China Fruits (PINK:CHFR)

For the years ended
		12/31/2012				12/31/2011
REVENUES:
Sales		$	3,709,101			$	3,476,158
Cost of goods sold			3,053,873				2,943,600
GROSS PROFIT			655,228				532,558
OPERATING EXPENSES:
Selling and marketing			545,456				446,961
Professional and legal expenses			94,700				95,264
General and administrative			838,597				532,394
TOTAL OPERATING EXPENSES			1,478,753				1,074,619
(LOSS) FROM CONTINUING OPERATIONS			(823,525	)			(542,061	)
OTHER INCOME (EXPENSE):
Interest income			—				—
Interest expenses			(143,936	)			(121,343	)
Government & other grant			1,219,731				297,761
Loss from disposal of fixed assets			(143,806	)			—
Other			19,957				(10,359	)
TOTAL OTHER INCOME (EXPENSES)			951,946				166,059
INCOME(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		$	128,421			$	(376,002	)
Income tax expense			—				—
NET (LOSS)		$	128,421			$	(376,002	)
Other comprehensive income
- Foreign currency translation gain (loss)		$	32,201				131,817
COMPREHENSIVE (LOSS)		$	160,622			$	(244,185	)
(Loss) per common share:
Basic			**			$	(0.01	)
Weighted average number of common shares outstanding
Basic			49,951,223				44,365,456
**Less than $0.01

We expect our sales to increase during 2013 as our moves toward implementing our business plan, including the increase in franchise retail stores, the increase in marketing budgets. We currently have six franchise retail stores in Beijing area, of which four stores are wholly owned by us under direct management, and two stores are managed by the franchisees. In 2013, we will evaluate the operation in the existing stores and replace those in poor performance with new stores. We expect the total number of franchise stores to be increased to seven by the end of 2013.

		For the three months ended
		3/31/2012				3/31/2011
REVENUES
Sales		$	1,028,639			$	673,976
Cost of goods sold			918,827				625,771
GROSS PROFIT			109,812				48,205
OPERATING EXPENSES:
Selling and marketing			236,334				119,779
Professional and legal expenses			17,050				20,550
General and administrative			185,864				120,732
TOTAL OPERATING EXPENSES			439,248				261,061
(LOSS) FROM CONTINUING OPERATIONS			(329,436	)			(212,856	)
OTHER INCOME (EXPENSE):
Interest income			—				—
Interest expenses			(38,512	)			(26,313	)
Government & other grant			256,805				15,188
Other			30,694				(6,221	)
TOTAL OTHER INCOME (EXPENSES)			248,987				(17,346	)
INCOME(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		$	(80,449	)		$	(230,202	)
Income tax expense			—				—
NET (LOSS) FROM CONTINUING OPERATIONS		$	(80,449	)			(230,202	)
NET INCOME FROM DISCONTINUED OPERATIONS		$	—			$	—
NET (LOSS)		$	(80,449	)		$	(230,202	)
Other comprehensive income
- Foreign currency translation gain			2,548			$	26,632
COMPREHENSIVE (LOSS)		$	(77,901	)		$	(203,570	)
(LOSS) per common share:
Basic			**				**
Weighted average number of common shares outstanding during the year - basic			49,951,223				38,779,689
**Less than $0.01

Gross revenues were $1,028,639 and $673,976 for the three months ended March 31, 2012 and 2011, 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 both three-month periods ended March 31, 2011 and 2010. The significant increase in gross revenues by $354,663 during the first quarter of 2012 was due primarily to the increasing traffic in our retail stores. After our efforts on marketing and brand recognition over years, more and more local customers know about our stores and turn into our regular customers. The revenue increased in 2012 was also due to the development in international markets. We had revenues of approximately $209,830, or 20.4% of total revenues, generated from Thailand, and approximately $283,694, or 7.2% of total revenues, from Indonesia.

We expect our sales will continue to increase to approximately $4,200,000 during 2012 as our moves toward implementing our business plan, including the increase in franchise retail stores, the increase in marketing budgets and development in international markets. . We currently have four franchise retail stores in Beijing area, of which 2 stores are wholly owned by us under direct management, and 2 stores are managed by the franchisees. In 2012, we will evaluate the operation in the existing stores and replace those in poor performance with new stores. The total number of franchise stores will be increased to six.

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. During the year of 2011, our total production was 3,781 tons, better than the expectation of 3,000 tons. We expect the production capacity will reach 4,500 tons in 2012 due to the improvement of production efficiency.

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. We currently have four franchise retail stores in Beijing area, of which 2 stores are wholly owned by us under direct management, and 2 stores are managed by the franchisees. In 2012, we will evaluate the operation in the existing stores and replace those in poor performance with new stores. The total number of franchise stores will be increased to six.

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.

In addition, we believe a sound warehouse and logistics center will help us to improve efficiency and reduce operating expenses. Especially for fresh fruits, the prompt handling and delivery is significant to reduce loss from spoilage. Therefore, we focus on establishing a systematic logistics center to support the expanding retail network. On March 3, 2012, we entered into a five-year lease agreement for warehouse and logistic space of approximately 26,700 square feet to store, select, pack and deliver fresh fruits. After the full operation of the logistics center, we believe both operating expenses and cost of goods sold will be reduced due to large-scale purchases and delivery.

2011 10K filed on:

	For the year ended
	12/31/2011			12/31/2010
REVENUES:
Sales	$	3,476,158		$	1,807,471
Cost of goods sold		2,943,600			1,485,643
GROSS PROFIT		532,558			321,828
OPERATING EXPENSES:
Selling and marketing		446,961			327,756
Professional and legal expenses		95,264			101,419
General and administrative		532,394			451,783
TOTAL OPERATING EXPENSES		1,074,619			880,958
(LOSS) FROM CONTINUING OPERATIONS		(542,061	)		(559,130	)
OTHER INCOME (EXPENSE):
Interest income		-			-
Interest expenses		(121,343	)		(28,749	)
Government & other grant		297,761			253,212
Other		(10,359	)		(5,760	)
TOTAL OTHER INCOME (EXPENSES)		166,059			218,703
INCOME(LOSS) FROM CONTINUING OPERATIONS BEFOR INCOME TAXES	$	(376,002	)	$	(340,427	)
Income tax expense		-			6,814
NET (LOSS) FROM CONTINUING OPERATIONS	$	(376,002	)		(347,241	)
NET INCOME FROM DISCONTINUED OPERATIONS	$	-		$	-
NET (LOSS)	$	(376,002	)	$	(347,241	)
Other comprehensive income
- Foreign currency translation gain	$	131,817		$	83,936
COMPREHENSIVE (LOSS)	$	(244,185	)	$	(263,305	)
(LOSS) per common share:
Basic		**			**
Weighted average number of common shares outstanding during the year - basic		44,365,456			38,750,010
**Less than $0.01

Gross revenues were $3,476,158 and $1,807,471 for the years ended December 31, 2011 and 2010, 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, 2011. The significant increase in gross revenues by $1,668,687 in 2011 was due primarily to the increasing traffic in our retail stores. After our efforts on marketing and brand recognition over years, more and more local customers know about our stores and turn into our regular customers. The revenue increased in 2011 was also due to the development in international markets. We had revenues of approximately $1,310,000, or 37.7% of total revenues, generated from international markets, including approximately $100,000 from Dubai, approximately $10,000 from France, approximately $500,000 from Thailand, and approximately $700,000 from Indonesia. On the other hand, we suffered historical low tangerine output in 2010 due to severe weather.

China Fruits Corpration And Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
For The Three and Nine Months Ended September 30, 2011 and 2010
(Expresed in US Dollars, except for number of shares)
		For the Three Months Ended								For the Nine Months Ended
		September 30, 2011				September 30, 2010				September 30, 2011				September 30, 2010
REVENUES:
Sales		$	426,266			$	284,935			$	1,592,960			$	1,212,127
Cost of goods sold			347,353				242,229				1,393,967				1,100,000
GROSS PROFIT			78,913				42,706				198,993				112,127
OPERATING EXPENSES:
Selling and marketing			89,836				101,391				309,883				201,291
Professional and legal expenses			20,550				20,550				62,214				62,419
General and administrative			138,156				173,935				386,969				405,431
TOTAL OPERATING EXPENSES			248,542				295,876				759,066				669,141
(LOSS) FROM CONTINUING OPERATIONS			(169,629	)			(253,170	)			(560,073	)			(557,014	)
OTHER INCOME (EXPENSE):
Interest income			317				56				359				610
Interest expenses			(28,929	)			(2,299	)			(84,220	)			(15,280	)
Gain on disposal(PPE)			—				—				—				1,659
Government & other grant			1,429				192				224,247				73,451
Other			(3,113	)			22				(9,013	)			8,159
TOTAL OTHER INCOME (EXPENSES)			(30,296	)			(2,029	)			131,373				68,599
INCOME(LOSS) FROM CONTINUING OPERATIONS BEFOR INCOME TAXES		$	(199,925	)		$	(255,199	)		$	(428,700	)		$	(488,415	)
Income tax expense			—				—				—				6,777
NET (LOSS) FROM CONTINUING OPERATIONS		$	(199,925	)		$	(255,199	)		$	(428,700	)		$	(495,192	)
NET (LOSS)		$	(199,925	)		$	(255,199	)		$	(428,700	)		$	(495,192	)
Other comprehensive income
- Foreign currency translation gain			44,755			$	32,975				106,220			$	47,819
COMPREHENSIVE (LOSS)		$	(155,170	)		$	(222,224	)		$	(322,480	)		$	(447,373	)
(LOSS) per common share:
Basic		$	(0.00	)		$	(0.01	)		$	(0.01	)		$	(0.01	)
Weighted average number of common shares outstanding during the year - basic			49,951,223				38,779,689				42,503,534				38,743,022

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 currently have four wholly-owned franchise retail stores in Beijing area, including the one opened in November of 2011 located at Feng Tai District, Beijing. We expect to open total 6 franchise retail stores in 2011 and expect to boost our revenues due to the increasing traffic.

As of June 30, 2011, the Registrant entered into a Settlement Agreement and Release (the “Agreement”) with Mei Tan, LingHua Chen, ChunFeng Huang, CunXing Xi, Bin Feng, GuiFen Chen and WenMing Cui, individual citizens of People’s Republic of China (collectively as “Creditors”), pursuant to which Creditors desired to settle the amount of $335,146 advanced as of December 31, 2009 in exchange for total 11,171,534 shares of Common Stock issued by the Registrant at the market price of $0.03 per share. The parties desired in exchange for the releases and promised delivery designated herein to release and discharge any and all claims that exist between the parties hereto arising from the amount of $335,146 advanced by the Creditors. On September 30, 2011, the total 11,171,534 shares of Common Stock were issued to the Creditors pro rata equal to their portion in the amount advanced to the Registrant as of December 31, 2009.

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.

 

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

			Three months ended								Nine months ended
			9/30/2010				9/30/2009				9/30/2010				9/30/2009
REVENUES:
Sales			$	284,935			$	186,667			$	1,212,127			$	1,037,651
Cost of goods sold				(242,229	)			(112,725	)			(1,100,000	)			(686,712	)
Cost of goods sold - related party				-				-				-				-
Total Cost of Revenues				(242,229	)			(112,725	)			(1,100,000	)			(686,712	)
GROSS PROFIT				42,706				73,942				112,127				350,939
OPERATING EXPENSES:
Selling and marketing				101,391				33,973				201,291				149,463
Professional and legal expenses				20,550				23,050				62,419				64,514
General and administrative				173,935				140,627				405,431				382,395
TOTAL OPERATING EXPENSES				295,876				197,650				669,141				596,372
INCOME(LOSS) FROM CONTINUING OPERATIONS				(253,170	)			(123,708	)			(557,014	)			(245,433	)
OTHER INCOME (EXPENSE):
Interest income				56				158				610				436
Interest expenses				(2,299	)			(5,232	)			(15,280	)			(13,062	)
Gain on disposal(PPE)				-				4,909				1,659				4,909
Government & other grant				192				10,985				73,451				104,783
Other				22				12,409				8,159				12,409
TOTAL OTHER INCOME (EXPENSES)				(2,029	)			23,229				68,599				109,475
INCOME(LOSS) FROM CONTINUING OPERATIONS BEFOR INCOME TAXES			$	(255,199	)		$	(100,479	)		$	(488,415	)		$	(135,958	)
Income tax expense				-				88				6,777				6,580
NET INCOME(LOSS) FROM CONTINUING OPERATIONS				(255,199	)			(100,567	)		$	(495,192	)		$	(142,538	)
NET INCOME(LOSS) FROM DISCONTINUED OPERATIONS			$	-			$	(15,182	)		$	-			$	(13,600	)
NET INCOME			$	(255,199	)		$	(115,749	)		$	(495,192	)		$	(156,138	)
Other comprehensive income
- Foreign currency translation gain			$	32,975				1,004				47,819				1,979
COMPREHENSIVE (LOSS) INCOME			$	(222,224	)		$	(114,745	)		$	(447,373	)		$	(154,159	)
Earnings(loss) per common share:
Continuing opeartions - basic & diluted				**				**				**				**
Discontinued operations- basic & diluted				**				**				**				**
Weighted average number of shares outstanding during the period - basic & diluted				38,779,689				36,129,689				38,743,022				36,129,689

We expect to be profitable in the year of 2011 due to the upward trend of current economy, the implementation of our business plan, including the increase in franchise retail stores, and the increase in marketing budgets. However, there can be no assurance that we will achieve or maintain profitability, or that any revenue growth will take place in the future.

HOW MANY TIMES IS MANAGEMENT GOING TO MAKE THIS STATEMENT!!!!!!

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

On August 31, 2010, the Registrant announced the appointment of Mr. Li, Lin Feng to the position of Chief Financial Officer of the Registrant as approved by the Board of Directors, and effective immediately.

China Fruits still unable to post a profit..

• We had sales of $147,951 and $927,192 for the three and six months ended June 30, 2010, respectively, compared to sales of $294,887 and $850,984 for the comparative periods ended June 30, 2009, respectively.  The sales decreased by $146,936, or approximately 50% during the three months ended June 30, 2010, compared to the same period ended June 30, 2009, due primarily to the traffic to our store slowing down since we only have one franchise retail store left located at Panjia Garden, Beijing.
  
• We had net loss of $149,876 and $239,980 from continuing operations for the three and six months ended June 30, 2010, respectively, compared to the net loss from continuing operations of $137,054 and $41,971 for the three and six months ended June 30, 2009, respectively. The increases in net loss during the three and six months ended June 30, 2010 were due primarily to the significant increase in cost of goods sold, resulting in insufficient gross profit to cover our expenses during the period.

But the company is predicting profitability:

"We expect to be profitable during the second half of fiscal year 2010 due to the recovery of current economy, the implementation of our business plan, including the increase in franchise retail stores, and the increase in marketing budgets. However, there can be no assurance that we will achieve or maintain profitability, or that any revenue growth will take place in the future."

GeoTeam Note®: Investors need to take this commentary with a grain of salt.  The company has made similar comments in the past that did not come to fruition.

CHFR reported 2009 year end results,

	Full Year 2009	Full Year 2008	Period Change
GAAP Revenue	$1.91 million	$1.66 million	15.1%
GAAP EPS	-$0.01	$0.01	n/a
Fully Diluted Shares	36 million	36 million	0.00

The fourth quarter was still nothing to right home about.

	4th Quarter 2009	4th Quarter 2008	Period Change
GAAP Revenue	$867 thousand	$806 thousand	7.6%
GAAP EPS	$0.00	$0.00	n/a
Fully Diluted Shares	36 million	36 million	0.00

We just mentioned this stock a few days ago. The company is still losing money, but losses have appeared to stabilize. Comments in the 10K look encouraging as it pertains to revenue growth:

We expect sales to increase during 2010 as our moves toward implementing our business plan, including the increase in franchise retail stores, the increase in marketing budgets.

However, no comments were made regarding the outlook for profitability. Although still a risky play that may amount to nothing, at .08 we are willing to devote some exposure to our diversified portfolios with long-shot opportunities.

Seeking feedback from GeoReaders on the status of CHFR story:

Specifically, I am referring to the following comments in the 2009 Third quarter 10Q filing:

In order to create our brand identity efficiently, we plan to acquire or joint venture with the existing profitable and middle-size retail stores. We will provide the stores with management, supplies, as well as the remodeling in connection with display, color and sign to match the franchise requirements. The first franchise store was opened in Beijing in November of 2007. As of September 30, 2008, there were 11 wholly-owned franchise retail stores opened, of which 5 stores located in Beijing, 3 stores located in Haining, eastern China, and 3 stores located in Dongguan, southern China. The biggest store has approximately 4,200 square feet and independent warehouse of approximately 1,200 square feet, which is located at the main street business center of He Ping Li, one of the busy areas in Beijing.

We expect to be profitable during the second half of fiscal year 2009 due to the recovery of current economy, the implementation of our business plan, including the increase in franchise retail stores, and the increase in marketing budgets. However, there can be no assurance that we will achieve or maintain profitability, or that any revenue growth will take place in the future.  

Is CHFR implying they will be profitable during the 2009 fourth quarter? The company was right around break even during the first nine months of  2009. We are also intrigued by the fact that the company raised funds via the sale of stock at $0.20, which is well above the current price.  

At $0.06 we will code CHFR as a GeoSpecial on the Radar just in case management delivers on its expectations.  We may request an interview.