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, 2009




or




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




For the
transition period from ______________ to ______________




Commission
File No. 333-120807




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC.


(Exact
name of Registrant as specified in its charter)





Nevada
              
              11-3718650(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (IRS
      Employer Identification No.)




10/F,
Wo Kee Hong Building


585-609
Castle Peak Road


Kwai Chung, N.T. Hong
Kong


(Address
of principal executive offices)




(852)
2954-2469


(Registrant’s
telephone number, including area code)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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. Yesx  
Noo




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, 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 for such shorter period that the
registrant was required to submit and post such files).  Yeso  Noo





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. (See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act):


Large
Accelerated Filer o Accelerated Filer o Non-Accelerated
FileroSmaller Reporting
Company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o Nox





The
number of shares of Common Stock, $0.005 par value, outstanding as of the close
of business on August 6, 2009 was 29,104,110.





CHINA
PREMIUM LIFESTYLE ENTERPRISE, INC.




FORM
10-Q




FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2009




TABLE
OF CONTENTS





PagePART
      I: FINANCIAL INFORMATION
                4Item
      1.
                Financial
      Statements
                4Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                23Item
      3.
                Quantitative
      and Qualitative Disclosures about Market Risk
                33Item 4T.
                Controls
      and Procedures
                33PART
      II: OTHER INFORMATION
                34Item 1.
                Legal
      Proceedings
                34Item 1A.
                Risk
      Factors
                35Item
      5.
                Other
      information
                35Item
      6.
                Exhibits
                35SIGNATURES
                37





2





Pursuant
to Item 10(f) of Regulation S-K promulgated under the Securities Act of 1933,
except as otherwise indicated we have elected to comply throughout this
Quarterly Report on Form 10-Q with the scaled disclosure requirements applicable
to “smaller reporting companies”.  In this Quarterly Report, unless
otherwise stated or the context otherwise requires, the terms “we”, “us”, “our”
and “the Company” refer to China Premium Lifestyle Enterprise, Inc. and our
consolidated subsidiaries taken together as a whole.


3


PART
I:  FINANCIAL INFORMATION




Item
1.   Financial Statements.




CHINA
PREMIUM LIFESTYLE ENTERPRISE, INC. AND SUBSIDIARIES




CONDENSED
CONSOLIDATED BALANCE SHEETS








June
      30, 2009
                      
                      
                      December
      31, 2008(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                      
                      $
                      1,976,626
                      
                      
                      $
                      5,827,132Restricted
      cash
                      
                      
                      4,401,745
                      
                      
                      
                      4,427,439Trade
      receivables, net of provision
                      
                      
                      4,337,098
                      
                      
                      
                      11,761,228Inventory,
      net
                      
                      
                      18,787,210
                      
                      
                      
                      12,670,567Prepayments
                      
                      
                      1,983,004
                      
                      
                      
                      1,952,882Other
      current assets
                      
                      
                      7,346,658
                      
                      
                      
                      6,419,106Amounts
      due from affiliates
                      
                      
                      11,980,930
                      
                      
                      
                      11,147,103Total
      current assets
                      
                      
                      50,813,271
                      
                      
                      
                      54,205,457Property
      and equipment, net
                      
                      
                      2,710,270
                      
                      
                      
                      2,905,927Goodwill
                      
                      
                      39,734
                      
                      
                      
                      39,734TOTAL
      ASSETS
                      
                      $
                      53,563,275
                      
                      
                      $
                      57,151,118LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                      
                      $
                      9,623,472
                      
                      
                      $
                      9,935,435Bills
      payable
                      
                      
                      473,911
                      
                      
                      
                      1,333,502Trade
      payables
                      
                      
                      5,311,553
                      
                      
                      
                      3,795,196Deposits
      received
                      
                      
                      20,982,234
                      
                      
                      
                      19,887,368Other
      current liabilities
                      
                      
                      3,457,964
                      
                      
                      
                      7,405,454Amounts
      due to affiliates
                      
                      
                      4,693,679
                      
                      
                      
                      2,433,340TOTAL
      LIABILITIES
                      
                      
                      44,542,813
                      
                      
                      
                      44,790,295Commitments
      and ContingenciesStockholders'
      equityPreferred
      stockAuthorized:
      100,000,000 preferred stock, par value $0.001 Issued and outstanding:
      247,798 shares as at June 30, 2009; (247,798 shares as at December 31,
      2008)
                      
                      
                      248
                      
                      
                      
                      248Common
      stockAuthorized:
      400,000,000 common stock, par value $0.005 Issued and outstanding:
      29,104,110 shares as at June 30, 2009; (29,104,110 shares as at December
      31, 2008)
                      
                      
                      145,521
                      
                      
                      
                      145,521Additional
      paid-in-capital
                      
                      
                      5,558,888
                      
                      
                      
                      5,558,888Accumulated
      other comprehensive income
                      
                      
                      253,856
                      
                      
                      
                      247,279Accumulated
      deficit
                      
                      
                      (3,039,870
                      )
                      
                      
                      (695,446
                      )TOTAL
      CHINA PREMIUM LIFESTYLE ENTERPRISE, INC.STOCKHOLDERS’ EQUITY
                      
                      
                      2,918,643
                      
                      
                      
                      5,256,490Noncontrolling
      interests
                      
                      
                      6,101,819
                      
                      
                      
                      7,104,333TOTAL
      EQUITY
                      
                      
                      9,020,462
                      
                      
                      
                      12,360,823TOTAL
      LIABILITIES AND EQUITY
                      
                      $
                      53,563,275
                      
                      
                      $
                      57,151,118





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




4




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)








Three
      months ended
                      June
      30,
                    
                    
                    Six
      months ended
                      June
      30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Sales:New
      and used vehicles
                    
                    $
                    35,102,716
                    
                    
                    $
                    29,565,593
                    
                    
                    $
                    49,824,806
                    
                    
                    $
                    49,479,009Parts
      and services and others
                    
                    
                    1,685,642
                    
                    
                    
                    1,482,646
                    
                    
                    
                    2,969,440
                    
                    
                    
                    2,844,561Fashion
      apparel and accessories
                    
                    
                    459,724
                    
                    
                    
                    199,691
                    
                    
                    
                    881,905
                    
                    
                    
                    371,187Net
      sales
                    
                    
                    37,248,082
                    
                    
                    
                    31,247,930
                    
                    
                    
                    53,676,151
                    
                    
                    
                    52,694,757Cost
      of sales:New
      and used vehicles
                    
                    
                    (31,842,214
                    )
                    
                    
                    (25,574,673
                    )
                    
                    
                    (45,918,391
                    )
                    
                    
                    (43,059,955
                    )Parts
      and services and others
                    
                    
                    (314,657
                    )
                    
                    
                    (360,382
                    )
                    
                    
                    (500,464
                    )
                    
                    
                    (728,632
                    )Fashion
      apparel and accessories
                    
                    
                    (710,677
                    )
                    
                    
                    (112,612
                    )
                    
                    
                    (1,123,081
                    )
                    
                    
                    (244,028
                    )Total
      cost of sales
                    
                    
                    (32,867,548
                    )
                    
                    
                    (26,047,667
                    )
                    
                    
                    (47,541,936
                    )
                    
                    
                    (44,032,615
                    )Gross
      profit:New
      and used vehicles
                    
                    
                    3,260,502
                    
                    
                    
                    3,990,920
                    
                    
                    
                    3,906,415
                    
                    
                    
                    6,419,054Parts
      and services and others
                    
                    
                    1,370,985
                    
                    
                    
                    1,122,264
                    
                    
                    
                    2,468,976
                    
                    
                    
                    2,115,929Fashion
      apparel and accessories
                    
                    
                    (250,953
                    )
                    
                    
                    87,079
                    
                    
                    
                    (241,176
                    )
                    
                    
                    127,159Total
      gross profit
                    
                    
                    4,380,534
                    
                    
                    
                    5,200,263
                    
                    
                    
                    6,134,215
                    
                    
                    
                    8,662,142Selling,
      general and administrative expenses
                    
                    
                    (5,155,112
                    )
                    
                    
                    (4,469,773
                    )
                    
                    
                    (9,825,203
                    )
                    
                    
                    (8,243,250
                    )Operating
      (loss) / earnings
                    
                    
                    (774,578
                    )
                    
                    
                    730,490
                    
                    
                    
                    (3,690,988
                    )
                    
                    
                    418,892Other
      income (expenses)Interest
      expenses and other finance costs
                    
                    
                    (214,085
                    )
                    
                    
                    (128,957
                    )
                    
                    
                    (405,141
                    )
                    
                    
                    (260,720
                    )Other
      income
                    
                    
                    343,377
                    
                    
                    
                    683,742
                    
                    
                    
                    770,055
                    
                    
                    
                    1,005,302Total
      other income
                    
                    
                    129,292
                    
                    
                    
                    554,785
                    
                    
                    
                    364,914
                    
                    
                    
                    744,582(Loss)
      / earnings  before income taxes
                    
                    
                    (645,286
                    )
                    
                    
                    1,285,275
                    
                    
                    
                    (3,326,074
                    )
                    
                    
                    1,163,474Provision
      for income taxes
                    
                    
                    (30,254
                    )
                    
                    
                    -
                    
                    
                    
                    (30,254
                    )
                    
                    
                    -Net
      (loss) / earnings including noncontrolling interests
                    
                    
                    (675,540
                    )
                    
                    
                    1,285,275
                    
                    
                    
                    (3,356,328
                    )
                    
                    
                    1,163,474Net
      (loss) / earnings  attributable to:China
      Premium Lifestyle Enterprise, Inccommon
      stockholders
                    
                    
                    (722,273
                    )
                    
                    
                    390,391
                    
                    
                    
                    (2,344,424
                    )
                    
                    
                    161,071Noncontrolling
      interests
                    
                    
                    46,733
                    
                    
                    
                    894,884
                    
                    
                    
                    (1,011,904
                    )
                    
                    
                    1,002,403(675,540
                    )
                    
                    
                    1,285,275
                    
                    
                    $
                    (3,356,328
                    )
                    
                    $
                    1,163,474(Loss)
      / earnings per common stock attributable to China Premium Lifestyle
      Enterprise, Inc common stockholdersBasic
                    
                    
                    (0.0248
                    )
                    
                    
                    0.0134
                    
                    
                    $
                    (0.0805
                    )
                    
                    $
                    0.0059Diluted
                    
                    
                    (0.0248
                    )
                    
                    
                    0.0115
                    
                    
                    $
                    (0.0805
                    )
                    
                    $
                    0.0050Weighted
      average number of common stock outstandingBasic
                    
                    
                    29,104,110
                    
                    
                    
                    29,104,110
                    
                    
                    
                    29,104,110
                    
                    
                    
                    27,020,163Diluted
                    
                    
                    29,104,110
                    
                    
                    
                    33,673,729
                    
                    
                    
                    29,104,110
                    
                    
                    
                    31,589,782





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


5


CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)








Six
      months ended
                        June
      30,2009
                      
                      
                      2008Operating
      activities:Net
      (loss) / earnings including noncontrolling interests
                      
                      $
                      (3,356,328
                      )
                      
                      $
                      1,163,474Adjustments
      to reconcile net loss to net cash provided by
      operating activitiesDepreciation
      and amortization
                      
                      
                      550,695
                      
                      
                      
                      404,026Disposal
      of property and equipment
                      
                      
                      -
                      
                      
                      
                      (130,168
                      )Provision
      for bad debts written back
                      
                      
                      (14,008
                      )
                      
                      
                      (28,635
                      )Provision
      for inventory
                      
                      
                      25,426
                      
                      
                      
                      -Other
      non-cash items
                      
                      
                      9,746
                      
                      
                      
                      110,521Changes
      in operating assets and liabilities:Trade
      receivables
                      
                      
                      7,438,138
                      
                      
                      
                      3,906,582Other
      current assets and prepayments
                      
                      
                      (957,674
                      )
                      
                      
                      (2,591,092
                      )Inventory
                      
                      
                      (6,142,069
                      )
                      
                      
                      (7,201,312
                      )Trade
      payables
                      
                      
                      1,516,357
                      
                      
                      
                      2,442,834Other
      current liabilities and deposits received
                      
                      
                      (2,852,625
                      )
                      
                      
                      2,512,174Net
      cash (used in)/provided by operating activities
                      
                      
                      (3,782,342
                      )
                      
                      
                      588,404Investing
      activities:Purchases
      of property and equipment
                      
                      
                      (348,816
                      )
                      
                      
                      (495,143
                      )Proceeds
      from disposal of property and equipment
                      
                      
                      -
                      
                      
                      
                      330,858Decrease
      in restricted cash
                      
                      
                      25,694
                      
                      
                      
                      -Net
      cash used in investing activities
                      
                      
                      (323,122
                      )
                      
                      
                      (164,285
                      )Financing
      activities:Advances
      from/(to) affiliates
                      
                      
                      1,426,512
                      
                      
                      
                      (539,963
                      )Decrease
      in borrowings and bills payable
                      
                      
                      (1,171,554
                      )
                      
                      
                      (1,541,874
                      )Net
      cash provided by/(used in) financing activities
                      
                      
                      254,958
                      
                      
                      
                      (2,081,837
                      )Decrease
      in cash and cash equivalents
                      
                      
                      (3,850,506
                      )
                      
                      
                      (1,657,718
                      )Cash
      and cash equivalents at beginning of the period
                      
                      
                      5,827,132
                      
                      
                      
                      6,583,566Cash
      and cash equivalents at end of the period
                      
                      $
                      1,976,626
                      
                      
                      $
                      4,925,848Supplemental
      disclosure of cash flows information:Cash
      paid for:Interest
                      
                      $
                      367,822
                      
                      
                      $
                      260,720Income
      taxes
                      
                      
                      30,254
                      
                      
                      
                      -





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




6




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS








NOTE
1.  SUMMARY OF PRINCIPAL ACCOUNTING POLICIES




Basis
of presentation




The
condensed consolidated financial statements include the accounts of China
Premium Lifestyle Enterprise, Inc. (the “Company”) and its subsidiaries. The
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America.
All significant intercompany transactions and balances have been
eliminated.




The
condensed consolidated financial statements are unaudited and, in our opinion,
include all adjustments, consisting of normal recurring adjustments and accruals
necessary for a fair representation of our condensed consolidated balance
sheets, operating results, and cash flows for the periods presented. Operating
results for the periods presented are not necessarily indicatives of the results
that may be expected for 2009. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted in accordance with the rules and regulations of the
Securities and Exchange Commission (the “SEC”). The condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and accompanying notes included in the Company’s 2008
Annual Report on Form 10-K.




Use
of estimates




The
preparation of the condensed consolidated financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the condensed consolidated financial statements, and the reported
amounts of revenue and expenses during the reporting periods. Management makes
its best estimate of the outcome for these items based on historical trends and
other information available when the condensed consolidated financial statements
are prepared. Changes in estimates are recognized in accordance with the
accounting principles for the estimate, which is typically in the period when
new information becomes available to management. Management believes the most
significant estimates affecting the condensed consolidated financial statements
include provision for bad debts, provision for inventory write-off, and
accounting for income taxes. Actual results could differ from those
estimates.




Earnings
(loss) per share




Basic
earnings (loss) per share is computed by dividing net operating results for the
reporting period attributable to common stockholders by the weighted average
number of shares of common stock outstanding during the period. Diluted earnings
per share is calculated by dividing net operating results for the reporting
period attributable to common stockholders by the weighted average number of
shares of common stock outstanding and the dilutive effect of common stock
equivalents. The computation of diluted loss per share does not assume the
dilutive effect of common stock equivalents as the effect of the common stock
equivalents is antidilutive.


7




Segment
reporting




The
Company determines and classifies its operating segments in accordance with SFAS
No. 131 Disclosures About
Segments Of An Enterprise And Related Information.  The Company
identifies and classifies its operating segments based on the nature of the
products and services with similar economic characteristics.  The
Company’s reportable segments are (1) motor vehicle retailing, which includes
sales of new and used vehicles, provision of vehicle maintenance and repair
services and sales of vehicle parts, and (2) fashion apparel retailing, which
includes sales of fashion apparel and accessories.




Fair
value of financial instruments




The
carrying amounts of the Company’s financial instruments including cash and cash
equivalents approximate fair value due to their high liquidity in actively
quoted trading markets and their short maturities. The Company’s trade
receivables, trade payables and accrued liabilities approximate fair value due
to their short maturities. The carrying amount of the short-term borrowings
approximate fair value as this facility bears interest at a variable rate tied
to the current market, and has terms similar to other borrowing arrangements
available to the Company.




SFAS
No. 157 defines fair value as the price that would be received from selling
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. When determining the fair value
measurements for assets and liabilities required to be recorded at fair value,
the Company considers the principal or most advantageous market in which the
Company would transact and considers assumptions that market participants would
use when pricing the asset or liability, such as inherent risk, transfer
restrictions, and risk of nonperformance. SFAS No. 157 establishes a
valuation hierarchy for disclosure of the inputs to valuation used to measure
fair value. This hierarchy prioritizes the inputs into three broad levels as
follows:




·
            Level
      1: quoted prices (unadjusted) in active markets for identical assets or
      liabilities;




·
            Level
      2: inputs other than quoted prices included within Level 1 that are either
      directly or indirectly observable;
and




·
            Level
      3: unobservable inputs in which little or no market activity exists,
      therefore requiring an entity to develop its own assumptions about the
      assumptions that market participants would use in
  pricing.




The
classification of a financial asset or liability within the hierarchy is
determined based on the lowest level input that is significant to the fair value
measurement. The carrying amounts of the Company’s financial instruments,
including cash and cash equivalents, approximate fair value due to their high
liquidity in actively quoted trading markets and their short
maturities.




Reclassifications




Certain
financial statement line items have been reclassified to conform to the current
period presentation and have no impact on the previously reported consolidated
net sales, operating results, or net financial position.


8


NOTE
2.  CONCENTRATION OF RISK




Concentration
of supplier risk




The
Company relies on supplies from numerous vendors. For the six months ended June
30, 2009 and 2008, the Company had two vendors that each accounted for more than
10% of total supply purchases. If either of these vendors terminates their
relationship with the Company or if the Company’s supply from these vendors is
interrupted or terminated for any reason, we may not have sufficient time to
replace the supply of products from the remaining vendors or other vendors to be
engaged.  Any such interruption would negatively impact our ability to
sell and distribute our products.  However, the suppliers’
concentration of credit risk does not affect the concentration of credit risk
with respect to trade payables as the Company makes the purchases through
facilities provided by banks and financial institutions.




Concentration
of risk due to geographic location




The
Company’s business, assets and operations are currently focused on the sales of
new and used vehicles, provision of vehicle maintenance and repair services, and
sales of vehicle parts in Hong Kong, and has recently expanded to the People
Republic of China (“PRC”). Accordingly, the Company’s business is affected to a
significant degree by economic, political and legal developments in Hong Kong
and the PRC.  Among other factors, the Company’s business may be
affected by changes in laws and regulations, anti-inflationary measures,
currency conversion and remittances abroad, and rates and methods of taxation,
among other factors.




NOTE
3.  RECENT ACCOUNTING PRONOUNCEMENTS




(a)   Recent
accounting pronouncements adopted




In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
157, Fair Value
Measurements (“SFAS 157”), which provides guidance about how to measure
assets and liabilities that use fair value. SFAS 157 applies whenever another US
GAAP standard requires (or permits) assets or liabilities to be measured at fair
value but does not expand the use of fair value to any new circumstances. This
standard also requires additional disclosures in both annual and quarterly
reports. SFAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff
Position (“FSP”) SFAS 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement Under Statement 13(“FSP SFAS 157-1”), which states that SFAS
157 does not address fair value measurements for purposes of lease
classification or measurement. In February 2008, the FASB issued FSP SFAS 157-2,
Effective Date of FASB
Statement No. 157 (“FSP SFAS 157-2”), which delays the effective
date for non-financial assets and non-financial liabilities to fiscal years
beginning after November 15, 2008, except for items that are measured at
fair value in the financial statements on a recurring basis (at least annually).
The Company adopted the provisions of SFAS 157 for its financial assets and
liabilities and those items for which it has measured on a recurring basis
effective January 1, 2008, and the adoption did not have a material impact
on its financial position and results of operations. As provided by FSP SFAS
157-2, the Company adopted SFAS 157 for certain of its non-financial assets and
liabilities on January 1, 2009 and the adoption did not have a material impact
on its financial position, cash flows and results of
operations.


9




In
December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations (“SFAS
141(R)”). SFAS 141(R) establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any noncontrolling interest in the
acquiree and the goodwill acquired. SFAS 141(R) also establishes disclosure
requirements to enable the evaluation of the nature and financial effects of the
business combination. The Company adopted SFAS 141(R) on January 1, 2009 and the
adoption did not have a material impact on its financial position, cash flows
and results of operations.




In
December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No.51(“SFAS 160”). SFAS 160 establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to
the noncontrolling interest, changes in a parent’s ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS 160 also establishes disclosure requirements that clearly
identify and distinguish between the interests of the parent and the interests
of the noncontrolling owners. Upon adoption of SFAS No. 160 on January 1, 2009,
the Company reclassified its noncontrolling interest from minority interest to
equity in the accompanying June 30, 2009 and December 31, 2008 condensed
consolidated balance sheets. In addition, the Company has separately disclosed
the amount of consolidated net loss attributable to the Company common
stockholders and its noncontrolling interest in the accompanying June 30, 2009
and 2008 condensed consolidated statements of operations.




In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities (“SFAS 161”). SFAS 161 is
intended to improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity’s financial position, financial
performance, and cash flows. SFAS 161 achieves these improvements by
requiring disclosure of the fair values of derivative instruments and their
gains and losses in a tabular format. It also provides more information about an
entity’s liquidity by requiring disclosure of derivative features that are
credit risk-related. Finally, it requires cross-referencing within footnotes to
enable financial statement users to locate important information about
derivative instruments. The Company adopted SFAS 161 on January 1, 2009 and the
adoption did not have a material impact on its financial position, cash flows
and results of operations.




In
April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments(“FSP SFAS 107-1 and APB 28-1”).  The FSP
amends SFAS No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosure about fair value of
financial instruments in interim financial statements.  The Company adopted
FSP SFAS 107-1 and APB 28-1 during the interim period ended June 30, 2009 and
the adoption did not have a material impact on its financial position, cash
flows and results of operations.




In
April 2009, the FASB issued Staff Position No. SFAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly,(“FSP SFAS
157-4”). FSP SFAS 157-4 provides guidelines for making fair value measurements
more consistent with the principles presented in SFAS 157. FSP SFAS
157-4 provides additional authoritative guidance in determining whether a market
is active or inactive, and whether a transaction is distressed, is applicable to
all assets and liabilities (i.e., financial and nonfinancial) and will require
enhanced disclosures. The Company adopted FSP SFAS 157-4 during the interim
period ended June 30, 2009 and the adoption did not have a material impact on
its financial position, cash flows and results of operations.


10




In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“FAS 165”). FAS
165 is intended to establish general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. FAS 165 requires disclosure
of the date through which an entity has evaluated subsequent events and the
basis for selecting that date, that is, whether that date represents the date
the financial statements were issued or were available to be
issued.  FAS 165 is effective for the Company’s second quarter ended
June 30, 2009.




(b)
 Recent accounting pronouncements not yet effective




In June
2009, the FASB issued the following pronouncements:




(i)
            SFAS
      No. 168, “The FASB Accounting Standards CodificationTM and the
      Hierarchy of Generally Accepted Accounting Principles”, a replacement of
      SFAS No. 162, “Hierarchy of Generally Accepted Accounting Principles”
      (“the Codification”). The Codification is the official single source of
      authoritative U.S. generally accepted accounting principles (“GAAP”). All
      existing accounting standards are superseded. All other accounting
      guidance not included in the Codification will be considered
      non-authoritative. The Codification also includes all relevant Securities
      and Exchange Commission (“SEC”) guidance organized using the same topical
      structure in separate sections within the Codification. The Codification
      is effective for the Company’s third-quarter 2009 financial
      statements.  The Codification is not expected to change
      GAAP.  The principal impact on the Company’s financial
      statements from the Codification adoption is limited to disclosures as all
      future references to authoritative accounting literature will be
      referenced in accordance with the
Codification.




(ii)
            SFAS
      No. 167, “Amendments to FASB Interpretation No. 46(R)” (“FAS
      167”). FAS 167 amends FASB Interpretation No. 46 (“FIN 46”) (revised
      December 2003), “Consolidation of Variable Interest entities” (“FIN 46R”),
      to require an analysis to determine whether a variable interest gives the
      entity a controlling financial interest in a variable interest entity.
      This statement requires an ongoing reassessment and eliminates the
      quantitative approach previously required for determining whether an
      entity is the primary beneficiary.  FAS 167 is effective for the
      Company’s fiscal year beginning January 1, 2010.  The
      Company is currently evaluating the impact that adopting this standard
      will have on its consolidated financial
  statements.




(iii)
            SFAS
      No. 166, “Accounting for Transfers of Financial Assets” (“FAS 166”).
      FAS 166 removes the concept of a qualifying special-purpose entity from
      SFAS No. 140, “Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities” (“FAS 140”), and removes the
      exception from applying FIN 46R. This statement also clarifies the
      requirements for isolation and limitations on portions of financial assets
      that are eligible for sale accounting.  FAS 166 is effective for
      our fiscal year beginning January 1, 2010.  The Company is
      currently evaluating the impact that adopting this standard will have on
      its consolidated financial
statements.




11




Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force (“EITF”)), the American Institute of Certified Public
Accountants (“AICPA”), and the SEC did not or are not believed by management to
have a material impact on the Company's present or future financial
statements.




NOTE
4.  (LOSS) / EARNINGS PER SHARE




The
computation of basic and diluted loss per share is as follows for the three
months and six months ended June 30:




Three
      months ended
                      June
      30,
                    
                    
                    Six
      months ended
                      June,
      302009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Numerator:Net
      (loss)/earnings attributable to China Premium Lifestyle Enterprise, Inc
      common stockholders
                    
                    $
                    (722,273
                    )
                    
                    $
                    390,391
                    
                    
                    $
                    (2,344,424
                    )
                    
                    $
                    161,071Denominator:Weighted
      average common stock outstanding
                    
                    
                    29,104,110
                    
                    
                    
                    29,104,110
                    
                    
                    
                    29,104,110
                    
                    
                    
                    27,020,163Effect
      of dilutive preferred stock
                    
                    
                    -
                    
                    
                    
                    4,569,619
                    
                    
                    
                    -
                    
                    
                    
                    4,569,619Weighted
      average common stock and dilutive potential common stock
                    
                    
                    29,104,110
                    
                    
                    
                    33,673,729
                    
                    
                    
                    29,104,110
                    
                    
                    
                    31,589,782Basic
      net (loss)/earnings per share
                    
                    $
                    (0.0248
                    )
                    
                    $
                    0.0134
                    
                    
                    $
                    (0.0805
                    )
                    
                    $
                    0.0059Diluted
      net (loss)/earnings per share
                    
                    $
                    (0.0248
                    )
                    
                    $
                    0.0115
                    
                    
                    $
                    (0.0805
                    )
                    
                    $
                    0.0050





As no
mandatory dividend is attached to the Series A convertible preferred stock
(“Series A Preferred Stock”), no adjustment was made to the basic loss per share
to take into consideration the Series A Preferred Stock.




The
computation of diluted loss per share for the three months and six months ended
June 30, 2009 did not assume the exercise of the potential dilution of Series A
Preferred Stock as the exercise of such preferred stock is
antidilutive.





NOTE
5.  INVENTORY, NET





Inventory
by major categories are summarized as follows:





June
      30,
                        
                        
                        December
      31,2009
                        
                        
                        2008New
      vehicles
                        
                        $
                        9,808,576
                        
                        
                        $
                        4,003,200Used
      vehicles
                        
                        
                        5,825,363
                        
                        
                        
                        4,837,562Fashion
      apparel
                        
                        
                        565,818
                        
                        
                        
                        1,716,163Parts,
      accessories and others
                        
                        
                        2,587,453
                        
                        
                        
                        2,113,642$
                        18,787,210
                        
                        
                        $
                        12,670,567





Vehicles
included in inventory of approximately $2,878,694 and $1,541,204 were pledged to
secure the stocking loan and other loans outstanding as of June 30, 2009 and
December 31, 2008, respectively (See Note 6).


12




NOTE
6.  BORROWINGS





The
Company's borrowings are summarized as follows:





June
      30,
                    
                    
                    December
      31,2009
                    
                    
                    2008Bank
      borrowings
                    
                    $
                    7,552,173
                    
                    
                    $
                    8,790,806Stocking
      loans
                    
                    
                    1,813,248
                    
                    
                    
                    1,144,629Other
      loans
                    
                    
                    258,051
                    
                    
                    
                    -Short-term
      borrowings
                    
                    $
                    9,623,472
                    
                    
                    $
                    9,935,435





Vehicles
included in inventory of approximately $2,878,694 and $1,541,204 were pledged to
secure the stocking loan and other loans outstanding as of June 30, 2009 and
December 31, 2008, respectively.





NOTE
7.  OTHER CURRENT LIABILITIES





Other
current liabilities by major categories are summarized as
follows:





June
      30,
                      
                      
                      December
      31,2009
                      
                      
                      2008Accruals
                      
                      $
                      985,040
                      
                      
                      $
                      1,687,143Other
      payables
                      
                      
                      2,472,924
                      
                      
                      
                      5,718,311$
                      3,457,964
                      
                      
                      $
                      7,405,454





Other
payables mainly consist of first registration tax on motor vehicles sold. First
registration tax is applicable to new motor vehicles sold in Hong Kong and is
computed on a progressive rate based on the gross selling price of the new motor
vehicles.




NOTE
8.  STOCKHOLDERS’ EQUITY





This Note
should be read in conjunction with Note 9.





On May 5,
2009, the independent non-executive member of the Board of Directors of the
Company approved the reformation (“Reformation”) of that certain Share Exchange
Agreement, dated July 15, 2006, among the Company, Fred De Luca, Corich
Enterprises, Inc., a British Virgin Islands corporation (“Corich”), Herbert
Adamczyk (“Adamczyk” and, together with Corich, the “Sellers”) and Technorient
Limited, a Hong Kong corporation (“Technorient”) (the “Exchange
Agreement”).  Under the Exchange Agreement, the Company agreed to
issue the Sellers and Orient Financial Services, Ltd. (“OFS”), as a designee of
the Sellers, an aggregate of 972,728 shares of the Company’s purported Series A
Convertible Preferred Stock (the “Preferred Shares”) in exchange for the Sellers
transferring of an aggregate of 226,231 shares of the capital stock of
Technorient to the Company.  Upon conversion, the purported Preferred
Shares were to be convertible into 89,689,881 shares (the “Conversion Shares”)
of the Company’s common stock, par value $0.001 per share (the “Common
Stock”).


13





The
Company has determined that: (i) the amendment (the “Preferred Stock Amendment”)
to the Company’s Articles of Incorporation (the “Articles”), dated April 7,
2006, pursuant to which a class of “blank check” preferred stock was purportedly
created, is invalid and of no force or effect because, while Article II, Section
10 of the Company’s By-Laws requires that if the Company’s stockholders elect to
act by written consent they must do so unanimously, the Preferred Stock
Amendment was approved only by the written consent of a majority of the
Company’s stockholders, (ii) the Certificate of Designation (the “Certificate of
Designation”), dated August 16, 2006, purportedly designating 2,000,000 shares
of the Company’s purported “blank check” preferred stock as “Series A
Convertible Preferred Stock,” is invalid and of no force and effect because, at
the time of the filing of the Certificate of Designation, the Company’s Articles
did not authorize the Company’s Board of Directors to designate the rights,
preferences and privileges of the Company’s purported “blank check” preferred
stock, and (iii) the amendment (the “Common Stock Amendment”) to the Company’s
Articles, dated December 18, 2006, pursuant to which the Company purported to
increase the number of shares of authorized common stock from 100,000,000 shares
to 400,000,000 shares, is invalid and of no force or effect because, while
Article II, Section 10 of the Company’s By-Laws requires that if the Company’s
stockholders elect to act by written consent they must do so unanimously, the
Common Stock Amendment was approved only by the written consent of a majority of
the Company’s stockholders.  As a result, the Company has determined
that the Company has never been authorized to issue any shares of any class or
series of preferred stock, including the Preferred Shares, and that the total
number of authorized shares of common stock of the Company is 100,000,000
shares.





At June
30, 2009, 29,104,110 shares of common stock and 247,798 shares of preferred
stock were outstanding.  If the Company is successful with respect to
all of its claims in the Federal Court Action (as more fully discussed in Note 9
below), then: (i) 4,569,619 shares of the Company’s outstanding common stock
would be cancelled and the Company would have a total of 24,534,491 shares of
common stock outstanding; (ii) 247,798 shares of the Company’s purported
preferred stock would be cancelled and the Company would have no shares of
preferred stock outstanding; (iii) the total number of authorized shares of
common stock of the Company would be 100,000,000 shares; and (iv) the Company
would have no shares of preferred stock authorized.  There can be no
assurance, however, that the Company will be successful with respect to any or
all of its claims in the Federal Court Action and the Company is unable to
evaluate the likelihood of an outcome, favorable or unfavorable, to the Company
with respect to its claims at this time, or to estimate the amount or range of a
possible loss.




As a
result of the foregoing, the Company determined that the Company has never been
authorized to issue any shares of any class or series of preferred stock,
including the Preferred Shares.





On
December 7, 2007, the Company effectuated a one-for-five reverse stock split
(the “Reverse Stock Split”) of the Company’s Common Stock.  As a
result of the Reverse Stock Split, each outstanding share of the Company’s
Common Stock, par value $0.001 per share, was converted into 0.20 shares of
Common Stock, par value $0.005 per share.


14





Taking
into account: (i) the number of authorized but unissued shares of Common Stock
of the Company as of the Closing Date of the Exchange Agreement and (ii) the
effect of the Reverse Stock Split, the Company, the Sellers, OFS and Technorient
agreed that the shares of Common Stock shall be deemed to have been issued to
the Sellers and OFS, as follows:





1.           Effective
as of the Closing Date of the Exchange Agreement, the Sellers and OFS are deemed
to have been issued an aggregate of 72,000,000 shares of the Company’s Common
Stock (in lieu of the Preferred Shares and any underlying Conversion Shares), on
a pre-Reverse Stock Split basis, as follows:





·
            54,000,000
      shares of Common Stock to Corich;


·
            12,240,000
      shares of Common Stock to Adamczyk;
and


·
            5,760,000
      shares of Common Stock to OFS.





2.           Upon
the effectiveness of and giving effect to the Reverse Stock Split, the
72,000,000 shares of pre-Reverse Stock Split Common Stock deemed to have been
issued to the Sellers and OFS effective as of the Closing Date of the Exchange
Agreement are deemed adjusted to an aggregate of 14,400,000 shares, as
follows:





·
            Corich’s
      shares were reduced to 10,800,000 shares of Common
  Stock;


·
            Adamczyk’s
      shares were reduced to 2,448,000 shares of Common Stock;
    and


·
            OFS’
      shares were reduced to 1,152,000 shares of Common
  Stock.





3.           Upon
the effectiveness of and giving effect to the Reverse Stock Split, the Sellers
and OFS are deemed to have been issued an aggregate of 3,537,977 additional
shares of the Company’s Common Stock, on a post-Reverse Stock Split basis, as
follows:





·
            2,611,569
      shares of Common Stock to Corich;


·
            636,665
      shares of Common Stock to Adamczyk;
and


·
            289,743
      shares of Common Stock to OFS.





Thus, the shares of pre-Reverse Stock
Split Common Stock deemed issued to the Sellers and OFS effective as of the
Closing Date of the Exchange Agreement (72,000,000), as adjusted by the Reverse
Stock Split (14,400,000), plus the post-Reverse Stock Split shares of Common
Stock deemed issued to the Sellers and OFS upon the effectiveness of the Reverse
Stock Split (3,537,977), equals the total aggregate number of post-Reverse Stock
Split shares of Common Stock the Company agreed to issue to the Sellers and OFS
(17,937,977).





NOTE
9.  COMMITMENTS AND CONTINGENT LIABILITIES





Litigation,
Claims and Assessments





From time
to time the Company may be involved in various disputes and litigation matters
arising in the normal course of business. It is the Company's belief that the
resolution of these matters will not have a material adverse effect on its
financial position or results of operations, however, management cannot provide
assurance that damages that result in a material adverse effect on its financial
position or results of operations will not be imposed in these
matters.  The Company accounts for contingent liabilities when it is
probable that future expenditures will be made and such expenditures can be
reasonably estimated.





15





On
December 19, 2008, the Company filed an action, styled China Premium Lifestyle Enterprise,
Inc. v. Happy Emerald Limited, et al., in the United States District
Court, Central District of California, Case No. SACV08-1439 (the “Federal Court
Action”), asserting claims for Securities Fraud, Breach of Contract, Fraud,
Conversion, Unjust Enrichment, Constructive Trust, Breach of Fiduciary Duty and
Declaratory Relief.  The Company named Happy Emerald Ltd., a purported
British Virgin Islands corporate entity (“HEL”), Global Premium Brands Co.,
Inc., a defunct California Corporation (“California Global”), Global Premium
Brands Co., Inc., a Nevada corporation (“Nevada Global”), Fred De Luca, Charles
Miseroy, Delia Rodriguez, Robert G. Pautsch, Richard Cabo and Federico Cabo as
defendants (collectively, the “Defendants”).




The
Company asserts in the Federal Court Action that the Defendants have acted in
concert to fraudulently obtain shares of the Company’s purported Series A
Convertible Preferred Stock (the “Disputed Preferred Shares”) and certain shares
of the Company’s common stock purportedly issued upon the conversion of certain
of the Disputed Preferred Shares (the “Disputed Conversion Shares” and together
with the Disputed Preferred Shares, the “Disputed Shares”) and, in some
instances, have breached their fiduciary duties to the Company relating to their
conducts involving the Disputed Preferred Shares.  The Company
authorized the issuance of the Disputed Preferred Shares as consideration for
certain future services to be performed by HEL under a July 15, 2006 Consultancy
Services Agreement.  HEL, however, as alleged in the Federal Court
Action, has not performed the required services and the Disputed Preferred
Shares have accordingly never been paid for.  The Company believes
that all of the Disputed Shares are subject to cancellation.  In the
Federal Court Action, the Company alleges that the Defendants have improperly
obtained certificates for the Disputed Preferred Shares, attempted to transfer
the Disputed Preferred Shares between themselves, and sought to have the
restrictive legend removed from a portion of the Disputed Conversion
Shares.  The Company is seeking a declaration of the
parties’ respective rights regarding the Disputed Shares as well as
injunctive relief and damages against the Defendants.





On May 5,
2009, the Company filed its Second Amended Complaint in the Federal Court Action
(the “SAC”).  On June 25, 2009, the court issued its ruling on a
motion to dismiss the SAC filed by some of the Defendants named in the
SAC.  Following that ruling, the court found that the SAC sufficiently
stated claims for breach of contract, fraud, conversion and breach of fiduciary
duty.





Certain
defendants in the Federal Court Action filed their Answer to the SAC on July 10,
2009 (the “Answer”).  Of those defendants, Federico G. Cabo, Fred De
Luca and Nevada Global asserted a Counterclaim against the Company, and others,
for slander of title relating to a portion of the Disputed
Shares.  Federico G. Cabo, Fred De Luca and Robert G. Pautsch also
asserted Crossclaims against certain other parties (that did not include the
Company).  The Company and the Defendants that filed the Answer have
entered into a stipulation that will allow the Defendants to file a First
Amended Answer on or before August 17, 2009.  It is anticipated that
HEL and the Defendants will oppose the Company’s position with respect to the
Company’s claims.  The Company is unable to evaluate the likelihood of
an outcome, favorable or unfavorable, to the Company with respect to its claims
at this time, or to estimate the amount or range of a possible
loss.





16





As more
fully discussed in Note 8, the Company has determined that the Company has never
been authorized to issue any shares of any class or series of preferred stock,
including the Disputed Preferred Shares.  As a result, in addition to
its other claims against HEL and the Defendants, the Company has asserted in the
SAC that all of the Disputed Shares are void and subject to
cancellation.  The Company is seeking a declaration that all of the
Disputed Shares are void and subject to cancellation.  It is
anticipated that HEL and the Defendants will oppose the Company’s position with
respect to the validity of the Disputed Shares.  The Company is unable
to evaluate the likelihood of an outcome, favorable or unfavorable, to the
Company with respect to the validity of the Disputed Shares at this time, or to
estimate the amount or range of a possible loss.





Operating
Lease Commitments





The
Company leases its dealership facilities, service center facilities and office
space under non-cancellable operating leases in Hong Kong and PRC. Minimum
future rental payments required under non-cancellable operating leases in effect
as of June 30, 2009 are as follows:





2009
                
                $
                1,909,8102010
                
                
                3,539,7132011
                
                
                2,090,0022012
                
                
                1,919,4282013
                
                
                1,823,024Later
      years
                
                
                7,635,642$
                18,917,619





Rent
expense for the three months and six months ended June 30, 2009 and 2008 was
$1,149,319, $698,503, $2,274,173 and $1,346,974, respectively.





Employment
Agreements





The
Company maintains employment agreements with its executives which extend through
2009. The agreements provide for a base salary, annual bonus to be determined by
the Board of Directors, termination payments, and other terms and conditions of
employment. In addition, the Company maintains employment agreements with other
key employees with similar terms and conditions.  As of June 30, 2009,
committed compensation to the executives and other key employees totaling
approximately $451,000 remain in effect.





NOTE
10. COMPREHENSIVE INCOME INFORMATION





(a)   The
Company’s comprehensive income is comprised of net operating results and
translation adjustments. Comprehensive income for the six months ended June 30
is as follows:





China Premium Lifestyle Enterprise, Inc
                      common stockholdersAccumulated deficit
                    
                    
                    Accumulated other
                      comprehensive income
                    
                    
                    Noncontrolling
                      interests
                    
                    
                    TotalAt
      January 1, 2009
                    
                    $
                    (695,446
                    )
                    
                    $
                    247,279
                    
                    
                    $
                    7,104,333
                    
                    
                    $
                    6,656,166Net
      loss
                    
                    
                    (1,622,151
                    )
                    
                    
                    -
                    
                    
                    
                    (1,058,637
                    )
                    
                    
                    (2,680,788
                    )Translation
      adjustments
                    
                    
                    -
                    
                    
                    
                    (1,214
                    )
                    
                    
                    -
                    
                    
                    
                    (1,214
                    )At
      March 31, 2009
                    
                    
                    (2,317,597
                    )
                    
                    
                    246,065
                    
                    
                    
                    6,045,696
                    
                    
                    
                    3,974,164Net
      (loss)/earnings
                    
                    
                    (722,273
                    )
                    
                    
                    -
                    
                    
                    
                    46,733
                    
                    
                    
                    (675,540
                    )Translation
      adjustments
                    
                    
                    -
                    
                    
                    
                    7,791
                    
                    
                    
                    9,390
                    
                    
                    
                    17,181At
      June 30, 2009
                    
                    $
                    (3,039,870
                    )
                    
                    $
                    253,856
                    
                    
                    $
                    6,101,819
                    
                    
                    $
                    3,315,805




17




China Premium Lifestyle Enterprise, Inc
                  common stockholdersAccumulated deficit
                
                
                Accumulated other
                  comprehensive income
                
                
                Noncontrolling
                  interests
                
                
                TotalAt
      January 1, 2008
                
                $
                (510,438
                )
                
                $
                118,892
                
                
                $
                4,918,636
                
                
                $
                4,527,090Net
      (loss)/earnings
                
                
                (229,320
                )
                
                
                -
                
                
                
                107,519
                
                
                
                (121,801
                )Translation
      adjustments
                
                
                -
                
                
                
                96,619
                
                
                
                -
                
                
                
                96,619At
      March 31, 2008
                
                
                (739,758
                )
                
                
                215,511
                
                
                
                5,026,155
                
                
                
                4,501,908Net
      earnings
                
                
                390,391
                
                
                
                -
                
                
                
                894,884
                
                
                
                1,285,275Translation
      adjustments
                
                
                -
                
                
                
                32,934
                
                
                
                -
                
                
                
                32,934At
      June 30, 2008
                
                $
                (349,367
                )
                
                $
                248,445
                
                
                $
                5,921,039
                
                
                $
                5,820,117





(b)
Condensed consolidated statement of comprehensive income (loss)





Three months ended
                      June 30,
                    
                    
                    Six months ended
                      June 30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Net
      (loss) / earnings including noncontrolling interest
                    
                    $
                    (675,540
                    )
                    
                    $
                    1,285,275
                    
                    
                    $
                    (3,356,328
                    )
                    
                    $
                    1,163,474Other
      comprehensive income, net of tax:Translation
      adjustments
                    
                    
                    17,181
                    
                    
                    
                    32,934
                    
                    
                    
                    15,967
                    
                    
                    
                    129,553Comprehensive
      (loss) / income including noncontrolling interest:
                    
                    
                    (658,359
                    )
                    
                    
                    1,318,209
                    
                    
                    
                    (3,340,361
                    )
                    
                    
                    1,293,027Net
      loss/(income)
                    
                    
                    (46,733
                    )
                    
                    
                    (894,884
                    )
                    
                    
                    1,011,904
                    
                    
                    
                    (1,002,403
                    )Translation
      adjustments
                    
                    
                    (9,390
                    )
                    
                    
                    -
                    
                    
                    
                    (9,390
                    )
                    
                    
                    -Comprehensive
      (loss) / earnings attributable to China Premium Lifestyle Enterprise, Inc
      common stockholders
                    
                    $
                    (714,482
                    )
                    
                    $
                    423,325
                    
                    
                    $
                    (2,337,847
                    )
                    
                    $
                    290,624





NOTE
11. BUSINESS SEGMENTS AND GEOGRAPHICAL INFORMATION





Business
Segments





The
Company operates in two business segments: Vehicles and Fashion Apparel. The
Company’s reporting segments are strategic business units that offer different
products and services. They are managed separately based on the fundamental
differences in their operations.





The
Vehicles segment consists primarily of the group of companies doing business as
Auto Italia Limited, Nanjing Auto Italia Car Trading Co., Limited and Dalian
Auto Italia Car Trading Co., Limited.  The Vehicle segment includes sales
of new and used vehicles, provision of vehicle maintenance and repair services
and sales of vehicle parts.





The
Fashion Apparel segment consists primarily of CPMM (Asia)
Limited.  The Fashion Apparel segment provides wholesale and retailing
of fashion apparel.





Information
by industry segment is set forth below for the three months and six months ended
June 30, 2009:





18





ThreemonthsendedJune30,2009
                
                Vehicles
                
                
                Fashion
                  Apparel
                
                
                Corporate
                
                
                Elimination
                
                
                ConsolidatedSalesExternal
      sales
                
                $
                36,788,358
                
                
                $
                459,724
                
                
                $
                -
                
                
                $
                -
                
                
                $
                37,248,082Inter-segment
      sales
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      sales
                
                
                36,788,358
                
                
                $
                459,724
                
                
                
                -
                
                
                
                -
                
                
                
                37,248,082ResultsOperating
      loss
                
                
                (160,336
                )
                
                
                (594,865
                )
                
                
                (19,377
                )
                
                
                -
                
                
                
                (774,578
                )Interest
      revenue
                
                
                3,217
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                3,217Interest
      expense
                
                
                (207,028
                )
                
                
                (7,057
                )
                
                
                -
                
                
                
                -
                
                
                
                (214,085
                )Other
      income
                
                
                338,819
                
                
                
                1,341
                
                
                
                -
                
                
                
                -
                
                
                
                340,160Loss
      before income taxes
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (645,286
                )Provision
      for income tax
                
                
                (30,254
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (30,254
                )Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (675,540
                )





SixmonthsendedJune30,2009
                
                Vehicles
                
                
                Fashion
                  Apparel
                
                
                Corporate
                
                
                Elimination
                
                
                ConsolidatedSalesExternal
      sales
                
                $
                52,794,246
                
                
                $
                881,905
                
                
                $
                -
                
                
                $
                -
                
                
                $
                53,676,151Inter-segment
      sales
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      sales
                
                
                52,794,246
                
                
                $
                881,905
                
                
                
                -
                
                
                
                -
                
                
                
                53,676,151ResultsOperating
      loss
                
                
                (2,304,350
                )
                
                
                (943,469
                )
                
                
                (443,169
                )
                
                
                -
                
                
                
                (3,690,988
                )Interest
      revenue
                
                
                15,730
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                15,730Interest
      expense
                
                
                (392,123
                )
                
                
                (13,018
                )
                
                
                -
                
                
                
                -
                
                
                
                (405,141
                )Other
      income
                
                
                726,872
                
                
                
                27,453
                
                
                
                -
                
                
                
                -
                
                
                
                754,325Loss
      before income taxes
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (3,326,074
                )Provision
      for income tax
                
                
                (30,254
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (30,254
                )Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (3,356,328
                )





19





ThreemonthsendedJune30,2008
                    
                    Vehicles
                    
                    
                    Fashion
                      Apparel
                    
                    
                    Corporate
                    
                    
                    Elimination
                    
                    
                    ConsolidatedSalesExternal
      sales
                    
                    $
                    31,048,239
                    
                    
                    $
                    199,691
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    31,247,930Inter-segment
      sales
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      sales
                    
                    
                    31,048,239
                    
                    
                    $
                    199,691
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    31,247,930ResultsOperating
      earnings/(loss)
                    
                    
                    1,068,241
                    
                    
                    
                    (414,081
                    )
                    
                    
                    76,330
                    
                    
                    
                    -
                    
                    
                    
                    730,490Interest
      revenue
                    
                    
                    10,778
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    10,778Interest
      expense
                    
                    
                    (124,588
                    )
                    
                    
                    (4,369
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (128,957
                    )Other
      income
                    
                    
                    671,791
                    
                    
                    
                    1,173
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    672,964Earnings
      before income taxes
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1,285,275Provision
      for income tax
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      earnings
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1,285,275





20





SixmonthsendedJune30,2008
                
                Vehicles
                
                
                Fashion
                  Apparel
                
                
                Corporate
                
                
                Elimination
                
                
                ConsolidatedSalesExternal
      sales
                
                $
                52,323,570
                
                
                $
                371,187
                
                
                $
                -
                
                
                $
                -
                
                
                $
                52,694,757Inter-segment
      sales
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      sales
                
                
                52,323,570
                
                
                $
                371,187
                
                
                
                -
                
                
                
                -
                
                
                
                52,694,757ResultsOperating
      earnings/(loss)
                
                
                1,217,674
                
                
                
                (711,704
                )
                
                
                (87,078
                )
                
                
                -
                
                
                
                418,892Interest
      revenue
                
                
                42,435
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                42,435Interest
      expense
                
                
                (255,179
                )
                
                
                (5,541
                )
                
                
                -
                
                
                
                -
                
                
                
                (260,720
                )Other
      income
                
                
                960,569
                
                
                
                2,298
                
                
                
                -
                
                
                
                -
                
                
                
                962,867Earnings
      before income taxes
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,163,474Provision
      for income tax
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      earnings
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,163,474





Vehicles
                
                Fashion
                  Apparel
                
                Corporate
                
                Consolidated2009Total
      assets
                
                $
                50,954,803
                
                $
                1,139,054
                
                $
                1,469,418
                
                $
                53,563,275Depreciation
      and amortization
                
                
                517,036
                
                
                33,659
                
                
                -
                
                
                550,695Net
      capital expenditures
                
                
                340,937
                
                
                7,879
                
                
                -
                
                
                348,8162008Total
      assets
                
                $
                46,726,035
                
                $
                1,663,996
                
                $
                1,469,418
                
                $
                49,859,449Depreciation
      and amortization
                
                
                374,103
                
                
                29,923
                
                
                -
                
                
                404,026Net
      capital expenditures
                
                
                273,785
                
                
                221,358
                
                
                -
                
                
                495,143


Geographic
Information:
 
 No
segment information is provided as the Group only has one geographical
segment.  The Group’s reportable business segments are Vehicle and
Fashion Apparel, which operations are located in the PRC (including Hong Kong
and Macau). Sales were predominately made to customers located in the PRC
(including Hong Kong and Macau).




21





NOTE
12.  RELATED PARTY TRANSACTIONS





The
following is a summary of significant transactions among certain related parties
and the Company during the three months and six months ended June
30:





Three months ended June
                            30,
                          
                          
                          Six months ended
                            June 30,Notes
                          
                          2009
                          
                          
                          2008
                          
                          
                          2009
                          
                          
                          2008Sales
      to:-
      Affiliates
                          (a)
                          
                          $
                          188,006
                          
                          
                          $
                          11,693
                          
                          
                          $
                          189,436
                          
                          
                          $
                          15,719Purchases
      from:-
      Affiliates
                          (a)
                          
                          
                          101,726
                          
                          
                          
                          12,928
                          
                          
                          
                          101,726
                          
                          
                          
                          14,914Interest
      received from:-
      Affiliates
                          (b)
                          
                          
                          159,924
                          
                          
                          
                          162,764
                          
                          
                          
                          314,120
                          
                          
                          
                          288,782Management
      fee paid to:-
      Affiliates
                          (c)
                          
                          
                          103,761
                          
                          
                          
                          -
                          
                          
                          
                          207,429
                          
                          
                          
                          -Management
      fee received from:-
      Affiliates
                          (c)
                          
                          
                          46,449
                          
                          
                          
                          46,196
                          
                          
                          
                          92,884
                          
                          
                          
                          92,373Service
      cost charged by:
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          --
      Affiliates
                          (c)
                          
                          
                          9,914
                          
                          
                          
                          -
                          
                          
                          
                          10,334Rental
      income received from:-
      Affiliates
                          (c)
                          
                          
                          38,706
                          
                          
                          
                          38,496
                          
                          
                          
                          77,402
                          
                          
                          
                          76,978Rental
      paid to:-
      Affiliate
                          (c)
                          
                          
                          4,203
                          
                          
                          
                          6,032
                          
                          
                          
                          8,316
                          
                          
                          
                          12,665Building
      management fee paid to:-
      Affiliate
                          (c)
                          
                          
                          851
                          
                          
                          
                          710
                          
                          
                          
                          1,702
                          
                          
                          
                          1,318Warehouse
      expenses paid to:-
      Affiliate
                          (c)
                          
                          
                          3,669
                          
                          
                          
                          -
                          
                          
                          
                          9,222
                          
                          
                          
                          -





Notes:





(a)
            The
      transactions were carried out at market price or, where no market price
      was available, at cost plus a percentage profit
  mark-up.





(b)
            The
      loan advance to an affiliate is unsecured, bears interest at 5.5% per
      annum and repayable on demand.





(c)
            The
      transactions were carried out at terms agreed between both
      parties.




NOTE
13. SUBSEQUENT EVENTS





The
Company evaluated all events or transactions through the date of this filing,
which is the date the financial statements were issued.  During this
period the Company did not have any material subsequent events that impacted our
condensed consolidated financial statements.





[End
of condensed consolidated financial statements.]





22





Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.




FORWARD-LOOKING
STATEMENTS




The
following discussion of our financial condition and results of operations should
be read in conjunction with the consolidated financial statements and related
notes thereto. The following discussion contains forward-looking statements. The
words or phrases “would be,” “will allow,” “intends to,” “will likely result,”
“are expected to,” “will continue,” “is anticipated,” “estimate,”
“project,”“believe,”  “plan,”
“intend “or similar expressions are intended to identify “forward-looking
statements.” Such statements include those concerning expected financial
performance, corporate strategy, and operational plans. Actual results could
differ materially from those projected in the forward-looking statements as a
result of a number of risks and uncertainties, including: (a) general economic
conditions in Hong Kong, Macau and China; (b) regulatory factors in Hong Kong,
Macau and China that may lead to additional costs or otherwise negatively affect
our business; (c) whether we are able to manage our planned growth efficiently,
including whether our management will be able to: (i) identify, hire, train,
retain, motivate and manage required personnel or (ii) successfully manage and
exploit existing and potential market opportunities; (d) whether we are able to
generate sufficient revenues or obtain financing to sustain and grow our
operations; (e) whether we are able to successfully fulfill our primary cash
requirements which are explained below under “Liquidity and Capital Resources”;
and (f) whether worldwide economic conditions will negatively affect the
automobile retail industry in Hong Kong, Macau and China. Statements made herein
are as of the date of the filing of this Form 10-Q with the United States
Securities and Exchange Commission and should not be relied upon as of any
subsequent date. Unless otherwise required by applicable law, we do not
undertake, and we specifically disclaim any obligation, to update any
forward-looking statements to reflect occurrences, developments, unanticipated
events or circumstances after the date of such statement.




COMPANY OVERVIEW




China
Premium Lifestyle Enterprise, Inc. is in the business of the importation,
distribution and sales of premium brand luxury products in the Hong Kong Special
Administrative Region, (“Hong Kong”), the Macau Special Administrative Region,
(“Macau”), and in the People’s Republic of China, (which for the purpose of this
report excludes Hong Kong, Macau and Taiwan, and hereinafter “China”).
Currently, the Company’s main business is its ownership interest in Technorient
Limited, a Hong Kongcorporation
(“Technorient”). The business of the subsidiaries of Technorient Limited
consists mainly of importation, distribution, and after-sales service of Italian
“Ferrari” and “Maserati” branded cars and spare parts in Hong Kong, Macau and
China. During 2008, through its wholly-owned subsidiary, CPMM (Asia) Limited
(“CPMM Asia”), the Company implemented its plan to import, distribute and sell
premium brand apparel in Hong Kong, Macau, China and Taiwan.




23




THE
BUSINESS OF TECHNORIENT





The
Company’s main business is its 49% ownership interest in Technorient. Technorient is a
corporation formed in Hong Kong on March 8, 1983. Technorient is the parent
company of Auto Italia Limited (“Auto Italia”), German Motors Limited (“German
Motors”), Italian Motors (Sales & Service) (“Italian Motors”), Italian
Motors (Sales & Service) Limited (“IML”) and King Express Group Limited
(“King Express”). Collectively, Auto Italia, Italian Motors, IML, German Motors
and King Express are hereafter referred to as the “Technorient Group”.
Originally founded in 1974 as German Motors, Technorient has served as the
holding company for Auto Italia, IML and German Motors since 1985.  IML was
appointed sole Ferrari importer and distributor for Hong Kong and Macau in 1992
(and exclusive importer for China between 1994 and 2004), and Auto Italia was
appointed importer and distributor for Maserati in 1996, having been a dealer
for the brand since 1994.  In 2003, IML transferred its entire car trading
business to Auto Italia, which in turn set up a new subdivision, Italian Motors,
to continue the business. On April 24, 2008, Auto Italia formed a wholly-owned
subsidiary named Success Master Holdings Limited, in Hong Kong. This new
entity currently does not have any operations.  On August 7, 2008, IML
formed a wholly owned subsidiary named Nanjing Auto Italia Car Trading Co., Ltd.
in China to engage in the distribution of Ferrari and Maserati cars in
Nanjing.




IML is a
1% equity holder in Ferrari Maserati Cars International Trading (Shanghai) Co.
Ltd., an equity joint venture company created with Ferrari S.p.A. and the
Beijing-based Poly Investment Group in 2004 to handle sales, marketing and
distribution of Maserati and Ferrari in China. We refer to Ferrari Maserati Cars
International Trading (Shanghai) Co. Ltd. as the “Shanghai JV”. The Shanghai JV
is building a network of dealerships for Ferrari and Maserati in
China.




Auto
Italia and Italian Motors operate from eight locations in Hong Kong and China,
incorporating sales, spare parts, service and body and paint shop facilities for
Ferrari and Maserati. Management believes that the group has a well-established
customer base comprised of high net worth individuals in Hong Kong and China and
enjoys through its sales performance and reputation for first class facilities
and customer service, and excellent relationship with senior management of both
Ferrari S.p.A. and Maserati S.p.A.




Management
of Technorient views the rapid development of the consumer market in China,
particularly the market for luxury products, as an opportunity to leverage the
Company’s existing high net worth customer base and reputation to develop a
platform for distribution of a wide range of luxury items, including additional
high end (performance) autos, luxury yachts and other premium lifestyle
items.




In
October 2007, King Express was appointed by AgustaWestland as its exclusive
distributor for the complete fleet of AgustaWestland commercial helicopters in
Hong Kong and Macau. It also has the right to sell to the highly strategic Pearl
River Delta region of Southern China on a non-exclusive basis. Currently, the
AgustaWestland helicopters business is in its preparatory stage with the likely
arrival of the first helicopter anticipated at the beginning of
2010.




THE BUSINESS OFCPMM ASIA




On
January 18, 2008, CPMM Asia entered into a License and Supply Agreement
(the “Agreement”) with Akkurate Ltd. (“Akkurate”) and Falber Confezioni S.R.L.
(“Falber”) for a term of 10 seasons through approximately January 31, 2013. The
Agreement granted CPMM Asia the exclusive right to sell men’s and women’s
Ready-to-Wear John Richmond, Richmond X, and Richmond Denim (“Products”)
and to open points of sale identified by the signs of Products identified by
the “John Richmond,” “Richmond,” “Richmond X,” and “Richmond Denim” marks
(collectively, the “Signs”) in China, Hong Kong, Macau and Taiwan (the
“Exclusivity Area”), which Products would be supplied by Falber.  Two
mono brand shops were opened in Hong Kong after the signing of the license and
supply agreement.





24




CURRENCY
CONVERSION AND EXCHANGE




The value
of Renminbi (“RMB”), Hong Kong Dollar and the Macau Pataca against the U.S.
dollar and other currencies may fluctuate and is affected by, among other
things, changes in political and economic conditions. Since 1994, the conversion
of RMB into foreign currencies, including Hong Kong and U.S. dollars, has been
based on rates set by the People’s Bank of China, or PBOC, which are set daily
based on the previous day’s PRC interbank foreign exchange market rate and
current exchange rates on the world financial markets. Since 1994, the official
exchange rate for the conversion of RMB to U.S. dollars has generally been
stable.




On July
21, 2005, however, PBOC announced a reform of its exchange rate system. Under
the reform, RMB is no longer effectively linked to US dollars but instead is
allowed to trade in a tight band against a basket of foreign currencies. If the
RMB were to increase in value against the U.S. dollar, for example, mainland
Chinese consumers would experience a reduction in the relative prices of goods
and services, which may translate into a positive increase in sales. On the
other hand, a decrease in the value of the RMB against the dollar would have the
opposite effect and may adversely affect our results of operations. Any
significant revaluation of RMB may materially and adversely affect our cash
flows, revenues, earnings and financial position, and the value of any dividends
payments. For example, an appreciation of RMB against the U.S. dollar or Hong
Kong dollars would make any new RMB denominated investments or expenditures more
costly to us, to the extent that we need to convert U.S. dollars or Hong Kong
dollars into RMB for such purposes. In addition, a strengthening of the U.S.
dollar against the Hong Kong Dollar or the Macau Pataca, if it occurred, would
adversely affect the value of your investment.




CRITICAL
ACCOUNTING POLICIES




In
preparing our financial statements, we make estimates, assumptions and judgments
that can have a significant effect on our revenues, income or loss from
operations, and net income or net loss, as well as on the value of certain
assets on our balance sheet. We believe that there are several accounting
policies that are critical to an understanding of our historical and future
performance as these policies affect the reported amounts of revenues, expenses,
and significant estimates and judgments applied by management. While there are a
number of accounting policies, methods and estimates affecting our financial
statements, the following policies are considered critical. In addition, you
should refer to our accompanying condensed consolidated balance sheet as of June
30, 2009 and the condensed consolidated statements of operations for the
six months ended June 30, 2009 and 2008, and the related notes thereto, for
further discussion of our accounting policies.




25




Trade
receivables and provision for bad debts





Trade
receivables, net of provision for bad debts, are concentrated with the
receivables from customers. We periodically record a provision for bad debts
based on our judgment resulting from an evaluation of the collectability of
trade receivables by assessing, among other factors, our customer’s willingness
or ability to pay, repayment history, general economic conditions, and the
ongoing relationship with our customers. The total amount of this provision is
determined by first identifying the receivables of customers that are considered
to be a higher credit risk based on their current overdue accounts, difficulties
in collecting from these customers in the past and their overall financial
condition. For each of these customers, we estimate the extent to which the
customer will be able to meet its financial obligation, and record a provision
that reduces our trade receivables for that customer to the amount that we
reasonably believe will be collected.  Additional provisions may be
required in the future if the financial condition of our customers or general
economic conditions deteriorate, thereby reducing net earnings.
 Historically our provisions for bad debts have been sufficient to cover
actual credit losses, and we believe that the provisions recorded at the balance
sheet dates are sufficient.




Inventory,
net




Inventory
consists primarily of new and used vehicles held for sale, and vehicle parts and
accessories, and are stated at the lower of cost or market. The new and used
vehicles are valued using the specific identification method and the costs
include acquisition and transportation expenses. The value of the parts and
accessories are valued at the first-in, first-out method and are stated at the
lower of cost or market.  Fashion apparel inventory is valued at the
first-in, first-out method and is stated at the lower of cost or market.
Write-down of potentially obsolete or slow-moving inventory is recorded based on
our analysis of inventory levels and assessment of estimated obsolescence based
upon assumptions about future demand and market conditions. Historically our
actual physical inventory count results have shown our estimates of write-down
of potentially obsolete or slow-moving inventory to be
reliable.  However, additional provisions may be required in the
future if general economic conditions deteriorate, thereby reducing net
earnings.




Share-based
compensation




We have
adopted SFAS No. 123(R),Share-Based Payment, as amended and interpreted, for our share-based
compensation. We utilized the modified prospective method approach, pursuant to
which we record compensation for all share-based awards granted based on their
fair value. The estimate of the fair value of the share-based compensation
requires the input of subjective assumptions. Changes in the subjective
assumptions could materially affect the estimate of fair value of share-based
compensation; however, based on an analysis using changes in certain assumptions
that could be reasonably possible in the near term, we believe the effect on the
share-based compensation recognized would not have been material.




Stock-based
compensation expense is based on awards that are ultimately expected to vest. We
evaluate the assumptions used to value our awards and if factors change, we
employ different assumptions. If there are any modifications or cancellations of
the underlying unvested securities, we may be required to accelerate, increase
or cancel any remaining unearned stock-based compensation expense. Future
stock-based compensation expense and unearned stock-based compensation will
increase to the extent that we grant additional equity awards to
employees.





26




Revenue
recognition




Revenue
consists of sales of new and used vehicles, vehicle maintenance and repair
services, and sales of vehicle parts and sales of fashion apparel. Revenues from
the following components are recognized as follows:




(i)
            Sales
      of new and used vehicles are recognized when a sales contract has been
      executed and the vehicle’s title has
passed.




(ii)
            Sales
      of fashion apparel and accessories are recognized when the products have
      been delivered and title has
passed.




(iii)
            Sales
      of vehicle parts are recognized when the parts have been delivered and the
      title has passed.




(iv)
            Vehicle
      maintenance and repair income is recognized when services are fully
      rendered.




Impairment
of long-lived assets




We
evaluate long-lived assets, including property and equipment, for impairment
when events and circumstances exist that indicate the carrying amount of these
assets may not be recoverable.  Recoverability of assets is measured by
comparing the carrying amount of an asset to the estimated undiscounted future
cash flows expected to be generated by the use of the asset.  The
undiscounted cash flows are subject to estimations and assumptions made by us.
If the estimated undiscounted cash flows change in the future, we may be
required to reduce the carrying amount of an asset.




Income
taxes




We are
required to estimate income tax provisions and amounts ultimately payable or
recoverable in numerous jurisdictions, including Hong Kong. We account for
income taxes under the provision of Statement of Financial Accounting Standards
No. 109,Accounting for Income Taxes,   (“SFAS 109”) and
related interpretations and guidance including FIN 48,Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109
  (“Fin 48”), resulting in two components of income tax expenses:
current and deferred.  Current income tax expense approximates taxes to be
paid or refunded for the relevant periods.  Deferred income tax expense
results from changes in deferred tax assets and liabilities between periods.
 Deferred income tax assets and liabilities are computed for differences
between the financial statements carrying amounts and the tax bases of existing
assets and liabilities that will result in taxable or deductible amount in the
future, as well as from net operating loss and tax credit carryforwards, and are
measured in accordance with the enacted tax laws and at the rates applicable in
the years in which the differences are expected to be recovered or settled.
 A deferred tax asset is recognized if it is more likely than not that a
benefit will be realized.  Otherwise, we will record a valuation allowance
when the utilization of the deferred tax asset is uncertain.  Additional
timing differences, future earning trends and/or tax strategies could warrant a
need for establishing an additional valuation allowance or a
reserve.





27




Contingencies




From time
to time, we are involved in disputes, litigation and other legal proceedings. We
record a charge equal to at least the minimum estimated liability for a loss
contingency when both of the following conditions are met: (i) information
available prior to issuance of the financial statements indicates that it is
probable that an asset had been impaired or a liability had been incurred at the
date of the financial statements, and (ii) the range of loss can be
reasonably estimated.  However, the actual liability in any such litigation
may be materially different from our estimates, which could result in the need
to record additional costs. Currently, we have no outstanding legal proceedings
or claims that require a loss contingency.




RESULTS
OF OPERATIONS




Six Months Ended June
30




Results
of operations comparison of six months ended June 30, 2009 to six months ended
June 30, 2008:




SALES




Sixmonths
      ended
                    June30, 2009
                  
                  
                  Sixmonths
      ended
                    June30, 2008Total
                    Sales
                  
                  
                  % of
                    Total Sales
                  
                  
                  Total
                    Sales
                  
                  
                  % of
                    Total SalesSales:New
      vehicles
                  
                  $
                  38,559,000
                  
                  
                  
                  71.8
                  %
                  
                  $
                  40,091,000
                  
                  
                  
                  76.1
                  %Used
      vehicles
                  
                  $
                  11,266,000
                  
                  
                  
                  21
                  %
                  
                  $
                  9,388,000
                  
                  
                  
                  17.8
                  %Parts
      and services and others
                  
                  $
                  2,969,000
                  
                  
                  
                  5.5
                  %
                  
                  $
                  2,845,000
                  
                  
                  
                  5.4
                  %Fashion
      Apparel
                  
                  $
                  882,000
                  
                  
                  
                  1.7
                  %
                  
                  $
                  371,000
                  
                  
                  
                  0.7
                  %Total
                  
                  $
                  53,676,000
                  
                  
                  
                  100
                  %
                  
                  $
                  52,695,000
                  
                  
                  
                  100
                  %




Sales
mainly consist of sales of new and used vehicles, sales of parts and services
for vehicle maintenance and repair and sale of fashion apparel.




Total
sales for the six months ended June 30, 2009 increased by
approximately $981,000 or 1.9% to approximately $53,676,000, compared with
approximately $52,695,000 for the same period of 2008.




New
vehicles sales decreased approximately $1,532,000 or 3.8% from the
first six months of 2008 compared to the same period of 2009,
while the quantity of new vehicles sold decreased 8.6% for the same period. The
used vehicles sales increased approximately $1,878,000 or 20% from the
first six months of 2008 compared to the same period of 2009, while
the quantity of used vehicles sold increased by 56.8% for the same
period.  The increase in sales of used vehicles and fashion
apparel as well as parts and service sales was partially offset by the
decrease in sale of new vehicles, which reflected a challenging automotive
retail market impacted by the unfavorable global economic
conditions.





28





COST
OF SALES




Cost of
sales for the six months ended June 30, 2009 increased to $47,542,000 from
$44,033,000 for the six months ended June 30, 2008, an increase
of $3,509,000 or 8%, which was consistent with the increase in Company’s
revenues during the same period.





GROSS
PROFIT




Gross
profit margin for the six months ended June 30, 2009 decreased by 5% from
16.4% for the same period of 2008 to 11.4% for the current period of
2009 and the gross profit decreased by $2,528,000 to $6,134,000 for the six
months ended June 30, 2009.  This decrease was mainly caused by the new and
used vehicles trading segment that was negatively impacted by an overall
competitive retail environment.  Certain used vehicles were sold
with a special discount in order to encourage the sales.





Our
results of operations were adversely impacted by overall economic conditions,
including a decline in consumer confidence and reduced credit availability
offered to consumers by financial institutions.




SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES




Selling,
general and administrative expenses or “S,G&A” expenses includes salaries
and related staffing expenses, facilities rent, rate and building management
fees, legal, accounting and  professional services fees, general
corporate expenses and marketing expenses.




S,G&A
for the six months ended June 30, 2009 were approximately $9,825,000, compared
to approximately $8,243,000 for the same period of 2008. The approximate
$1,582,000 increase in S,G&A expenses was primarily due to increased rental
expenses, legal, professional and audit fees.





Our
rent, rate and building management fees increased from approximately $1,641,000
for the six months ended June 30, 2008 to $2,412,000 for the same period of
2009.  This increase is mainly due to the continued development of the
fashion apparel business and motor business. Legal, professional and audit
fees increased from $238,000 in the six months ended June 30, 2008 to $815,000
for the same period of 2009. The increase was mainly due to the professional
fees incurred for US SEC reporting and compliance obligations.




OTHER
INCOME, NET




Other
income for the six months ended June 30, 2009 decreased to approximately
$365,000 compared to approximately $745,000 for the same period of 2008, a total
decrease of $380,000. The decrease was primarily due to the decreased other
operating income and the increased interest expenses and other finance
costs. The other operating income is comprised of interest and rental recharge
to affiliates and forfeitures of sales deposits.  The decrease was
mainly due to the $130,000 gain on disposal of property and equipment recognized
in first six months of 2008.  Interest expenses and other finance
costs increased from approximately $261,000 for the six months ended June 30,
2008 to approximately $405,000 for the same period of 2009. The funds from which
our increased interest expenses were incurred were used for working capital
purposes.





29


Three Months Ended June
30





Results
of operations comparison of three months ended June 30, 2009 to three
months ended June 30, 2008:





SALES




Threemonthsended
                        June30,2009
                      
                      
                      Threemonthsended
                        June30,2008Total
                        Sales
                      
                      
                      %of
                        TotalSales
                      
                      
                      Total
                        Sales
                      
                      
                      %of
                        TotalSalesSales:New
      vehicles
                      
                      $
                      28,877,000
                      
                      
                      
                      77.5
                      %
                      
                      $
                      25,692,000
                      
                      
                      
                      82.2
                      %Used
      vehicles
                      
                      $
                      6,225,000
                      
                      
                      
                      16.7
                      %
                      
                      $
                      3,874,000
                      
                      
                      
                      12.4
                      %Parts
      and services and others
                      
                      $
                      1,686,000
                      
                      
                      
                      4.5
                      %
                      
                      $
                      1,483,000
                      
                      
                      
                      4.7
                      %Fashion
      Apparel
                      
                      $
                      460,000
                      
                      
                      
                      1.3
                      %
                      
                      $
                      199,000
                      
                      
                      
                      0.7
                      %Total
                      
                      $
                      37,248,000
                      
                      
                      
                      100
                      %
                      
                      $
                      31,248,000
                      
                      
                      
                      100
                      %




Sales
mainly consist of sales of new and used vehicles, sales of parts and services
for vehicle maintenance and repair and sale of fashion apparel.




Total
sales for the three months ended June 30, 2009 increased by approximately
$6,000,000 or 19.2% to approximately $37,248,000, compared with approximately
$31,248,000 for the same period of 2008.  The increase was primarily
due to the increased sales from our vehicle trading segment.




New
vehicles sales increased approximately $3,185,000 or 12.4% from the
second quarter of 2008 to the same period of 2009, while the quantity
of new vehicles sold remained the same for both periods.  The increase
in sales of vehicles was primarily due to the launch of the Ferrari “430
Scuderia Spider” and “California”.  The used vehicles sales increased
approximately $2,351,000 or 60.7% from the second quarter of 2008 to
the same period of 2009, while the quantity of used vehicles sold increased
by 90.5% for the same period.  The increase in sales of used vehicles
was due to the sale of certain highly acclaimed used cars, including 430
Scuderia.




COST
OF SALES




Cost of
sales for the three months ended June 30, 2009 increased to $32,868,000
from $26,048,000 for the three months ended June 30, 2008; the $6,820,000 or
26.2% increase was consistent with the increase in Company’s revenues during the
same period.




30


GROSS
PROFIT




Gross
profit margin for the three months ended June 30, 2009 decreased by
4.8% from 16.6% for the same period of 2008, to 11.8% for the
current period of 2009, and the gross profit decreased by $819,000 to
$4,381,000 for the three months ended June 30, 2009.  This
decrease was mainly caused by the new and used vehicles trading segment that was
negatively impacted by an overall competitive retail environment. Certain
used vehicles were sold with a special discount in order to encourage the
sales.




Our
results of operations were adversely impacted by overall economic conditions,
including a decline in consumer confidence and reduced credit availability
offered to consumers by financial institutions.




SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES




Selling,
general and administrative expenses or “S,G&A” expenses includes salaries
and related staffing expenses, facilities rent, rate and building management
fees, legal, accounting, professional services, general corporate expenses and
marketing expenses.




S,G&A
for the three months ended June 30, 2009 were approximately $5,155,000,
compared to approximately $4,470,000 for the same period of 2008. The
approximate $685,000 increase in S,G&A expenses was primarily due to
increased rental expenses, legal, professional and audit fees.




Our rent,
rate and building management fees increased from approximately $939,000 for the
three months ended June 30, 2008 to $1,217,000 for the same period of 2009,
the increase in such fees were mainly due to development of the fashion apparel
business and motor business. Legal, professional and audit fees increased
from $153,000 in the three months ended June 30, 2008 to $411,000 for the
same period of 2009. The increase was mainly due to the professional fees
incurred for US SEC reporting and compliance obligations.




OTHER
INCOME, NET




Other
income for the three months ended June 30, 2009 decreased to approximately
$129,000 compared to approximately $555,000 for the same period of 2008, a total
decrease of $426,000. The decrease was primarily due to the decreased other
operating income and the increased interest expenses and other finance
costs. The other operating income is comprised of interest and rental recharge
to affiliates and forfeitures of sales deposits.  The decrease was mainly
due to the $130,000 gain on disposal of property and equipment recognized in
second quarter of year 2008.  Interest expenses and other finance
costs increased from approximately $129,000 for the second quarter of 2008
to approximately $214,000 for the same period of 2009. The funds from which our
increased interest expenses were incurred were used for working capital
purposes.




LIQUIDITY
AND CAPITAL RESOURCES




CASH
FLOWS FROM OPERATING ACTIVITIES




Our
operations utilized cash resources of approximately $3,782,000 for the
six months ended June 30, 2009, compared to generating cash resources of
approximately $588,000 for the six months ended June 30, 2008, primarily as
a net result of the following:




31





            For
      the six months ended June 30, 2009, cash flow provided by sales net
      of operating expenses decreased by approximately $4,303,000 to cash
      outflow of $2,784,000. The decrease was primarily as a result of the
      decrease in gross profit.





            For
      the six months ended June 30, 2009, account receivables decreased by
      approximately $7,438,000, primarily due to the collection of account
      receivables relating to the sales recognized in the fourth
      quarter.





            For
      the six months ended June 30, 2009, our inventory increased by
      approximately $6,142,000, which was caused by overall
      unfavorable economic conditions, including a decline in consumer
      confidence.





            For
      the six months ended June 30, 2009, the increase or decrease of
      various current operating assets and liabilities, included in the
      aforementioned items, resulted in an aggregate decrease of cash inflow
      from operations of approximately
$998,000.




CASH
FLOWS FROM INVESTING ACTIVITIES




For the
six months ended June 30, 2009, we expended net cash of approximately
$323,000 in investing activities mainly for the acquisition of property and
equipment to support the development of the PRC motor business. For the
six months ended June 30, 2008, we utilized approximately $164,000 in
investing activities, mainly for acquisition of property and
equipment.




CASH
FLOWS FROM FINANCING ACTIVITIES




During
the six months ended June 30, 2009, we repaid approximately $1,172,000 of
our obligations owed on outstanding debt as compared to approximately $1,542,000
for the six months ended June 30, 2008.




For
the six months ended June 30, 2009, we received approximately $1,427,000
net advances from affiliates. For the six months ended June 30, 2008, we
made approximately $540,000 net advances to affiliates. The advances from /
to affiliates were made from / to entities that are under common
management, where Mr. Richard Man Fai Lee, the Company’s Chief Executive
Officer, is the common director of the Company and the affiliates. These
advances included interest bearing and non interest bearing portions depending
on the nature of the advances.




WORKING
CAPITAL REQUIREMENTS




Current
assets exceeded current liabilities at June 30, 2009 by approximately
$6,270,000, a decrease of $3,145,000 from December 31, 2008. The ratio of our
current assets to our current liabilities was 1.14 to 1 at June 30,
2009 compared to 1.21 to 1 at December 31, 2008. At June 30,
2009, our current assets of approximately $50,813,000 included approximately
$18,787,000 in inventory that was funded by the operating cash flow and trade
finance facilities. Our current liabilities of approximately $44,543,000
included non-refundable customer deposits. Given the exclusive nature and
extremely limited production of Ferrari cars, our customers are willing to place
material deposits in advance to the Company in order to secure their new car
orders. This resulted in customer deposits of approximately
$20,982,000.




32


SEASONALITY




Our
business is modestly seasonal.  Our operations generally experience higher
volumes of vehicle sales in the fourth quarter of each year due in part to
manufacturers’ production and delivery patterns.




EFFECT
OF FLUCTUATION IN FOREIGN EXCHANGE RATES




Information
regarding the effects of the fluctuation in foreign exchange rates on our
Company is included in Item 3 below.




OFF-BALANCE
SHEET ARRANGEMENTS




We
do not have any off-balance sheet arrangements that have or are reasonably
likely to have a material current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.




Item
3. Quantitative and Qualitative Disclosures about Market Risk.




Not
applicable to smaller reporting companies.




Item
4T.   Controls and Procedures




EVALUATION OF DISCLOSURE
CONTROLS AND
PROCEDURES




The
Company’s management, with the participation of our Chief Executive Officer
(“CEO”) and our Chief Financial Officer (“CFO”), has performed an evaluation of
the Company’s disclosure controls and procedures, as that term is defined in
Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), as of June 30, 2009.  Disclosure controls and
procedures refer to controls and other procedures that are designed to ensure
that information required to be disclosed in our periodic reports filed under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified by 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 in reports filed or submitted under the Exchange Act is accumulated
and communicated to management, including our CEO and CFO, as appropriate, to
allow timely decisions regarding required disclosure.




Based
on such evaluation, our CEO and CFO concluded that our disclosure controls and
procedures were effective as of June 30, 2009.




CHANGES IN INTERNAL CONTROL OVER
FINANCIAL REPORTING




There
were no changes in our internal control over financial reporting (as defined in
Rule 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2009
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.




33


Our management, including our CEO and
CFO, does not expect that our disclosure controls and internal control over
financial reporting will prevent all error and all fraud.  A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are
met.  Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs.  Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within the Company have been detected.  These inherent limitations
include the realities that judgments in decision-making can be faulty and that
breakdowns can occur because of simple error or
mistake.  Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the controls.




PART
II - OTHER INFORMATION




Item 1. LegalProceedings.




This Item should be read in conjunction
with Notes 8 and 9 to the Company’s Condensed Consolidated Financial Statements
(Unaudited) as of June 30, 2009.





The
Company is currently engaged in litigation (the “Federal Court Action”) with
respect to certain shares of the Company’s purported Series A Convertible
Preferred Stock (the “Disputed Preferred Shares”) purportedly issued to Happy
Emerald Limited (“HEL”) and certain shares of the Company’s Common Stock
purportedly issued upon the conversion of certain of the Disputed Preferred
Shares (the “Disputed Conversion Shares” and together with the Disputed
Preferred Shares, the “Disputed Shares”).





On May 5,
2009, the Company filed its Second Amended Complaint in the Federal Court Action
(the “SAC”).  On June 25, 2009, the court issued its ruling on a
motion to dismiss the SAC filed by some of the defendants named in the
SAC.  Following that ruling, the court found that the SAC sufficiently
stated claims for breach of contract, fraud, conversion and breach of fiduciary
duty.





Certain
defendants in the Federal Court Action filed their Answer to the SAC on July 10,
2009 (the “Answer”).  Of those defendants, Federico G. Cabo, Fred De
Luca and Global Premium Brands Co., Inc. asserted a Counterclaim against the
Company, and others, for slander of title relating to a portion of the Disputed
Shares.  Federico G. Cabo, Fred De Luca and Robert G. Pautsch also
asserted Crossclaims against certain other parties (that did not include the
Company).  The Company and the defendants that filed the Answer have
entered into a stipulation that will allow the defendants to file a First
Amended Answer on or before August 17, 2009.





In
addition, as more fully discussed in Note 8 to the Company’s Consolidated
Financial Statements (Unaudited) as of June 30, 2009, the Company has determined
that the Company has never been authorized to issue any shares of any class or
series of preferred stock, including the Disputed Preferred
Shares.  As a result, in addition to its other claims against HEL and
the defendants, the Company asserted in the SAC that all of the Disputed Shares
are void and subject to cancellation.


34


There can
be no assurance that the Company will be successful with respect to any or all
of its claims in the Federal Court Action and the Company is unable to evaluate
the likelihood of an outcome, favorable or unfavorable, to the Company with
respect to its claims at this time, or to estimate the amount or range of a
possible loss.




In the ordinary course of its business,
and other than as set forth above or as described in the notes to our condensed
consolidated financial statements, we and our subsidiaries may be involved from
time to time in various pending or threatened legal proceedings, arising from
the conduct of business.  After consultation with legal counsel and a
review of available facts, it is management’s opinion that these proceedings,
after consideration of any reserves and rights to indemnification, ultimately
will be resolved without materially affecting our consolidated financial
position.  However given the indeterminate amounts that may be sought
in these proceedings and the inherent difficulty in predicting the outcome of
such legal proceedings, including the proceeding described above, it is possible
that an adverse outcome in certain matters could be material to our operating
results for any particular reporting period.





Item
1A. Risk Factors.




Not
applicable to smaller reporting companies.




Item
5. Other Information.




During
the three months ended June 30, 2009, there have been no material changes to the
procedures by which security holders may recommend nominees to the Company’s
board of directors.




Item
6. Exhibits.





Exhibit
                No.
              
              Description2.1
              
              Share
      Exchange Agreement dated July 15, 2006 among the Company, Fred De Luca,
      Corich Enterprises, Inc., Herbert Adamczyk and Technorient Limited,
      incorporated by reference from the Form 8-K/A filed with the SEC on July
      28, 2006.2.2
              
              Reformation
      of Share Exchange Agreement dated May 5, 2009 among the Company, Corich
      Enterprises, Inc., Herbert Adamczyk, Technorient Limited and Orient
      Financial Services, Ltd., incorporated by reference from the Form 8-K
      filed with the SEC on May 11, 2009.3.1
              
              Articles
      of Incorporation, dated as of April 19, 2004, incorporated by reference
      from the Company’s Form SB-2 Registration Statement filed with the SEC on
      November 26, 2004 (File No. 333-120807).3.2
              
              By-Laws
      of Xact Aid Inc., incorporated by reference from the Company’s Form SB-2
      Registration Statement filed with the SEC on November 26, 2004 (File No.
      333-120807).




35





3.3
              
              Certificate
      of Amendment to Articles of Incorporation, effective date December 27,
      2006, incorporated by reference from the Company’s Annual Report on Form
      10-K for the year ended December 31, 2007 filed with the SEC on March 31,
      2008.3.4
              
              Certificate
      of Amendment to Articles of Incorporation, effective date December 7,
      2007, incorporated by reference from the Company’s Current Report on Form
      8-K filed with the SEC on December 10, 2007.10.1
              
              Supplemental
      Deed dated June 24, 2009, incorporated by reference from the Company’s
      Current Report on Form 8-K filed with the SEC on June 26,
      2009.31.1
              
              Certification
      of Chief Executive Officer pursuant to Rule 15D-15(E) of the Securities
      Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.31.2
              
              Certification
      of the Chief Financial Officer pursuant to Rule 15D-15(E) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.32.1
              
              Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed
      herewith.




36


SIGNATURES




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 thereunto
duly authorized.





CHINA
      PREMIUM LIFESTYLE ENTERPRISE, INC.(Registrant)Date:
      August 12, 2009
                        
                        By:
                        /s/ Richard Man Fai
      LeeRichard
      Man Fai LeeChief
      Executive OfficerDate:
      August 12, 2009
                        
                        By:
                        /s/Joseph Tik Tung WongJoseph
      Tik Tung WongChief
      Financial Officer and
Treasurer




37


EXHIBIT
INDEX





Exhibit
                No.
              
              Description2.1
              
              Share
      Exchange Agreement dated July 15, 2006 among the Company, Fred De Luca,
      Corich Enterprises, Inc., Herbert Adamczyk and Technorient Limited,
      incorporated by reference from the Form 8-K/A filed with the SEC on July
      28, 2006.2.2
              
              Reformation
      of Share Exchange Agreement dated May 5, 2009 among the Company, Corich
      Enterprises, Inc., Herbert Adamczyk, Technorient Limited and Orient
      Financial Services, Ltd., incorporated by reference from the Form 8-K
      filed with the SEC on May 11, 2009.3.1
              
              Articles
      of Incorporation, dated as of April 19, 2004, incorporated by reference
      from the Company’s Form SB-2 Registration Statement filed with the SEC on
      November 26, 2004 (File No. 333-120807).3.2
              
              By-Laws
      of Xact Aid Inc., incorporated by reference from the Company’s Form SB-2
      Registration Statement filed with the SEC on November 26, 2004 (File No.
      333-120807).3.3
              
              Certificate
      of Amendment to Articles of Incorporation, effective date December 27,
      2006, incorporated by reference from the Company’s Annual Report on Form
      10-K for the year ended December 31, 2007 filed with the SEC on March 31,
      2008.3.4
              
              Certificate
      of Amendment to Articles of Incorporation, effective date December 7,
      2007, incorporated by reference from the Company’s Current Report on Form
      8-K filed with the SEC on December 10, 2007.10.1
              
              Supplemental
      Deed dated June 24, 2009, incorporated by reference from the Company’s
      Current Report on Form 8-K filed with the SEC on June 26,
      2009.31.1
              
              Certification
      of Chief Executive Officer pursuant to Rule 15D-15(E) of the Securities
      Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.31.2
              
              Certification
      of the Chief Financial Officer pursuant to Rule 15D-15(E) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.32.1
              
              Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed
      herewith.


38