**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, 2008




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. Yes x No o




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







Large
      Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o


Smaller
      Reporting Company x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x




The
      number of shares of Common Stock outstanding as of November 3, 2008 was
      29,104,110.










**CHINA
      PREMIUM LIFESTYLE ENTERPRISE, INC.**




**FORM
      10-Q**




**FOR
      THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008**




**TABLE
      OF CONTENTS**





**Page**PART
                I: FINANCIAL INFORMATION
            
            1Item
                1.
            Condensed
                Consolidated Financial Statements
            
            1Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            13Item
                3.
            Quantitative
                and Qualitative Disclosures about Market Risk
            
            28Item 4T.
            Controls
                and Procedures
            
            29PART
                II: OTHER INFORMATION
            
            30Item 1.
            Legal
                Proceedings
            
            30Item 1A.
            Risk
                Factors
            
            30Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            30Item
                3.
            Defaults
                Upon Senior Securities
            
            30Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            30Item
                5.
            Other
                information
            
            30Item
                6.
            Exhibits
            
            30**SIGNATURES**
            
            31**EXHIBITS**







**PART
      I:  FINANCIAL INFORMATION**




**Item
      1. Condensed Consolidated Financial Statements.**




CHINA
      PREMIUM LIFESTYLE ENTERPRISE, INC. AND SUBSIDIARIES




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS




AS
      OF
      SEPTEMBER 30, 2008 AND




FOR
      THE
      NINE MONTHS ENDED SEPTEMBER 30, 2008




1




**CHINA
      PREMIUM LIFESTYLE ENTERPRISE, INC. AND SUBSIDIARIES**




**CONDENSED
      CONSOLIDATED BALANCE SHEETS**





**September
                30,**
            
            
            **December
                31,****2008**
            
            
            **2007****(unaudited)****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            8,682,702
            
            $
            6,583,566Restricted
                cash
            
            
            1,158,734
            
            
            1,154,226Trade
                receivables, net of provision
            
            
            2,426,674
            
            
            10,440,455Inventory,
                net
            
            
            16,087,021
            
            
            9,162,934Prepayments
            
            
            3,008,559
            
            
            1,602,793Other
                current assets
            
            
            5,571,107
            
            
            2,931,877Amounts
                due from affiliates
            
            
            9,791,224
            
            
            10,226,161Total
                current assets
            
            
            46,726,021
            
            
            42,102,012Property
                and equipment, net
            
            
            1,846,761
            
            
            2,050,850Goodwill
            
            
            39,644
            
            
            39,436**TOTAL
                ASSETS**
            
            $
            48,612,426
            
            $
            44,192,298**LIABILITIES
                AND****STOCKHOLDERS’****EQUITY**Current
                liabilities:Short-term
                borrowings
            
            $
            6,688,824
            
            $
            5,274,838Obligations
                under finance lease - current portion
            
            
            -
            
            
            110,996Bills
                payable
            
            
            809,131
            
            
            2,659,191Trade
                payables
            
            
            3,562,236
            
            
            1,063,265Deposits
                received
            
            
            21,567,102
            
            
            16,306,698Other
                current liabilities
            
            
            1,496,919
            
            
            7,088,429Amounts
                due to affiliates
            
            
            1,832,636
            
            
            1,457,134**TOTAL
                LIABILITIES**
            
            
            35,956,848
            
            
            33,960,551Minority
                interests
            
            
            6,717,997
            
            
            4,918,636Commitments
                and ContingenciesStockholders'
                equityPreferred
                stockAuthorized:
                100,000,000 preferred stock, par value $0.001Issued
                and outstanding: 247,798 shares as at September 30, 2008; (495,791
                shares
                as at December 31, 2007)
            
            
            248
            
            
            496Common
                stockAuthorized:
                400,000,000 common stock, par value $0.005Issued
                and outstanding: 29,104,110 shares as at September 30, 2008; (24,534,491
                shares as at December 31, 2007)
            
            
            145,521
            
            
            122,672Additional
                paid-in-capital
            
            
            5,558,888
            
            
            5,581,489Accumulated
                other comprehensive income
            
            
            198,507
            
            
            118,892Retained
                earnings/(Accumulated deficit)
            
            
            34,417
            
            
            (510,438
            )**TOTAL
                STOCKHOLDERS’ EQUITY**
            
            
            5,937,581
            
            
            5,313,111**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            $
            48,612,426
            
            $
            44,192,298




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


2


**CHINA
      PREMIUM LIFESTYLE ENTERPRISE, INC. AND
      SUBSIDIARIES**




**CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)**





**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2008**
            
            
            **2007**
            
            
            **2008**
            
            
            **2007**Sales:New
                and used vehicles
            
            $
            31,321,200
            
            $
            24,819,562
            
            $
            80,800,209
            
            $
            64,290,343Parts
                and services and others
            
            
            2,040,951
            
            
            1,941,571
            
            
            5,256,699
            
            
            4,597,838**Net
                sales**
            
            
            33,362,151
            
            
            26,761,133
            
            
            86,056,908
            
            
            68,888,181Cost
                of sales:New
                and used vehicles
            
            
            (27,544,207
            )
            
            (21,862,921
            )
            
            (70,604,162
            )
            
            (57,008,236
            )Parts
                and services and others
            
            
            (512,122
            )
            
            (639,969
            )
            
            (1,484,782
            )
            
            (1,408,830
            )**Total
                cost of sales**
            
            
            (28,056,329
            )
            
            (22,502,890
            )
            
            (72,088,944
            )
            
            (58,417,066
            )Gross
                profit:New
                and used vehicles
            
            
            3,776,993
            
            
            2,956,641
            
            
            10,196,047
            
            
            7,282,107Parts
                and services and others
            
            
            1,528,829
            
            
            1,301,602
            
            
            3,771,917
            
            
            3,189,008**Total
                gross profit**
            
            
            5,305,822
            
            
            4,258,243
            
            
            13,967,964
            
            
            10,471,115Selling,
                general and administrative expenses
            
            
            (4,301,541
            )
            
            (3,453,237
            )
            
            (12,544,791
            )
            
            (9,066,006
            )**Operating
                earnings**
            
            
            1,004,281
            
            
            805,006
            
            
            1,423,173
            
            
            1,405,109Other
                incomeInterest
                expenses
            
            
            (150,640
            )
            
            (158,803
            )
            
            (411,360
            )
            
            (580,783
            )Share
                of result of an associate
            
            
            -
            
            
            (71,615
            )
            
            -
            
            
            (149,675
            )Other
                income
            
            
            327,101
            
            
            274,928
            
            
            1,332,403
            
            
            759,760Total
                other income
            
            
            176,461
            
            
            44,510
            
            
            921,043
            
            
            29,302**Earnings
                before minority interests and income taxes**
            
            
            1,180,742
            
            
            849,516
            
            
            2,344,216
            
            
            1,434,411Provision
                for income taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -**Earnings
                before minority interests**
            
            
            1,180,742
            
            
            849,516
            
            
            2,344,216
            
            
            1,434,411Minority
                interests
            
            
            (796,958
            )
            
            (539,044
            )
            
            (1,799,361
            )
            
            (995,340
            )**Net
                earnings**
            
            $
            383,784
            
            $
            310,472
            
            $
            544,855
            
            $
            439,071**Earnings
                per share****Basic**
            
            $
            0.0132
            
            $
            0.0127
            
            $
            0.0197
            
            $
            0.0243**Diluted**
            
            $
            0.0114
            
            $
            0.0092
            
            $
            0.0169
            
            $
            0.0161Weighted
                average number of common stock outstandingBasic
            
            
            29,104,110
            
            
            24,534,443
            
            
            27,719,882
            
            
            18,057,181Diluted
            
            
            33,673,729
            
            
            33,673,679
            
            
            32,289,501
            
            
            27,196,417




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


3




**CHINA
      PREMIUM LIFESTYLE ENTERPRISE, INC. AND
      SUBSIDIARIES**




**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**





**Nine
                months ended**
              **September
                30,****2008**
            
            
            **2007****Operating
                activities:**Net
                earnings
            
            $
            544,855
            
            $
            439,071Adjustments
                to reconcile net earnings to net cash provided by operating
                activitiesMinority
                interests
            
            
            1,799,361
            
            
            995,340Depreciation
                and amortization
            
            
            604,420
            
            
            525,599(Bad
                debts written back)/provision for bad debts and bad debts written
                off
            
            
            (26,144
            )
            
            80,646Provision
                for inventory written back
            
            
            -
            
            
            (8,965
            )Equity
                earnings of an associate
            
            
            -
            
            
            149,675Other
                non-cash items
            
            
            51,961
            
            
            28,472Disposal
                of property and equipment
            
            
            (130,130
            )
            
            (1,601
            )Changes
                in operating assets and liabilities:Trade
                receivables
            
            
            8,039,925
            
            
            7,794,197Other
                current assets and prepayments
            
            
            (4,044,996
            )
            
            (196,756
            )Inventory
            
            
            (6,924,087
            )
            
            (5,019,231
            )Trade
                payables
            
            
            2,498,971
            
            
            1,017,991Other
                current liabilities and deposits received
            
            
            (331,106
            )
            
            3,687,620Net
                cash provided by operating activities
            
            
            2,083,030
            
            
            9,492,058**Investing
                activities:**Increase
                in restricted cash
            
            
            -
            
            
            (129,311
            )Purchases
                of property and equipment
            
            
            (579,434
            )
            
            (149,666
            )Proceeds
                from disposal of property and equipment
            
            
            332,170
            
            
            16,092Net
                cash used in investing activities
            
            
            (247,264
            )
            
            (262,885
            )**Financing
                activities:**Advances
                from/(to) affiliates
            
            
            810,440
            
            
            (5,746,286
            )Advances
                to an associate
            
            
            -
            
            
            (394,089
            )Decrease
                in borrowings and bills payable
            
            
            (547,070
            )
            
            (2,567,245
            )Net
                cash provided by/(used in) financing activities
            
            
            263,370
            
            
            (8,707,620
            )Increase
                in cash and cash equivalents
            
            
            2,099,136
            
            
            521,553Cash
                and cash equivalents at beginning of the period
            
            
            6,583,566
            
            
            3,475,635Cash
                and cash equivalents at end of the period
            
            $
            8,682,702
            
            $
            3,997,188**Supplemental
                disclosure of cash flows information:**Cash
                paid for:Interest
            
            $
            411,360
            
            $
            580,783




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


4


**CHINA
      PREMIUM LIFESTYLE ENTERPRISE, INC. AND SUBSIDIARIES**




**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**NOTE
      1. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES**




*Basis
      of presentation*




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




The
      condensed consolidated financial statements are unaudited and, in our opinion,
      include all adjustments, consisting of normal recurring adjustments and accruals
      necessary for a fair representation of our condensed consolidated balance
      sheets, operating results, and cash flows for the periods presented. Operating
      results for the periods presented are not necessarily indicatives of the results
      that may be expected for 2008. Certain information and footnote disclosures
      normally included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been
      condensed or omitted in accordance with the rules and regulations of the
      Securities and Exchange Commission (the “SEC”). The condensed consolidated
      financial statements should be read in conjunction with the audited consolidated
      financial statements and accompany notes included in the 2007 annual report
      on
      Form 10-K.




*Use
      of estimates*




The
      preparation of the condensed consolidated financial statements requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and the disclosure of contingent assets and liabilities
      at the date of the condensed consolidated financial statements, and the reported
      amounts of revenue and expenses during the reporting periods. Management makes
      it 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
      per share*




Basic
      earnings per share is computed by dividing net operating results for the
      reporting period attributable to common stockholders by the weighted average
      number of common stocks 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 common
      stocks outstanding and the dilutive effect of common stock equivalents.




5


*Segment
      reporting*




The
      Company determines and classified its operating segments in accordance SFAS
      No.
      132 Disclosures About Segments of An Enterprise and Related Information. The
      Company identified and classifies its operating segments based on the nature
      of
      the products and services with similar economic characteristics. The Company’s
      reportable segment is motor vehicles retailing, which includes sales of new
      and
      used vehicles, provision of vehicle maintenance and repair services, and sales
      of vehicle parts.




*Warranty
      Claims, Purchase Discounts, Rebates or Sales Discounts and
      Returns*




The
      motor
      vehicles and parts the Company sells have a limited warranty policy provided
      by
      the manufacturers. The warranty is limited in terms of number of parts and
      services covered by the warranty policy and the duration of the warranty period.
      The Company does not offer any purchase discount or rebate due to the unique
      brand of the motor vehicle the Company sells. Sales discounts are charged to
      earnings in the period which the sales discount is incurred. For the nine months
      ended September 30, 2008 and 2007, the total sales discounts charged to
      earnings were $184,208 and $66,079 respectively. The Company bears the cost
      of
      any returns of the spare parts that are not covered by the manufacturer. The
      costs are charged to earnings in the period which the returns are
      incurred.




*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.




**NOTE
      2. CONCENTRATION OF RISK**




*Concentration
      of supplier risk*




Our
      Company relies on supplies from numerous vendors. For the three months and
      nine
      months ended September 30, 2008 and 2007, the Company had two vendors that
      each
      accounted for more than 10% of total supply purchases. If any of the vendors
      terminate their relationships with our Company or if our Company’s supply from
      the vendors is interrupted or terminated for any reason, we may not have
      sufficient time to replace the supply of products from the remaining vendors.
      Any such interruption would negatively impact our ability to sell and distribute
      our products. In addition, the suppliers’ concentration of risk pose effect to
      the concentration of risk with respect to trade payables as the Company has
      made
      certain of the purchases through credits provided by vendors.




*Concentration
      of risk due to geographic location*




Our
      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 is currently expanding
      its
      operations to People Republic of China (“PRC”), and accordingly, is affected to
      a significant degree by any economic, political and legal developments in Hong
      Kong and PRC.




6


**NOTE
      3. RECENT ACCOUNTING PRONOUNCEMENTS**




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




In
      February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
      Assets and Financial Liabilities - Including an amendment of FASB Statement
      No.
      115 (“SFAS 159”), which is effective for the Company beginning January 1, 2008.
      This standard permits entities to choose to measure many financial instruments
      and certain other items at fair value and consequently report unrealized gains
      and losses on such items in earnings. The Company has elected not to adopt
      the
      fair value provisions of SFAS 159 and the adoption of SFAS 159 did not have
      a
      significant impact of its financial position, cash flows and results of
      operations.




In
      December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations
      (“SFAS 141(R)”). SFAS 141(R) establishes principles and requirements for how an
      acquirer recognizes and measures in its financial statements the identifiable
      assets acquired, the liabilities assumed, any noncontrolling interest in the
      acquiree and the goodwill acquired. SFAS 141(R) also establishes disclosure
      requirements to enable the evaluation of the nature and financial effects of
      the
      business combination. SFAS 141(R) will be effective for financial statements
      issued for fiscal years beginning after December 15, 2008, and will be adopted
      by the Company beginning in the first quarter of 2009. The Company does not
      expect there to be any significant impact of adopting SFAS 141(R) on its
      financial position, cash flows and results of operations.




In
      December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
      Consolidated Financial Statements - an amendment of Accounting Research Bulletin
      No.51 (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for
      ownership interests in subsidiaries held by parties other than the parent,
      the
      amount of consolidated net income attributable to the parent and to the
      noncontrolling interest, changes in a parent’s ownership interest, and the
      valuation of retained noncontrolling equity investments when a subsidiary is
      deconsolidated. SFAS 160 also establishes disclosure requirements that clearly
      identify and distinguish between the interests of the parent and the interests
      of the noncontrolling owners. SFAS 160 will be effective for financial
      statements issued for fiscal years beginning after December 15, 2008, and will
      be adopted by the Company beginning in the first quarter of 2009. The Company
      does not expect there to be any significant impact of adopting SFAS 160 on
      its
      financial position, cash flows and results of operations.




7


In
      March
      2008, the FASB issued SFAS No. 161, Disclosures about Derivative
      Instruments and Hedging Activities (“SFAS 161”). SFAS 161 is intended
      to improve financial reporting about derivative instruments and hedging
      activities by requiring enhanced disclosures to enable investors to better
      understand their effects on an entity’s financial position, financial
      performance, and cash flows. SFAS 161 achieves these improvements by
      requiring disclosure of the fair values of derivative instruments and their
      gains and losses in a tabular format. It also provides more information about
      an
      entity’s liquidity by requiring disclosure of derivative features that are
      credit risk-related. Finally, it requires cross-referencing within footnotes
      to
      enable financial statement users to locate important information about
      derivative instruments. SFAS 161 will be effective for financial statements
      issued for fiscal years and interim periods beginning after November 15,
      2008, and will be adopted by the Company beginning in the first quarter of
      2009. The Company does not expect there to be any significant impact of adopting
      SFAS 161 on its financial position, cash flows and results of
      operations.




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




**NOTE
      4. EARNINGS PER SHARE**




The
      computations of basic and diluted earnings per share are as follows for the
      three months and nine months ended September 30, 2008 and 2007:





**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2008**
            
            
            **2007**
            
            
            **2008**
            
            
            **2007****Numerator:**Net
                earnings available to common shareholders
            
            $
            383,784
            
            $
            310,472
            
            $
            544,855
            
            $
            439,071**Denominator:**Weighted
                average common stock outstanding
            
            
            29,104,110
            
            
            24,534,443
            
            
            27,719,882
            
            
            18,057,181Effect
                of dilutive preferred stock
            
            
            4,569,619
            
            
            9,139,236
            
            
            4,569,619
            
            
            9,139,236Weighted
                average common stock and dilutive potential common stock
            
            
            33,673,729
            
            
            33,673,679
            
            
            32,289,501
            
            
            27,196,417Basic
                net earnings per share
            
            $
            0.0132
            
            $
            0.0127
            
            $
            0.0197
            
            $
            0.0243Diluted
                net earnings per share
            
            $
            0.0114
            
            $
            0.0092
            
            $
            0.0169
            
            $
            0.0161




On
      December 7, 2007, the Company effected a reverse stock split pursuant to which
      each five outstanding shares of common stock, par value $0.001, were
      automatically converted into one share of common stock, par value $0.005 (the
      “Reverse Stock Split”). All of the share number, share prices and per-share
      amounts have been adjusted, on a retroactive basis, to reflect the effect of
      the
      Reverse Stock Split.




8


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




**NOTE
      5. INVENTORY, NET**




Inventory
      by major categories are summarized as follows:




**September
                30,**
            
            
            **December
                31,****2008**
            
            
            **2007**New
                vehicles
            
            $
            7,044,169
            
            $
            3,364,857Used
                vehicles
            
            
            5,325,962
            
            
            4,179,732Parts,
                accessories and others
            
            
            3,716,890
            
            
            1,618,345$
            16,087,021
            
            $
            9,162,934




Vehicles
      included in inventory of approximately $2,159,000 and $2,091,150 were pledged
      to
      secure the stocking loan outstanding as of September 30, 2008 and December
      31,
      2007, respectively (See Note 6).




**NOTE
      6. BORROWINGS**




The
      Company's borrowings are summarized as follows:




**September
                30,**
            
            
            **December
                31,****2008**
            
            
            **2007**Bank
                borrowings
            
            $
            4,791,552
            
            $
            3,307,597Stocking
                loans
            
            
            1,897,272
            
            
            1,967,241Obligations
                under finance lease
            
            
            -
            
            
            110,996Short-term
                borrowings
            
            $
            6,688,824
            
            $
            5,385,834




Vehicles
      included in inventory of approximately $2,159,000 and $2,091,150 were pledged
      to
      secure the stocking loan outstanding as of September 30, 2008 and December
      31,
      2007, respectively. The finance lease outstanding as of December 31, 2007 was
      secured by motor vehicles included in property and equipment with a carrying
      value of approximately $239,041.




The
      weighted average interest rate on short-term borrowings as of September 30,
      2008
      and December 31, 2007 were 5.5% and 8.5% respectively.




**NOTE
      7. OTHER CURRENT LIABILITIES**




Other
      current liabilities by major categories are summarized as follows:




**September
                30,**
            
            
            **December
                31,****2008**
            
            
            **2007**Accruals
            
            $
            1,098,702
            
            $
            1,067,884Other
                payables
            
            
            398,217
            
            
            6,020,545$
            1,496,919
            
            $
            7,088,429




9




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**




*General*




The
      Company’s total authorized capital at September 30, 2008, is 500,000,000 shares
      of which 400,000,000 shares are common stock of par value $0.005 and 100,000,000
      shares are preferred stock of par value $0.001. At September 30, 2008,
      29,104,110 shares of common stock and 247,798 shares of preferred stock,
      respectively, were issued and outstanding.




*Common
      stock*




On
      March
      24, 2008, the Company issued 4,569,619 shares of restricted common stock as
      a
      preferred stockholder converted 247,798 shares of the Company’s Series A
      Preferred Stock into 4,569,619 shares of restricted common stock at a conversion
      ratio of 1 Series A Preferred Stock to 18.4409 shares of common
      stock.




*Preferred
      stock*




The
      movement of the preferred stock during the nine months ended September 30,
      2008
      is stated in the common stock section above.




**NOTE
      9. COMMITMENTS AND CONTINGENT LIABILITIES**




*Litigation,
      Claims and Assessments*




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




*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, 2008 are as follows:





2008
            
            $
            740,8082009
            
            
            3,192,4772010
            
            
            2,295,9742011
            
            
            745,2092012
            
            
            586,707$
            7,561,175




10




Rent
      expenses for the three months and nine months ended September 30, 2008 and
      2007
      were $762,224, $317,974, $2,109,189 and $916,638, respectively.




*Employment
      Agreements*




The
      Company maintains employment agreements with its executive officers, which
      extend through 2007 to 2008. The agreements provide for a base salary, annual
      bonus to be determined by the Board of Directors, termination payments, stock
      options, non-competition provisions, 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, 2008,
      committed compensation to the executives and other key employees totaling
      approximately $32,000 remain in effect.




**NOTE
      10. COMPREHENSIVE INCOME**




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




**Three
                months ended**
              **September
                30,**
            **Nine
                months ended**
              **September
                30,****2008**
            
            
            **2007**
            
            
            **2008**
            
            
            **2007**Comprehensive
                income :Net
                earnings
            
            $
            383,784
            
            $
            310,472
            
            $
            544,855
            
            $
            439,071Translation
                adjustments
            
            
            (49,938
            )
            
            70,201
            
            
            79,615
            
            
            162,403Total
                comprehensive income, net of taxes
            
            $
            333,846
            
            $
            380,673
            
            $
            624,470
            
            $
            601,474




**NOTE
      11. 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
            
            
            **2008**
            
            
            **2007**
            
            
            **2008**
            
            
            **2007**Sales
                to:-
                Affiliates
            
            
            (a)
            
            
            6,892
            
            
            191,174
            
            
            22,611
            
            
            200,084-
                A
                related company
            
            
            (b)
            
            
            -
            
            
            -
            
            
            -
            
            
            394,847Purchases
                from:-
                Affiliates
            
            
            (a)
            
            
            40,634
            
            
            110,422
            
            
            55,548
            
            
            115,981-
                An associate
            
            
            (a)
            
            
            -
            
            
            3,162,986
            
            
            -
            
            
            5,389,418-
                A
                director of Technorient
            
            
            (a)
            
            
            600,000
            
            
            -
            
            
            600,000
            
            
            172,926Interest
                received from:-
                Affiliates
            
            
            (c)
            
            
            154,525
            
            
            174,125
            
            
            443,307
            
            
            449,519Management
                fee income from:-
                Affiliates
            
            
            (d)
            
            
            46,146
            
            
            38,404
            
            
            138,519
            
            
            115,260




11




Service
                fee from:-
                An associate
            
            
            (d)
            
            
            -
            
            
            238,593
            
            
            -
            
            
            498,917Rental
                income received from:-
                Affiliates
            
            
            (d)
            
            
            38,455
            
            
            -
            
            
            115,433
            
            
            -Rental
                paid to:-
                Affiliate
            
            
            (d)
            
            
            5,670
            
            
            -
            
            
            18,335
            
            
            -Building
                management fee paid to:-
                Affiliate
            
            
            (d)
            
            
            637
            
            
            -
            
            
            1,955
            
            
            -




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
                transaction with a related company, which was under common management
                by a
                common director of Technorient, was carried out at market price or,
                where
                no market price was available, at cost plus a percentage profit
                mark-up.


(c)
            The
                loans advance to an affiliates are unsecured, bear interest at 5.5%
                (2007:
                8.5%) per annum and repayable on demand.


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


12




**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.
      China Premium Lifestyle Enterprise, Inc. is referred to herein as “we” or “our.”
The words or phrases “would be,” “will allow,” “intends to,” “will likely
      result,” “are expected to,” “will continue,” “is anticipated,” “estimate,”
“project,” 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 AND HISTORY**




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 private limited liability company incorporated in Hong Kong. The
      business of the subsidiaries of Technorient Limited consists mainly of
      importation, distribution, and after-sale service of Italian “Ferrari” and
“Maserati” branded cars and spare parts in Hong Kong, Macau and China. The
      Company is also planning to import, distribute and sell premium brand apparel
      and other luxury brand products in Hong Kong, Macau, China and
      Taiwan.




The
      Company was originally formed in the State of Nevada on April 19, 2004 under
      its
      predecessor name, Xact Aid, Inc. On April 30, 2004, the Company issued 1,000
      shares of our common stock (representing all of its issued and outstanding
      shares) to Addison-Davis Diagnostics, Inc. (f/k/a QT5, Inc.), a Delaware
      corporation ("Addison-Davis"), in consideration of Addison-Davis advancing
      start-up and operating capital.




13


On
      November 15, 2004, the Company acquired the Xact Aid line of first aid products
      for minor injuries from Addison-Davis in accordance with an Agreement of Sale
      and Transfer of Assets entered into between the Company and Addison-Davis.
      The
      assets acquired were, including all goodwill appurtenant thereto, (a) inventory;
      (b) confidential and proprietary information relating to the Xact Aid products;
      (c) Seller’s domain names including source codes, user name and passwords; (d)
      all designs and copyrights in connection with the Trademark; and (e) all records
      and materials relating to suppliers and customer list. In full consideration
      for
      all the acquired assets, the Company agreed to (i) repay funds advanced by
      Addison-Davis for the Company’s operating expenses from inception to September
      30, 2004, which were repaid in November 2004 and December 2004; (ii) assume
      a
      promissory note issued to Xact Aid Investments and (iii) issue to Addison-Davis
      2,000,000 shares of the Company’s common stock.




From
      the
      Company’s inception to May 9, 2005, the date that the Company was spun-off from
      Addison-Davis, Addison-Davis was the Company’s sole stockholder and as such the
      Company was a wholly-owned subsidiary of Addison-Davis and it was included
      in
      the consolidated financial statements filed by Addison-Davis with the Securities
      and Exchange Commission (the “SEC”).




On
      December 22, 2005, the Company entered into a transaction divesting itself
      of
      certain assets because the Company, in management’s opinion, could not
      attract capital to successfully exploit, in return for the assumption of certain
      liabilities, a guarantee to pay another significant liability, and all of the
      common stock of a development stage company. The Company acquired one hundred
      percent (100%) of the issued and outstanding shares of Brooke Carlyle Life
      Sciences, Inc., a Nevada corporation ("Brooke Carlyle), a development stage
      company with a business plan to develop an online Internet portal containing
      information on sexually transmitted diseases, generating revenue from
      advertising from pharmaceutical companies. In accordance with the terms of
      the
      acquisition, the Company agreed to: (i) sell, assign and transfer to Brooke
      Carlyle any and all of its rights title and interests in connection with the
      License Agreement and the Patent Assignment; (ii) sell, assign and transfer
      the
      Xact Aid line of first aid products for minor injuries, including all its
      related rights, titles and inventory; (iii) transfer a rental security deposit
      receivable in the amount of $225; and (iv) transfer certain notes receivable
      to
      Brooke Carlyle in the aggregate amount of $20,000. In consideration, Brooke
      Carlyle: (i) assumed various liabilities payable by the Company in the aggregate
      amount of $102,488; (ii) guaranteed payment of the Company’s $950,000 promissory
      note payable in connection with the Patent Pending Assignment; and (iii) issued
      to the Company One Million (1,000,000) shares of Brooke Carlyle common
      stock.




The
      Company’s management team then determined that it was no longer in the best
      interests of the Company and its stockholder to continue pursuing sales and
      marketing efforts for the wound-specific first aid kit line of products. In
      an
      effort to bring revenues and profitable operations to the Company, management
      sought to effect a transaction that would attract a viable business operation
      and liquidate its liabilities. As a result of such decisions, on March 3, 2006,
      the Company entered into a non-binding letter of intent ("Letter of Intent")
      with Technorient Limited, a Hong Kong corporation ("Technorient") for a proposed
      acquisition of an interest in Technorient via a share exchange by and among
      the
      Company and Technorient and Technorient’s shareholders. On May 4, 2006, in order
      to satisfy certain provisions in the Share Exchange Agreement described below
      with Technorient, the Company entered into a Stock Purchase Agreement (the
      "Agreement") with Nexgen Biogroup, Inc. ("Nexgen"), for the sale of the
      1,000,000 shares (the "Shares") of the common stock of Brooke Carlyle held
      by the Company, which at that time represented all or substantially all of
      the
      assets of the Company, for $1,000 cash, representing a consideration of $.001
      per share of Brooke Carlyle, Brooke Carlyle's par value per Share (the "Sale").
      In accordance with the terms of the Agreement, the Company agreed to: (i) sell,
      assign and transfer to Nexgen any and all of its rights, title and interests
      in
      Brooke Carlyle; and (ii) transfer to Nexgen 1,000,000 shares of Brooke Carlyle
      common stock. Further, on April 7, 2006, in order to satisfy certain provisions
      of the Share Exchange Agreement described below, the Company amended its
      Articles of Incorporation to provide for the authorization of 100,000,000 shares
      of preferred stock.




14


On
      June
      9, 2006, the Company entered into a share exchange agreement (the "Exchange
      Agreement") with Technorient, Fred De Luca, a director of the Company, Corich
      Enterprises Inc., a British Virgin Islands corporation ("Corich"), and Herbert
      Adamczyk (collectively the “parties”). Subsequently, on July 15, 2006, the
      parties entered into an amended share exchange agreement, which agreement
      replaced in its entirety and superseded the Exchange Agreement. We refer to
      this
      share exchange agreement, as amended and restated, as the Amended Exchange
      Agreement. Pursuant to the terms of the Amended Exchange Agreement, the Company
      agreed to acquire from Corich and Mr. Adamczyk (the "Sellers") 49% of the
      outstanding capital stock of Technorient in exchange for the Company issuing
      to
      the Sellers and Orient Financial Services Ltd. ("OFS") 972,728 shares of Series
      A Convertible Preferred Stock (the "Series A Preferred Shares") (this share
      exchange transaction is hereinafter referred to as the "Exchange"). The 972,728
      Series A Preferred Shares were convertible into approximately 89,689,881 shares
      of common stock, which on an as-converted basis represented 53.5% of the
      outstanding common stock of the Company on a fully diluted basis, taking into
      account the Exchange.




As
      of
      August 31, 2006, the Company had 21,629,339 outstanding shares of common stock.
      The Company’s Articles of Incorporation provided for authorized capital of two
      hundred million shares (200,000,000) of which one hundred million (100,000,000)
      were $0.001 par value common stock and one hundred million (100,000,000) are
      $0.001 par value preferred stock. Prior to the Exchange, Federico G. Cabo,
      a
      director, owned 3,000,000 shares of common stock, and Mr. De Luca, secretary
      and
      director, owned 6,000,000 shares of common stock. Pursuant to the Exchange,
      the
      Company cancelled the 9,000,000 shares of common stock owned by Messrs. De
      Luca
      and Cabo (the "Share Cancellations").




On
      September 5, 2006, pursuant to the Amended Exchange Agreement and after all
      of
      the conditions precedent to closing were satisfied, Corich and Mr. Adamczyk,
      as
      shareholders of Technorient, transferred 49% of the outstanding capital stock
      of
      Technorient on a fully diluted basis to the Company in exchange for the 972,728
      Series A Preferred Shares. Pursuant to the terms of the Amended Exchange
      Agreement, there were approximately 167,644,553 shares of common stock issued
      and outstanding after giving effect to (a) the Exchange, (b) the share
      cancellations, debt conversions and the issuance of the consulting shares
      pursuant to the Amended Exchange Agreement, and (c) assuming the full conversion
      of the Series A Preferred Shares. As a result of the Exchange, the Company
      became a 49% shareholder of Technorient. Additionally, as a condition to the
      Exchange, the Company completed the sale of all the capital stock of Brooke
      Carlyle, which prior to the Exchange constituted all of the Company’s assets,
      for $1,000 cash to Nexgen.




15


In
      connection with the Exchange, the Company issued (i) to Corich and Mr. Adamczyk
      an aggregate of 972,728 shares of the Series A Preferred Shares in exchange
      for
      49% of the issued and outstanding shares of Technorient, (ii) 561,245 shares
      of
      Series A Preferred Shares to Happy Emerald Limited, a British Virgin Islands
      company, for consulting services to be provided to Technorient after the
      Exchange, and (iii) an aggregate of 21,629,337 shares of common stock in
      connection with certain conversions of outstanding debt. As a result, after
      giving effect to the Exchange, the debt conversions, the issuance of shares
      to
      Happy Emerald, the issued and outstanding shares of the Company’s common stock
      on a fully diluted, as converted basis was 167,644,553 shares.




After
      the
      closing of the Exchange, the Company’s main business is its 49% ownership
      interest in Technorient.




On
      December 27, 2006, the Company effected an increase in the number of the
      Company’s authorized shares of capital stock from 200,000,000 to 500,000,000
      total authorized shares of capital stock, and a corporate name change through
      the filing of a Certificate of Amendment to the Company’s Articles of
      Incorporation with the State of Nevada’s Secretary of State. As of such date the
      Company’s authorized capital stock consisted of 400,000,000 authorized shares of
      common stock, $0.001 par value per share, and 100,000,000 authorized shares
      of
      preferred stock, with a par value $0.001 per share. The Company also
      concurrently effected a change of the Company’s corporate name to “China Premium
      Lifestyle Enterprise, Inc.” The Company name change and its new trading symbol
      (OTCBB: CPMM) became effective on the OTC Bulletin Board on December 28,
      2006.




In
      March
      2007, the Company entered into an agreement with Falber Confezioni, S.r.l.
      to
      become the sole importer and distributor of John Richmond, Richmond X and
      Richmond Denim clothing for men and women in Hong Kong, Macau, Taiwan and in
      China commencing in the Spring/Summer season of 2008 and ending in the
      Fall/Winter season of 2012.




On
      April
      3, 2007, the Company established a wholly owned subsidiary named CPMM (Asia)
      Limited (f/k/a Leader Mount Limited), a limited liability company organized
      under Hong Kong Law (“CPMM Asia”). CPMM Asia is principally engaged in the
      distribution of luxury brand apparel.




On
      July
      10, 2007, the Company entered into a Non-binding Letter of Intent with Keyforce
      (BVI) Limited (“Keyforce (BVI)”) (the “Letter of Intent”), a subsidiary of Wo
      Kee Hong (Holdings) Limited of Hong Kong, to begin negotiations to acquire
      from
      Keyforce (BVI) its luxury yacht distribution business. Keyforce (BVI) is the
      sole shareholder of Keyforce Holdings Limited (“Keyforce Holdings”) and Noble
      Brand Investments Limited (“Noble Brand”). Keyforce Holdings is engaged in the
      distribution of luxurious Italian “Ferretti” motor yachts in China while Noble
      Brand distributes Taiwanese produced “Horizon” motor yachts in China, Hong Kong
      and Macau. The Letter of Intent expired on January 9, 2008. As of the date
      of
      filing of this Form 10Q, no binding agreements had been entered into, but
      discussions remain ongoing.




16


On
      December 7, 2007, the Company filed a Certificate of Change Pursuant to Nevada
      Revised Statutes §78.209 with the Nevada Secretary of State to effect a reverse
      stock split pursuant to which each five outstanding shares of common stock,
      par
      value $0.001, were automatically converted into one share of common stock,
      par
      value $0.005, and the total number of shares of our common stock outstanding
      was
      reduced from 122,672,214 shares to 24,534,491 shares. No change was made in
      the
      number of the Company’s authorized shares. No script or fractional share
      certificates were issued in connection with the stock split. Stockholders
      received a number of shares of new common stock rounded up to the nearest whole
      number in lieu of fractional interests resulting from the stock
      split. Following the stock split, the Company’s common shares began trading
      under the new ticker symbol (OTCBB: CPLY).




The
      conversion price of the Series A Preferred Shares was adjusted up by the
      one-to-five ratio from $0.04338 to $0.2169 per share, and the conversion ratio
      of shares of common stock issued upon conversion of the Series A Preferred
      Shares was proportionately decreased from 92.2045 shares of common stock per
      one
      share of Series A Preferred Shares to 18.4409 shares of new common stock per
      one
      share of Series A Preferred Shares.




Each
      stockholder’s percentage ownership interest in the company and proportional
      voting power remained unchanged after the stock split except for adjustments
      resulting from post-split rounding of fractional interests. The rights and
      privileges of the holders of common stock were substantially unaffected by
      the
      stock split.




On
      April
      24, 2008, the Company adopted a Code of Business Conduct and Ethics applicable
      to its employees, officers and directors.




**TECHNORIENT
      OVERVIEW**




Technorient
      is a private limited liability company incorporated 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 by Mr. Adamczyk as German
      Motors, Technorient was formed as the holding company for Auto Italia, IML
      and
      German Motors in 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. This new entity currently does not have
      any operations.




17


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 six 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.




King
      Express has been appointed as exclusive distributor by “AgustaWestland”
helicopters for Hong Kong and Macau for the complete fleet of “AgustaWestland ”
commercial helicopters. 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
      likely arrival of the first helicopter anticipated at the beginning of
      2010.




**CPMM
      (ASIA) OVERVIEW**




On
      January 18, 2008, CPMM Asia, a wholly-owned subsidiary of the Company, 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 grants 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 “John Richmond,” “Richmond,” “Richmond X,” and
“Richmond Denim” marks (collectively, the “Signs”) in China, Hong Kong, Macau
      and Taiwan (the “Exclusivity Area”), which Products will be supplied by Falber.
      In addition, CPMM Asia has the right to use the Signs, and open and manage
      in
      the Exclusivity Area mono-brand shops identified by the Signs for the sale
      of
      the Products and other articles identified by the Signs. CPMM Asia also has
      the
      right to sublicense these rights to third parties. The first mono brand shop
      of
“Richmond X” was opened in Hong Kong at the end of 2007. In early May 2008, CPMM
      Asia opened a second mono brand shop in Hong Kong.




**EMPLOYEES**




As
      of
      September 30, 2008, we employed approximately 186 persons on a full-time basis
      in Hong Kong and China. We believe we have good relationships with our employees
      and no major disputes or work stoppages have occurred since our
      inception.




18


The
      Company had previously reported that 495,791 shares of Series A Preferred Stock
      were issued and outstanding as of December 31, 2007. However, only 495,596
      shares of Series A Preferred Stock were issued and outstanding as of December
      31, 2007. The Company deems this overstatement of 195 shares of Series A
      Preferred Stock as immaterial and having no material impact on past
      reports.




**CURRENCY
      CONVERSION AND EXCHANGE**




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




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




**CRITICAL
      ACCOUNTING POLICIES**




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




19


*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 collectibility 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 obligations, and record a provision
      that reduces our trade receivables for that customer to the amount that is
      reasonably believed 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. 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.




*Share-based
      compensation*




We
      has
      adopted SFAS No. 123(R), *Share-Based
      Payment* ,
      as
      amended and interpreted, for its share-based compensation. We utilized the
      modified prospective method approach, pursuant to which we have recorded
      compensation for all 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.




*Revenue
      recognition*




Revenue
      consists primarily of sales of new and used vehicles, vehicle maintenance and
      repair services, and sales of vehicle parts. 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 passed.




20


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




(iii)  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 accounts for
      income taxes under the provision of Statement of Financial Accounting Standards
      No. 109, *Accounting
      for Income Taxes* ,
      (“SFAS
      109”) and related interpretations and guidance including FIN 58, *Accounting
      for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
      109* (“Fin
      48”), resulting in two components of income tax expenses: current and deferred.
      Current income tax expense approximates taxes to be paid or refunded for the
      relevant periods. Deferred income tax expense results from changes in deferred
      tax assets and liabilities between periods. Deferred income tax assets and
      liabilities are computed for differences between the financial statements
      carrying amounts and the tax bases of existing assets and liabilities that
      will
      result in taxable or deductible amount in the future, as well as from net
      operating loss and tax credit carryforwards, and are measured at the enacted
      tax
      laws and rates applicable in the years which the differences are expected to
      be
      recovered or settled. A deferred tax asset is recognized if it is more likely
      than not that a benefit will be realized. Otherwise, we will record a valuation
      allowance when the utilization of the deferred tax asset is uncertain.
      Additional timing differences, future earning trends and/or tax strategies
      may
      occur which could warrant a need for establishing an additional valuation
      allowance or a reserve.




**RECENT
      ACCOUNTING PRONOUNCEMENTS**




In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
      157, *Fair
      Value Measurements* (“SFAS
      157”), which provides guidance about how to measure assets and liabilities that
      use fair value. SFAS 157 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. SFAS 157 is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007. In February 2008, the FASB issued FASB Staff Position (“FSP”)
      157-1, *Application
      of FASB Statement No. 157 to FASB Statement No. 13 and Other
      Accounting Pronouncements That Address Fair Value Measurements for Purposes
      of
      Lease Classification or Measurement under Statement 13* (“FSP
      157-1”), which states that SFAS 157 does not address fair value measurements for
      purposes of lease classification or measurement. In February 2008, the FASB
      issued FSP 157-2, *Effective
      Date of FASB Statement No. 157* (“FSP
      157-2”) *,* which
      delays the effective date for non-financial assets and non-financial liabilities
      to fiscal years beginning after November 15, 2008, except for items that
      are measured at fair value in the financial statements on a recurring basis
      (at
      least annually). The Company adopted the provisions of SFAS 157 for its
      financial assets and liabilities and those items for which it has measured
      on a
      recurring basis effective January 1, 2008, and the adoption did not have a
      material impact on its financial position and results of operations. As provided
      by FSP 157-2, the Company has elected to defer the adoption of SFAS 157 for
      certain of its non-financial assets and liabilities and is currently evaluating
      the impact of adopting SFAS 157 on its non-financial assets and
      liabilities.




21


In
      February 2007, the FASB issued SFAS 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities - Including
      an
      amendment of FASB Statement No. 115* (“SFAS
      159”), which is effective for the Company beginning January 1, 2008. This
      standard permits entities to choose to measure many financial instruments and
      certain other items at fair value and consequently report unrealized gains
      and
      losses on such items in earnings. The Company has elected not to adopt the
      fair
      value provisions of SFAS 159 and the adoption of SFAS 159 did not have a
      significant impact of its financial position, cash flows and results of
      operations. **




In
      December 2007, the FASB issued SFAS 141 (revised 2007), *Business
      Combinations* (“SFAS
      141(R)”). SFAS 141(R) establishes principles and requirements for how an
      acquirer recognizes and measures in its financial statements the identifiable
      assets acquired, the liabilities assumed, any noncontrolling interest in the
      acquiree and the goodwill acquired. SFAS 141(R) also establishes disclosure
      requirements to enable the evaluation of the nature and financial effects of
      the
      business combination. SFAS 141(R) will be effective for financial statements
      issued for fiscal years beginning after December 15, 2008, and will be adopted
      by the Company beginning in the first quarter of 2009. The Company does not
      expect there to be any significant impact of adopting SFAS 141(R) on its
      financial position, cash flows and results of operations.




In
      December 2007, the FASB issued SFAS 160, *Noncontrolling
      Interests in Consolidated Financial Statements - an amendment of Accounting
      Research Bulletin No.51* (“SFAS
      160”). SFAS 160 establishes accounting and reporting standards for ownership
      interests in subsidiaries held by parties other than the parent, the amount
      of
      consolidated net income attributable to the parent and to the noncontrolling
      interest, changes in a parent’s ownership interest, and the valuation of
      retained noncontrolling equity investments when a subsidiary is deconsolidated.
      SFAS 160 also establishes disclosure requirements that clearly identify and
      distinguish between the interests of the parent and the interests of the
      noncontrolling owners. SFAS 160 will be effective for financial statements
      issued for fiscal years beginning after December 15, 2008, and will be adopted
      by the Company beginning in the first quarter of 2009. The Company does not
      expect there to be any significant impact of adopting SFAS 160 on its financial
      position, cash flows and results of operations.




In
      March
      2008, the FASB issued SFAS No. 161, *Disclosures
      about Derivative Instruments and Hedging Activities* (“SFAS 161”). SFAS 161 is intended to improve financial reporting
      about derivative instruments and hedging activities by requiring enhanced
      disclosures to enable investors to better understand their effects on an
      entity’s financial position, financial performance, and cash flows.
      SFAS 161 achieves these improvements by requiring disclosure of the fair
      values of derivative instruments and their gains and losses in a tabular format.
      It also provides more information about an entity’s liquidity by requiring
      disclosure of derivative features that are credit risk-related. Finally, it
      requires cross-referencing within footnotes to enable financial statement users
      to locate important information about derivative instruments. SFAS 161 will
      be effective for financial statements issued for fiscal years and interim
      periods beginning after November 15, 2008, will be adopted by the Company
      beginning in the first quarter of 2009. The Company does not expect there to
      be
      any significant impact of adopting SFAS 161 on its financial position, cash
      flows and results of operations.




22


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




**RESULTS
      OF OPERATIONS**




**Results
      of operations comparison of nine months ended September 30, 2008 to nine months
      ended September 30, 2007**




**SALES**




**Nine
                months ended**
              **September
                30, 2008**
            **Nine
                months ended**
              **September
                30, 2007****Total**
              **Sales**
            
            
            **%
                of**
              **Total
                Sales**
            
            
            **Total**
              **Sales**
            
            
            **%
                of**
              **Total
                Sales**Sales:New
                vehicles
            
            $
            66,767,000
            
            
            77.6
            %
            $
            47,649,000
            
            
            69.2
            %Used
                vehicles
            
            $
            14,033,000
            
            
            16.3
            %
            $
            16,641,000
            
            
            24.2
            %Parts
                and services and others
            
            $
            5,257,000
            
            
            6.1
            %
            $
            4,598,000
            
            
            6.6
            %Total
            
            $
            86,057,000
            
            
            100
            %
            $
            68,888,000
            
            
            100
            %




Total
      sales mainly consists of new and used vehicles, sale of parts, and services
      rendered for vehicle maintenance and repair.




Net
      total
      sales for nine months ended September 30, 2008 increased by approximately
      $17,169,000 or 24.9% to approximately $86,057,000, compared with approximately
      $68,888,000 for the same period of 2007. The increase was primarily attributable
      to the increased sales from our new vehicle trading segment.




New
      vehicles sales increased approximately $19,118,000 or 40.1% from the first
      nine
      months of 2007 to the same period of 2008 while the quantity of new vehicles
      sold increased 42.1% for the same period. This was primarily due to the launch
      of the Ferrari 8-cylinder sports car, the “430 Scuderia,” and an increase in
      deliveries of the Maserati 8-cylinder two-door 2+2 coupe, the “GranTurismo,”
which was launched in the last quarter of 2007. The used vehicles sales
      decreased approximately $2,608,000 or 15.7% from the first nine months of 2007
      to the same period of 2008 while the quantity of used vehicles sold decreased
      24.7% for the same period.




23


The
      increase in parts and service sales was mainly attributed to the increase in
      deliveries of Ferrari and Maserati cars to customers during the last few
      years.




**COST
      OF SALES**




Cost
      of
      sales for the nine months ended September 30, 2008 increased to $72,089,000
      from
      $58,417,000 for the nine months ended September 30, 2007, a $13,672,000 or
      23.4%
      increase was in line with the increase in Company’s increase in revenues during
      this period.




**GROSS
      PROFIT**




Gross
      profit margin for nine months ended September 30, 2008 increased by
      1.0% from 15.2% for the same period of 2007 to 16.2% for the current period
      and the gross profit increased by approximately $3,497,000 to approximately
      $13,968,000 for the nine months ended September 30, 2008. This increase is
      mainly attributed to the new and used vehicles trading segment. The gross profit
      margin increase in the first nine months of 2008 was mainly due to deliveries
      of
      the “GranTurismo” and sales of certain highly acclaimed used cars including
      Ferrari 599 GTB Fiorano, F430 Spider and Maserati GranTurismo.




**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 nine months ended September 30, 2008 were approximately $12,545,000,
      compared to approximately $9,066,000 for the same period of 2007. The
      approximate $3,479,000 increase in S,G&A expenses was primarily due to the
      growth of revenues as well as additional rent, staff and related costs incurred
      in the course of our start-up of new business. The staffing expenses increased
      from approximately $3,670,000 for the nine months ended September 30, 2007
      to
      approximately $5,081,000 for the same period of 2008. The aggregate of rent,
      rate and building management fees increased from approximately $1,012,000 for
      the nine months ended September 30, 2007 to approximately $2,574,000 for the
      same period of 2008. The rental, staff and related cost incurred in the start-up
      of new business was approximately $1,208,000.




**OTHER
      INCOME, NET**




Other
      income for the nine months ended September 30, 2008 were approximately $921,000,
      compared to approximately $29,000 for the same period of 2007, a total increase
      of $892,000. The increase was primarily due to the increased management fees,
      interest and rental income charged to affiliate companies, decreased interest
      expenses and approximately $130,000 gain on disposal of property and equipment.
      The management fees, interest and rental income charged to affiliate companies
      increased from approximately $565,000 for the nine months ended September 30,
      2007 to approximately $697,000 for the same period of 2008. The interest
      expenses decreased from approximately $581,000 in the first nine months of
      2007
      to approximately $411,000 for the same period of 2008.




24


**MINORITY
      INTERESTS**




Minority
      interests for the periods presented represent outside ownership interests in
      subsidiaries that are consolidated with the parent for financial reporting
      purposes.




**Results
      of operations comparison of three months ended September 30, 2008 to three
      months ended September 30, 2007**




**SALES**




**Three
                months ended**
              **September
                30, 2008**
            **Three
                months ended**
              **September
                30, 2007****Total**
              **Sales**
            
            
            **%
                of**
              **Total
                Sales**
            
            
            **Total**
              **Sales**
            
            
            **%
                of**
              **Total
                Sales**Sales:New
                vehicles
            
            $
            26,677,000
            
            
            80.0
            %
            $
            20,605,000
            
            
            77.0
            %Used
                vehicles
            
            $
            4,644,000
            
            
            13.9
            %
            $
            4,215,000
            
            
            15.7
            %Parts
                and services and others
            
            $
            2,041,000
            
            
            6.1
            %
            $
            1,941,000
            
            
            7.3
            %Total
            
            $
            33,362,000
            
            
            100
            %
            $
            26,761,000
            
            
            100
            %




Total
      sales mainly consists of new and used vehicles, sale of parts, and services
      rendered for vehicle maintenance and repair.




Net
      total
      sales for three months ended September 30, 2008 increased by approximately
      $6,601,000 or 24.7% to approximately $33,362,000, compared with approximately
      $26,761,000 for the same period of 2007. The increase was primarily attributable
      to the increased sales from our new vehicle trading segment.




New
      vehicles sales increased approximately $6,072,000 or 29.5% from the third
      quarter of 2007 to the same period of 2008 while the quantity of new vehicles
      sold increased 12% for the same period. This increase in sales of vehicles
      was
      primarily due to the launch of the Ferrari 8-cylinder sports car, the “430
      Scuderia,” and an increase in deliveries of the Maserati 8-cylinder, two-door
      2+2 coupe, the “GranTurismo,” which was launched in the last quarter of 2007.
      The used vehicles sales increased approximately $429,000 or 10.2% from the
      third
      quarter of 2007 to the same period of 2008 while the quantity of used vehicles
      sold maintained at the same level for both periods.




The
      increase in parts and service sales was mainly attributed to the increase in
      deliveries of Ferrari and Maserati cars to customers during the last few
      years.




**COST
      OF SALES**




Cost
      of
      sales for the three months ended September 30, 2008 increased to $28,056,000
      from $22,503,000 for the three months ended September 30, 2007, a $5,553,000
      or
      24.7% increase was in line with the increase in Company’s increase in revenues
      during this period.




25


**GROSS
      PROFIT**




Gross
      profit margin for three months ended September 30, 2008 and 2007 were 15.9%,
      and
      the gross profit increased by approximately $1,048,000 to approximately
      $5,306,000 for the three months ended September 30, 2008. This increase was
      mainly attributed to the new and used vehicles trading segment.




**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, 2008 were approximately $4,302,000,
      compared to approximately $3,453,000 for the same period of 2007. The
      approximate $849,000 increase in S,G&A expenses was primarily due to the
      growth of revenues as well as additional rent, staff and related cost incurred
      in the course of our start-up of new business. The staffing expenses increased
      from approximately $1,356,000 for the three months ended September 30, 2007
      to
      approximately $1,636,000 for the same period of 2008. The aggregate of rent,
      rate and building management fees increased from approximately $350,000 for
      the
      three months ended September 30, 2007 to approximately $933,000 for the same
      period of 2008. The rental, staff and related cost incurred in the start-up
      of
      new business was approximately $457,000.




**OTHER
      INCOME, NET**




Other
      income for the three months ended September 30, 2008 increased to approximately
      $176,000 compared to approximately $45,000 for the same period of 2007, a total
      increase of $131,000. The increase was primarily due to the decrease of share
      of
      result of an associate. The Company had completed the disposal of 29% equity
      interest in the Shanghai JV in December 2007, no share of loss of that associate
      was incurred in 2008. In the third quarter of 2007, the share of loss of an
      associate was approximately $72,000.




**MINORITY
      INTERESTS**




Minority
      interests for the periods presented represent outside ownership interests in
      subsidiaries that are consolidated with the parent for financial reporting
      purposes.




**LIQUIDITY
      AND CAPITAL RESOURCES**




CASH
      FLOWS FROM OPERATING ACTIVITIES




Our
      operations generated cash resources of approximately $2,083,000 for the nine
      months ended September 30, 2008, compared to generating cash resources of
      approximately $9,492,000 for the nine months ended September 30, 2007, primarily
      as a net result of the following:




·
            For
                the nine months ended September 30, 2008, cash flow provided by sales
                net
                of operating expenses increased by approximately $636,000 to $2,844,000.
                The increase was primarily as a result of the increase in
                sales.




26




·
            For
                the nine months ended September 30, 2008, account receivables decreased
                by
                approximately $8,040,000, primarily due to the collection of account
                receivables relating to the sales recognized in the last three
                quarters.




·
            For
                the nine months ended September 30, 2008, our inventory increased
                by
                approximately $6,924,000. The increase was consistent with our business
                growth especially in the car trading
                segment.




·
            For
                the nine months ended September 30, 2008, the increase or decrease
                of
                various current operating assets and liabilities, included in the
                aforementioned items, resulted in an aggregate decrease of cash inflow
                from operations of approximately
                $761,000.




CASH
      FLOWS FROM INVESTING ACTIVITIES




For
      the
      nine months ended September 30, 2008, we expended net cash of approximately
      $247,000 in investing activities that is the combined effect of the acquisition
      and disposal of property and equipment. We had utilized approximately $579,000
      for acquisition of property and equipment whereas we had received approximately
      $332,000 proceeds from disposal of property and equipment. For the nine months
      ended September 30, 2007, we utilized approximately $263,000 in investing
      activities, mainly for acquisition of property and equipment.




CASH
      FLOWS FROM FINANCING ACTIVITIES




During
      the nine months ended September 30, 2008, we repaid approximately $547,000
      of
      our obligations owed on outstanding debt as compared to approximately $2,567,000
      for the nine months ended September 30, 2007.




For
      the
      nine months ended September 30, 2008, we received approximately $810,000
      advances from affiliates. For the nine months ended September 30, 2007, we
      provided approximately $5,746,000 and $394,000 advances to affiliates and
      an associate, respectively. The advances to affiliates were made 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, 2008 by approximately
      $10,769,000, an increase of $2,628,000 from December 31, 2007. The ratio of
      our
      current assets to our current liabilities was 1.3 to 1 at September 30, 2008
      compared to 1.24 to 1 at December 31, 2007. At September 30, 2008, our
      current assets of approximately $46,726,000 included approximately $16,087,000
      in inventory that was funded by the operating cash flow and trade finance
      facilities. Our current liabilities of approximately $35,957,000 included
      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 $21,567,000.




27


**SEASONALITY**




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




**EFFECT
      OF FLUCTUATION IN FOREIGN EXCHANGE RATES**




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




**OFF-BALANCE
      SHEET ARRANGEMENTS**




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




**Item
      3. Quantitative and Qualitative Disclosures about Market
      Risk.**




We
      currently do not hold or use any derivative or other financial instruments
      that
      expose us to substantial market risk and we have no foreign exchange contracts.
      Our financial instruments consist of cash and cash equivalents, trade
      receivables **** 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.




*Interest
      Rates* . Our
      exposure to market risk for changes in interest rates relates primarily to
      our
      short-term obligations; thus, fluctuations in interest rates would not have
      a
      material impact on the fair value of the Company’s securities. At September 30,
      2008, we had approximately $8,683,000 in cash and cash equivalents. A
      hypothetical 10% increase or decrease in interest rates would not have a
      material impact on our earnings or loss, or the fair market value or cash flows
      of these instruments.




*Foreign
      Exchange Rates* . 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, 2008 was not material to
      us.




28


**Item
      4T.   Controls and Procedures**




*EVALUATION
      OF DISCLOSURE CONTROLS AND PROCEDURES*




Our
      Chief
      Executive Officer (“Principal Executive Officer”) and Chief Financial Officer
      (“Principal Financial and Accounting Officer”), have performed an evaluation of
      the Company’s disclosure controls and procedures, as that term is defined in
      Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), as of September 30, 2008 and each has concluded that such
      disclosure controls and procedures are effective 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 company reports
      filed or submitted under the Exchange Act is accumulated and communicated to
      management, including our Principal Executive Officer and Principal Financial
      and Accounting Officer, as appropriate to allow timely decisions regarding
      disclosure.




As
      required by Rules 13a-15 and 15d-15 under the Exchange Act, our Principal
      Executive Officer and Principal Financial and Accounting Officer carried out
      an
      evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures as of  September 30, 2008. Based on their
      evaluation, they concluded that our disclosure controls and procedures were
      effective.




*CHANGES
      IN INTERNAL CONTROL OVER FINANCIAL REPORTING*




There
      were no changes in our internal control over financial reporting (as defined
      in
      Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
      amended) during the quarter ended September 30, 2008 that have materially
      affected, or are reasonably likely to materially affect our internal control
      over financial reporting.


29




**PART
      II: OTHER INFORMATION**




**Item
      1. Legal Proceedings.**




None.




**Item
      1A. Risk Factors.**




There
      have been no material changes in our business, operations or prospects that
      would require a change to the Risk Factor disclosure included in our most recent
      Annual Report on Form 10-K that have not already been disclosed.




**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**




None.




**Item
      3. Defaults Upon Senior Securities.**




None.




**Item
      4. Submission of Matters to a Vote of Security Holders.**




None.




**Item
      5. Other Information.**




There
      have been no material changes to the procedures by which security holders may
      recommend nominees to the Company’s board of directors.




**Item
      6. Exhibits.**





**Exhibit
                Number**
            
            **Description**31.1
            
            Certification
                of Chief Executive Officer pursuant to Rules 13A-14(A)/15D-15(E)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002, filed herewith.31.2
            
            Certification
                of the Chief Financial Officer pursuant to Rules 13A-14(A)/15D-15(E)
                of
                the Securities Exchange Act of 1934, as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002, filed herewith.32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                18
                U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002),
                filed
                herewith.




30




**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,
              2008
            By:
            /s/
              Richard Man
              Fai LeeRichard Man Fai LeeChief Executive Officer
              (Principal Executive
                Officer)




Date:
                November
                13,
                2008
              By:
              /s/
                Joseph Tik
                Tung WongJoseph Tik Tung WongChief Financial Officer
                (Principal Financial and Accounting
                    Officer)




31