, due on no later than November 30, 2013 (3) | 486,742 | 475,637 | ||||||
698,436 | 536,035 |
(1) This loan agreement was entered by and between the Company and its related party on March 1, 2011. The loan bears zero interest and is due on February 28, 2013. The loans are used for working capital, and the Company expects them to be repaid from its revenues.
(2) This loan agreement was entered by and between the Company and its related party on May 20, 2009. The loan bears zero interest and is due on May 19, 2012. The loans are used for working capital, and the Company expects them to be repaid from its revenues.
(3) This loan agreement was entered by and between the Company and the local government on December 24, 2008. The loan bears zero interest, of which 50% is due on November 30, 2012 and the balance is due on November 30, 2013. The loans issued by the local government are to encourage modern agricultural development, and the Company expects them to be repaid from its revenues.
14. AMOUNT DUE TO STOCKHOLDERS
Since inception, the stockholders have advanced certain foreign consulting, advisory, legal and accounting fees during the periods presented for the benefit of our Company. Pursuant to a conversion agreement dated June 30, 2011, the stockholders agreed to settle the amount of $335,146 in advances due as of December 31, 2009 in exchange for a total of 11,171,534 shares of Common Stock issued by the Company at the market price of $0.03 per share. As a result, the remaining balances outstanding as of June 30, 2011 and December 31, 2010 were $203,983 and $455,796, respectively.
15. GOVERNMENT & OTHER GRANTS
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 $222,818 for the six months ended June 30, 2011. These grants bear no repayment requirements.
16. NET LOSS PER SHARE
Basic net loss per share was computed using the weighted average number of the common shares outstanding during the period. There were no dilutive common stock equivalents as of June 30, 2011 due to immaterial net income or net losses during the period.
The following table sets forth the computation of basic net loss per share for the three and six months ended June 30, 2011 and 2010 indicated:
Three months ended | Six months ended | |||||||||||||||
6/30/2011 | 6/30/2010 | 6/30/2011 | 6/30/2010 | |||||||||||||
Numerator: | ||||||||||||||||
Net income(loss) | $ | 1,427 | $ | (149,876 | ) | $ | (2 28,775 | ) |
$ | (239,980 | ) | |||||
Denominator: | ||||||||||||||||
Weighted average number of shares outstanding | ||||||||||||||||
Basic | 38,779,689 | 38,779,689 | 38,779,689 | 38,779,689 | ||||||||||||
Loss per common share | ||||||||||||||||
Basic | ** | ** | $ | ( 0.01) | $ | ( 0.01) |
** Less than $.01
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CHINA FRUITS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(UNAUDITED)
17. CONCENTRATION AND RISK
(a) Major customers
For the six months ended June 30, 2011 and 2010, 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.
There were no revenues from one customer over 5% of total revenues for the six months ended June 30, 2011 and 2010, respectively.
(b) Credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.
18. COMMITMENT AND CONTINGENCIES
The Company rented 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 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 six months ended June 30, 2011, rental expense was $126,619.
19. 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 June 30, 2011, the Company had an accumulated deficit of $1,780,330. 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 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.
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.
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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 June 30, 2011, 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.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010
Revenues
Gross revenues were $492,718 and $1,166,694 for the three and six months ended June 30, 2011, respectively, compared to gross revenues of $147,951 and $927,192 for the same periods ended June 30, 2010, respectively. We generate our revenues from sales of fresh fruits and related products, including our signature tangerine. The revenues are recognized 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 during both three-month and six-month periods ended June 30, 2011. The increase in revenues during the first half of 2011 compared to the same period in 2010 was due primarily to new revenues from our three new retail stores, which were opened during the third quarter of 2010.
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 6 franchise retail stores in 2011 and expect to boost our revenues due to the increasing traffic.
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Net Income / (Loss)
We had net income of $1,427 for the three months ended June 30, 2011 and net loss of $228,775 for the six months ended June 30, 2011. Comparatively, we had net losses of $149,876 and $239,980 for the three and six months ended June 30, 2010, respectively. The net income during the second quarter of 2011 was due primarily to the grants received from the local government in amount of $207,630, which was to encourage our efforts on modern agricultural development. Without the government grant, our loss from continuing operations increased to $177,588 and $390,444 during the three and six months ended June 30, 2011, respectively, from $169,904 and $303,844 during the same periods in 2010. The increase was due to the increase in selling expenses, such as advertising, shipping and handling, and exhibition expenses.
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 three and six months ended June 30, 2011 were $249,463 and $510,524, respectively, increase by $64,644 and $137,259, compared to $184,819 and $373,265 for the same periods ended June 30, 2010, respectively. The increase in operating expenses in 2011 was attributable to the increase in selling and marketing expenses, such as advertising, shipping and handling, and exhibition expenses. We upgraded the signs in all retailed stores during the first half of 2011.
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. We had $420,843 in cost of goods sold, or approximately 85.4% of revenues, and had $1,046,614 in cost of goods sold, or approximately 89.7% of revenues, during the three and six months ended June 30, 2011, respectively. Comparatively, we had $133,036 in cost of goods sold, or approximately 89.9% of revenues, and had $857,771 in cost of goods sold, or approximately 92.5% of revenues, during the three and six months ended June 30, 2010, respectively. 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 $202,874 for the six months ended June 30, 2011, compared to cash flows of $26,893 provided by operations for the six months ended June 30, 2010. Negative cash flows from operations for the six months ended June 30, 2011 were due primarily to the net loss of $228,775, plus the increase in prepaid expenses in the amount of $251,090, and the decrease in other payables and accrued liabilities in an amount of $113,536, partially offset by the decrease in accounts receivable and inventories by $117,004 and $206,891, respectively. Positive cash flows from operations for the six months ended June 30, 2010 were due primarily to the decrease in accounts receivable in the amount of $358,603, plus the decrease in inventories and other assets by $60,024 and $7,083, respectively, partially offset by the net loss of $239,980 and the decrease in accounts payable and tax payable by $163,237 and $32,252, respectively.
Cash flows used in investing activities were $120,348 during the six months ended June 30, 2011 consisting of $57,920 used in construction in progress and $62,428 used in purchase of property and equipment. Comparatively, cash flows of $141,047 used in investing activities during the comparable period in 2010 were due solely to the purchase of property and equipment.
Cash flows provided by financing activities were $158,680 during the six months ended June 30, 2011, compared to cash flows of $135,576 used in financing activities for the six months ended June 30, 2010. Positive cash flows from financing activities during the first half of 2011 were due primarily to proceeds from note payable to a local bank in an amount of $764,175, which is due on January 7, 2012 and bears annual interest at 6.1005%, and proceeds from related party loan in amount of $148,250, which is due on February 28, 2013 with zero interest. The loans are used for working capital, and we expect them to be repaid our revenues. Our cash outflow during the six months ended June 30, 2011 was attributable to the advance to third parties in an amount of $837,078. Negative cash flows from financing activities during the six months ended June 30, 2010 were due primarily to advance to third parties in an amount of $417,576, offset by proceeds from related party loan of $102,000, and proceeds of $180,000 from sales of shares pursuant to an Offshore Subscription Agreement, dated January 12, 2010, the purchase price of which were twenty cents (US$.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 $700,000 for the year of 2011.
Overall, we have funded our cash needs from inception through June 30, 2011 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 $153,127 on hand as of June 30, 2011. Currently, we have enough cash to fund our operations for about six months. This is based on current cash flows from operating activities and projected revenues. However, 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 $700,000 per year starting in 2010. 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:
·
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Curtail new product launches |
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Limit our future marketing efforts to areas that we believe would be the most profitable. |
Demand for the products and services will be dependent on, among other things, market acceptance of our products, citrus market and fresh fruits 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information to be reported under this item is not required of smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES.
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and its Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining our disclosure controls and procedures. The controls and procedures established by us are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.
As of the end of the period covered by this report, 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 their evaluation of our controls and procedures that as of June 30, 2011, our internal controls over financial reporting are effective and provide a reasonable assurance of achieving their objective.
The Certifying Officers have also concluded that there was no change in our internal controls over financial reporting identified in connection with the evaluation that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 4T. 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 June 30, 2011, 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 Quarterly 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 Quarterly 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 June 30, 2011. 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 Quarterly 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 Quarterly 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.
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None.
The information to be reported under this item has not changed since the previously filed 10K, for the year ended December 31, 2010.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Pursuant to a conversion agreement dated June 30, 2011, the stockholders agreed to settle the amount of $335,146 in advances due as of December 31, 2009 in exchange for a total of 11,171,534 shares of Common Stock issued by the Company at the market price of $0.03 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. (REMOVED AND RESERVED)
None.
None.
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31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
Reports on Form 8-K filed in the first quarter of 2011
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.
Reports on Form 8-K filed subsequent to the first quarter of 2011
On April 28, 2011, we filed a current report on Form 8-K to announce the restatement of our audited consolidated financial statements for the year ended December 31, 2009.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
CHINA FRUITS CORP. | ||
Date: Date: August ___, 2011 | By: | /s/ Chen, Quan Long |
Chen, Quan Long Chief Executive Officer |
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