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: September 30, 2009




or




 ̈ 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 the definitions of
“accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange
Act):





Large
      Accelerated Filer o
            Accelerated
      Filer o
            Non-Accelerated
      Filero
            Smaller Reporting
      Company x(Do not
      check if a smaller reporting company.)




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 November 9, 2009 was 29,104,110.





CHINA
PREMIUM LIFESTYLE ENTERPRISE, INC.




FORM
10-Q




FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 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
                      36SIGNATURES
                      
                      37




2


Explanatory
Note





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 (UNAUDITED)


September
      30,
                    
                    
                    December
      31,2009
                    
                    
                    2008(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    3,326,567
                    
                    
                    $
                    5,827,132Restricted
      cash
                    
                    
                    4,402,254
                    
                    
                    
                    4,427,439Trade
      receivables, net of provision
                    
                    
                    1,491,602
                    
                    
                    
                    11,761,228Inventory,
      net
                    
                    
                    20,632,335
                    
                    
                    
                    12,670,567Prepayments
                    
                    
                    1,854,263
                    
                    
                    
                    1,952,882Other
      current assets
                    
                    
                    4,130,960
                    
                    
                    
                    6,419,106Amounts
      due from affiliates
                    
                    
                    12,569,307
                    
                    
                    
                    11,147,103Total
      current assets
                    
                    
                    48,407,288
                    
                    
                    
                    54,205,457Property
      and equipment, net
                    
                    
                    4,603,368
                    
                    
                    
                    2,905,927Goodwill
                    
                    
                    39,730
                    
                    
                    
                    39,734TOTAL
      ASSETS
                    
                    $
                    53,050,386
                    
                    
                    $
                    57,151,118LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                    
                    $
                    8,867,915
                    
                    
                    $
                    9,935,435Bills
      payable
                    
                    
                    926,204
                    
                    
                    
                    1,333,502Trade
      payables
                    
                    
                    4,808,119
                    
                    
                    
                    3,795,196Deposits
      received
                    
                    
                    23,863,770
                    
                    
                    
                    19,887,368Other
      current liabilities
                    
                    
                    2,305,995
                    
                    
                    
                    7,405,454Amounts
      due to affiliates
                    
                    
                    4,677,172
                    
                    
                    
                    2,433,340Total
      current liabilities
                    
                    
                    45,449,175
                    
                    
                    
                    44,790,295Long-term
      borrowing
                    
                    
                    1,060,091
                    
                    
                    
                    -TOTAL
      LIABILITIES
                    
                    
                    46,509,266
                    
                    
                    
                    44,790,295Commitments
      and ContingenciesStockholders'
      equityPreferred
      stockAuthorized:
      100,000,000 preferred stock, par value $0.001
                      Issued
      and outstanding: 247,798 shares as at September 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 September 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
                    
                    
                    286,220
                    
                    
                    
                    247,279Accumulated
      deficit
                    
                    
                    (4,866,598
                    )
                    
                    
                    (695,446
                    )TOTAL
      CHINA PREMIUM LIFESTYLE ENTERPRISE, INC.STOCKHOLDERS’ EQUITY
                    
                    
                    1,124,279
                    
                    
                    
                    5,256,490Noncontrolling
      interests
                    
                    
                    5,416,841
                    
                    
                    
                    7,104,333TOTAL
      EQUITY
                    
                    
                    6,541,120
                    
                    
                    
                    12,360,823TOTAL
      LIABILITIES AND EQUITY
                    
                    $
                    53,050,386
                    
                    
                    $
                    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
                  September
      30,
                
                
                Nine
      months ended
                  September
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Sales:New
      and used vehicles
                
                $
                27,391,199
                
                
                $
                31,321,200
                
                
                $
                77,216,005
                
                
                $
                80,800,209Parts
      and services and others
                
                
                2,442,121
                
                
                
                1,777,790
                
                
                
                5,411,561
                
                
                
                4,622,351Fashion
      apparel and accessories
                
                
                299,423
                
                
                
                263,161
                
                
                
                1,181,328
                
                
                
                634,348Net
      sales
                
                
                30,132,743
                
                
                
                33,362,151
                
                
                
                83,808,894
                
                
                
                86,056,908Cost
      of sales:New
      and used vehicles
                
                
                (25,908,646
                )
                
                
                (27,544,207
                )
                
                
                (71,827,037
                )
                
                
                (70,604,162
                )Parts
      and services and others
                
                
                (612,026
                )
                
                
                (352,910
                )
                
                
                (1,112,490
                )
                
                
                (1,081,542
                )Fashion
      apparel and accessories
                
                
                (457,918
                )
                
                
                (159,212
                )
                
                
                (1,580,999
                )
                
                
                (403,240
                )Total
      cost of sales
                
                
                (26,978,590
                )
                
                
                (28,056,329
                )
                
                
                (74,520,526
                )
                
                
                (72,088,944
                )Gross
      profit:New
      and used vehicles
                
                
                1,482,553
                
                
                
                3,776,993
                
                
                
                5,388,968
                
                
                
                10,196,047Parts
      and services and others
                
                
                1,830,095
                
                
                
                1,424,880
                
                
                
                4,299,071
                
                
                
                3,540,809Fashion
      apparel and accessories
                
                
                (158,495
                )
                
                
                103,949
                
                
                
                (399,671
                )
                
                
                231,108Total
      gross profit
                
                
                3,154,153
                
                
                
                5,305,822
                
                
                
                9,288,368
                
                
                
                13,967,964Selling,
      general and administrative expenses
                
                
                (5,516,916
                )
                
                
                (4,301,541
                )
                
                
                (15,342,119
                )
                
                
                (12,544,791
                )Operating
      (loss) / earnings
                
                
                (2,362,763
                )
                
                
                1,004,281
                
                
                
                (6,053,751
                )
                
                
                1,423,173Other
      income (expenses)Interest
      expenses and other finance costs
                
                
                (218,630
                )
                
                
                (150,640
                )
                
                
                (623,771
                )
                
                
                (411,360
                )Other
      income
                
                
                35,391
                
                
                
                327,101
                
                
                
                805,446
                
                
                
                1,332,403Total
      other income (expenses)
                
                
                (183,239
                )
                
                
                176,461
                
                
                
                181,675
                
                
                
                921,043(Loss)
      / earnings  before income taxes
                
                
                (2,546,002
                )
                
                
                1,180,742
                
                
                
                (5,872,076
                )
                
                
                2,344,216Provision
      for income taxes
                
                
                (41
                )
                
                
                -
                
                
                
                (30,295
                )
                
                
                -Net
      (loss) / earnings including noncontrolling interests
                
                
                (2,546,043
                )
                
                
                1,180,742
                
                
                
                (5,902,371
                )
                
                
                2,344,216Net
      (loss) / earnings  attributable to:China
      Premium Lifestyle Enterprise, Inc common stockholders
                
                
                (1,826,728
                )
                
                
                383,784
                
                
                
                (4,171,152
                )
                
                
                544,855Noncontrolling
      interests
                
                
                (719,315
                )
                
                
                796,958
                
                
                
                (1,731,219
                )
                
                
                1,799,361(2,546,043
                )
                
                
                1,180,742
                
                
                $
                (5,902,371
                )
                
                $
                2,344,216(Loss)
      / earnings per common stock attributable to China Premium Lifestyle
      Enterprise, Inc common stockholdersBasic
                
                $
                (0.0628
                )
                
                $
                0.0132
                
                
                $
                (0.1433
                )
                
                $
                0.0197Diluted
                
                $
                (0.0628
                )
                
                $
                0.0114
                
                
                $
                (0.1433
                )
                
                $
                0.0169Weighted
      average number of common stock outstandingBasic
                
                
                29,104,110
                
                
                
                29,104,110
                
                
                
                29,104,110
                
                
                
                27,719,882Diluted
                
                
                29,104,110
                
                
                
                33,673,729
                
                
                
                29,104,110
                
                
                
                32,289,501





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)





Nine
      months ended
                    September
      30,2009
                  
                  
                  2008Operating
      activities:Net
      (loss) / earnings including noncontrolling interests
                  
                  $
                  (5,902,371
                  )
                  
                  $
                  2,344,216Adjustments
      to reconcile net (loss) / earnings to net cash provided by operating 
      activitiesDepreciation
      and amortization
                  
                  
                  896,904
                  
                  
                  
                  604,420Disposal
      of property and equipment
                  
                  
                  202,766
                  
                  
                  
                  (130,130
                  )Provision
      for bad debts written back
                  
                  
                  (25,346
                  )
                  
                  
                  (26,144
                  )Provision
      for inventory
                  
                  
                  29,978
                  
                  
                  
                  -Other
      non-cash items
                  
                  
                  74,004
                  
                  
                  
                  51,961Changes
      in operating assets and liabilities:Trade
      receivables
                  
                  
                  10,294,972
                  
                  
                  
                  8,039,925Other
      current assets and prepayments
                  
                  
                  2,386,765
                  
                  
                  
                  (4,044,996
                  )Inventory
                  
                  
                  (7,991,746
                  )
                  
                  
                  (6,924,087
                  )Trade
      payables
                  
                  
                  1,012,923
                  
                  
                  
                  2,498,971Other
      current liabilities and deposits received
                  
                  
                  (1,074,371
                  )
                  
                  
                  (331,106
                  )Net
      cash (used in)/provided by operating activities
                  
                  
                  (95,522
                  )
                  
                  
                  2,083,030Investing
      activities:Purchases
      of property and equipment
                  
                  
                  (2,802,636
                  )
                  
                  
                  (579,434
                  )Proceeds
      from disposal of property and equipment
                  
                  
                  14,193
                  
                  
                  
                  332,170Decrease
      in restricted cash
                  
                  
                  25,185
                  
                  
                  
                  -Net
      cash used in investing activities
                  
                  
                  (2,763,258
                  )
                  
                  
                  (247,264
                  )Financing
      activities:Advances
      from affiliates
                  
                  
                  772,942
                  
                  
                  
                  810,440Decrease
      in borrowings and bills payable
                  
                  
                  (414,727
                  )
                  
                  
                  (547,070
                  )Net
      cash provided by financing activities
                  
                  
                  358,215
                  
                  
                  
                  263,370(Decrease)
      / increase in cash and cash equivalents
                  
                  
                  (2,500,565
                  )
                  
                  
                  2,099,136Cash
      and cash equivalents at beginning of the period
                  
                  
                  5,827,132
                  
                  
                  
                  6,583,566Cash
      and cash equivalents at end of the period
                  
                  $
                  3,326,567
                  
                  
                  $
                  8,682,702Supplemental
      disclosure of cash flows information:Cash
      paid for:Interest
                  
                  $
                  623,771
                  
                  
                  $
                  411,360Income
      taxes
                  
                  
                  30,295
                  
                  
                  
                  -





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
(“US GAAP”). 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 indicative of the results
that may be expected for all of 2009 or in future periods. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with US GAAP 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, as filed with the SEC on March
31, 2009..





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
Financial Accounting Standards Board (“FASB”) Accounting Standards CodificationTM
(“ASC”) 280 Segment
Reporting.  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
vehicles 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 these borrowings bear interest at a variable rate tied
to the current market, and have terms similar to other borrowing arrangements
available to the Company.





ASC 820
Fair Value Measurements and
Disclosures (“ASC 820”) 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. ASC 820 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 nine months ended
September 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 its operations to
the People’s 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 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 method of
taxation, among other factors.





NOTE
3.  RECENT ACCOUNTING PRONOUNCEMENTS




(a)   Recent
accounting pronouncements adopted




In
June 2009, the FASB issued a standard that established the FASB ASC and
amended the hierarchy of generally accepted accounting principles (GAAP) such
that the ASC became the single source of authoritative nongovernmental U.S.
GAAP. The ASC did not change current U.S. GAAP, but was intended to simplify
user access to all authoritative U.S. GAAP by providing all the authoritative
literature related to a particular topic in one place. All previously existing
accounting standard documents were superseded and all other accounting
literature not included in the ASC is considered non-authoritative. New
accounting standards issued subsequent to June 30, 2009 are communicated by
the FASB through Accounting Standards Updates (“ASUs”). For the Company, the ASC
was effective July 1, 2009. This standard did not have an impact on the
Company’s consolidated results of operations or financial condition. However,
throughout the notes to the condensed consolidated financial statements
references that were previously made to various former authoritative U.S. GAAP
pronouncements have been changed to coincide with the appropriate section of the
ASC.




9


In
September 2006, the FASB issued an accounting standard codified in ASC 820,
which provides guidance about how to measure assets and liabilities that use
fair value. ASC 820 apply 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. ASC 820 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007. In February 2008, the FASB issued amendments which state that
ASC 820 does not address fair value measurements for purposes of lease
classification or measurement and delay 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 ASC 820 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. The Company adopted ASC 820 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.




In
December 2007, the FASB issued a new business combinations standard codified
within ASC 805 Business
Combinations(“ASC 805”).  ASC 805 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.  ASC 805 also establishes disclosure requirements to enable
the evaluation of the nature and financial effects of the business
combination.  The Company adopted ASC 805 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 a new standard which established the accounting
for and reporting of noncontrolling interests in partially owned consolidated
subsidiaries and the loss of control of subsidiaries codified within ASC 810
Consolidation(“ASC
810”).  ASC 810 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.  ASC 810 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 ASC 810 on
January 1, 2009, the Company reclassified its noncontrolling interest from
minority interest to equity in the accompanying September 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 September 30, 2009 and 2008 condensed consolidated
statements of operations.




In March
2008, the FASB issued an accounting standard related to disclosures about
derivative instruments and hedging activities, codified in ASC 815 Derivatives and Hedging(“ASC
815”). ASC 815 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. ASC 815 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 ASC 815 on January 1, 2009 and the
adoption did not have a material impact on its financial position, cash flows
and results of operations.




10


In
April 2009, the FASB issued an accounting standard regarding interim
disclosures about fair value of financial instruments to require disclosure
about fair value of financial instruments in interim financial statements. 
The Company adopted the standard 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 an accounting standard which provides guidelines for
making fair value measurements more consistent with the principles presented in
ASC 820. The standard 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 the standard 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 May
2009, the FASB issued a new accounting standard regarding subsequent events
codified in ASC 855 Subsequent
Events(“ASC 855”). ASC 855 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. It
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. ASC 855 is effective for the Company’s second quarter ended
June 30, 2009.





(b) Recent
accounting pronouncements not yet effective




(i)
            In
      June 2009, the FASB issued Statement No. 167, “Amendments to FASB
      Interpretation No. 46(R)”. Statement No. 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. Statement No. 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.





(ii)
            In
      June 2009, the FASB issued Statement No. 166, “Accounting for
      Transfers of Financial Assets”. Statement No. 166 removes the concept of a
      qualifying special-purpose entity from Statement No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities” 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.
      Statement No. 166 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.




11


(iii)
            In
      August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair
      Value, which provides additional guidance on how companies should
      measure liabilities at fair value under ASC 820. The ASU clarifies that
      the quoted price for an identical liability should be used. However, if
      such information is not available, a entity may use, the quoted price of
      an identical liability when traded as an asset, quoted prices for similar
      liabilities or similar liabilities traded as assets, or another valuation
      technique (such as the market or income approach). The ASU also indicates
      that the fair value of a liability is not adjusted to reflect the impact
      of contractual restrictions that prevent its transfer and indicates
      circumstances in which quoted prices for an identical liability or quoted
      price for an identical liability traded as an asset may be considered
      level 1 fair value measurements. For the Company, this ASU is effective
      October 1, 2009. The Company is currently evaluating the impact of
      this standard, but would not expect it to have a material impact on the
      Company’s consolidated results of operations or financial
      condition.





Other
recent accounting pronouncements issued by the FASB, 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 nine months ended September 30:


Three
      months ended
                        September
      30,
                      
                      
                      Nine
      months ended
                        September
      30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Numerator:Net
      (loss)/earnings attributable to China Premium Lifestyle Enterprise, Inc
      common stockholders
                      
                      $
                      (1,826,728
                      )
                      
                      $
                      383,784
                      
                      
                      $
                      (4,171,152
                      )
                      
                      $
                      544,855Denominator:Weighted
      average common stock outstanding
                      
                      
                      29,104,110
                      
                      
                      
                      29,104,110
                      
                      
                      
                      29,104,110
                      
                      
                      
                      27,719,882Effect
      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
                      
                      
                      
                      32,289,501Basic
      net (loss)/earnings per share
                      
                      $
                      (0.0628
                      )
                      
                      $
                      0.0132
                      
                      
                      $
                      (0.1433
                      )
                      
                      $
                      (0.0197
                      )Diluted
      net (loss)/earnings per share
                      
                      $
                      (0.0628
                      )
                      
                      $
                      0.0114
                      
                      
                      $
                      (0.1433
                      )
                      
                      $
                      (0.0169
                      )


12


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 nine months ended
September 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:





September
      30,
                    
                    
                    December
      31,2009
                    
                    
                    2008New
      vehicles
                    
                    $
                    13,286,085
                    
                    
                    $
                    4,003,200Used
      vehicles
                    
                    
                    4,269,719
                    
                    
                    
                    4,837,562Fashion
      apparel
                    
                    
                    292,884
                    
                    
                    
                    1,716,163Parts,
      accessories and others
                    
                    
                    2,783,647
                    
                    
                    
                    2,113,642$
                    20,632,335
                    
                    
                    $
                    12,670,567





Vehicles
included in inventory of approximately $3,576,792 and $1,541,204 were pledged to
secure the stocking loan and other loans outstanding as of September 30, 2009
and December 31, 2008, respectively (See Note 6).





NOTE
6.  BORROWINGS





The
Company's borrowings are summarized as follows:


September
      30,
                    
                    
                    December
      31,2009
                    
                    
                    2008Bank
      borrowings
                    
                    $
                    6,834,472
                    
                    
                    $
                    8,790,806Stocking
      loans
                    
                    
                    2,835,479
                    
                    
                    
                    1,144,629Other
      loans
                    
                    
                    258,055
                    
                    
                    
                    -9,928,006
                    
                    
                    
                    9,935,435Bank
      borrowings due after one year
                    
                    
                    (1,060,091
                    )
                    
                    
                    -Short-term
      borrowings
                    
                    $
                    8,867,915
                    
                    
                    $
                    9,935,435





Vehicles
included in inventory of approximately $3,576,792 and $1,541,204 were pledged to
secure the stocking loan and other loan outstanding as of September 30, 2009 and
December 31, 2008, respectively.





NOTE
7.  OTHER CURRENT LIABILITIES





Other
current liabilities by major categories are summarized as follows:





September
      30,
                    
                    
                    December
      31,2009
                    
                    
                    2008Accruals
                    
                    $
                    782,494
                    
                    
                    $
                    1,687,143Other
      payables
                    
                    
                    1,523,501
                    
                    
                    
                    5,718,311$
                    2,305,995
                    
                    
                    $
                    7,405,454




13


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”).





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.




14


At
September 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; and (iii) the total number of authorized shares of
common stock of the Company would be 100,000,000 shares.  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.





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.




15


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. Except as set forth herein, 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.





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.




16


Certain
defendants in the Federal Court Action filed their First Amended Answer to the
SAC on August 17, 2009 (the “First Amended 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, conversion,
promissory estoppels and fraud relating to 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 is scheduled to answer the First Amended
Counterclaim on or before November 9, 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
or Counterclaims at this time, or to estimate the amount or range of a possible
loss.





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 September 30, 2009 are as follows:





2009
                
                $
                858,7662010
                
                
                3,350,4752011
                
                
                2,206,5832012
                
                
                1,919,7892013
                
                
                1,823,219Later
      years
                
                
                7,635,838$
                17,794,670





Rent
expense for the three months and nine months ended September 30, 2009 and 2008
was $1,104,167, $762,224, $3,378,340 and $2,109,189, 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 September 30,
2009, committed compensation to the executives and other key employees totaling
approximately $340,138 remain in effect.





17


NOTE
10. COMPREHENSIVE INCOME INFORMATION





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





China Premium Lifestyle Enterprise,
      Inc
                    common stockholdersAccumulated
      deficit
                  
                  
                  Accumulated
      other
                    comprehensive
      income
                  
                  
                  Noncontrolling
                    interests
                  
                  
                  Total(Unaudited)At
      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
                  
                  
                  
                  3,315,805Net
      loss
                  
                  
                  (1,826,728
                  )
                  
                  
                  -
                  
                  
                  
                  (719,315
                  )
                  
                  
                  (2,546,043
                  )Translation
      adjustments
                  
                  
                  -
                  
                  
                  
                  32,364
                  
                  
                  
                  34,337
                  
                  
                  
                  66,701At
      September 30, 2009
                  
                  $
                  (4,866,598
                  )
                  
                  $
                  286,220
                  
                  
                  $
                  5,416,841
                  
                  
                  $
                  836,463





China Premium Lifestyle Enterprise,
      Inc
                  common stockholdersAccumulated deficit
                
                
                Accumulated other
                  comprehensive income
                
                
                Noncontrolling
                  interests
                
                
                Total(Unaudited)At
      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
                
                
                
                5,820,117Net
      earnings
                
                
                383,784
                
                
                
                -
                
                
                
                796,958
                
                
                
                1,180,742Translation
      adjustments
                
                
                -
                
                
                
                (49,938
                )
                
                
                -
                
                
                
                (49,938
                )At
      September 30, 2008
                
                $
                34,417
                
                
                $
                198,507
                
                
                $
                6,717,997
                
                
                $
                6,950,921





(b)
Condensed consolidated statements of comprehensive income
(loss)/earnings





Three
      months ended
                      September
      30,
                    
                    
                    Nine
      months ended
                      September
      30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Net
      (loss) /earnings including noncontrolling interest
                    
                    $
                    (2,546,043
                    )
                    
                    $
                    1,180,742
                    
                    
                    $
                    (5,902,371
                    )
                    
                    $
                    2,344,216Other
      comprehensive income, net of tax:Translation
      adjustments
                    
                    
                    66,701
                    
                    
                    
                    (49,938
                    )
                    
                    
                    82,668
                    
                    
                    
                    79,615Comprehensive
      (loss) /earnings including noncontrolling interest
                    
                    
                    (2,479,342
                    )
                    
                    
                    1,130,804
                    
                    
                    
                    (5,819,703
                    )
                    
                    
                    2,423,831Comprehensive
      loss /(income) attributable to noncontrolling interest:Net
      loss /(income)
                    
                    
                    719,315
                    
                    
                    
                    (796,958
                    )
                    
                    
                    1,731,219
                    
                    
                    
                    (1,799,361
                    )Translation
      adjustments
                    
                    
                    (34,337
                    )
                    
                    
                    -
                    
                    
                    
                    (43,727
                    )
                    
                    
                    -Comprehensive
      (loss) /earnings attributable to China Premium Lifestyle Enterprise, Inc
      common stockholders
                    
                    $
                    (1,794,364
                    )
                    
                    $
                    333,846
                    
                    
                    $
                    (4,132,211
                    )
                    
                    $
                    624,470




18


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 nine months
ended September 30:





Three
      months ended September 30,2009 (Unaudited)
                
                Vehicles
                
                
                Fashion
                  Apparel
                
                
                Corporate
                
                
                Elimination
                
                
                ConsolidatedSalesExternal
      sales
                
                $
                29,833,320
                
                
                $
                299,423
                
                
                $
                -
                
                
                $
                -
                
                
                $
                30,132,743Inter-segment
      sales
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      sales
                
                
                29,833,320
                
                
                $
                299,423
                
                
                
                -
                
                
                
                -
                
                
                
                30,132,743ResultsOperating
      earnings/(loss)
                
                
                (1,231,196)
                
                
                
                (782,650)
                
                
                
                (348,917)
                
                
                
                -
                
                
                
                (2,362,763)Interest
      revenue
                
                
                2,244
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,244Interest
      expense
                
                
                (214,234)
                
                
                
                (4,396)
                
                
                
                -
                
                
                
                -
                
                
                
                (218,630)Other
      income
                
                
                32,803
                
                
                
                344
                
                
                
                -
                
                
                
                -
                
                
                
                33,147Loss
      before income taxes
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (2,546,002)Provision
      for income tax
                
                
                (41)
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (41)Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (2,546,043
                )




19





Nine
      months ended September 30,2009 (Unaudited)
                
                Vehicles
                
                
                Fashion
                  Apparel
                
                
                Corporate
                
                
                Elimination
                
                
                ConsolidatedSalesExternal
      sales
                
                $
                82,627,566
                
                
                $
                1,181,328
                
                
                $
                -
                
                
                $
                -
                
                
                $
                83,808,894Inter-segment
      sales
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      sales
                
                
                82,627,566
                
                
                $
                1,181,328
                
                
                
                -
                
                
                
                -
                
                
                
                83,808,894ResultsOperating
      loss
                
                
                (3,535,546)
                
                
                
                (1,726,119)
                
                
                
                (792,086)
                
                
                
                -
                
                
                
                (6,053,751)Interest
      revenue
                
                
                17,974
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                17,974Interest
      expense
                
                
                (606,357)
                
                
                
                (17,414)
                
                
                
                -
                
                
                
                -
                
                
                
                (623,771)Other
      income
                
                
                759,675
                
                
                
                27,797
                
                
                
                -
                
                
                
                -
                
                
                
                787,472Loss
      before income taxes
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (5,872,076)Provision
      for income tax
                
                
                (30,295)
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (30,295)Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (5,902,371
                )





Three
      months ended September 30,2008 (Unaudited)
                
                Vehicles
                
                
                Fashion
                  Apparel
                
                
                Corporate
                
                
                Elimination
                
                
                ConsolidatedSalesExternal
      sales
                
                $
                33,098,990
                
                
                $
                263,161
                
                
                $
                -
                
                
                $
                -
                
                
                $
                33,362,151Inter-segment
      sales
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      sales
                
                
                33,098,990
                
                
                $
                263,161
                
                
                
                -
                
                
                
                -
                
                
                
                33,362,151ResultsOperating
      earnings/(loss)
                
                
                1,407,241
                
                
                
                (368,663)
                
                
                
                (34,297)
                
                
                
                -
                
                
                
                1,004,281Interest
      revenue
                
                
                17,249
                
                
                
                11,958
                
                
                
                -
                
                
                
                -
                
                
                
                29,207Interest
      expense
                
                
                (145,912)
                
                
                
                (4,728)
                
                
                
                -
                
                
                
                -
                
                
                
                (150,640)Other
      income
                
                
                284,082
                
                
                
                13,812
                
                
                
                -
                
                
                
                -
                
                
                
                297,894Earnings
      before income taxes
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,180,742Provision
      for income tax
                
                
                
                -
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      earnings
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,180,742




20





Nine
      months ended September 30,2008 (Unaudited)
                
                Vehicles
                
                
                Fashion
                  Apparel
                
                
                Corporate
                
                
                Elimination
                
                
                ConsolidatedSalesExternal
      sales
                
                $
                85,422,560
                
                
                $
                634,348
                
                
                $
                -
                
                
                $
                -
                
                
                $
                86,056,908Inter-segment
      sales
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      sales
                
                
                85,422,560
                
                
                $
                634,348
                
                
                
                -
                
                
                
                -
                
                
                
                86,056,908ResultsOperating
      earnings/(loss)
                
                
                2,624,915
                
                
                
                (1,080,367)
                
                
                
                (121,375)
                
                
                
                -
                
                
                
                1,423,173Interest
      revenue
                
                
                59,684
                
                
                
                11,958
                
                
                
                -
                
                
                
                -
                
                
                
                71,642Interest
      expense
                
                
                (401,091)
                
                
                
                (10,269)
                
                
                
                -
                
                
                
                -
                
                
                
                (411,360)Other
      income
                
                
                1,244,651
                
                
                
                16,110
                
                
                
                -
                
                
                
                -
                
                
                
                1,260,761Earnings
      before income taxes
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,344,216Provision
      for income tax
                
                
                
                -
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      earnings
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,344,216





Vehicles
                        
                        
                        Fashion
                          Apparel
                        
                        
                        Corporate
                        
                        
                        Consolidated2009Total
      assets
                        
                        $
                        51,025,202
                        
                        
                        $
                        555,766
                        
                        
                        $
                        1,469,418
                        
                        
                        $
                        53,050,386Depreciation
      and amortization
                        
                        
                        878,961
                        
                        
                        
                        17,943
                        
                        
                        
                        -
                        
                        
                        
                        896,904Net
      capital expenditures
                        
                        
                        2,794,757
                        
                        
                        
                        7,879
                        
                        
                        
                        -
                        
                        
                        
                        2,802,6362008Total
      assets
                        
                        $
                        44,162,665
                        
                        
                        $
                        2,980,343
                        
                        
                        $
                        1,469,418
                        
                        
                        $
                        48,612,426Depreciation
      and amortization
                        
                        
                        555,398
                        
                        
                        
                        49,022
                        
                        
                        
                        -
                        
                        
                        
                        604,420Net
      capital expenditures
                        
                        
                        329,417
                        
                        
                        
                        250,017
                        
                        
                        
                        -
                        
                        
                        
                        579,434





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 nine months ended September
30:





Three months ended
                    September 30,
                  
                  
                  Nine months ended
                    September 30,Notes
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Sales
      to:-
      Affiliates
                  (a)
                  
                  $
                  1,572
                  
                  
                  $
                  6,892
                  
                  
                  $
                  191,008
                  
                  
                  $
                  22,611Purchases
      from:-
      Affiliates
                  (a)
                  
                  
                  41,530
                  
                  
                  
                  40,634
                  
                  
                  
                  143,256
                  
                  
                  
                  55,548-
      A director of Technorient
                  (a)
                  
                  
                  -
                  
                  
                  
                  600,000
                  
                  
                  
                  -
                  
                  
                  
                  600,000Interest
      received from:-
      Affiliates
                  (b)
                  
                  
                  164,875
                  
                  
                  
                  154,525
                  
                  
                  
                  478,995
                  
                  
                  
                  443,307Management
      fee paid to:-
      Affiliates
                  (c)
                  
                  
                  94,984
                  
                  
                  
                  -
                  
                  
                  
                  302,413
                  
                  
                  
                  -Management
      fee received from:-
      Affiliates
                  (c)
                  
                  
                  46,445
                  
                  
                  
                  46,146
                  
                  
                  
                  139,329
                  
                  
                  
                  138,519Service
      cost charged by:-
      Affiliates
                  (c)
                  
                  
                  578
                  
                  
                  
                  -
                  
                  
                  
                  10,912
                  
                  
                  
                  -Rental
      income received from:-
      Affiliates
                  (c)
                  
                  
                  -
                  
                  
                  
                  38,455
                  
                  
                  
                  77,404
                  
                  
                  
                  115,433Rental
      paid to:-
      Affiliate
                  (c)
                  
                  
                  4,203
                  
                  
                  
                  5,670
                  
                  
                  
                  12,519
                  
                  
                  
                  18,335Building
      management fee paid to:-
      Affiliate
                  (c)
                  
                  
                  851
                  
                  
                  
                  637
                  
                  
                  
                  2,553
                  
                  
                  
                  1,955Warehouse
      expenses paid to:-
      Affiliate
                  (c)
                  
                  
                  3,448
                  
                  
                  
                  -
                  
                  
                  
                  12,670
                  
                  
                  
                  -





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 during the second half 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.


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 dividend
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 our common stock.




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
September 30, 2009 and the condensed consolidated statements of operations
for the nine months ended September 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 ASC 718 “Compensation-Stock Compensation”, 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 ASC 740 “Income Taxes”, 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 earnings 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




NineMonths EndedSeptember30




Results
of operations - comparison of nine months ended September 30, 2009 to
nine months ended September 30, 2008:




SALES




Nine months ended
                              September 30, 2009
                            
                            
                            Nine months ended
                              September 30, 2008Total
                              Sales
                            
                            
                            % of
                              Total Sales
                            
                            
                            Total
                              Sales
                            
                            
                            % of
                              Total SalesSales:New
      vehicles
                            
                            $
                            61,144,000
                            
                            
                            
                            72.9
                            %
                            
                            $
                            66,768,000
                            
                            
                            
                            77.6
                            %Used
      vehicles
                            
                            $
                            16,072,000
                            
                            
                            
                            19.2
                            %
                            
                            $
                            14,033,000
                            
                            
                            
                            16.3
                            %Parts
      and services and others
                            
                            $
                            5,412,000
                            
                            
                            
                            6.5
                            %
                            
                            $
                            4,622,000
                            
                            
                            
                            5.4
                            %Fashion
      Apparel
                            
                            $
                            1,181,000
                            
                            
                            
                            1.4
                            %
                            
                            $
                            634,000
                            
                            
                            
                            0.7
                            %Total
                            
                            $
                            83,809,000
                            
                            
                            
                            100
                            %
                            
                            $
                            86,057,000
                            
                            
                            
                            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 nine months ended September 30, 2009 decreased by
approximately $2,248,000 or 2.6% to approximately $83,809,000, compared with
approximately $86,057,000 for the same period of 2008.




New
vehicles sales decreased approximately $5,624,000 or 8.4% from the
first nine months of 2008 compared to the same period of 2009,
while the quantity of new vehicles sold decreased 12.5% for the same period. The
used vehicles sales increased approximately $2,039,000 or 14.5% from the
first nine months of 2008 compared to the same period of 2009, while
the quantity of used vehicles sold increased by 43.3% 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 nine months ended September 30, 2009 increased to $74,521,000
from $72,089,000 for the nine months ended September 30, 2008, an increase
of $2,432,000 or 3.3%.





GROSS
PROFIT




Gross
profit margin for the nine months ended September 30, 2009 decreased by
5.1% from 16.2% for the same period of 2008 to 11.1% for the current period of
2009 and the gross profit decreased by $4,680,000 to $9,288,000 for the
nine months ended September 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 nine months ended September 30, 2009 were approximately $15,342,000,
compared to approximately $12,545,000 for the same period of 2008. The
approximate $2,797,000 increase in S,G&A expenses was primarily due to
increased rental and depreciation expenses, legal, professional and audit
fees.





Our
rent, rate, building management fees and depreciation expenses increased from
approximately $3,178,000 for the nine months ended September 30, 2008 to
$4,479,000 for the same period of 2009.  This increase is mainly due
to the continued development of the motor business. Legal, professional and
audit fees increased from $422,000 in the nine months ended September 30, 2008
to $1,131,000 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 nine months ended September 30, 2009 decreased to
approximately $182,000 compared to approximately $921,000 for the same period of
2008, a total decrease of $739,000. 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.  Interest expenses and other finance costs increased from
approximately $411,000 for the nine months ended September 30, 2008 to
approximately $624,000 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 EndedSeptember30





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





SALES


Three months ended
                            September 30, 2009
                          
                          
                          Three months ended
                            September 30, 2008Total
                            Sales
                          
                          
                          % of
                            Total Sales
                          
                          
                          Total
                            Sales
                          
                          
                          % of
                            Total SalesSales:New
      vehicles
                          
                          $
                          22,584,000
                          
                          
                          
                          74.9
                          %
                          
                          $
                          26,677,000
                          
                          
                          
                          80.0
                          %Used
      vehicles
                          
                          $
                          4,807,000
                          
                          
                          
                          16.0
                          %
                          
                          $
                          4,644,000
                          
                          
                          
                          13.9
                          %Parts
      and services and others
                          
                          $
                          2,442,000
                          
                          
                          
                          8.1
                          %
                          
                          $
                          1,778,000
                          
                          
                          
                          5.4
                          %Fashion
      Apparel
                          
                          $
                          299,000
                          
                          
                          
                          1.0
                          %
                          
                          $
                          263,000
                          
                          
                          
                          0.7
                          %Total
                          
                          $
                          30,132,000
                          
                          
                          
                          100
                          %
                          
                          $
                          33,362,000
                          
                          
                          
                          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 September 30, 2009 decreased by
approximately $3,230,000 or 9.7% to approximately $30,132,000, compared with
approximately $33,362,000 for the same period of 2008.




New
vehicles sales decreased approximately $4,093,000 or 15.3% from the
third quarter of 2008 to the same period of 2009, while the quantity
of new vehicles sold decreased 11.8% for the same period.  The used
vehicles sales increased approximately $163,000 or 3.5% from the
third quarter of 2008 to the same period of 2009, while the
quantity of used vehicles sold increased by 17.4% 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..




COST
OF SALES




Cost of
sales for the three months ended September 30, 2009 decreased to
$26,979,000 from $28,056,000 for the three months ended September 30, 2008; the
$1,077,000 or 3.8% decrease was consistent with the decrease in Company’s
revenues during the same period.




GROSS
PROFIT




Gross
profit margin for the three months ended September 30, 2009 decreased
by 5.4% from 15.9% for the same period of 2008, to 10.5% for the
current period of 2009, and the gross profit decreased by $2,152,000
to $3,154,000 for the three months ended September 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.




30


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 September 30, 2009 were approximately
$5,517,000, compared to approximately $4,302,000 for the same period of 2008.
The approximate $1,215,000 increase in S,G&A expenses was primarily due to
increased rental expenses, depreciation expenses, legal, professional and audit
fees.




Our rent,
rate, building management fees and depreciation expenses increased from
approximately $1,134,000 for the three months ended September 30, 2008 to
$1,516,000 for the same period of 2009, the increase in such fees were
mainly due to development of the motor business. Legal, professional and
audit fees increased from $184,000 in the three months ended September 30,
2008 to $316,000 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 (EXPENSES), NET




Other
expenses for the three months ended September 30, 2009 decreased to
approximately $183,000 compared to other income of approximately $176,000 for
the same period of 2008, a total decrease of $360,000. 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.  Interest expenses and other finance costs increased from
approximately $151,000 for the third quarter of 2008 to approximately
$219,000 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 $96,000 for the
nine months ended September 30, 2009, compared to generating cash resources
of approximately $2,083,000 for the nine months ended September 30, 2008,
primarily as a net result of the following:





            For
      the nine months ended September 30, 2009, cash flow provided by sales
      net of operating expenses decreased by approximately $7,568,000 to cash
      outflow of $4,724,000. The decrease was primarily as a result of the
      decrease in gross profit.





            For
      the nine months ended September 30, 2009, account receivables
      decreased by approximately $10,295,000, primarily due to the collection of
      account receivables relating to the sales recognized in the last three
      quarters and a decrease in orders for new and used
      automobiles.




31



            For
      the nine months ended September 30, 2009, our inventory increased by
      approximately $7,992,000, which was caused by overall
      unfavorable economic conditions, including a decline in consumer
      confidence.





            For
      the nine months ended September 30, 2009, the increase or decrease of
      various current operating assets and liabilities, included in the
      aforementioned items, resulted in an aggregate increase of cash inflow
      from operations of approximately
$4,629,000.




CASH
FLOWS FROM INVESTING ACTIVITIES




For the
nine months ended September 30, 2009, we expended net cash of approximately
$2,763,000 in investing activities mainly for the acquisition of property and
equipment to support the development of the motor business. For the
nine months ended September 30, 2008, we utilized approximately
$247,000 in investing activities, mainly for acquisition of property and
equipment.  The increase in the acquisition of property and equipment
was due to the inauguration of our second 3S (Sales, Service and Spare Parts)
Centre in the third quarter of 2009.




CASH
FLOWS FROM FINANCING ACTIVITIES




During
the nine months ended September 30, 2009, we repaid approximately $415,000
of our obligations owed on outstanding debt as compared to approximately
$547,000 for the nine months ended September 30, 2008.




For
the nine months ended September 30, 2009, we received approximately
$773,000 in net advances from affiliates. For the nine months ended
September 30, 2008, we received approximately $810,000 in net advances
from 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 September 30, 2009 by approximately
$2,958,000, a decrease of $6,457,000 from December 31, 2008. The ratio of our
current assets to our current liabilities was 1.07 to 1 at September 30,
2009 compared to 1.21 to 1 at December 31, 2008. At
September 30, 2009, our current assets of approximately $48,407,000
included approximately $20,632,000 in inventory that was funded by the operating
cash flow and trade finance facilities. Our current liabilities of approximately
$45,449,000 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
$23,864,000.




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.


32


EFFECT
OF FLUCTUATION IN FOREIGN EXCHANGE RATES




We
have no foreign exchange contracts.  Our financial instruments consist of
cash and cash equivalents, trade receivable and payables, bills payable,
other current assets, other current liabilities, and bank borrowings.  We
consider investments in highly liquid instruments purchased with a remaining
maturity of 90 days or less at the date of purchase to be cash equivalents.
However, in order to manage the foreign exchange risks, we may engage in hedging
activities to manage our financial exposure related to currency exchange
fluctuation. In these hedging activities, we might use fixed-price, forward and
option contracts when feasible.




While
our reporting currency is the U.S. dollar, to date virtually all of our revenues
and costs are denominated in Hong Kong Dollars and a significant portion of our
assets and liabilities is denominated in Hong Kong Dollars. As a result, we are
exposed to foreign exchange risk as our revenues and results of operations may
be impacted by fluctuations in the exchange rate between U.S. Dollars and Hong
Kong Dollars.  If the Hong Kong Dollar depreciates against the U.S. Dollar,
the value of our Hong Kong Dollar revenues and assets as expressed in our U.S.
Dollar financial statements will decline. Thus, our revenues and operating
results may be impacted by exchange rate fluctuations of the Hong Kong Dollar.
While we may choose to do so in the future, the availability and effectiveness
of any hedging transactions may be limited and we may not be able to
successfully hedge our exchange rate risks. Accordingly, we may experience
economic losses and negative impacts on earnings and equity as a result of
foreign exchange rate fluctuations. The effect of foreign exchange rate
fluctuation for the nine months ended September 30, 2009 was not material to
us.




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 September 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.


33


Based
on such evaluation, our CEO and CFO concluded that our disclosure controls and
procedures were effective as of September 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 September 30,
2009 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.




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 September 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 September 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.


34


Certain
defendants in the Federal Court Action filed their First Amended Answer to the
SAC on August 17, 2009 (the “First Amended Answer”).  Of those
defendants, Federico G. Cabo, Fred De Luca and Global Premium Brands Co., Inc. a
Nevada corporation, asserted a First Amended Counterclaim against the Company,
and others, for slander of title, conversion, promissory estoppels and fraud
relating to 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 is scheduled to answer the
First Amended Counterclaim on or before November 9, 2009.





In
addition, as more fully discussed in Note 8 to the Company’s Consolidated
Financial Statements (Unaudited) as of September 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.





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 September 30, 2009, there have been no matters required
to be disclosed in a report on Form 8-K but not reported, and no material
changes to the procedures by which security holders may recommend nominees to
the Company’s board of directors.


35


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).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 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 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:
      November 13, 2009
                  
                  By:
                  /s/ Richard Man Fai LeeRichard
      Man Fai LeeChief
      Executive OfficerDate:
      November 13, 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 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 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