China Fruits Corporation Reports FY2015 First Quarter Results

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May 21, 2015, 03:00 ET

BEIJING, May 21, 2015 /PRNewswire/ -- China Fruits Corporation (OTC: CHFR) ("China Fruits" or "the Company"), a distributor and producer of fresh tangerine and other fresh fruits in the People's Republic of China, released its financial results for the quarter ended March 31, 2015.

First Quarter 2015 Highlights

Revenues from franchise stores were approximately $4.0 million, an increase of 78% compared to the same period in 2014.
Revenues from e-commerce were approximately $1.0 million, which were zero during the same period in 2014.

"After the expansion in our network of franchise retail stores, we switched our focus from the overseas markets to the domestic market. In 2015, we will focus on developing our markets in Nanchang and Hangzhou to expand our franchise retail stores. The 2015 target number of retail stores throughout China is expected to grow to 135 in 2015" said Mr. Quanlong Chen, Chairman and Chief Executive Officer of China Fruits Corporation, "We believe we will be able to expand our market share during 2015 through an effective and efficient franchise retail network. We were pleased to see immediate profitability in our e-commerce operations during 2014 and expect that to continue to strengthen. Our long term goal is to combine e-commerce with a network of retail stores network to increase the Company's brand recognition in fruit e-commerce business."

First Quarter 2015 Results

Revenue

The Company reported that total gross revenue were $5,850,335 for the three months ended March 31, 2015, compared to gross revenues of $8,015,860 for the same period ended March 31, 2014.The decrease in revenues during the first quarter of 2015 was due primarily to the decrease in revenues from overseas markets.

During the first quarter of 2015, the revenues from franchised stores were approximately $4.0 million, an increase of 78% compared to the same period in 2014. The Company also had revenues from e-commerce in amount of approximately $1.0 million, which were zero during the same period in 2014. However, the revenues increased in domestic market and e-commerce failed to completely offset the revenues decreased in oversea markets, resulting in the decrease by approximately 27% in total.

Cost of Goods Sold

The Company had $5,293,100 in cost of goods sold, or approximately 90% of revenues, during the three months ended March 31, 2015. Comparatively, the Company had $7,098,744 in cost of goods sold, or approximately 89% of revenues, during the three months ended March 31, 2014. The Company expects to reduce the cost of goods sold through collaboration with more non-related suppliers, which could also help the Company to reduce the risk of concentration.

Operating Expense

Operating expenses for the three months ended March 31, 2015 were $1,385,855, an increase of $461,675, or 50%, compared to $924,180 for the same period in 2014. The increase in operating expenses during the first quarter of 2015 was due primarily to the increase in general and administrative expenses, which were $742,910 in the first quarter of 2015, compared to $327,710 in the same period ended March 31, 2014.

Net Income

The Company had a net loss of $802,846 for the three months ended March 31, 2015, compared to net income of $114,711 for the three months ended March 31, 2014.The net loss during the first quarter of 2015 was due to insufficient gross profit to cover a number of relatively fixed operating expenses.

Cash and Cash Equivalents

As of March 31, 2015, China Fruits had cash and cash equivalents of $37,080, compared to $1,586,253 as of March 31, 2014. Cash flow used in operating activities was $355,911 for the three months ended of 2015. Cash flow used in investing activities was $3,511. Net cash provided by financing activities was $1,147,692.

Financial Guidance

China Fruits continues to develop e-commerce business, as the Company believes the goal is to combine its e-commerce operations with a growing retail stores network to introduce an "online to offline" business model for their clients. Such integration will increase the Company's brand recognition and market share in the fruit e-commerce business.

The Company also expects the total number of franchise stores to be increase to around 135 by the end of 2015. The expansion will be accomplished via acquisitions, franchise sales and/or direct setups.

In June of 2014, the board of directors of the Company authorized and approved a new subsidiary called US-China Fruits Company Limited ("US-China Fruits") under the laws of the British Virgin Islands, of which China Fruits has a 99.99% ownership. The articles of incorporation of US-China Fruits was filed on June 16, 2014 but the Company had no activities as of March 31, 2015. The Company believes the new subsidiary will increase operating efficiencies when they develop any overseas markets in the future.

About China Fruits

China Fruits Corporation (OTC: CHFR) is a U.S.-listed holding company, engaged in manufacturing, trading and distributing fresh tangerine and other fresh fruits in the People's Republic of China. The Company wholly owns three subsidiaries: Taina International Fruits (Beijing) Co., Ltd., which builds and operates franchise retail stores, Jiangxi Taina Nanfeng Orange Co., Ltd., which engages in the fresh fruits manufacturing, and US-China Fruits Company Limited, which plans to do the business of import and export. The Company owns a 782,765-square-foot manufacturing base, with air-adjusted and fresh-keeping warehouse, and advanced photoelectric fruit sorter. The Company owns 64 franchise retail stores, one distribution center and one express export zone in Nanfeng. With the support from the international capital markets, the company is strengthening the branded franchise fruit retail stores and digging deeply in this niche. From the very beginning of its business, the Company has been awarded with "National Leading Enterprise of Agriculture Industrialization", "China's Most Influential Fruit Brand", "China's Fast-Growing Company", and "Top Ten Most Trustable Enterprise" among other rewards. For more information, please visit the Company's corporate website: www.taina.cn.

Forward Looking Statement

This press release contains "forward-looking information", which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company and its projects. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of China Fruits Corporation to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and China Fruits Corporation disclaim, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements. The reader in encouraged to read any and all press releases in conjunction with filing made with the Securities and Exchange Commission which are publicly available at www.sec.gov.

For More Information

Investor Relations
Dragon Gate Investment Partners LLC
Email: [email protected]
Tel: +1(646)-801-2803
Website: http://www.taina.cn

China Fruits Corporation
Consolidated Balance Sheets
As of March 31, 2015 and December 31, 2014
Unaudited
(Stated in US Dollars)
		3/31/2015		Audited 12/31/2014
ASSETS
Current Assets
Cash & Cash Equivalents	$	37,080	$	801,356
Accounts Receivable, Net		34,757,522		41,433,191
Other Receivable, Net		757,612		585,520
Advance to Supplies		4,112,748		5,857,017
Inventories		3,134,891		1,859,173
Prepaid Expense		142,739		89,558
Refundable Tax		2,347,120		1,779,485
Due From The Related Party		—		1,114,279
TOTAL CURRENT ASSETS		45,289,712		53,519,579

Noncurrent Assets
Investment		163,690		162,906
Property, Plant & Equipment, Net		3,668,320		3,366,085
Construction in Progress		3,044		356,793
Intangible Assets, Net		301,063		307,614
Other Long-term Asset Deposit		55,592		55,326
Long-term amortization		280		1,115
TOTAL NON-CURRENT ASSETS		4,191,989		4,249,839

TOTAL ASSETS	$	49,481,701	$	57,769,418

LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	33,854,910	$	40,583,792
Short-term loans		2,807,287		4,936,059
Customer deposit		757,457		767,396
Taxes payable		1,783,383		1,360,123
Other payables		1,647,621		841,156
Due to related parties		2,178,390		1,941,527
Accrued liabilities and payroll tax liabilities		362,837		1,262,399
Long-term bank loan, current portion		379,761		377,942
TOTAL CURRENT LIABILITIES		43,771,646		52,070,394


LONG-TERM LIABILITIES
Long term bank loan		756,249		342,103
TOTAL LONG TERM LIABILITIES		756,249		342,103

TOTAL LIABILITIES	$	44,527,895	$	52,412,497


				Audited
		3/31/2015		12/31/2014
STOCKHOLDERS' EQUITY

Common stock, par value $.001, 100,000,000 shares authorized, 2,089,016 and 1,998,049 shares issued	$	2,089	$	1,998
and outstanding as of March 31, 2015 and December 31, 2014, respectively
Preferred stock, 200,000,000 shares authorized, designated as Series A and Series B.		13		13
Series A: par value $.001; 2,000,000 shares authorized, 13,150 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively
Series B; par value $0.001, voting; 50,000,000 shares authorized, 12,100,000 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively		12,100		12,100
Additional paid in capital		4,208,272		3,837,817
Statutory reserve		170,950		170,950
Retained earnings		71,078		873,924
Accumulated other comprehensive income		489,304		460,119
TOTAL STOCKHOLDERS' EQUITY		4,953,806		5,356,921

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	49,481,701	$	57,769,418



China Fruits Corporation
Consolidated Statements of Income
For the three months ended March 31, 2015 and 2014
Unaudited
(Stated in US Dollars)

	Three Months Ended
REVENUES:		3/31/2015		3/31/2014
Sales	$	5,850,335	$	8,015,860
Cost of goods sold		(5,293,100)		(7,098,744)
GROSS PROFIT		557,235		917,116

OPERATING EXPENSES:
Selling expenses		642,945		596,470
General and administrative expenses		742,910		327,710
TOTAL OPERATING EXPENSES		1,385,855		924,180

INCOME (LOSS) FROM CONTINUING OPERATIONS		(828,620)		(7,064)

OTHER INCOME (EXPENSE):
Other income		—		14,308
Other expense		(1,710)		—
Interest income		62		60
Interest expense		(85,239)		(51,109)
Government grants		155,988		239,132
TOTAL OTHER INCOME (LOSS) & EXPENSE		69,101		202,391

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(759,519)		195,327

Income tax expense		43,327		80,615
NET INCOME (LOSS)		(802,846)	$	114,712

Other compressive income
-Foreign currency translation gain (Loss)		29,185		(31,194)

COMPREHENSIVE INCOME / (LOSS)		(773,661)		83,518
Income/(Loss) per common share:
-Basic		(0.39)		0.06
-Fully diluted		(0.15)		0.06
Weighted average number of common shares outstanding:
-Basic		2,065,564		1,998,049
-Fully diluted		5,439,447		1,998,049



China Fruits Corporation
Consolidated Statements of Cash Flows
For the three months ended March 31, 2015 and 2014
Unaudited
(Stated in US Dollars)

		For the three months ended
		3/31/2015		3/31/2014
Net Income/(loss)	$	(802,846)	$	114,711
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		87,925		59,425
Bad debt expense		395,005
(Increase)/decrease in operating assets:
Accounts receivable		6,283,260		(884,262
Inventories		(1,275,717)		1,035,267
Other receivable		(172,092)		—
Prepaid expenses and other current assets		1,123,187		326,376
Related party receivable		1,114,279		—
Increase/(decrease) in operating activities:
Accounts payable		(6,728,883)		(2,689,030
Other payables and accrued liabilities		(81,527)		(509,719
Tax payable		423,259		164,677
Customer deposit		(9,939)		—
Net cash (used in) provided by operating activities	$	355,911	$	(2,382,555

Cash Flows from Investing Activities
(Increase)/decrease in Construction in Progress	$	355,466	$	—
Purchase of property and equipment		(358,977)		(10,225
Net cash provided (used in) by investing activities	$	(3,511)	$	(10,225

Cash Flows from Financing Activities
Repayments of short-term loans	$	(2,152,527)
Advanced from related party		572,916		3,699,006
Repayments of advanced from related party
Proceeds from notes payable – related party		—		251,546
Due to stockholders		19,420		—
Proceeds from long-term loan		412,499		—
Net cash provided by (used in) Financing Activities	$	(1,147,692)	$	3,950,552

Foreign currency translation adjustment		31,016		(11,736

Net increase/(decrease) in cash & cash equivalents for the periods		(764,276)		1,546,036

Cash & cash equivalents:
Beginning of period	$	801,356	$	40,217
End of period	$	37,080	$	1,586,253

Supplementary disclosures of cash flows information:
Interest received	$	149	$	—
Interest paid	$	71,147	$	41,091
Income taxes paid	$	259,829	$	164

Supplementary disclosure of non-cash financing activity:
Conversion of debt and accrued interests to equity	$	358,978	$	—