UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q/A


(Amendment
No. 2)




x
            QUARTERLY
      REPORT PURSUANT TOSECTION
      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934





For the
quarterly period ended: March 31, 2009




or




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





For the
transition period from __________________ to _____________________




Commission
File No. 333-120807




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC.


(Exact
name of Registrant as specified in its charter)





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





10/F,
      Wo Kee Hong Building
              585-609
      Castle Peak Road
              Kwai
      Chung, N.T. Hong Kong(Address
      of principal executive offices)





(852)
      2954-2469(Registrant’s
      telephone number, including area
code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.




Yes xNo o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).  Yes oNo 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 oAccelerated Filer oNon-Accelerated Filer oSmaller 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 oNo x




The
number of shares of Common Stock, $0.005 par value, outstanding as of the close
of business on May 11, 2009 was 23,323,860.









EXPLANATORY
NOTE




As used in this Amendment No. 2 (the
“Form 10-Q/A”) to our Quarterly Report on Form 10-Q for the three months ended
March 31, 2009 (the “First Quarter 2009 Form 10-Q”), the terms “we,” “us,” “our”
and the “Company” mean China Premium Lifestyle Enterprise, Inc., a Nevada
corporation, and our consolidated subsidiaries, taken together as a
whole.




On April
20, 2010, our management initially concluded that our consolidated audited
financial statements for the years ended December 31, 2008, 2007 and 2006 and
our consolidated unaudited interim financial statements for the periods ended
March 31, 2006 through September 30, 2009 needed to be restated and should not
be relied upon.  Upon further analysis, on May 14, 2010, our
management concluded that reliance on our unaudited interim financial statements
for the period ended March 31, 2006 should not be withdrawn and that no
restatements should be made to our unaudited interim financial statements for
the period ended March 31, 2006.  However, our management concluded
that certain Notes to our unaudited interim financial statements included in the
quarterly report on Form 10-QSB for the period ended March 31, 2006 needed to be
amended.  In addition, our management concluded that certain Notes to
our audited financial statements included in the annual report on Form 10-KSB
for our former fiscal year ended June 30, 2006 also needed to be
amended.




This Form 10-Q/A to our First Quarter
2009 Form 10-Q is being filed with the Securities and Exchange Commission (the
“SEC”) to amend and restate our consolidated unaudited interim financial
statements as of March 31, 2009 and for the three months ended March 31, 2009
and 2008.




In addition, we will file Reports on
Form 10-K/A for prior periods to amend and restate our consolidated audited
financial statements for the annual periods in fiscal years ended December 31,
2008, 2007 and 2006 and Reports on Form 10-Q/A to amend and restate our
consolidated unaudited financial statements for the quarterly periods ended
September 30, 2006 through September 30, 2009.  We will also file a
Report on Form 10-K/A to amend certain Notes to our audited financial statements
for the annual period in our former fiscal year ended June 30, 2006 and a Report
on Form 10-Q/A to amend certain Notes to our unaudited interim financial
statements for the quarterly period ended March 31, 2006.




The common stock numbers in this
Explanatory Note give effect to a one-for-five reverse stock split (the “Reverse
Stock Split”) of our common stock, par value $0.005 per share, effective on
December 7, 2007.




Background




In September 2006, we closed the
transactions contemplated by that certain Share Exchange Agreement, dated July
15, 2006, by and among us, Fred De Luca, Corich Enterprises, Inc., a British
Virgin Islands corporation, Herbert Adamczyk and Technorient Limited, a Hong
Kong corporation (the “Share Exchange Agreement”).  Pursuant to the
terms of the Share Exchange Agreement, we issued an aggregate of 972,728 shares
(the “Exchange Shares”) of Series A Convertible Preferred Stock in exchange for
shares of the capital stock of Technorient.




In connection with the Share Exchange
Agreement and prior to its closing, we entered into a consulting agreement dated
July 15, 2006 with Happy Emerald Ltd. (“HEL”) pursuant to which we issued to HEL
561,245 shares (the “HEL Shares”) of Series A Convertible Preferred Stock in
exchange for certain future services to be performed by HEL after the closing of
the Share Exchange Agreement.




In January 2007, we authorized the
delivery of 65,454 shares (the “Bern Noble Shares”) of the HEL Shares to Bern
Noble, Ltd. (“Bern Noble”) for consulting services rendered by Bern Noble to us
in connection with the Share Exchange Agreement.  In March 2007, Bern
Noble converted the Bern Noble Shares into 1,210,631 shares of common
stock.




The following actions were also
taken:




·
            on
      April 7, 2006, prior management filed an amendment to our Articles of
      Incorporation purporting to create a class of 100,000,000 shares of “blank
      check” preferred stock (the “Preferred Stock
  Amendment”);




i




·
            on
      August 16, 2006, prior management filed an amendment to our Articles of
      Incorporation purporting to designate 2,000,000 shares of the “blank
      check” preferred stock as “Series A Convertible Preferred Stock” (the
      “Certificate of Designation”); and




·
            on
      December 18, 2006, we filed an amendment to our Articles of Incorporation
      purporting to increase the number of shares of authorized common stock
      from 100,000,000 shares to 400,000,000 shares (the “Common Stock
      Amendment”).




On December 19, 2008, we filed an
action in the United States District Court for the Central District of
California (the “Federal Court Action”), for fraud, breach of fiduciary duty,
breach of contract and conversion against HEL, certain members of our prior
management, including Fred De Luca, Charles Miseroy, Robert G. Pautsch and
Federico Cabo, and certain other defendants.  In the Federal Court
Action, we alleged that:




·
            HEL
      had never performed any services under the consulting agreement;
      and




·
            the
      defendants, including the members of prior management, had (1)
      fraudulently obtained certificates for 495,596 shares of the Series A
      Convertible Preferred Stock, (2) improperly attempted to transfer the
      shares among themselves and their affiliates, (3) improperly converted
      247,798 of the shares into 4,569,619 shares of common stock, and (4)
      sought to have the restrictive legend removed from the resulting shares of
      common stock.




During the pendency of the Federal
Court Action, our legal advisors discovered that the Preferred Stock Amendment,
the Certificate of Designation and the Common Stock Amendment had not been
properly authorized.  Specifically:




·
            each
      of the Preferred Stock Amendment and the Common Stock Amendment was
      approved only by the written consent of a majority of our
      then-stockholders, whereas our By-Laws required such written consent to be
      approved unanimously; and




·
            at
      the time of the filing of the Certificate of Designation with the Nevada
      Secretary of State, the Articles of Incorporation did not authorize the
      Board of Directors to designate the rights, preferences and privileges of
      any “blank check” preferred stock.




We were advised that the Preferred
Stock Amendment, the Certificate of Designation and the Common Stock Amendment
were invalid and of no force and effect.  Further, we were advised
that we were never authorized to issue any shares of any class or series of
preferred stock, including the Exchange Shares, the Bern Noble Shares and the
HEL Shares, and that any shares of common stock underlying such shares would
also not have been authorized.  In addition, we were advised that we
were never authorized to issue any shares of common stock in excess of
100,000,000 shares.




Upon learning of the invalidity of the
Preferred Stock Amendment, the Certificate of Designation and the Common Stock
Amendment:




·
            current
      management took action to correct any potential defect in the transactions
      contemplated to acquire the shares of Technorient under the Share Exchange
      Agreement.  On May 5, 2009, we entered into a reformation
      (“Reformation”) of the Share Exchange Agreement pursuant to which the
      parties agreed that the 17,937,977 shares of common stock (on a
      post-Reverse Stock Split basis) underlying the Exchange Shares were agreed
      to have been issued in lieu of the Exchange Shares
      themselves.  Pursuant to the Reformation, the parties agreed
      that an aggregate of 14,400,000 shares of our common stock (on a
      post-Reverse Stock Split basis) were deemed to have been issued on the
      closing date of the Share Exchange Agreement, and that upon the
      effectiveness of and giving effect to the Reverse Stock Split on December
      7, 2007, an aggregate of an additional 3,537,977 shares of common stock
      were deemed to have been issued;
and




·
            we
      amended our complaint in the Federal Court Action to allege that all of
      the disputed shares (the HEL Shares and, derivatively, the Bern Noble
      Shares), were void and subject to cancellation.  Because of the
      uncertainty of the outcome of the Federal Court Action, however, we
      determined not to make any changes with respect to such shares on our
      financial statements until the pending litigation was finally resolved
      through a judgment in or settlement of the Federal Court
      Action.




ii




On March 1, 2010, we settled the
Federal Court Action.  Under the terms of the settlement, the
defendants agreed to return to us for cancellation all of the disputed shares,
including 247,798 shares of the Series A Convertible Preferred Stock and
4,569,619 shares of common stock.




Further, in connection with the
settlement, Bern Noble agreed to return to us for cancellation the 1,210,631
shares of common stock that had originally been derived from the HEL
Shares.  We also agreed to replace the Bern Noble Shares with an equal
number of new shares of common stock in consideration of services rendered to us
in 2006 in connection with the closing of the Share Exchange
Agreement.  We agreed to deliver the replacement shares in nine
monthly installments.




Restatements




We have restated certain items on our
consolidated balance sheets, consolidated statements of operations and
consolidated statements of stockholders’ equity and comprehensive income (loss),
based on the following:




·
            our
      determination that we were never authorized to issue any shares of any
      class or series of preferred stock, including the Exchange Shares, the
      Bern Noble Shares and the HEL
Shares;




·
            our
      determination that the Preferred Stock Amendment, the Certificate of
      Designation designating the Series A Convertible Preferred Stock and the
      Common Stock Amendment were invalid and of no force and
      effect;




·
            the
      issuance of shares of common stock in connection with the
      Reformation;




·
            the
      cancellation and reissuance of the shares of common stock converted from
      the Bern Noble Shares (including the recognition of the receipt of the
      services performed by Bern Noble in 2006);
and




·
            the
      settlement of the Federal Court
Action.




The
following describes the restatements to the Company’s condensed consolidated
financial statements:




·
            On
      the condensed consolidated balance sheets, at March 31, 2009 and December
      31, 2008, prepayments decreased by $1,468,930 to reflect the return
      for cancellation of the disputed shares of preferred stock and common
      stock in connection with the settlement of the Federal Court Action. 
      Accordingly, at March 31, 2009 and December 31, 2008, preferred stock
      decreased by $248, common stock decreased by $28,902, additional
      paid-in-capital decreased by $1,439,780 and stockholders’
      equity decreased by $1,468,930. Further, all references to an
      authorized class or series of preferred stock and any issued and
      outstanding shares of preferred stock have been deleted from the restated
      balance sheets at March 31, 2009 and December 31,
  2008;




·
            On
      the condensed consolidated statement of operations, for the three months
      ended March 31, 2009, basic and diluted loss per share
      increased by $0.0138, and for the three months ended March 31,
      2008, basic and diluted loss per share increased by $0.0006;
      and




·
            In
      addition, for the three months ended March 31, 2009, the basic and diluted
      weighted average number of outstanding shares decreased by 5,780,250, and
      for the three months ended March 31, 2008, the basic and diluted weighted
      average number of outstanding shares decreased by
    1,612,356.




The
restatements had no impact on the Company’s cash or cash flows.





Scope of This Form
10-Q/A




This Form 10-Q/A sets forth the First
Quarter 2009 Form 10-Q in its entirety.  The following Items contain
amended disclosures relating to the restatements:




·
            Part
      I, Item 1. Financial Statements;




iii




·
            Part
      I, Item. 2. Management’s Discussion and Analysis of Financial Condition
      and Results of Operation, under the headings “Restatements” and
      “Working Capital
      Requirements;”




·
            Part
      I, Item 4T. Controls and
Procedures;




·
            Part
      II, Item 1. Legal Proceedings; and




·
            Part
      II, Item 6. Exhibits (to contain the currently-dated certifications from
      our principal executive officer and principal financial officer, as
      required by Sections 302 and 906 of the Sarbanes-Oxley Act of
      2002).




Other than the amendments to the
disclosures in the Items listed above, no other material modifications or
updates have been made to the First Quarter 2009 Form
10-Q.  Information not affected by the Items listed above remains
unchanged and reflects the disclosures made at the time of, and as of the dates
described in, the First Quarter 2009 Form 10-Q.  Further, other than
the amendments to the disclosures in the Items listed above, this Form 10-Q/A
does not describe events occurring after the First Quarter 2009 Form 10-Q
(including with respect to exhibits), or modify or update disclosures (including
forward-looking statements) which may have been affected by events or changes in
facts occurring after the date of the First Quarter 2009 Form
10-Q.  Accordingly, this Form 10-Q/A should be read in its historical
context and in conjunction with our filings made with the SEC subsequent to the
filing of the First Quarter 2009 Form 10-Q, as information in such filings may
update or supersede certain information contained in this Form
10-Q/A.




iv







CHINA
PREMIUM LIFESTYLE ENTERPRISE, INC.




FORM
10-Q




FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2009




TABLE
OF CONTENTS




PART
      I:  FINANCIAL INFORMATION
                                      
                                      
                                      1Item
      1.  Financial Statements.
                                      
                                      
                                      1Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations.
                                      
                                      
                                      23Item
      3. Quantitative and Qualitative Disclosures about Market
    Risk.
                                      
                                      
                                      30Item
      4T.   Controls and Procedures
                                      
                                      
                                      30PART
      II - OTHER INFORMATION
                                      
                                      
                                      33Item
      1. Legal Proceedings.
                                      
                                      
                                      33Item
      1A. Risk Factors.
                                      
                                      
                                      34Item
      5. Other Information.
                                      
                                      
                                      34Item
      6. Exhibits.
                                      
                                      
                                      34SIGNATURES
                                      
                                      
                                      35









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




PART
I:  FINANCIAL INFORMATION




Item
1.  Financial Statements.




CHINA
PREMIUM LIFESTYLE ENTERPRISE, INC. AND SUBSIDIARIES




CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS




AS
OF MARCH 31, 2009 AND




FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008




1




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED
BALANCE SHEETS (UNAUDITED)




March
      31,
                              
                              
                              December
      31,2009
                                (Restated)
                              
                              
                              2008
                                (Restated)ASSETSCurrent
      assets:Cash
      and cash equivalents
                              
                              $
                              3,080,442
                              
                              
                              $
                              5,827,132Restricted
      cash
                              
                              
                              4,436,736
                              
                              
                              
                              4,427,439Trade
      receivables, net of provision
                              
                              
                              2,451,581
                              
                              
                              
                              11,761,228Inventory,
      net
                              
                              
                              20,106,427
                              
                              
                              
                              12,670,567Prepayments
                              
                              
                              325,624
                              
                              
                              
                              483,952Other
      current assets
                              
                              
                              6,943,340
                              
                              
                              
                              6,419,106Amounts
      due from affiliates
                              
                              
                              11,061,491
                              
                              
                              
                              11,147,103Total
      current assets
                              
                              
                              48,405,641
                              
                              
                              
                              52,736,527Property
      and equipment, net
                              
                              
                              2,897,553
                              
                              
                              
                              2,905,927Goodwill
                              
                              
                              39,734
                              
                              
                              
                              39,734TOTAL
      ASSETS
                              
                              $
                              51,342,928
                              
                              
                              $
                              55,682,188LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                              
                              $
                              10,613,750
                              
                              
                              $
                              9,935,435Bills
      payable
                              
                              
                              -
                              
                              
                              
                              1,333,502Trade
      payables
                              
                              
                              3,405,942
                              
                              
                              
                              3,795,196Deposits
      received
                              
                              
                              23,402,035
                              
                              
                              
                              19,887,368Other
      current liabilities
                              
                              
                              2,064,858
                              
                              
                              
                              7,405,454Amounts
      due to affiliates
                              
                              
                              3,646,452
                              
                              
                              
                              2,433,340TOTAL
      LIABILITIES
                              
                              
                              43,133,037
                              
                              
                              
                              44,790,295Commitments
      and ContingenciesStockholders'
      equityCommon
      stockAuthorized:
      100,000,000 common stock, par value $0.005Issued
      and outstanding: 23,323,860 shares as at March 31, 2009; (23,323,860
      shares as at December 31, 2008)
                              
                              
                              116,619
                              
                              
                              
                              116,619Additional
      paid-in-capital
                              
                              
                              4,119,108
                              
                              
                              
                              4,119,108Accumulated
      other comprehensive income
                              
                              
                              246,065
                              
                              
                              
                              247,279Accumulated
      deficit
                              
                              
                              (2,317,597)
                              
                              
                              
                              (695,446)TOTAL
      CHINA PREMIUM LIFESTYLE ENTERPRISE, INC. STOCKHOLDERS’
      EQUITY
                              
                              
                              2,164,195
                              
                              
                              
                              3,787,560Noncontrolling
      interests
                              
                              
                              6,045,696
                              
                              
                              
                              7,104,333TOTAL
      EQUITY
                              
                              
                              8,209,891
                              
                              
                              
                              10,891,893TOTAL
      LIABILITIES AND EQUITY
                              
                              $
                              51,342,928
                              
                              
                              $
                              55,682,188






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




2




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)




Three
      months ended
                                      March
      31,2009
                                      (Restated)
                                    
                                    
                                    2008
                                      (Restated)Sales:New
      and used vehicles
                                    
                                    $
                                    14,722,090
                                    
                                    
                                    $
                                    19,913,416Parts
      and services and others
                                    
                                    
                                    1,283,798
                                    
                                    
                                    
                                    1,361,915Fashion
      apparel and accessories
                                    
                                    
                                    422,181
                                    
                                    
                                    
                                    171,496Net
      sales
                                    
                                    
                                    16,428,069
                                    
                                    
                                    
                                    21,446,827Cost
      of sales:New
      and used vehicles
                                    
                                    
                                    (
      14,076,177
                                    )
                                    
                                    
                                    (17,485,282
                                    )Parts
      and services and others
                                    
                                    
                                    (
      185,807
                                    )
                                    
                                    
                                    (368,250
                                    )Fashion
      apparel and accessories
                                    
                                    
                                    (412,404
                                    )
                                    
                                    
                                    (131,416
                                    )Total
      cost of sales
                                    
                                    
                                    (14,674,388
                                    )
                                    
                                    
                                    (17,984,948
                                    )Gross
      profit:New
      and used vehicles
                                    
                                    
                                    645,913
                                    
                                    
                                    
                                    2,428,134Parts
      and services and others
                                    
                                    
                                    1,097,991
                                    
                                    
                                    
                                    993,665Fashion
      apparel and accessories
                                    
                                    
                                    9,777
                                    
                                    
                                    
                                    40,080Total
      gross profit
                                    
                                    
                                    1,753,681
                                    
                                    
                                    
                                    3,461,879Selling,
      general and administrative expenses
                                    
                                    
                                    (4,670,091
                                    )
                                    
                                    
                                    (3,773,477
                                    )Operating
      loss
                                    
                                    
                                    (2,916,410
                                    )
                                    
                                    
                                    (311,598
                                    )Other
      income (expenses)Interest
      expenses and other finance costs
                                    
                                    
                                    (191,056
                                    )
                                    
                                    
                                    (131,763
                                    )Other
      income
                                    
                                    
                                    426,678
                                    
                                    
                                    
                                    321,560Total
      other income (expenses)
                                    
                                    
                                    235,622
                                    
                                    
                                    
                                    189,797Loss
      before income taxes
                                    
                                    
                                    (2,680,788
                                    )
                                    
                                    
                                    (121,801
                                    )Provision
      for income taxes
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Net
      loss including noncontrolling interests
                                    
                                    
                                    (2,680,788
                                    )
                                    
                                    
                                    (121,801
                                    )Net
      loss attributable to:China
      Premium Lifestyle Enterprise, Inc common stockholders
                                    
                                    
                                    (1,622,151
                                    )
                                    
                                    
                                    (229,320
                                    )Noncontrolling
      interests
                                    
                                    
                                    (1,058,637
                                    )
                                    
                                    
                                    107,519$
                                    (2,680,788
                                    )
                                    
                                    $
                                    (121,801
                                    )Loss
      per common stock attributable to China Premium Lifestyle Enterprise, Inc
      common stockholdersBasic
                                    
                                    $
                                    (0.0695
                                    )
                                    
                                    $
                                    (0.0098
                                    )Diluted
                                    
                                    $
                                    (0.0695
                                    )
                                    
                                    $
                                    (0.0098
                                    )Weighted
      average number of common stock outstandingBasic
                                    
                                    
                                    23,323,860
                                    
                                    
                                    
                                    23,323,860Diluted
                                    
                                    
                                    23,323,860
                                    
                                    
                                    
                                    23,323,860






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




3






CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)




Three months ended
                                  March 31,2009
                                
                                
                                2008Operating
      activities:Net
      loss including noncontrolling interests
                                
                                $
                                (2,680,788
                                )
                                
                                $
                                (121,801
                                )Adjustments
      to reconcile net loss to net cash provided by
      operating  activitiesDepreciation
      and amortization
                                
                                
                                268,393
                                
                                
                                
                                197,569Provision
      for bad debts and bad debts written off
                                
                                
                                -
                                
                                
                                
                                69,861Provision
      for bad debts written back
                                
                                
                                (1,014
                                )
                                
                                
                                -Provision
      for inventory
                                
                                
                                38,040
                                
                                
                                
                                -Other
      non-cash items
                                
                                
                                (2,651
                                )
                                
                                
                                79,901Changes
      in operating assets and liabilities:Trade
      receivables
                                
                                
                                9,310,661
                                
                                
                                
                                640,326Other
      current assets and prepayments
                                
                                
                                (365,906
                                )
                                
                                
                                (755,612
                                )Inventory
                                
                                
                                (7,473,900
                                )
                                
                                
                                (4,846,437
                                )Trade
      payables
                                
                                
                                (389,254
                                )
                                
                                
                                2,926,882Other
      current liabilities and deposits received
                                
                                
                                (1,825,930
                                )
                                
                                
                                3,496,974Net
      cash (used in)/provided by operating activities
                                
                                
                                (3,122,349
                                )
                                
                                
                                1,687,663Investing
      activities:Purchases
      of property and equipment
                                
                                
                                (258,581
                                )
                                
                                
                                (170,586
                                )Increase
      in restricted cash
                                
                                
                                (9,297
                                )
                                
                                
                                (2,155
                                )Net
      cash used in investing activities
                                
                                
                                (267,878
                                )
                                
                                
                                (172,741
                                )Financing
      activities:Advances
      from affiliates
                                
                                
                                1,298,724
                                
                                
                                
                                1,154,346Repayments
      from an associate
                                
                                
                                -
                                
                                
                                
                                -Decrease
      in borrowings and bills payable
                                
                                
                                (655,187
                                )
                                
                                
                                (2,756,576
                                )Net
      cash provided by/(used in) financing activities
                                
                                
                                643,537
                                
                                
                                
                                (1,602,230
                                )Decrease
      in cash and cash equivalents
                                
                                
                                (2,746,690
                                )
                                
                                
                                (87,308
                                )Cash
      and cash equivalents at beginning of the period
                                
                                
                                5,827,132
                                
                                
                                
                                6,583,566Cash
      and cash equivalents at end of the period
                                
                                $
                                3,080,442
                                
                                
                                $
                                6,496,258Supplemental
      disclosure of cash flows information:Cash
      paid for:Interest
                                
                                $
                                191,056
                                
                                
                                $
                                131,763






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




4




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES




NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




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 accompanying condensed consolidated
financial statements have been restated as described in Note 14.





The
condensed consolidated financial statements are unaudited and, in our opinion,
include all adjustments, consisting of normal recurring adjustments and accruals
necessary for a fair representation of our condensed consolidated balance
sheets, operating results, and cash flows for the periods presented. Operating
results for the periods presented are not necessarily indicative of the results
that may be expected for 2009. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted in accordance with the rules and regulations of the
Securities and Exchange Commission (the “SEC”). The December 31, 2008 condensed
consolidated balance sheet amounts are derived from the Company’s audited
financial statements but do not include all disclosures required by accounting
principles generally accepted in the United States of America.  The
condensed consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and accompanying notes included in
the Company’s Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year
ended December 31, 2008.





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





Earnings
(loss) per share





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





Segment
reporting





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




5




Fair
value of financial instruments





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




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




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




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




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




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





Reclassifications





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





NOTE
2.  CONCENTRATION OF RISK





Concentration
of supplier risk





The
Company relies on supplies from numerous vendors. For the three months ended
March 31, 2009 and 2008, the Company had two vendors that each accounted for
more than 10% of total supply purchases. If either of these vendors terminates
their relationship with the Company or if the Company’s supply from these
vendors is interrupted or terminated for any reason, we may not have sufficient
time to replace the supply of products from the remaining vendors and other
vendors to be engaged. Any such interruption would negatively impact our ability
to sell and distribute our products. However, the suppliers’ concentration of
credit risk does not pose any effect to the concentration of credit risk with
respect to trade payables as the Company made the purchases through facilities
provided by banks and financial institutions.





Concentration
of risk due to geographic location





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




6




NOTE
3.  RECENT ACCOUNTING PRONOUNCEMENTS





(a)           Recent
accounting pronouncements adopted





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





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




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




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





(b)           Recent
accounting pronouncements not yet effective





In
April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments.  The FSP amends SFAS No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosure about fair value of
financial instruments in interim financial statements.  FSP SFAS 107-1 and
APB 28-1 are effective for interim and annual periods ending after June 15,
2009 with early adoption permitted for periods ending after March 15,
2009.  The Company does not expect the adoption of this statement to have a
material impact on the Company’s financial statements.




7




In April
2009, the FASB issued Staff Position No. SFAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly,(“FSP SFAS
157-4”). FSP SFAS 157-4 provides guidelines for making fair value measurements
more consistent with the principles presented in SFAS 157. FSP SFAS
157-4 provides additional authoritative guidance in determining whether a market
is active or inactive, and whether a transaction is distressed, is applicable to
all assets and liabilities (i.e., financial and nonfinancial) and will require
enhanced disclosures. The pronouncement is effective for periods ending after
June 15, 2009. The Company does not expect the adoption of this statement
to have a material impact on the Company’s financial statements.





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





NOTE
4.  LOSS PER SHARE





The
computation of basic and diluted loss per share is as follows for the three
months ended March 31:





2009
                
                
                2008(Restated)
                
                
                (Restated)Numerator:Net
      loss attributable to China Premium Lifestyle Enterprise, Inc. common
      stockholders
                
                $
                (1,622,151
                )
                
                $
                (229,320
                )Denominator:Weighted
      average common stock outstanding
                
                
                23,323,860
                
                
                
                23,323,860Basic
      net loss per share
                
                $
                (0.0695
                )
                
                $
                (0.0098
                )Diluted
      net loss per share
                
                $
                (0.0695
                )
                
                $
                (0.0098
                )







NOTE
5.  INVENTORY, NET





Inventory
by major categories are summarized as follows:





March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008New
      vehicles
                  
                  $
                  10,216,202
                  
                  
                  $
                  4,003,200Used
      vehicles
                  
                  
                  6,240,227
                  
                  
                  
                  4,837,562Fashion
      apparel
                  
                  
                  1,264,085
                  
                  
                  
                  1,716,163Parts,
      accessories and others
                  
                  
                  2,385,913
                  
                  
                  
                  2,113,642$
                  20,106,427
                  
                  
                  $
                  12,670,567





Vehicles
included in inventory of approximately $4,661,011 and $1,541,204 were pledged to
secure the stocking loan outstanding as of March 31, 2009 and December 31, 2008,
respectively (See Note 6).





NOTE
6.  BORROWINGS





The
Company's borrowings are summarized as follows:





March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008Bank
      borrowings
                  
                  $
                  6,976,714
                  
                  
                  $
                  8,790,806Stocking
      loans
                  
                  
                  3,637,036
                  
                  
                  
                  1,144,629Short-term
      borrowings
                  
                  $
                  10,613,750
                  
                  
                  $
                  9,935,435




8




Vehicles
included in inventory of approximately $4,661,011 and $1,541,204 were pledged to
secure the stocking loan outstanding as of March 31, 2009 and December 31, 2008,
respectively.





NOTE
7.  OTHER CURRENT LIABILITIES





Other
current liabilities by major categories are summarized as follows:




March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008Accruals
                  
                  $
                  1,099,009
                  
                  
                  $
                  1,687,143Other
      payables
                  
                  
                  965,849
                  
                  
                  
                  5,718,311$
                  2,064,858
                  
                  
                  $
                  7,405,454





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





NOTE
8. STOCKHOLDERS’ EQUITY





This Note
should be read in conjunction with Notes 9 and 13.





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





The
Company’s total authorized capital at March 31, 2009 is 100,000,000 shares of
common stock, par value $0.005 per share.  At March 31, 2009,
23,323,860 shares of common stock were issued and outstanding.




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.




9




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




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




On May 5,
2009, the Company filed its First Amended Complaint in the Federal Court
Action.  As more fully discussed in Note 13, the Company has
determined that the Company has never been authorized to issue any shares of any
class or series of preferred stock, including the Disputed Preferred
Shares.  As a result, in addition to its other claims against HEL and
the Defendants, the Company has asserted in the First Amended Complaint that all
of the Disputed Shares are void and subject to cancellation.  The
Company is seeking a declaration that all of the Disputed Shares are void and
subject to cancellation.  It is anticipated that HEL and the
Defendants will oppose the Company’s position with respect to the validity of
the Disputed Shares.  The Company is unable to evaluate the likelihood
of an outcome, favorable or unfavorable, to the Company with respect to the
validity of the Disputed Shares at this time, or to estimate the amount or range
of a possible loss.





In a
related matter, the Company was named as a defendant in a state court action,
styled Federico G. Cabo, et
al. v. China Premium Lifestyle Enterprise, Inc., et al.,California
Superior Court, Ventura County, Case No. 56-2008-00333382-CU-BC-VTA (the “State
Court Action”).  The plaintiffs in the State Court Action (Defendants
in the Federal Court Action) Federico Cabo, Fred De Luca, and Nevada Global,
asserted various claims against multiple defendants relating to the Disputed
Shares purportedly issued to HEL in which these plaintiffs claim an
interest.  The plaintiffs asserted claims for Estoppel, Slander of
Title, Conversion and Constructive Trust against the Company in the State Court
Action.  By agreement with the plaintiffs in the State Court Action,
the State Court Action was dismissed, without prejudice, and it is anticipated
that the same or similar claims will be asserted in the Federal Court
Action.  The Company denies any such alleged wrongdoing and will
vigorously defend these claims if they are asserted in the Federal Court
Action.  The Company, however, is unable to evaluate the likelihood of
an outcome, favorable or unfavorable, to the Company with respect to any such
anticipated claims at this time or to estimate the amount or range of a possible
loss.





Effective
March 1, 2010, the Company settled the Federal Court Action.  Under
the terms of the settlement: (1) the Defendants agreed to return to the Company
for cancellation 247,798 shares of preferred stock and 4,569,619 shares of
common stock; (2) Mr. De Luca resigned from the Company’s board of directors
effective March 1, 2010; (3) the parties executed a mutual release; and (4) the
Company dismissed the action with prejudice.




In
December 2006, the Company had delivered 65,454 shares of preferred stock to
Bern Noble, Ltd. (“Bern Noble”) for consulting services rendered in connection
with the Exchange.  In March 2007, Bern Noble converted such shares
into 1,210,631 shares of common stock.  As discussed in the
Explanatory Note at the beginning of this Report and as previously disclosed in
the Company’s Current Report on Form 8-K, as filed with the SEC on May 11, 2009,
the Company later determined that it was never authorized to issue any shares of
preferred stock.  In connection with the settlement, Bern Noble agreed
to return to us for cancellation the 1,210,631 shares of common
stock.  We also agreed to replace the shares with an equal number of
new shares of common stock in consideration of services rendered to us in 2006
in connection with the closing of the Amended Share Exchange
Agreement.  We agreed to deliver the replacement shares in nine
monthly installments.




10




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 March 31, 2009 are as follows:





2009
                
                $
                3,007,8272010
                
                
                3,607,6442011
                
                
                2,217,0452012
                
                
                2,120,9522013
                
                
                1,916,512Later
      years
                
                
                7,634,657$
                20,504,637





Rent
expense for the three months ended March 31, 2009 and 2008 was $1,124,854 and
$648,471, respectively.




Employment
Agreements





The
Company maintains employment agreements with its executives which extend through
2009. The agreements provide for a base salary, annual bonus to be determined by
the Board of Directors, termination payments, and other terms and conditions of
employment. In addition, the Company maintains employment agreements with other
key employees with similar terms and conditions.  As of March 31,
2009, committed compensation to the executives and other key employees totaling
approximately $534,000 remain in effect.





NOTE
10. COMPREHENSIVE INCOME





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





China Premium Lifestyle Enterprise,
                      Inc common stockholdersAccumulated
                      deficit
                    
                    
                    Accumulated other
                      comprehensive
                      income
                    
                    
                    Noncontrolling
                      interests
                    
                    
                    TotalAt
      January 1, 2009
                    
                    $
                    (695,446
                    )
                    
                    $
                    247,279
                    
                    
                    $
                    7,104,333
                    
                    
                    $
                    6,656,166Net
      loss
                    
                    
                    (1,622,151
                    )
                    
                    
                    -
                    
                    
                    
                    (1,058,637
                    )
                    
                    
                    (2,680,788
                    )Translation
      adjustments
                    
                    
                    -
                    
                    
                    
                    (1,214
                    )
                    
                    
                    -
                    
                    
                    
                    (1,214
                    )At
      March 31, 2009
                    
                    $
                    (2,317,597
                    )
                    
                    $
                    246,065
                    
                    
                    $
                    6,045,696
                    
                    
                    $
                    3,974,164





China Premium Lifestyle Enterprise,
                      Inc common stockholdersAccumulated
                      deficit
                    
                    
                    Accumulated other
                      comprehensive
                      income
                    
                    
                    Noncontrolling
                      interests
                    
                    
                    TotalAt
      January 1, 2008
                    
                    $
                    (510,438
                    )
                    
                    $
                    118,892
                    
                    
                    $
                    4,918,636
                    
                    
                    $
                    4,527,090Net
      loss
                    
                    
                    (229,320
                    )
                    
                    
                    -
                    
                    
                    
                    107,519
                    
                    
                    
                    (121,801
                    )Translation
      adjustments
                    
                    
                    -
                    
                    
                    
                    96,619
                    
                    
                    
                    -
                    
                    
                    
                    96,619At
      March 31, 2008
                    
                    $
                    (739,758
                    )
                    
                    $
                    215,511
                    
                    
                    $
                    5,026,155
                    
                    
                    $
                    4,501,908




11




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





Three
      months ended March 31,2009
                    
                    
                    2008Net
      loss including noncontrolling interest
                    
                    $
                    (2,680,788
                    )
                    
                    $
                    (121,801
                    )Other
      comprehensive income, net of tax:Translation
      adjustments
                    
                    
                    (1,214
                    )
                    
                    
                    96,619Comprehensive
      loss including noncontrolling interest
                    
                    
                    (2,682,002
                    )
                    
                    
                    (25,182
                    )Comprehensive
      loss (income) attributable to noncontrolling interest
                    
                    
                    1,058,637
                    
                    
                    
                    (107,519
                    )Comprehensive
      loss attributable to China Premium Lifestyle Enterprise, Inc common
      stockholders
                    
                    $
                    (1,623,365
                    )
                    
                    $
                    (132,701
                    )




NOTE 11. BUSINESS SEGMENTS AND
GEOGRAPHICAL INFORMATION





Business
Segments





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





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





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





Information
by industry segment is set forth below for the quarter ended March
31:




2009
                              
                              
                              Vehicles
                              
                              
                              Fashion
                                Apparel
                              
                              
                              Corporate
                              
                              
                              Elimination
                              
                              
                              ConsolidatedSalesExternal
      sales
                              
                              
                              $
                              16,005,888
                              
                              
                              $
                              422,181
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              16,428,069Inter-segment
      sales
                              
                              
                              
                              21,346
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (21,346)
                              
                              
                              
                              -Net
      sales
                              
                              
                              
                              16,027,234
                              
                              
                              $
                              422,181
                              
                              
                              
                              -
                              
                              
                              
                              (21,346)
                              
                              
                              
                              16,428,069ResultsOperating
      loss
                              
                              
                              
                              (2,142,804)
                              
                              
                              
                              (348,604
                              )
                              
                              
                              (423,792
                              )
                              
                              
                              (1,210)
                              
                              
                              
                              (2,916,410)Interest
      revenue
                              
                              
                              
                              12,513
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              12,513Interest
      expense
                              
                              
                              
                              (185,095
                              )
                              
                              
                              (5,961
                              )
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (191,056
                              )Other
      income
                              
                              
                              
                              388,053
                              
                              
                              
                              26,112
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              414,165Loss
      before income taxes
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (2,680,788)Provision
      for income tax
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Net
      loss
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (2,680,788
                              )





12




2008
                            
                            
                            Vehicles
                            
                            
                            Fashion
                              Apparel
                            
                            
                            Corporate
                            
                            
                            Elimination
                            
                            
                            ConsolidatedSalesExternal
      sales
                            
                            
                            $
                            21,275,331
                            
                            
                            $
                            171,496
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            21,446,827Inter-segment
      sales
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Net
      sales
                            
                            
                            
                            21,275,331
                            
                            
                            $
                            171,496
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            21,446,827ResultsOperating
      earnings/(loss)
                            
                            
                            
                            149,433
                            
                            
                            
                            (297,623
                            )
                            
                            
                            (163,408
                            )
                            
                            
                            
                            -
                            
                            
                            (311,598)Interest
      revenue
                            
                            
                            
                            31,657
                            
                            
                            
                            1,125
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            32,782Interest
      expense
                            
                            
                            
                            (130,591
                            )
                            
                            
                            (1,172
                            )
                            
                            
                            -
                            
                            
                            
                            
                            -
                            
                            
                            (131,763
                            )Other
      income
                            
                            
                            
                            288,778
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            288,778Loss
      before income taxes
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (121,801)Provision
      for income tax
                            
                            
                            
                            
                            -
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Net
      loss
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (121,801)





Vehicles
                      
                      
                      Fashion
                        Apparel
                      
                      
                      Corporate
                      
                      
                      Consolidated2009Total
      assets (Restated)
                      
                      
                      
                      
                      
                      
                      $
                      49,467,298
                      
                      
                      $
                      1,875,142
                      
                      
                      $
                      488
                      
                      
                      $
                      51,342,928Depreciation
      and amortization
                      
                      
                      
                      
                      
                      
                      
                      251,959
                      
                      
                      
                      16,434
                      
                      
                      
                      -
                      
                      
                      
                      268,393Net
      capital expenditures
                      
                      
                      
                      
                      
                      
                      
                      258,581
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      258,5812008Total
      assets (Restated)
                      
                      
                      
                      
                      
                      
                      $
                      45,226,930
                      
                      
                      $
                      1,298,334
                      
                      
                      $
                      494
                      
                      
                      $
                      46,525,758Depreciation
      and amortization
                      
                      
                      
                      
                      
                      
                      
                      187,055
                      
                      
                      
                      10,514
                      
                      
                      
                      -
                      
                      
                      
                      197,569Net
      capital expenditures
                      
                      
                      
                      
                      
                      
                      
                      37,841
                      
                      
                      
                      132,745
                      
                      
                      
                      -
                      
                      
                      
                      170,586





Geographic
Information





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




13




NOTE
12.  RELATED PARTY TRANSACTIONS





The
following is a summary of significant transactions among certain related parties
and the Company during the three months ended March 31:




Notes
                      
                      2009
                      
                      
                      2008Sales
      to:-
      Affiliates
                      
                      (a)
                      
                      $
                      1,430
                      
                      
                      $
                      4,026Purchases
      from:-
      Affiliates
                      
                      (a)
                      
                      
                      -
                      
                      
                      
                      1,986Interest
      received from:-
      Affiliates
                      
                      (b)
                      
                      
                      154,196
                      
                      
                      
                      126,018Management
      fee paid to:-
      Affiliates
                      
                      (c)
                      
                      
                      103,668
                      
                      
                      
                      -Management
      fee received from:-
      Affiliates
                      
                      (c)
                      
                      
                      46,435
                      
                      
                      
                      46,177Service
      cost charged by:-
      Affiliates
                      
                      (c)
                      
                      
                      420
                      
                      
                      
                      -Rental
      income received from:-
      Affiliates
                      
                      (c)
                      
                      
                      38,696
                      
                      
                      
                      38,482Rental
      paid to:-
      Affiliate
                      
                      (c)
                      
                      
                      4,113
                      
                      
                      
                      6,633Building
      management fee paid to:-
      Affiliate
                      
                      (c)
                      
                      
                      851
                      
                      
                      
                      608Warehouse
      expenses paid to:-
      Affiliate
                      
                      (c)
                      
                      
                      5,553
                      
                      
                      
                      -





Notes:





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





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





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





NOTE
13.  SUBSEQUENT EVENTS





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





The
Company has determined that: (i) the amendment to the Company’s Articles of
Incorporation (the “Articles”), dated April 7, 2006, pursuant to which a class
of “blank check” preferred stock was purportedly created (the “Amendment”), is
invalid and of no force or effect because the Amendment was approved by a
majority of the Company’s stockholders acting by written consent in
contravention of Article II, Section 10 of the Company’s By-Laws,
which  requires that actions taken by written consent of the Company’s
stockholders be unanimous; and (ii) the Certificate of Designation dated August
16, 2006 (the “Certificate of Designation”), purportedly designating 2,000,000
shares of the Company’s purported “blank check” preferred stock as “Series A
Convertible Preferred Stock,” is invalid and of no force and effect because, at
the time of the filing of the Certificate of Designation, the Company’s Articles
did not authorize the Company’s Board of Directors to designate the rights,
preferences and privileges of the Company’s purported “blank check” preferred
stock.




14




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





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





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





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





·
            54,000,000
      shares of Common Stock to Corich;·
            12,240,000
      shares of Common Stock to Adamczyk;
and


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





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





·
            Corich’s
      shares were reduced to 10,800,000 shares of Common
  Stock;·
            Adamczyk’s
      shares were reduced to 2,448,000 shares of Common Stock;
    and·
            OFS’
      shares were reduced to 1,152,000 shares of Common
  Stock.





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





·
            2,611,569
      shares of Common Stock to Corich;·
            636,665
      shares of Common Stock to Adamczyk;
and


·
            289,743
      shares of Common Stock to OFS.





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





NOTE
14. RESTATEMENT OF FINANCIAL STATEMENTS





Background




In
September 2006, the Company closed the transactions contemplated by that certain
Share Exchange Agreement, dated July 15, 2006, among the Company, Fred De Luca,
Corich Enterprises, Inc., a British Virgin Islands corporation, Herbert Adamczyk
and Technorient Limited, a Hong Kong corporation (the “Share Exchange
Agreement”).  Pursuant to the terms of the Share Exchange Agreement,
the Company issued an aggregate of 972,728 shares (the “Exchange Shares”)
of Series A Convertible Preferred Stock in exchange for shares of the capital
stock of Technorient.




15




In
connection with the Share Exchange Agreement and prior to its closing, the
Company entered into a consulting agreement dated July 15, 2006 with Happy
Emerald Ltd. (“HEL”) pursuant to which the Company issued to HEL 561,245 shares
(the “HEL Shares”) of Series A Convertible Preferred Stock in exchange for
certain future services to be performed by HEL after the closing of the Share
Exchange Agreement.




In
January 2007, the Company authorized the delivery of 65,454 shares (the “Bern
Noble Shares”) of the HEL Shares to Bern Noble, Ltd. (“Bern Noble”) for
consulting services rendered by Bern Noble to the Company in connection with the
Share Exchange Agreement.  In March 2007, Bern Noble converted the
Bern Noble Shares into 1,210,631 shares of common stock.




The
following actions were also taken:




·
            on
      April 7, 2006, prior management filed an amendment to the Articles of
      Incorporation purporting to create a class of “blank check” preferred
      stock (the “Preferred Stock
Amendment”);




·
            on
      August 16, 2006, prior management filed an amendment to the Articles of
      Incorporation purporting to designate 2,000,000 shares of the “blank
      check” preferred stock as “Series A Convertible Preferred Stock” (the
      “Certificate of Designation”); and




·
            on
      December 18, 2006, the Company filed an amendment to the Articles of
      Incorporation purporting to increase the number of shares of authorized
      common stock from 100,000,000 shares to 400,000,000 shares (the “Common
      Stock Amendment”).




On
December 19, 2008, the Company filed an action in the United States District
Court for the Central District of California (the “Federal Court Action”), for
fraud, breach of fiduciary duty, breach of contract and conversion against HEL,
certain members of the Company’s prior management, including Fred De Luca,
Charles Miseroy, Robert G. Pautsch and Federico Cabo, and certain other
defendants.  In the Federal Court Action, the Company alleged
that:




·
            HEL
      had never performed any services under the consulting agreement;
      and




·
            the
      defendants, including the members of prior management, had (1)
      fraudulently obtained certificates for 495,596 shares of the Series A
      Convertible Preferred Stock, (2) improperly attempted to transfer the
      shares among themselves and their affiliates, (3) improperly converted
      247,798 of the shares into 4,569,619 shares of common stock, and (4)
      sought to have the restrictive legend removed from the resulting shares of
      common stock.




During
the pendency of the Federal Court Action, the Company’s legal advisors
discovered that the Preferred Stock Amendment, the Certificate of Designation
and the Common Stock Amendment had not been properly
authorized.  Specifically:




·
            each
      of the Preferred Stock Amendment and the Common Stock Amendment was
      approved only by the written consent of a majority of the Company’s
      then-stockholders, whereas the By-Laws required such written consent to be
      approved unanimously; and




·
            at
      the time of the filing of the Certificate of Designation with the
      Secretary of State of the State of Nevada, the articles of incorporation
      did not authorize the Board of Directors to designate the rights,
      preferences and privileges of any “blank check” preferred
      stock.




The
Company was advised that the Preferred Stock Amendment, the Certificate of
Designation and the Common Stock Amendment were invalid and of no force and
effect.  Further, the Company was advised that the Company was never
authorized to issue any shares of any class or series of preferred stock,
including the Exchange Shares, the Bern Noble Shares and the HEL Shares, and
that any shares of common stock underlying the shares of preferred stock would
also not have been authorized.




16




Upon
learning of the invalidity of the Preferred Stock Amendment, the Certificate of
Designation and the Common Stock Amendment:




·
            current
      management took action to correct any potential defect in the transactions
      contemplated to acquire the shares of Technorient under the Share Exchange
      Agreement.  On May 5, 2009, the Company entered into a
      reformation (“Reformation”) of the Share Exchange Agreement pursuant to
      which the parties agreed that the 17,937,977 shares of common stock (on a
      post-Reverse Stock Split basis) underlying the Exchange Shares were agreed
      to have been issued in lieu of the Exchange Shares
      themselves.  Pursuant to the Reformation, the parties agreed
      that an aggregate of 14,400,000 shares of the Company’s common stock were
      deemed to have been issued on the closing date of the Share Exchange
      Agreement, and that upon the effectiveness of and giving effect to the
      Reverse Stock Split on December 7, 2007, an aggregate of an additional
      3,537,977 shares of common stock were deemed to have been issued;
      and




·
            the
      Company amended its complaint in the Federal Court Action to allege that
      all of the disputed shares (the HEL Shares and, derivatively, the Bern
      Noble Shares), were void and subject to cancellation.  Because
      of the uncertainty of the outcome of the Federal Court Action, however,
      the Company determined not to make any changes with respect to such shares
      on its financial statements until the pending litigation was finally
      resolved through a judgment in or settlement of the Federal Court
      Action.




On March
1, 2010, the Company settled the Federal Court Action.  Under the
terms of the settlement, the defendants agreed to return to the Company for
cancellation all of the disputed shares, including 247,798 shares of the Series
A Convertible Preferred Stock and 4,569,619 shares of common stock.




Further,
in connection with the settlement, Bern Noble agreed to return to the Company
for cancellation the 1,210,631 shares of common stock that had originally been
derived from the HEL Shares.  The Company also agreed to replace the
Bern Noble Shares with an equal number of new shares of common stock in
consideration of services rendered to the Company in 2006 in connection with the
closing of the Share Exchange Agreement.  We agreed to deliver the
replacement shares in nine monthly installments.




Restatements




Certain
items on the Company’s consolidated balance sheets, consolidated statements of
operations and consolidated statements of stockholders’ equity and comprehensive
income (loss) have been restated, based on the following:




·
            the
      Company’s determination that it was never authorized to issue any shares
      of any class or series of preferred stock, including the Exchange Shares,
      the Bern Noble Shares and the HEL
Shares;




·
            the
      Company’s determination that the Preferred Stock Amendment, the
      Certificate of Designation designating the Series A Preferred Stock and
      the Common Stock Amendment were invalid and of no force and
      effect;




·
            the
      issuance of shares of common stock in connection with the
      Reformation;




·
            the
      cancellation and reissuance of the shares of common stock converted from
      the Bern Noble Shares (including the recognition of the receipt of the
      services performed by Bern Noble in 2006);
and




·
            the
      settlement of the Federal Court
Action.




The
following describes the restatements to the Company’s condensed consolidated
financial statements:




·
            On
      the condensed consolidated balance sheets, at March 31, 2009 and December
      31, 2008, prepayments decreased by $1,468,930 to reflect the return
      for cancellation of the disputed shares of preferred stock and common
      stock in connection with the settlement of the Federal Court Action. 
      Accordingly, at March 31, 2009 and December 31, 2008, preferred stock
      decreased by $248, common stock decreased by $28,902, additional
      paid-in-capital decreased by $1,439,780 and stockholders’ equity
      decreased by $1,468,930. Further, all references to an authorized
      class or series of preferred stock and any issued and outstanding shares
      of preferred stock have been deleted from the restated balance sheets at
      March 31, 2009 and December 31,
2008;




17




·
            On
      the condensed consolidated statement of operations, for the three months
      ended March 31, 2009, basic and diluted loss per share
      increased by $0.0138, and for the three months ended March 31,
      2008, basic and diluted loss per share increased by $0.0006;
      and




·
            In
      addition, for the three months ended March 31, 2009, the basic and diluted
      weighted average number of outstanding shares decreased by 5,780,250, and
      for the three months ended March 31, 2008, the basic and diluted weighted
      average number of outstanding shares decreased by
    1,612,356.




The
restatements had no impact on the Company’s cash or cash flows.





The
restated condensed consolidated balance sheets have been restated as
follows:




18




Condensed
Consolidated Balance Sheets




As of March
      31, 2009As Previously
                                            Reported
                                          
                                          Adjustments
                                          
                                          As RestatedASSETS
                                          
                                          $
                                          
                                          $
                                          
                                          $Current
      assets:Cash
      and cash equivalents
                                          
                                          
                                          3,080,442
                                          
                                          
                                          -
                                          
                                          
                                          3,080,442Restricted
      cash
                                          
                                          4,436,736
                                          
                                          -
                                          
                                          4,436,736Trade
      receivables, net of provision
                                          
                                          2,451,581
                                          
                                          -
                                          
                                          2,451,581Inventory,
      net
                                          
                                          20,106,427
                                          
                                          -
                                          
                                          20,106,427Prepayments
                                          
                                          1,794,554
                                          
                                          (1,468,930
                                          )
                                          325,624Other
      current assets
                                          
                                          6,943,340
                                          
                                          -
                                          
                                          6,943,340Amounts
      due from affiliates
                                          
                                          11,061,491
                                          
                                          -
                                          
                                          11,061,491Total
      current assets
                                          
                                          49,874,571
                                          
                                          (1,468,930
                                          )
                                          48,405,641Property
      and equipment, net
                                          
                                          2,897,553
                                          
                                          -
                                          
                                          2,897,553Goodwill
                                          
                                          39,734
                                          
                                          -
                                          
                                          39,734TOTAL
      ASSETS
                                          
                                          52,811,858
                                          
                                          (1,468,930
                                          )
                                          51,342,928LIABILITIES
      AND STOCKHOLDERS’EQUITYCurrent
      liabilities:Short-term
      borrowings
                                          
                                          
                                          10,613,750
                                          
                                          
                                          -
                                          
                                          
                                          10,613,750Bills
      payable
                                          
                                          -
                                          
                                          -
                                          
                                          -Trade
      payables
                                          
                                          3,405,942
                                          
                                          -
                                          
                                          3,405,942Deposits
      received
                                          
                                          23,402,035
                                          
                                          -
                                          
                                          23,402,035Other
      current liabilities
                                          
                                          2,064,858
                                          
                                          -
                                          
                                          2,064,858Amounts
      due to affiliates
                                          
                                          3,646,452
                                          
                                          -
                                          
                                          3,646,452TOTAL
      LIABILITIES
                                          
                                          43,133,037
                                          
                                          -
                                          
                                          43,133,037Commitments
      and ContingenciesStockholders’equityPreferred
      stockAuthorized:
      100,000,000 preferred stock, par value $0.001Issued
      and outstanding: 2009: 247,798 (note 1)
                                          
                                          248
                                          
                                          (248
                                          )
                                          -Common
      stockAuthorized:
      100,000,000 common stock, par value $0.005Issued
      and outstanding: 2009: 29,104,110 (note 2)
                                          
                                          145,521
                                          
                                          (28,902
                                          )
                                          116,619Additional
      paid-in capital
                                          
                                          5,558,888
                                          
                                          (1,439,780
                                          )
                                          4,119,108Accumulated
      other comprehensive income
                                          
                                          246,065
                                          
                                          -
                                          
                                          246,065Accumulated
      deficit
                                          
                                          (2,317,597
                                          )
                                          -
                                          
                                          (2,317,597
                                          )TOTAL
      CHINA PREMIUM LIFESTYLE ENTERPRISE, INC. STOCKHOLDERS’EQUITY
                                          
                                          3,633,125
                                          
                                          (1,468,930
                                          )
                                          2,164,195Noncontrolling
      interests
                                          
                                          6,045,696
                                          
                                          -
                                          
                                          6,045,696TOTAL
      STOCKHOLDERS’ EQUITY
                                          
                                          9,678,821
                                          
                                          (1,468,930
                                          )
                                          8,209,891TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                          
                                          52,811,858
                                          
                                          (1,468,930
                                          )
                                          51,342,928







19




As of December 31, 2008As Previously
                                                              Reported
                                                            
                                                            Adjustments
                                                            
                                                            As RestatedASSETS
                                                            
                                                            $
                                                            
                                                            $
                                                            
                                                            $Current
      assets:Cash
      and cash equivalents
                                                            
                                                            
                                                            5,827,132
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            5,827,132Restricted
      cash
                                                            
                                                            4,427,439
                                                            
                                                            -
                                                            
                                                            4,427,439Trade
      receivables, net of provision
                                                            
                                                            11,761,228
                                                            
                                                            -
                                                            
                                                            11,761,228Inventory,
      net
                                                            
                                                            12,670,567
                                                            
                                                            -
                                                            
                                                            12,670,567Prepayments
                                                            
                                                            1,952,882
                                                            
                                                            (1,468,930
                                                            )
                                                            483,952Other
      current assets
                                                            
                                                            6,419,106
                                                            
                                                            -
                                                            
                                                            6,419,106Amounts
      due from affiliates
                                                            
                                                            11,147,103
                                                            
                                                            -
                                                            
                                                            11,147,103Total
      current assets
                                                            
                                                            54,205,457
                                                            
                                                            (1,468,930
                                                            )
                                                            52,736,527Property
      and equipment, net
                                                            
                                                            2,905,927
                                                            
                                                            -
                                                            
                                                            2,905,927Goodwill
                                                            
                                                            39,734
                                                            
                                                            -
                                                            
                                                            39,734TOTAL
      ASSETS
                                                            
                                                            57,151,118
                                                            
                                                            (1,468,930
                                                            )
                                                            55,682,188LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                                                            
                                                            
                                                            9,935,435
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            9,935,435Bills
      payable
                                                            
                                                            1,333,502
                                                            
                                                            -
                                                            
                                                            1,333,502Trade
      payables
                                                            
                                                            3,795,196
                                                            
                                                            -
                                                            
                                                            3,795,196Deposits
      received
                                                            
                                                            19,887,368
                                                            
                                                            -
                                                            
                                                            19,887,368Other
      current liabilities
                                                            
                                                            7,405,454
                                                            
                                                            -
                                                            
                                                            7,405,454Amounts
      due to affiliates
                                                            
                                                            2,433,340
                                                            
                                                            -
                                                            
                                                            2,433,340TOTAL
      LIABILITIES
                                                            
                                                            44,790,295
                                                            
                                                            -
                                                            
                                                            44,790,295Commitments
      and ContingenciesStockholders’equityPreferred
      stockAuthorized:
      100,000,000 preferred stock, par value $0.001Issued
      and outstanding: 2008: 247,798 (note 1)
                                                            
                                                            248
                                                            
                                                            (248
                                                            )
                                                            -Common
      stock
                                                            
                                                            145,521
                                                            
                                                            (28,902
                                                            )
                                                            116,619Authorized:
      100,000,000 common stock, par value $0.005Issued
      and outstanding: 2008: 29,104,110 (note 2)Additional
      paid-in capital
                                                            
                                                            5,558,888
                                                            
                                                            (1,439,780
                                                            )
                                                            4,119,108Accumulated
      other comprehensive income
                                                            
                                                            247,279
                                                            
                                                            -
                                                            
                                                            247,279Accumulated
      deficit
                                                            
                                                            (695,446
                                                            )
                                                            -
                                                            
                                                            (695,446
                                                            )TOTAL
      CHINA
      PREMIUM LIFESTYLE ENTERPRISE, INC. STOCKHOLDERS’
    EQUITY
                                                            
                                                            5,256,490
                                                            
                                                            (1,468,930
                                                            )
                                                            3,787,560Noncontrolling
      interests
                                                            
                                                            7,104,333
                                                            
                                                            -
                                                            
                                                            7,104,333TOTAL
      STOCKHOLDERS’ EQUITY
                                                            
                                                            12,360,823
                                                            
                                                            (1,468,930
                                                            )
                                                            10,891,893TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                            
                                                            57,151,118
                                                            
                                                            (1,468,930
                                                            )
                                                            55,682,188




Note:




1.
              The
      Company did not have any authorized shares or any class or series of
      preferred stock at any of the dates referenced in the balance sheets. The
      references to an authorized class or series of preferred stock and any
      issued and outstanding shares of preferred stock have been deleted from
      the restated balance sheets at March 31, 2009 and December 31,
      2008.2.
              At
      March 31, 2009 and December 31, 2008, giving effect to the transactions
      related to the restatements discussed in this Note 14, there were issued
      and outstanding 23,323,860 shares of common
  stock.


20




The
restated condensed consolidated statements of operations have been restated as
follows:




Condensed
Consolidated Statement of Operations




For
      the 3 months ended March 31, 2009As
      Previously
                                        Reported
                                      
                                      
                                      Adjustments
                                      
                                      
                                      As
      RestatedSales:New
      and used vehicles
                                      
                                      $
                                      14,722,090
                                      
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      14,722,090Parts
      and services and others
                                      
                                      
                                      1,283,798
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,283,798Fashion
      apparel and accessories
                                      
                                      
                                      422,181
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      422,181Net
      sales
                                      
                                      
                                      16,428,069
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      16,428,069Cost
      of sales:New
      and used vehicles
                                      
                                      
                                      (
      14,076,177
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (
      14,076,177
                                      )Parts
      and services and others
                                      
                                      
                                      (
      185,807
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (
      185,807
                                      )Fashion
      apparel and accessories
                                      
                                      
                                      (412,404
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (412,404
                                      )Total
      cost of sales
                                      
                                      
                                      (14,674,388
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (14,674,388
                                      )Gross
      profit:New
      and used vehicles
                                      
                                      
                                      645,913
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      645,913Parts
      and services and others
                                      
                                      
                                      1,097,991
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,097,991Fashion
      apparel and accessories
                                      
                                      
                                      9,777
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      9,777Total
      gross profit
                                      
                                      
                                      1,753,681
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,753,681Selling,
      general and administrative expenses
                                      
                                      
                                      (4,670,091
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (4,670,091
                                      )Operating
      loss
                                      
                                      
                                      (2,916,410
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (2,916,410
                                      )Other
      income (expenses)Interest
      expenses and other finance costs
                                      
                                      
                                      (191,056
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (191,056
                                      )Other
      income
                                      
                                      
                                      426,678
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      426,678Total
      other income (expenses)
                                      
                                      
                                      235,622
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      235,622Loss
      before income taxes
                                      
                                      
                                      (2,680,788
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (2,680,788
                                      )Provision
      for income taxes
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Net
      loss including noncontrolling interests
                                      
                                      
                                      (2,680,788
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (2,680,788
                                      )Net
      loss attributable to:China
      Premium Lifestyle Enterprise, Inc common stockholders
                                      
                                      
                                      (1,622,151
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      (1,622,151
                                      )Noncontrolling
      interests
                                      
                                      
                                      (1,058,637
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (1,058,637
                                      )$
                                      (2,680,788
                                      )
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      (2,680,788
                                      )Loss
      per share of common stock attributable to China Premium Lifestyle
      Enterprise, Inc common stockholdersBasic
                                      
                                      $
                                      (0.0557
                                      )
                                      
                                      $
                                      (0.0138
                                      )
                                      
                                      $
                                      (0.0695
                                      )Diluted
                                      
                                      $
                                      (0.0557
                                      )
                                      
                                      $
                                      (0.0138
                                      )
                                      
                                      $
                                      (0.0695
                                      )Weighted
      average number of shares outstandingBasic
                                      
                                      
                                      29,104,110
                                      
                                      
                                      
                                      (5,780,250)
                                      
                                      
                                      
                                      23,323,860Diluted
                                      
                                      
                                      29,104,110
                                      
                                      
                                      
                                      (5,780,250)
                                      
                                      
                                      
                                      23,323,860





21




For
      the 3 months ended March 31, 2008As
      Previously
                                            Reported
                                          
                                          
                                          Adjustments
                                          
                                          
                                          As
      RestatedSales:New
      and used vehicles
                                          
                                          $
                                          19,913,416
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          19,913,416Parts
      and services and others
                                          
                                          
                                          1,361,915
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,361,915Fashion
      apparel and accessories
                                          
                                          
                                          171,496
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          171,496Net
      sales
                                          
                                          
                                          21,446,827
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          21,446,827Cost
      of sales:New
      and used vehicles
                                          
                                          
                                          (17,485,282
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (17,485,282
                                          )Parts
      and services and others
                                          
                                          
                                          (368,250
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (368,250
                                          )Fashion
      apparel and accessories
                                          
                                          
                                          (131,416
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (131,416
                                          )Total
      cost of sales
                                          
                                          
                                          (17,984,948
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (17,984,948
                                          )Gross
      profit:New
      and used vehicles
                                          
                                          
                                          2,428,134
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          2,428,134Parts
      and services and others
                                          
                                          
                                          993,665
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          993,665Fashion
      apparel and accessories
                                          
                                          
                                          40,080
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          40,080Total
      gross profit
                                          
                                          
                                          3,461,879
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          3,461,879Selling,
      general and administrative expenses
                                          
                                          
                                          (3,773,477
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (3,773,477
                                          )Operating
      loss
                                          
                                          
                                          (311,598
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (311,598
                                          )Other
      income (expenses)Interest
      expenses and other finance costs
                                          
                                          
                                          (131,763
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (131,763
                                          )Other
      income
                                          
                                          
                                          321,560
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          321,560Total
      other income (expenses)
                                          
                                          
                                          189,797
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          189,797Loss
      before income taxes
                                          
                                          
                                          (121,801
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (121,801
                                          )Provision
      for income taxes
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Net
      loss including noncontrolling interests
                                          
                                          
                                          (121,801
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (121,801
                                          )Net
      loss attributable to:China
      Premium Lifestyle Enterprise, Inc common stockholders
                                          
                                          
                                          (229,320
                                          )
                                          
                                          
                                          
                                          
                                          
                                          
                                          (229,320
                                          )Noncontrolling
      interests
                                          
                                          
                                          107,519
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          107,519$
                                          (121,801
                                          )
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          (121,801
                                          )Loss
      per share of common stock attributable to China Premium Lifestyle
      Enterprise, Inc common stockholdersBasic
                                          
                                          $
                                          (0.0092
                                          )
                                          
                                          $
                                          (0.0006
                                          )
                                          
                                          $
                                          (0.0098
                                          )Diluted
                                          
                                          $
                                          (0.0092
                                          )
                                          
                                          $
                                          (0.0006
                                          )
                                          
                                          $
                                          (0.0098
                                          )Weighted
      average number of shares outstandingBasic
                                          
                                          
                                          24,936,216
                                          
                                          
                                          
                                          (1,612,356)
                                          
                                          
                                          
                                          23,323,860Diluted
                                          
                                          
                                          24,936,216
                                          
                                          
                                          
                                          (1,612,356)
                                          
                                          
                                          
                                          23,323,860






End
of condensed consolidated financial statements.




22




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




FORWARD-LOOKING
STATEMENTS




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




RESTATEMENTS




The Company is restating its
consolidated financial statements as of March 31, 2009 and for the three month
periods ended March 31, 2009 and 2008 in this amendment to the Company’s
Quarterly Report on Form 10-Q/A for the period ended March 31, 2009. All
amounts in Management’s Discussion and Analysis of Financial Condition and
Results of Operations that are the subject of these restatements in
the financial statements filed herewith have been adjusted, as
appropriate, for the effects of the restatement. For a more detailed discussion
of the restatements and their underlying circumstances, please refer to the
Explanatory Note at the beginning of this Report and Note 14 of the Notes to the
consolidated financial statements included in this Report.




COMPANY
OVERVIEW




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




THE
BUSINESS OF TECHNORIENT




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




23




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




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




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




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




THE
BUSINESS OF CPMM ASIA




On
January 18, 2008, CPMM Asia entered into a License and Supply Agreement
(the “Agreement”) with Akkurate Ltd. (“Akkurate”) and Falber Confezioni S.R.L.
(“Falber”) for a term of 10 seasons through approximately January 31, 2013. The
Agreement 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 identified by
the ”John Richmond,” “Richmond,” “Richmond X,” and “Richmond Denim” marks
(collectively, the “Signs”) in China, Hong Kong, Macau and Taiwan (the
“Exclusivity Area”), which Products will be supplied by Falber. In addition,
CPMM Asia has the right to use the Signs, and to 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.




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.




24




CRITICAL
ACCOUNTING POLICIES




In
preparing our financial statements, we make estimates, assumptions and judgments
that can have a significant effect on our revenues, income or loss from
operations, and net income or net loss, as well as on the value of certain
assets on our balance sheet. We believe that there are several accounting
policies that are critical to an understanding of our historical and future
performance as these policies affect the reported amounts of revenues, expenses,
and significant estimates and judgments applied by management. While there are a
number of accounting policies, methods and estimates affecting our financial
statements, the following policies are considered critical. In addition, you
should refer to our accompanying condensed consolidated balance sheet as of
March 31, 2009 and the condensed consolidated statements of operations for the
three months ended March 31, 2009 and 2008, and the related notes thereto, for
further discussion of our accounting policies.




Trade
receivables and provision for bad debts




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




Inventory,
net




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




Share-based
compensation




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




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




25




Revenue
recognition




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




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




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




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




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




Impairment
of long-lived assets




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




Income
taxes




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




Contingencies




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




RECENT
ACCOUNTING PRONOUNCEMENTS




(a)           Recent
accounting pronouncements adopted




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




26




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




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




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




(b)           Recent
accounting pronouncements not yet effective




In
April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments.  The FSP amends SFAS No. 107,
Disclosures about Fair Value
of Financial Instruments to require disclosure about fair value of
financial instruments in interim financial statements.  FSP FAS 107-1 and
APB 28-1 are effective for interim and annual periods ending after June 15,
2009 with early adoption permitted for periods ending after March 15,
2009.  The Company does not expect the adoption of this statement to have a
material impact on the Company’s financial statements.




In April
2009, the FASB issued Staff Position No. FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly, (“FSP SFAS
157-4”). FSP SFAS 157-4 provides guidelines for making fair value measurements
more consistent with the principles presented in SFAS 157. FSP SFAS
157-4 provides additional authoritative guidance in determining whether a market
is active or inactive, and whether a transaction is distressed, is applicable to
all assets and liabilities (i.e., financial and nonfinancial) and will require
enhanced disclosures. The pronouncement is effective for periods ending after
June 15, 2009. The Company does not expect the adoption of this statement
to have a material impact on the Company’s financial statements.




27




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.




RESULTS
OF OPERATIONS




Results
of operations comparison of three months ended March 31, 2009 to three
months ended March 31, 2008




SALES




Three
      months ended
                      March
      31, 2009
                    
                    
                    Three
      months ended
                      March
      31, 2008Total
                      Sales
                    
                    
                    %
      of
                      Total
      Sales
                    
                    
                    Total
                      Sales
                    
                    
                    %
      of
                      Total
      SalesSales:New
      vehicles
                    
                    $
                    9,682,000
                    
                    
                    
                    58.9
                    %
                    
                    $
                    14,399,000
                    
                    
                    
                    67.1
                    %Used
      vehicles
                    
                    $
                    5,040,000
                    
                    
                    
                    30.7
                    %
                    
                    $
                    5,514,000
                    
                    
                    
                    25.7
                    %Parts
      and services and others
                    
                    $
                    1,284,000
                    
                    
                    
                    7.8
                    %
                    
                    $
                    1,362,000
                    
                    
                    
                    6.4
                    %Fashion
      Apparel
                    
                    $
                    422,000
                    
                    
                    
                    2.6
                    %
                    
                    $
                    172,000
                    
                    
                    
                    0.8
                    %Total
                    
                    $
                    16,428,000
                    
                    
                    
                    100
                    %
                    
                    $
                    21,447,000
                    
                    
                    
                    100
                    %





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




Total
sales for the three months ended March 31, 2009 decreased by approximately
$5,019,000 or 23.4% to approximately $16,428,000, compared with approximately
$21,447,000 for the same period of 2008. The decrease was primarily
caused by the decreased sales from our vehicle trading
segment.




New
vehicles sales decreased approximately $4,717,000 or 32.8% from the
first quarter of 2008 to the same period of 2009 while the
quantity of new vehicles sold decreased 24% for the same period. The used
vehicles sales decreased approximately $474,000 or 8.6% from the
first quarter of 2008 to the same period of 2009 while the
quantity of used vehicles sold increased by 26% for the same period.
The decrease in sales of new and used vehicles as well as parts and service
sales reflected a challenging automotive retail market impacted by the
unfavorable global economic conditions.




COST OF
SALES




Cost of
sales for the three months ended March 31, 2009 decreased to
$14,674,000 from $17,985,000 for the three months ended March 31, 2008, a
$3,311,000 or 18.4% decrease was consistent with the decrease in Company’s
revenues during the same period.




GROSS
PROFIT




Gross
profit margin for the three months ended March 31, 2009 decreased by 5.4%
from 16.1% for the same period of 2008 to 10.7% for the current period of
2009 and the gross profit decreased by $1,708,000 to $1,754,000 for the
three months ended March 31, 2009.  This decrease was mainly caused by
the new and used vehicles trading segment that was negatively impacted by an
overall competitive retail environment.  Certain used
vehicles were sold with a special discount in order to encourage the
sales.




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




28




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 March 31, 2009 were approximately $4,670,000,
compared to approximately $3,773,000 for the same period of 2008. The
approximate $897,000 increase in S,G&A expenses was primarily due to
increased rental expenses, legal, professional and audit fees.




Our rent,
rate and building management fees increased from approximately $702,000 for the
three months ended March 31, 2008 to $1,195,000 for the same period of
2009, the increase in such fees were mainly due to development of the fashion
apparel business and motor business. Legal, professional and audit fees
increased from $86,000 in the three months ended March 31, 2008  to
$404,000 for the same period of 2009. The increase was mainly due to the
professional fees incurred for US SEC reporting and compliance
obligations.




OTHER
INCOME, NET




Other
income for the three months ended March 31, 2009 increased to approximately
$236,000 compared to approximately $190,000 for the same period of 2008, a total
increase of $46,000. The increase was primarily due to the combination of
increased other operating income offset by increased interest expenses and other
finance costs. The other operating income is comprised of interest and rental
recharge to affiliates and forfeitures of sales deposits.  Such income
increased from $322,000 for the three months ended 2008 to $427,000 for the same
period of 2009 that was mainly due to the forfeiture of several sale deposits
amounting of $77,000. Interest expenses and other finance costs increased from
approximately $132,000 for the three months ended 2008 to approximately
$191,000 for the same period of 2009. The funds from which our increased
interest expenses were incurred were used for working capital
purposes.




LIQUIDITY
AND CAPITAL RESOURCES




CASH
FLOWS FROM OPERATING ACTIVITIES




Our
operations utilized cash resources of approximately $3,122,000 for the three
months ended March 31, 2009, compared to generating cash resources of
approximately $1,688,000 for the three months ended March 31, 2008, primarily as
a net result of the following:




·
            For
      the three months ended March 31, 2009, cash flow provided by sales net of
      operating expenses decreased by approximately $2,602,000 to cash outflow
      of $2,378,000. The decrease was primarily as a result of the decrease in
      sales.




·
            For
      the three months ended March 31, 2009, account receivables decreased by
      approximately $9,311,000, primarily due to the collection of account
      receivables relating to the sales recognized in the fourth
      quarter.




·
            For
      the three months ended March 31, 2009, our inventory increased by
      approximately $7,474,000, which was caused by overall
      unfavorable economic conditions, including a decline in consumer
      confidence.




·
            For
      the three months ended March 31, 2009, the increase or decrease of various
      current operating assets and liabilities, included in the aforementioned
      items, resulted in an aggregate decrease of cash inflow from operations of
      approximately $744,000.




CASH
FLOWS FROM INVESTING ACTIVITIES




For the
three months ended March 31, 2009, we expended net cash of approximately
$268,000 in investing activities mainly for the acquisition of property and
equipment to support the development of the PRC motor business. For the three
months ended March 31, 2008, we utilized approximately $173,000 in investing
activities, mainly for acquisition of property and equipment.




29




CASH
FLOWS FROM FINANCING ACTIVITIES




During
the three months ended March 31, 2009, we repaid approximately $655,000 of our
obligations owed on outstanding debt as compared to approximately $2,757,000 for
the three months ended March 31, 2008.




For the
three months ended March 31, 2009, we received approximately $1,299,000 net
advances from affiliates. For the three months ended March 31, 2008, we received
approximately $1,154,000 net advances from affiliates. The advances from /
to affiliates were made from / to entities that are under common
management, where Mr. Richard Man Fai Lee, the Company’s Chief Executive
Officer, is the common director of the Company and the affiliates. These
advances included interest bearing and non interest bearing portions depending
on the nature of the advances.




WORKING
CAPITAL REQUIREMENTS




Current
assets exceeded current liabilities at March 31, 2009 by approximately
$5,273,000, a decrease of $2,673,000 from December 31, 2008. The ratio of our
current assets to our current liabilities was 1.12 to 1 at March 31,
2009 compared to 1.18 to 1 at December 31, 2008. At March 31,
2009, our current assets of approximately $48,406,000 included approximately
$20,106,000 in inventory that was funded by the operating cash flow and trade
finance facilities. Our current liabilities of approximately $43,133,000
included non-refundable customer deposits. Given the exclusive nature and
extremely limited production of Ferrari cars, our customers are willing to place
material deposits in advance to the Company in order to secure their new car
orders. This resulted in customer deposits of approximately
$23,402,000.




SEASONALITY




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




EFFECT OF
FLUCTUATION IN FOREIGN EXCHANGE RATES




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




OFF-BALANCE
SHEET ARRANGEMENTS




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




Item
3. Quantitative and Qualitative Disclosures about Market Risk.




Not
applicable to smaller reporting companies.




Item
4T.   Controls and Procedures




NOTE:
This Item 4T. Controls and Procedures has been updated to reflect the
restatement of our audited financial statements for the years ended December 31,
2008, 2007 and 2006, the restatement of our unaudited interim financial
statements for the periods ended September 30, 2006 through September 30, 2009,
the amendment of certain Notes to our audited financial statements for our
former fiscal  year ended June 30, 2006 and the amendment of certain
Notes to our unaudited interim financial statements for the period ended March
31, 2006, as discussed above in the Explanatory Note at the beginning of this
Report and in Note 14 of the Notes to the consolidated financial statements
included in this Report.




Reevaluation
of Effectiveness of Internal Control over Financial Reporting and Disclosure
Controls and Procedures




This Form
10-Q/A presents restatements of the financial statements for the covered
period.  In connection with this Form 10-Q/A, our management
reevaluated the effectiveness of our internal control over financial reporting
and our disclosure controls and procedures, as defined in Rule 13a-15(e) under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of
March 31, 2009.  In assessing whether our internal control over
financial reporting and disclosure controls and procedures were effective as of
such date, our management considered the impact of the restatements to our
consolidated audited financial statements for the period ended March 31, 2009,
as outlined in Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations under the section heading
“Restatements,”as
well as our control environment.  In connection with our reevaluation,
we discovered material weaknesses in our internal control over financial
reporting and determined that our disclosure controls and procedures were not
adequate as of the end of the period covered by this report.




30




Our
management is responsible for establishing and maintaining an adequate system of
internal control over financial reporting as required by Section 404A of the
Sarbanes-Oxley Act of 2002 (“SOX”).  Our system of internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles
generally accepted in the United States of America (“GAAP”).  Our
internal control over financial reporting includes those policies and procedures
that:




·
            pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect our transactions and dispositions of our
      assets;




·
            provide
      reasonable assurance that our transactions are recorded as necessary to
      permit preparation of our financial statements in accordance with GAAP,
      and that our receipts and expenditures are being made only in accordance
      with authorizations of our management and our directors;
    and




·
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use, or disposition of our assets that could
      have a material effect on the financial
  statements.




Because
of its inherent limitations, a system of internal control over financial
reporting can provide only reasonable assurance and may not prevent or detect
misstatements.  Further, because of changes in conditions,
effectiveness of internal controls over financial reporting may vary over
time.  Our system contains self monitoring mechanisms, and actions are
taken to correct deficiencies as they are identified.




During
the pendency of the Federal Court Action and preparing for our 2009 year end
evaluation of effectiveness of our system of internal control over financial
reporting based on the framework in Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) and SEC guidance on conducting such assessments, our
management concluded that our system of internal control over financial
reporting was not effective as of the period ended March 31, 2006 through the
period ended September 30, 2009, which resulted in restatements described in the
Explanatory Note at the beginning of this Report and Note 14 of the Notes to the
consolidated financial statements included in this Report.




Our
management has identified internal control deficiencies which resulted in the
material restatements described above and which, in our management’s judgment,
represented a material weakness in internal control over financial
reporting.  The control deficiencies related to controls over the
accounting and disclosure for certain transactions to ensure that such
transactions were recorded as necessary to permit preparation of financial
statements and disclosure in accordance with GAAP.




Specifically,
the control deficiencies related to:




·
            the
      invalid adoption of certain purported amendments to our Articles of
      Incorporation,




·
            the
      unauthorized issuance by prior management of shares of our capital stock,
      and




·
            the
      lack of recognition of the receipt of services from certain third party
      consultants on our financial
statements.




A
material weakness in internal controls is a significant deficiency, or
combination of significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the financial statements would not be
prevented or detected on a timely basis by us.




In the
course of our revised assessment of internal controls over financial reporting,
we also re-assessed our disclosure controls and procedures as defined in Rule
13a-15(e) of the Exchange Act.  Our management is responsible for
establishing and maintaining an adequate system of disclosure controls and
procedures designed to provide reasonable assurance that the information
required to be disclosed by us in reports that we file and submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms.  Disclosure controls
also are designed to reasonably assure that such information is accumulated and
communicated to management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosures.  Disclosure controls include components of internal
control over financial reporting, which consists of control processes designated
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements in accordance with United States
generally accepted accounting principles.




31




We have
determined that our material weakness in internal controls over financial
reporting was also a weakness in our disclosure controls and procedures, since
such weakness related to the disclosure controls which provide us with
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles.




In
designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and in reaching a reasonable level of assurance our management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.




Based on
its assessment, including consideration of the aforementioned material
weaknesses, and the criteria discussed above, management has restated its
conclusion relative to the effectiveness of our internal control over financial
reporting and disclosure controls and procedures as of March 31,
2009.  Accordingly, our management has concluded that our internal
control over financial reporting and our disclosure controls and procedures were
not effective as of March 31, 2009 to provide reasonable assurance that
information required to be disclosed by us in the reports that we file under the
Exchange Act is recorded, processed, and summarized within the appropriate
periods.




Our
management is responsible for establishing and maintaining an adequate system of
disclosure controls and procedures designed to provide reasonable assurance that
the information required to be disclosed by us in reports that we file and
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and
forms.  Disclosure controls also are designed to reasonably assure
that such information is accumulated and communicated to management, including
the Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosures.  Disclosure
controls include components of internal control over financial reporting, which
consists of control processes designated to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements in accordance with GAAP.




We have
determined that our material weakness in internal controls over financial
reporting was also a weakness in our disclosure controls and procedures, since
such weakness related to the disclosure controls which provide us with
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP.




In
designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and in reaching a reasonable level of assurance our management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.




Based on
its assessment, including consideration of the above-mentioned material
weakness, and the criteria discussed above, management has restated its
conclusion relative to the effectiveness of our internal control over financial
reporting and disclosure controls and procedures as of March 31,
2009.  Accordingly, our management has concluded that our internal
control over financial reporting and that our disclosure controls and procedures
were not effective as of March 31, 2009 to provide reasonable assurance that
information required to be disclosed by us in the reports that we file under the
Exchange Act is recorded, processed, and summarized within the appropriate
periods.




Management
will continue to evaluate the effectiveness of our internal controls over
financial reporting and our disclosure controls and procedures on an ongoing
basis, and has taken action and implemented improvements as
necessary.




32




Changes
in Internal Controls over Financial Reporting




No
changes to our internal control over financial reporting or disclosure controls
and procedures were made to rectify the material weakness during the period
covered by this Form 10-Q/A because such weakness was not known at that
time.  However, subsequent to the period, we remediated this weakness
by:




·
            retaining
      new advisors to advise us and adopting a policy to consult with such
      advisors (or other outside experts) regarding complex legal and accounting
      issues;




·
            completing
      a review and updated risk assessment of all of our financial controls and
      procedures; and




·
            reviewing
      and instituting controls for each
weakness.




PART
II - OTHER INFORMATION




Item
1. Legal Proceedings.




This Item
should be read in conjunction with Notes 8, 9 and 13 to the Company’s
Consolidated Financial Statements (Unaudited) as of March 31, 2009.




The
Company is currently engaged in litigation (the “Federal Court Action”) with
respect to certain shares of the Company’ purported Series A Convertible
Preferred Stock (the “Disputed Preferred Shares”) purportedly issued to Happy
Emerald Limited (“HEL”) and certain shares of the Company’s Common Stock
purportedly issued upon the conversion of certain of the Disputed Preferred
Shares (the “Disputed Conversion Shares” and together with the Disputed
Preferred Shares, the “Disputed Shares”).  On May 5, 2009, the Company
filed its First Amended Complaint in the Federal Court Action.







In its
First Amended Complaint, the Company has asserted that the Disputed Shares have
never been earned and has asserted claims for Securities Fraud, Breach of
Contract, Fraud, Conversion, Unjust Enrichment, Constructive Trust, Breach of
Fiduciary Duty and Declaratory Relief.  In addition, as more fully
discussed in Note 13 to the Company’s Consolidated Financial Statements
(Unaudited) as of March 31, 2009, the Company has determined that the Company
has never been authorized to issue any shares of any class or series of
preferred stock, including the Disputed Preferred Shares.  As a
result, in addition to its other claims against HEL and the defendants, the
Company has asserted in the First Amended Complaint that all of the Disputed
Shares are void and subject to cancellation.




In a
related matter, the Company was named as a defendant in a state court action,
styled Federico G. Cabo, et
al. v. China Premium Lifestyle Enterprise, Inc., et al.,California
Superior Court, Ventura County, Case No. 56-2008-00333382-CU-BC-VTA (the “State
Court Action”).  The plaintiffs in the State Court Action (defendants
in the Federal Court Action) Federico Cabo, Fred De Luca, and Nevada Global,
asserted various claims against multiple defendants relating to the Preferred
Shares issued to HEL in which these plaintiffs claim an interest.  The
plaintiffs asserted claims for estoppels, slander of title, conversion and
constructive trust against the Company in the State Court Action.  By
agreement with the plaintiffs in the State Court Action, the State Court Action
was dismissed, without prejudice, and it is anticipated that the same or similar
claims will be asserted in the Federal Court Action.  The Company
denies any such alleged wrongdoing and will vigorously defend these claims if
they are asserted in the Federal Court Action.  The Company, however,
is unable to evaluate the likelihood of an outcome, favorable or
unfavorable, to the Company at this time or to estimate the amount or range of a
possible loss.





Effective
March 1, 2010, the Company settled the Federal Court Action.  Under
the terms of the settlement: (1) the defendants agreed to return to the Company
for cancellation 247,798 shares of preferred stock and 4,569,619 shares of
common stock; (2) Mr. De Luca resigned from the Company’s board of directors
effective March 1, 2010; (3) the parties executed a mutual release; and (4) the
Company dismissed the action with prejudice.




In
December 2006, the Company had delivered 65,454 shares of preferred stock to
Bern Noble, Ltd. (“Bern Noble”) for consulting services rendered in connection
with the Exchange.  In March 2007, Bern Noble converted such shares
into 1,210,631 shares of common stock.  As discussed in the
Explanatory Note at the beginning of this Report and as previously disclosed in
the Company’s Current Report on Form 8-K, as filed with the SEC on May 11, 2009,
the Company later determined that it was never authorized to issue any shares of
preferred stock.  In connection with the settlement, Bern Noble agreed
to return to us for cancellation the 1,210,631 shares of common
stock.  We also agreed to replace the shares with an equal number of
new shares of common stock in consideration of services rendered to us in 2006
in connection with the closing of the Amended Share Exchange
Agreement.  We agreed to deliver the replacement shares in nine
monthly installments.




33




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




Item
1A. Risk Factors.




Not
applicable to smaller reporting companies.




Item
5. Other Information.




During
the three months ended March 31, 2009, there have been no material changes to
the procedures by which security holders may recommend nominees to the Company’s
board of directors.




Item
6. Exhibits.




Exhibit
              No.
            
            Description2.1
            
            Share
      Exchange Agreement dated July 15, 2006 among the Company, Fred De Luca,
      Corich Enterprises, Inc., Herbert Adamczyk and Technorient Limited,
      incorporated by reference from the Form 8-K/A filed with the SEC on July
      28, 2006.2.2
            
            Reformation
      of Share Exchange Agreement dated May 5, 2009 among the Company, Corich
      Enterprises, Inc., Herbert Adamczyk, Technorient Limited and Orient
      Financial Services, Ltd., incorporated by reference from the Form 8-K
      filed with the SEC on May 11, 2009.3.1
            
            Articles
      of Incorporation, dated as of April 19, 2004, incorporated by reference
      from the Company’s Form SB-2 Registration Statement filed with the SEC on
      November 26, 2004 (File No. 333-120807).3.2
            
            By-Laws
      of Xact Aid Inc., incorporated by reference from the Company’s Form SB-2
      Registration Statement filed with the SEC on November 26, 2004 (File No.
      333-120807).3.3
            
            Certificate
      of Amendment to Articles of Incorporation, effective date December 27,
      2006, incorporated by reference from the Company’s Annual Report on Form
      10-K for the year ended December 31, 2007 filed with the SEC on March 31,
      2008.3.4
            
            Certificate
      of Amendment to Articles of Incorporation, effective date December 7,
      2007, incorporated by reference from the Company’s Current Report on Form
      8-K filed with the SEC on December 10, 2007.31.1
            
            Certification
      of Chief Executive Officer pursuant to Rule 15D-15(E) of the Securities
      Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.31.2
            
            Certification
      of the Chief Financial Officer pursuant to Rule 15D-15(E) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.32.1
            
            Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed
      herewith.




34




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:           May
      17, 2010
                            By:
                            /s/
      Richard Man Fai LeeRichard
      Man Fai LeeChief
      Executive OfficerDate:           May
      17, 2010
                            By:
                            /s/
      Joseph Tik Tung WongJoseph
      Tik Tung WongChief
      Financial Officer




35




EXHIBIT
INDEX




Exhibit
              No.
            
            Description2.1
            
            Share
      Exchange Agreement dated July 15, 2006 among the Company, Fred De Luca,
      Corich Enterprises, Inc., Herbert Adamczyk and Technorient Limited,
      incorporated by reference from the Form 8-K/A filed with the SEC on July
      28, 2006.2.2
            
            Reformation
      of Share Exchange Agreement dated May 5, 2009 among the Company, Corich
      Enterprises, Inc., Herbert Adamczyk, Technorient Limited and Orient
      Financial Services, Ltd., incorporated by reference from the Form 8-K
      filed with the SEC on May 11, 2009.3.1
            
            Articles
      of Incorporation, dated as of April 19, 2004, incorporated by reference
      from the Company’s Form SB-2 Registration Statement filed with the SEC on
      November 26, 2004 (File No. 333-120807).3.2
            
            By-Laws
      of Xact Aid Inc., incorporated by reference from the Company’s Form SB-2
      Registration Statement filed with the SEC on November 26, 2004 (File No.
      333-120807).3.3
            
            Certificate
      of Amendment to Articles of Incorporation, effective date December 27,
      2006, incorporated by reference from the Company’s Annual Report on Form
      10-K for the year ended December 31, 2007 filed with the SEC on March 31,
      2008.3.4
            
            Certificate
      of Amendment to Articles of Incorporation, effective date December 7,
      2007, incorporated by reference from the Company’s Current Report on Form
      8-K filed with the SEC on December 10, 2007.31.1
            
            Certification
      of Chief Executive Officer pursuant to Rule 15D-15(E) of the Securities
      Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.31.2
            
            Certification
      of the Chief Financial Officer pursuant to Rule 15D-15(E) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.32.1
            
            Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed
      herewith.




36