UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q/A


(Amendment
No. 1)





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




For the
quarterly period ended: March 31, 2007




or




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




For the
transition period from 
to




Commission
File No. 333-120807




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC.


(Exact
name of Registrant as specified in its charter)




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





10/F,
      Wo Kee Hong Building585-609
      Castle Peak RoadKwai Chung, N.T. Hong Kong(Address
      of principal executive offices)





(852) 2514-4880(Registrant’s
      telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. 
         Yes  x No  o




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




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




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




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




The
number of shares of common stock outstanding as of May 10, 2007 was
98,929,180.





EXPLANATORY
NOTE




As used
in this Amendment No. 1 (the “Form 10-Q/A”) to our Quarterly Report on Form 10-Q
for the three months ended March 31, 2007 (the “First Quarter 2007 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 2007 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, 2007 and for the three
months ended March 31, 2007 and 2006.




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.




NOTE:  The common stock numbers in the
“Background” sections of this Explanatory Note and Note 13 of the financial
statements filed herewith 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.  However, unless otherwise indicated, the
common stock numbers in the “Restatements” sections of this Explanatory Note and
Note 13 of the financial statements filed herewith, and in the balance of this
Form 10-Q/A reflect our pre-Reverse Stock Split capitalization, as in effect
during the period covered by this Form 10-Q/A.




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.




i





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”);




·
            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




ii




·
            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.




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, 2007 and December
      31, 2006, 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, 2007, preferred stock decreased by $574,
      common stock decreased by $16,534, additional paid-in-capital
      decreased by $1,451,822 and stockholders' equity decreased by
      $1,468,930. At December 31, 2006, preferred stock decreased by
      $1,534, common stock increased by $72,000, additional paid-in-capital
      decreased by $1,539,396 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, 2007 and
      December 31, 2006;




iii




·
            on
      the condensed consolidated statement of operations, for the three months
      ended March 31, 2007, basic and diluted loss per share decreased by
      $0.0061, and for the three months ended March 31, 2006, basic and diluted
      loss per share increased by $0.0039;
and




·
            for
      the three months ended March 31, 2007, the basic and diluted weighted
      average number of outstanding shares increased by 69,048,856, and for the
      three months ended March 31, 2006, the basic and diluted weighted average
      number of outstanding shares increased by
  89,689,881.




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 2007 Form 10-Q in its entirety.  The
following Items contain amended disclosures relating to the
restatements:




·
            Part
      I, Item 1. Financial Statements;




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




·
            Part
      I, Item 4. Controls and Procedures;
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 2007 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 2007 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 2007 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 2007 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 2007
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/A




FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2007




TABLE
OF CONTENTS




PagePART
      I: FINANCIAL INFORMATION
                    
                    
                    1Item
      1. Financial Statements
                    
                    
                    1Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                    
                    
                    18Item
      3.  Quantitative and Qualitative Disclosures about Market
      Risk
                    
                    
                    24Item
      4.  Controls and Procedures
                    
                    
                    25PART
      II: OTHER INFORMATION
                    
                    
                    28Item
      1. Legal Proceedings
                    
                    
                    28Item
      1A.  Risk Factors.
                    
                    
                    28Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                    
                    
                    28Item
      3. Defaults Upon Senior Securities
                    
                    
                    28Item
      4. Submission of Matters to a Vote of Security Holders
                    
                    
                    28Item
      5. Other Information
                    
                    
                    28Item
      6. Exhibits
                    
                    
                    28SIGNATURES
                    
                    
                    29





PART
I:  FINANCIAL INFORMATION




Item
      1.
            Financial
      Statements.




CHINA
PREMIUM LIFESTYLE ENTERPRISE, INC. AND SUBSIDIARIES




CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




AS
OF MARCH 31, 2007 AND




FOR
THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006




INDEX
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




CONDENSED
      CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                    
                    
                    2CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                    
                    
                    3CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                    
                    
                    4NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                    
                    
                    5




1


CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES




CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)







March
      31,
                        
                        
                        December
      31,2007
                        
                        
                        2006$
                          (Restated)
                        
                        
                        $
                          (Restated)(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                        
                        
                        2,168,690
                        
                        
                        
                        3,475,635Restricted
      cash
                        
                        
                        384,025
                        
                        
                        
                        385,629Trade
      receivables, net of provision
                        
                        
                        4,345,358
                        
                        
                        
                        11,246,621Inventory,
      net
                        
                        
                        9,445,959
                        
                        
                        
                        6,815,863Prepayments
                        
                        
                        14,053
                        
                        
                        
                        37,328Other
      current assets
                        
                        
                        1,819,432
                        
                        
                        
                        1,503,626Amounts
      due from affiliates
                        
                        
                        6,996,531
                        
                        
                        
                        4,503,367Amount
      due from an associate
                        
                        
                        356,235
                        
                        
                        
                        457,267Total
      current assets
                        
                        
                        25,530,283
                        
                        
                        
                        28,425,336Property
      and equipment, net
                        
                        
                        2,234,148
                        
                        
                        
                        2,377,656Investment
      in an associate
                        
                        
                        1,333,357
                        
                        
                        
                        1,355,530Deferred
      income taxes
                        
                        
                        537,634
                        
                        
                        
                        539,880TOTAL
      ASSETS
                        
                        
                        29,635,422
                        
                        
                        
                        32,698,402LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                        
                        
                        6,423,734
                        
                        
                        
                        5,315,497Obligations
      due under finance lease - current portion
                        
                        
                        166,411
                        
                        
                        
                        167,106Bills
      payable
                        
                        
                        3,027,919
                        
                        
                        
                        4,412,575Trade
      payables
                        
                        
                        300,187
                        
                        
                        
                        480,859Deposits
      received
                        
                        
                        10,827,003
                        
                        
                        
                        8,607,049Other
      current liabilities
                        
                        
                        2,793,809
                        
                        
                        
                        7,331,020Total
      current liabilities
                        
                        
                        23,539,063
                        
                        
                        
                        26,314,106Long-term
      liabilities:Obligations
      due under finance lease - non-current portion
                        
                        
                        69,338
                        
                        
                        
                        111,404TOTAL
      LIABILITIES
                        
                        
                        23,608,401
                        
                        
                        
                        26,425,510Commitments
      and ContingenciesMinority
      interests
                        
                        
                        3,335,133
                        
                        
                        
                        3,318,358Stockholders’
      equityCommon
      stockAuthorized:
      100,000,000 common stock, par value $0.001Issued
      and outstanding: 98,929,180 shares as at March 31, 2007 (98,929,180 as at
      December 31, 2006)
                        
                        
                        98,961
                        
                        
                        
                        98,961Additional
      paid-in-capital
                        
                        
                        4,136,766
                        
                        
                        
                        4,136,766Accumulated
      other comprehensive income
                        
                        
                        48,860
                        
                        
                        
                        51,507Accumulated
      deficits
                        
                        
                        (1,592,699
                        )
                        
                        
                        (1,332,700
                        )TOTAL
      STOCKHOLDERS’ EQUITY
                        
                        
                        2,691,888
                        
                        
                        
                        2,954,534TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
                        
                        29,635,422
                        
                        
                        
                        32,698,402





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


2





CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES




CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)




Three
      months endedMarch 31,2007
                        
                        
                        2006$
                          (Restated)
                        
                        
                        $
                          (Restated)Sales:New
      and used vehicles
                        
                        
                        15,823,975
                        
                        
                        
                        8,265,543Parts
      and services
                        
                        
                        1,186,668
                        
                        
                        
                        979,477Net
      sales
                        
                        
                        17,010,643
                        
                        
                        
                        9,245,020Cost
      of sales:New
      and used vehicles
                        
                        
                        (14,149,803
                        )
                        
                        
                        (7,424,582
                        )Parts
      and services
                        
                        
                        (342,099
                        )
                        
                        
                        (309,147
                        )Total
      cost of sales
                        
                        
                        (14,491,902
                        )
                        
                        
                        (7,733,729
                        )Gross
      profit:New
      and used vehicles
                        
                        
                        1,674,172
                        
                        
                        
                        840,961Parts
      and services
                        
                        
                        844,569
                        
                        
                        
                        670,330Total
      gross profit
                        
                        
                        2,518,741
                        
                        
                        
                        1,511,291Selling
      and marketing
                        
                        
                        (142,048
                        )
                        
                        
                        (107,106
                        )General
      and administrative expenses
                        
                        
                        (2,493,061
                        )
                        
                        
                        (1,925,755
                        )Operating
      loss
                        
                        
                        (116,368
                        )
                        
                        
                        (521,570
                        )Other
      income (expenses)Interest
      expenses
                        
                        
                        (177,287
                        )
                        
                        
                        (65,608
                        )Share
      of result of an associate
                        
                        
                        (39,892
                        )
                        
                        
                        (226,722
                        )Other
      income
                        
                        
                        90,343
                        
                        
                        
                        107,964Total
      other expenses
                        
                        
                        (126,836
                        )
                        
                        
                        (184,366
                        )Loss
      before minority interests and income taxes
                        
                        
                        (243,204
                        )
                        
                        
                        (705,936
                        )Provision
      for income taxes
                        
                        
                        -
                        
                        
                        
                        -Loss
      before minority interests
                        
                        
                        (243,204
                        )
                        
                        
                        (705,936
                        )Minority
      interests
                        
                        
                        (16,795
                        )
                        
                        
                        360,374Net
      loss
                        
                        
                        (259,999
                        )
                        
                        
                        (345,562
                        )Loss
      per shareBasic
                        
                        
                        (0.0026
                        )
                        
                        
                        (0.0039
                        )Diluted
                        
                        
                        (0.0026
                        )
                        
                        
                        (0.0039
                        )Weighted
      average number of common stock outstandingBasic
                        
                        
                        98,929,180
                        
                        
                        
                        89,689,881Diluted
                        
                        
                        98,929,180
                        
                        
                        
                        89,689,881




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


3




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES




CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)




Three
      months ended
                                              March
      31,2007
                                            
                                            
                                            2006$
                                            
                                            
                                            $Cash
      flows from operating activities:Net
      loss
                                            
                                            
                                            (259,999
                                            )
                                            
                                            
                                            (345,562
                                            )Adjustments
      to reconcile net loss to net cash provided by operating
      activitiesMinority
      interests
                                            
                                            
                                            16,795
                                            
                                            
                                            
                                            (360,374
                                            )Depreciation
      and amortization
                                            
                                            
                                            172,539
                                            
                                            
                                            
                                            120,896Provision
      for bad debts and bad debts written off
                                            
                                            
                                            53,825
                                            
                                            
                                            
                                            46,911Provision
      for inventory written back
                                            
                                            
                                            (8,975
                                            )
                                            
                                            
                                            -Equity
      earnings of an associate
                                            
                                            
                                            39,892
                                            
                                            
                                            
                                            226,722Other
      non-cash items
                                            
                                            
                                            (11,987
                                            )
                                            
                                            
                                            29,639Changes
      in operating assets and liabilities:Trade
      receivables
                                            
                                            
                                            6,847,438
                                            
                                            
                                            
                                            3,977,971Other
      current assets and prepayments
                                            
                                            
                                            (292,531
                                            )
                                            
                                            
                                            915,325Inventory
                                            
                                            
                                            (2,621,121
                                            )
                                            
                                            
                                            (2,842,072
                                            )Trade
      payables
                                            
                                            
                                            (180,672
                                            )
                                            
                                            
                                            23,489Other
      current liabilities and deposits received
                                            
                                            
                                            (2,317,257
                                            )
                                            
                                            
                                            93,098Net
      cash provided by operating activities
                                            
                                            
                                            1,437,947
                                            
                                            
                                            
                                            1,886,043Cash
      flows from investing activities:Purchases
      of property and equipment
                                            
                                            
                                            (33,580
                                            )
                                            
                                            
                                            (14,490
                                            )Net
      cash used in investing activities
                                            
                                            
                                            (33,580
                                            )
                                            
                                            
                                            (14,490
                                            )Cash
      flows from financing activities:Advances
      to affiliates
                                            
                                            
                                            (2,493,164
                                            )
                                            
                                            
                                            (2,170,832
                                            )Repayments
      from an associate
                                            
                                            
                                            101,032
                                            
                                            
                                            
                                            239,368Increase
      (decrease) in borrowings and bills payable
                                            
                                            
                                            (319,180
                                            )
                                            
                                            
                                            1,044,015Net
      cash used in financing activities
                                            
                                            
                                            (2,711,312
                                            )
                                            
                                            
                                            (887,449
                                            )Increase
      (decrease) in cash and cash equivalents
                                            
                                            
                                            (1,306,945
                                            )
                                            
                                            
                                            984,104Cash
      and cash equivalents at beginning of the period
                                            
                                            
                                            3,475,635
                                            
                                            
                                            
                                            452,754Cash
      and cash equivalents at end of the period
                                            
                                            
                                            2,168,690
                                            
                                            
                                            
                                            1,436,858Supplemental
      disclosure of cash flow information:Cash
      paid for:Interest
                                            
                                            
                                            177,287
                                            
                                            
                                            
                                            65,608





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


4





CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES




NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (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. All
significant intercompany transactions and balances have been eliminated. The
accompanying condensed consolidated financial statements have been restated as
described in Note 13.




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 2007 due to seasonal and other factors. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission (the “SEC”). The condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and accompanying notes included in the
Company’s Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year
ended December 31, 2006.




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
it best estimate of the outcome for these items based on historical trends and
other information available when the condensed consolidated financial statements
are prepared. Changes in estimates are recognized in accordance with the
accounting principles for the estimate, which is typically in the period when
new information becomes available to management. Management believes the most
significant estimates affecting the condensed consolidated financial statements
include provision for bad debts, provision for inventory write-off, and
accounting for income taxes. Actual results could differ from those
estimates.




Share-based
compensation




The
Company elected to adopt SFAS No. 123(R), “Share-Based Payment,” as amended and
interpreted, which is effective as of the beginning of the annual reporting
period that begins after June 15, 2005. The Company utilized the modified
prospective method approach, pursuant to which the Company has recorded
compensation for all awards granted after July 1, 2005 based on their fair
value.




Earnings
per share




Basic
earnings per share is computed by dividing net operating results for the
reporting period attributable to common stockholders by the weighted average
number of common shares outstanding during the period. Diluted earnings per
share is calculated by dividing net operating results for the reporting period
attributable to common stockholders by the weighted average number of common
shares outstanding and the dilutive effect of common stock equivalents. All per
share and per share information are adjusted retroactively to the earliest
periods presented to reflect the effect of the Company’s recent recapitalization
between the Company and Technorient Limited (See the Company’s Annual Report on
Form 10-K/A (Amendment No. 1) for the fiscal year ended December 31, 2006 for
details of the Company’s recent recapitalization).




5




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, 2007 and 2006, the Company had two vendors that each accounted for
more than 10% of total supply purchases. If any of the vendors terminate their
relationships with the Company or if the Company’s supply from the vendors is
interrupted or terminated for any reason, the Company may not have sufficient
time to replace the supply of products from the remaining vendors. Any such
interruption would negatively impact the Company’s ability to sell and
distribute its products. However, the suppliers’ concentration of risk does not
pose any effect to the concentration of 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 is currently focused on the sales of
new and used vehicles, provision of vehicle maintenance and repair services, and
sales of vehicle parts in Hong Kong and is currently expanding its operations to
People Republic of China (“PRC”), and accordingly, is affected to a significant
degree by any economic, political and legal developments in Hong Kong and
PRC.




NOTE
3. RECENT ACCOUNTING PRONOUNCEMENTS




In
February 2006, the FASB issued SFAS 155, Accounting for Certain
Hybrid Financial Instruments - an amendment of FASB Statements 133 and 140,
(“SFAS 155”), which will be effective for the Company beginning January 1, 2007.
The statement permits interests in hybrid financial instruments that contain an
embedded derivative that would otherwise require bifurcation, to be accounted
for as a single financial instrument at fair value, with changes in fair value
recognized in earnings. This election is permitted on an
instrument-by-instrument basis for all hybrid financial instruments held,
obtained, or issued as of the adoption date. The Company does not expect there
to be any significant impact of adopting this standard on its consolidated
financial position, cash flows and results of operations.




In June
2006, the FASB issued Interpretation 48, Accounting for Uncertainty in Income
Taxes — an Interpretation of FASB Statement No. 109 (“FIN 48”), which
clarifies the accounting for uncertainty in tax positions. This Interpretation
requires that the Company recognize in its financial statements the impact of a
tax position if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. The provisions of FIN 48
are effective for the Company on January 1, 2007, with the cumulative
effect of the change in accounting principle, if any, recorded as an adjustment
to opening retained earnings. The Company does not expect there to be any
significant impact of adopting FIN 48 on its consolidated financial position,
cash flows and results of operations.




In
September 2006, the 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 will 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 will require
additional disclosures in both annual and quarterly reports. SFAS 157 will be
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and will be adopted by us beginning in the first quarter of
2008. The Company does not expect there to be any significant impact of adopting
this standard on its consolidated financial position, cash flows and results of
operations.




In
September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 was
issued to eliminate the diversity of practice in how public companies quantify
misstatements of financial statements, including misstatements that were not
material to prior years’ financial statements. The Company will apply the
provisions of SAB 108 to its annual financial statements for the year ending
December 31, 2006. The Company has evaluated the potential impact of SAB 108 and
does not believe the impact of the application of this guidance will be material
to its consolidated financial position, cash flows and results of
operations.




6




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




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




NOTE
4. LOSS PER SHARE




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




2007
                        
                        
                        2006$
                          (Restated)
                        
                        
                        $
                          (Restated)Numerator:Net
      loss available to common stockholders
                        
                        
                        (259,999
                        )
                        
                        
                        (345,562
                        )Denominator:Weighted
      average common stock outstanding
                        
                        
                        98,929,180
                        
                        
                        
                        89,689,881Basic
      net loss per share
                        
                        
                        (0.0026
                        )
                        
                        
                        (0.0039
                        )Diluted
      net loss per share
                        
                        
                        (0.0026
                        )
                        
                        
                        (0.0039
                        )





The
weighted average common stock outstanding for the three months ended March 31,
2006, was adjusted to reflect the Company’s recent recapitalization between the
Company and Technorient Limited. The computation of the net loss per share for
the three months ended March 31, 2006, is computed by dividing the net loss
attributable to the common stockholders’ by the number of shares issued in the
reverse takeover transaction.





NOTE
5. INVENTORY, NET




Inventory
by major categories are summarized as follows:




March
      31,
                            
                            
                            December
      31,2007
                            
                            
                            2006$
                            
                            
                            $New
      vehicles
                            
                            
                            4,276,469
                            
                            
                            
                            2,310,112Used
      vehicles
                            
                            
                            3,695,156
                            
                            
                            
                            3,183,658Parts,
      accessories and other
                            
                            
                            1,474,334
                            
                            
                            
                            1,322,0939,445,959
                            
                            
                            
                            6,815,863





Vehicles
included in inventory of approximately $2,440,000 and $1,710,000 were pledged to
secure the stocking loan outstanding as of March 31, 2007 and December 31, 2006,
respectively (See Note 8).




7


NOTE
6. PREPAYMENTS




Prepayments
at are summarized as follows:




March
      31,
                            
                            
                            December
      31,2007
                            
                            
                            2006$
                              (Restated)
                            
                            
                            $
                              (Restated)Prepaid
      expenses
                            
                            
                            14,053
                            
                            
                            
                            37,32814,053
                            
                            
                            
                            37,328





NOTE
7. INVESTMENT IN AN ASSOCIATE




In 2004,
a subsidiary of the Company entered into a strategic alliance with Ferrari
S.p.A. (“Ferrari”) and Poly Technologies, Inc. (“Poly Technologies”), a
subsidiary of Poly Group, to set up an Equity Joint Venture (“EJV”) company,
Ferrari Maserati Cars International Trading (Shanghai) Co., Limited, in Mainland
China. The EJV is the sole importer of “Ferrari” and “Maserati” cars in China,
responsible for the import, marketing, dealer sales, spare parts and accessories
supply, and after-sale technical supports for these unique global brands. The
Company, Ferrari and Poly Technologies own 30%, 40% and 30% respectively in the
EJV. The registered capital of the EJV was $3 million and was contributed by the
partners to the EJV in proportion to their respective equity interest. In August
2004, the EJV was formally set up, with the business license issued by the
relevant PRC authority.




On
December 30, 2005, a subsidiary of the Company and Ferrari entered into the
Equity Interest Transfer Agreement relating to the transfer of 29% equity
interest in the EJV (“Equity Interest Transfer”), for a consideration of
$870,000. As of March 31, 2007, the disposal has yet to be approved by the
relevant authorities in the PRC and the disposal has not become effective. Due
to the undeterminable timeline in finalizing the Equity Interest Transfer, the
investment in EJV continues to be accounted for as “Investment In An Associate”
under the equity method of accounting.





NOTE
8. BORROWINGS




The
Company’s borrowings at are summarized as follows:




March
      31,
                            
                            
                            December
      31,2007
                            
                            
                            2006$
                            
                            
                            $Bank
      borrowings
                            
                            
                            4,498,875
                            
                            
                            
                            3,985,579Stocking
      loans
                            
                            
                            1,924,859
                            
                            
                            
                            1,329,918Obligations
      due under finance lease
                            
                            
                            235,749
                            
                            
                            
                            278,5106,659,483
                            
                            
                            
                            5,594,007Borrowings
      due after one year - obligations under finance lease
                            
                            
                            69,338
                            
                            
                            
                            111,404Short-term
      borrowings
                            
                            
                            6,590,145
                            
                            
                            
                            5,482,603





Vehicles
included in inventory of approximately $2,440,000 and $1,710,000 were pledged to
secure the stocking loan outstanding as of March 31, 2007 and December 31, 2006,
respectively. The current portion together with the non-current portion of
finance lease was secured by motor vehicle included in property and equipment
with a carrying value of approximately $310,000 (December 31, 2006:
$330,000).




The bank
borrowings, which are mainly used to finance the purchase of vehicles, are
secured by pledge of certain affiliates’ properties and are interest-bearing
with settlement date within twelve months from the corresponding balance sheet
dates. The interest rates are generally based on the bank’s best lending rate
plus a certain percentage and the credit lines are normally subject to periodic
review. The range of effective interest rates (which are also equal to
contracted interest rates) on the Company’s borrowings is 8.50% per annum
(December 31, 2006: 8.50% to 9.25% per annum).





The
Company has financed a motor vehicle in the amount of approximately $330,000
(December 31, 2006: $330,000) under a non-cancellable finance
lease.


8




NOTE
9. OTHER CURRENT LIABILITIES




Other
current liabilities by major categories are summarized as follows:




March
      31,
                            
                            
                            December
      31,2007
                            
                            
                            2006$
                            
                            
                            $Accruals
                            
                            
                            524,325
                            
                            
                            
                            443,434Other
      payables
                            
                            
                            2,269,484
                            
                            
                            
                            6,887,5862,793,809
                            
                            
                            
                            7,331,020





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
10. CAPITAL STOCK




General




The
Company’s total authorized capital at March 31, 2007, is 100,000,000 shares of
common stock, par value $0.001. At March 31, 2007, 98,929,180 shares of common
stock were issued and outstanding.




NOTE
11. COMMITMENTS AND CONTINGENT LIABILITIES




Litigation,
Claims and Assessments




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




Operating
Lease Commitments




The
Company leases its dealership facilities, service center facilities and office
space under non-cancellable operating leases in Hong Kong and PRC. Minimum
future rental payments required under non-cancellable operating leases in effect
as of March 31, 2007 are as follows:




2007
                          
                          $
                          743,5192008
                          
                          
                          136,041$
                          879,560





Rent
expense for the three months ended March 31, 2007 and 2006 was $286,679 and
$269,548, respectively.




9




Employment
Agreements




The
Company maintains employment agreements with its executives which extend through
2007 to 2008. The agreements provide for a base salary, annual bonus to be
determined by the Board of Directors, termination payments, 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, 2007, committed compensation to the executives and other key employees
totaling approximately $573,000 remain in effect.




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:




Note
                                        
                                        2007
                                        
                                        
                                        2006$
                                        
                                        
                                        $Sales
      to:-
      Affiliates
                                        (a)
                                        
                                        
                                        3,835
                                        
                                        
                                        
                                        161,356-
      An associate
                                        (a)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        70,733Purchases
      from:-
      Affiliates
                                        (a)
                                        
                                        
                                        5,559
                                        
                                        
                                        
                                        1,355-
      An associate
                                        (a)
                                        
                                        
                                        1,428,160
                                        
                                        
                                        
                                        -Interest
      received from:-
      Affiliates
                                        (b)
                                        
                                        
                                        11,047
                                        
                                        
                                        
                                        -Management
      fee paid to:-
      Affiliates
                                        (c)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        77,290Service
      fee from:-
      An associate
                                        (c)
                                        
                                        
                                        132,972
                                        
                                        
                                        
                                        121,626





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 8.50% per
      annum and repayable on demand.




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




NOTE
13. RESTATEMENT OF FINANCIAL STATEMENTS




NOTE:
The common stock numbers in the “Background” section of this Note 13 give effect
to the Company’s one-for-five reverse stock split (the “Reverse Stock Split”) of
its common stock, par value $0.005 per share, effective on December 7,
2007.  However, the common stock numbers in the “Restatements” section of
this Note 13 reflect the Company’s pre-Reverse Stock Split capitalization, as in
effect during the period covered by this Form 10-Q/A.




Background




In
September 2006, the Company closed the transactions contemplated by that certain
Share Exchange Agreement, dated July 15, 2006, by and 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.




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.




10




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 (on a post-Reverse Stock
Split basis).




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 100,000,000 shares 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 (on a
      post-Reverse Stock Split basis), 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 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.




11




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 such shares would also not have been
authorized.  In addition, the Company was advised that the Company was
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, 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 (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 (on a post-Reverse Stock Split
      basis) 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
      the Company’s 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 (on a post-Reverse Stock
Split basis).




Further,
in connection with the settlement, Bern Noble agreed to return to the Company
for cancellation the 1,210,631 shares of common stock (on a post-Reverse Stock
Split basis) 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 (on a post-Reverse Stock Split basis) in consideration of
services rendered to the Company in 2006 in connection with the closing of the
Share Exchange Agreement.  The Company 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 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;




12




·
            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, 2007 and December
      31, 2006, 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, 2007, preferred stock decreased by $574,
      common stock decreased by $16,534, additional paid-in-capital
      decreased by $1,451,822 and stockholders' equity decreased by
      $1,468,930. At December 31, 2006, preferred stock decreased by
      $1,534, common stock increased by $72,000, additional paid-in-capital
      decreased by $1,539,396 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, 2007 and
      December 31, 2006;




·
            on
      the condensed consolidated statement of operations, for the three months
      ended March 31, 2007, basic and diluted loss per share decreased by
      $0.0061, and for the three months ended March 31, 2006, basic and diluted
      loss per share increased by $0.0039;
and




·
            for
      the three months ended March 31, 2007, the basic and diluted weighted
      average number of outstanding shares increased by 69,048,856, and for the
      three months ended March 31, 2006, the basic and diluted weighted average
      number of outstanding shares increased by
  89,689,881.




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


13


The
condensed consolidated balance sheets have been restated as
follows:




Condensed
Consolidated Balance Sheets





As of March 31,
    2007As Previously
                                          Reported
                                        
                                        
                                        Adjustments
                                        
                                        
                                        As Restated$
                                        
                                        
                                        $
                                        
                                        
                                        $ASSETSCurrent
      assets:Cash
      and cash equivalents
                                        
                                        
                                        2,168,690
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,168.690Restricted
      cash
                                        
                                        
                                        384,025
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        384,025Trade
      receivables, net of provision
                                        
                                        
                                        4,345,358
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,345,358Inventory,
      net
                                        
                                        
                                        9,445,959
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        9,445,959Prepayments
                                        
                                        
                                        1,482,983
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        14,053Other
      current assets
                                        
                                        
                                        1,819,432
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,819,432Amounts
      due from affiliates
                                        
                                        
                                        6,996,531
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        6,996,531Amount
      due from an associate
                                        
                                        
                                        356,235
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        356,235Total
      current assets
                                        
                                        
                                        26,999,213
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        25,530,283Property
      and equipment, net
                                        
                                        
                                        2,234,148
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,234,148Investment
      in an associate
                                        
                                        
                                        1,333,357
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,333,357Deferred
      income taxes
                                        
                                        
                                        537,634
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        537,634TOTAL
      ASSETS
                                        
                                        
                                        31,104,352
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        29,635,422LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                                        
                                        
                                        6,423,734
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        6,423,734Obligations
      due under finance lease – current portion
                                        
                                        
                                        166,411
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        166,411Bills
      payable
                                        
                                        
                                        3,027,919
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,027,919Trade
      payables
                                        
                                        
                                        300,187
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        300,187Deposits
      received
                                        
                                        
                                        10,827,003
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        10,827,003Other
      current liabilities
                                        
                                        
                                        2,793,809
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,793,809Total
      current liabilities
                                        
                                        
                                        23,539,063
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        23,539,063Long-term
      liabilities:Obligations
      due under finance lease – non-current portion
                                        
                                        
                                        69,338
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        69,338TOTAL
      LIABILITIES
                                        
                                        
                                        23,608,401
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        23,608,401Commitments
      and ContingenciesMinority
      interests
                                        
                                        
                                        3,335,133
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,335,133Stockholders’
      equityPreferred
      stockAuthorized:
      100,000,000 preferred stock, par value $0.001Issued
      and outstanding: 2007: 573,973 (note 1)
                                        
                                        
                                        574
                                        
                                        
                                        
                                        (574
                                        )
                                        
                                        
                                        -Common
      stockAuthorized:
      100,000,000 common stock, par value $0.001Issued
      and outstanding: 2007: 115,463,499 (note 2)
                                        
                                        
                                        115,495
                                        
                                        
                                        
                                        (16,534
                                        )
                                        
                                        
                                        98,961Additional
      paid-in capital
                                        
                                        
                                        5,588,588
                                        
                                        
                                        
                                        (1,451,822
                                        )
                                        
                                        
                                        4,136,766Accumulated
      other comprehensive income
                                        
                                        
                                        48,860
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        48,860Accumulated
      deficits
                                        
                                        
                                        (1,592,699
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (1,592,699
                                        )TOTAL
      STOCKHOLDERS’ EQUITY
                                        
                                        
                                        4,160,818
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        2,691,888TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                        
                                        
                                        31,104,352
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        29,635,422




14




As of December 31, 2006As Previously
                                          Reported
                                        
                                        
                                        Adjustments
                                        
                                        
                                        As Restated$
                                        
                                        
                                        $
                                        
                                        
                                        $ASSETSCurrent
      assets:Cash
      and cash equivalents
                                        
                                        
                                        3,475,635
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,475,635Restricted
      cash
                                        
                                        
                                        385,629
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        385,629Trade
      receivables, net of provision
                                        
                                        
                                        11,246,621
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        11,246,621Inventory,
      net
                                        
                                        
                                        6,815,863
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        6,815,863Prepayments
                                        
                                        
                                        1,506,258
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        37,328Other
      current assets
                                        
                                        
                                        1,503,626
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,503,626Amounts
      due from affiliates
                                        
                                        
                                        4,503,367
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,503,367Amount
      due from an associate
                                        
                                        
                                        457,267
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        457,267Total
      current assets
                                        
                                        
                                        29,894,266
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        28,425,336Property
      and equipment, net
                                        
                                        
                                        2,377,656
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,377,656Investment
      in an associate
                                        
                                        
                                        1,355,530
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,355,530Deferred
      income taxes
                                        
                                        
                                        539,880
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        539,880TOTAL
      ASSETS
                                        
                                        
                                        34,167,332
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        32,698,402LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                                        
                                        
                                        5,315,497
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        5,315,497Obligations
      due under finance lease – current portion
                                        
                                        
                                        167,106
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        167,106Bills
      payable
                                        
                                        
                                        4,412,575
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,412,575Trade
      payables
                                        
                                        
                                        480,859
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        480,859Deposits
      received
                                        
                                        
                                        8,607,049
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        8,607,049Other
      current liabilities
                                        
                                        
                                        7,331,020
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        7,331,020Total
      current liabilities
                                        
                                        
                                        26,314,106
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        26,314,106Long-term
      liabilities:Obligations
      due under finance lease – non-current portion
                                        
                                        
                                        111,404
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        111,404TOTAL
      LIABILITIES
                                        
                                        
                                        26,425,510
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        26,425,510Commitments
      and ContingenciesMinority
      interests
                                        
                                        
                                        3,318,358
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,318,358Stockholders’
      equityPreferred
      stockAuthorized:
      100,000,000 preferred stock, par value $0.001Issued
      and outstanding: 2006: 1,533,973 (note 1)
                                        
                                        
                                        1,534
                                        
                                        
                                        
                                        (1,534
                                        )
                                        
                                        
                                        -Common
      stockAuthorized:
      100,000,000 common stock, par value $0.001Issued
      and outstanding: 2006: 26,929,180 (note 2)
                                        
                                        
                                        26,961
                                        
                                        
                                        
                                        72,000
                                        
                                        
                                        
                                        98,961Additional
      paid-in capital
                                        
                                        
                                        5,676,162
                                        
                                        
                                        
                                        (1,539,396
                                        )
                                        
                                        
                                        4,136,766Accumulated
      other comprehensive income
                                        
                                        
                                        51,507
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        51,507Accumulated
      deficits
                                        
                                        
                                        (1,332,700
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (1,332,700
                                        )TOTAL
      STOCKHOLDERS’ EQUITY
                                        
                                        
                                        4,423,464
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        2,954,534TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                        
                                        
                                        34,167,332
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        32,698,402





Notes:




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, 2007 and
December 31, 2006.





2. 
         At March 31, 2007 and
December 31, 2006, giving effect to the transactions related to the restatements
discussed in this Note 13, there were issued and outstanding 98,929,180 shares
of common stock.


15


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




Condensed
Consolidated Statements of Operation




For the 3 months ended March 31,
      2007As Previously
                                    Reported
                                  
                                  
                                  Adjustments
                                  
                                  
                                  As RestatedSales:New
      and used vehicles
                                  
                                  $
                                  15,823,975
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  15,823,975Parts
      and services
                                  
                                  
                                  1,186,668
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,186,668Net
      sales
                                  
                                  
                                  17,010,643
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  17,010,643Cost
      of sales:New
      and used vehicles
                                  
                                  
                                  (14,149,803
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (14,149,803
                                  )Parts
      and services
                                  
                                  
                                  (342,099
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (342,099
                                  )Total
      cost of sales
                                  
                                  
                                  (14,491,902
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (14,491,902
                                  )Gross
      profit:New
      and used vehicles
                                  
                                  
                                  1,674,172
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,674,172Parts
      and services
                                  
                                  
                                  844,569
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  844,569Total
      gross profit
                                  
                                  
                                  2,518,741
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,518,741Selling
      and marketing
                                  
                                  
                                  (142,048
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (142,048
                                  )General
      and administrative expenses
                                  
                                  
                                  (2,493,061
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (2,493,061
                                  )Operating
      loss
                                  
                                  
                                  (116,368
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (116,368
                                  )Other
      income (expenses)Interest
      expenses
                                  
                                  
                                  (177,287
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (177,287
                                  )Share
      of result of an associate
                                  
                                  
                                  (39,892
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (39,892
                                  )Other
      income
                                  
                                  
                                  90,343
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  90,343Total
      other income (expenses)
                                  
                                  
                                  (126,836
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (126,836
                                  )Loss
      before minority interests and income taxes
                                  
                                  
                                  (243,204
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (243,204
                                  )Provision
      for income taxes
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Loss
      before minority interests
                                  
                                  
                                  (243,204
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (243,204
                                  )Minority
      interests
                                  
                                  
                                  (16,795
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (16,795
                                  )Net
      loss
                                  
                                  $
                                  (259,999
                                  )
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  (259,999
                                  )Loss
      per shareBasic
                                  
                                  $
                                  (0.0087
                                  )
                                  
                                  $
                                  0.0061
                                  
                                  
                                  $
                                  (0.0026
                                  )Diluted
                                  
                                  $
                                  (0.0087
                                  )
                                  
                                  $
                                  0.0061
                                  
                                  
                                  $
                                  (0.0026
                                  )Weighted
      average number of common shares outstandingBasic
                                  
                                  
                                  29,880,324
                                  
                                  
                                  
                                  69,048,856
                                  
                                  
                                  
                                  98,929,180Diluted
                                  
                                  
                                  29,880,324
                                  
                                  
                                  
                                  69,048,856
                                  
                                  
                                  
                                  98,929,180




16





For the 3 months ended March 31,
      2006As Previously
                                  Reported
                                
                                
                                Adjustments
                                
                                
                                As RestatedSales:New
      and used vehicles
                                
                                $
                                8,265,543
                                
                                
                                $
                                -
                                
                                
                                $
                                8,265,543Parts
      and services
                                
                                
                                979,477
                                
                                
                                
                                -
                                
                                
                                
                                979,477Net
      sales
                                
                                
                                9,245,020
                                
                                
                                
                                -
                                
                                
                                
                                9,245,020Cost
      of sales:New
      and used vehicles
                                
                                
                                (7,424,582
                                )
                                
                                
                                -
                                
                                
                                
                                (7,424,582
                                )Parts
      and services
                                
                                
                                (309,147
                                )
                                
                                
                                -
                                
                                
                                
                                (309,147
                                )Total
      cost of sales
                                
                                
                                (7,733,729
                                )
                                
                                
                                -
                                
                                
                                
                                (7,733,729
                                )Gross
      profit:New
      and used vehicles
                                
                                
                                840,961
                                
                                
                                
                                -
                                
                                
                                
                                840,961Parts
      and services
                                
                                
                                670,330
                                
                                
                                
                                -
                                
                                
                                
                                670,330Total
      gross profit
                                
                                
                                1,511,291
                                
                                
                                
                                -
                                
                                
                                
                                1,511,291Selling
      and marketing
                                
                                
                                (107,106
                                )
                                
                                
                                -
                                
                                
                                
                                (107,106
                                )General
      and administrative expenses
                                
                                
                                (1,925,755
                                )
                                
                                
                                -
                                
                                
                                
                                (1,925,755
                                )Operating
      loss
                                
                                
                                (521,570
                                )
                                
                                
                                -
                                
                                
                                
                                (521,570
                                )Other
      income (expenses)Interest
      expenses
                                
                                
                                (65,608
                                )
                                
                                
                                -
                                
                                
                                
                                (65,608
                                )Share
      of result of an associate
                                
                                
                                (226,722
                                )
                                
                                
                                -
                                
                                
                                
                                (226,722
                                )Other
      income
                                
                                
                                107,964
                                
                                
                                
                                -
                                
                                
                                
                                107,964Total
      other income (expenses)
                                
                                
                                (184,366
                                )
                                
                                
                                -
                                
                                
                                
                                (184,366
                                )Loss
      before minority interests and income taxes
                                
                                
                                (705,936
                                )
                                
                                
                                -
                                
                                
                                
                                (705,936
                                )Provision
      for income taxes
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Loss
      before minority interests
                                
                                
                                (705,936
                                )
                                
                                
                                -
                                
                                
                                
                                (705,936
                                )Minority
      interests
                                
                                
                                360,374
                                
                                
                                
                                -
                                
                                
                                
                                360,374Net
      loss
                                
                                $
                                (345,562
                                )
                                
                                $
                                -
                                
                                
                                $
                                (345,562
                                )Loss
      per shareBasic
                                
                                $
                                N/A
                                
                                
                                $
                                (0.0039
                                )
                                
                                $
                                (0.0039
                                )Diluted
                                
                                $
                                N/A
                                
                                
                                $
                                (0.0039
                                )
                                
                                $
                                (0.0039
                                )Weighted
      average number of common shares outstandingBasic
                                
                                
                                N/A
                                
                                
                                
                                89,689,881
                                
                                
                                
                                89,689,881Diluted
                                
                                
                                N/A
                                
                                
                                
                                89,689,881
                                
                                
                                
                                89,689,881


(End
of condensed consolidated financial statements)




17


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




FORWARD-LOOKING
STATEMENTS




In
addition to historical information, the matters discussed in this Form 10-Q
contain forward-looking statements that involve risks or uncertainties.
Generally, the words “believes,” “anticipates,” “may,” “will,” “should,”
“expect,” “intend,” “estimate,” “continue,” and similar expressions or the
negative thereof or comparable terminology are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties, including the matters set forth in this report or other reports
or documents we file with the Securities and Exchange Commission from time to
time, which could cause actual results or outcomes to differ materially from
those projected. Undue reliance should not be placed on these forward-looking
statements, which speak only as of the date hereof. We undertake no obligation
to update these forward-looking statements. Readers should carefully review the
risks described in other documents we file from time to time with the Securities
and Exchange Commission, including the Annual Report on Form 10-K for the fiscal
year ended December 31, 2006, the Quarterly Reports on Form 10-Q or 10-QSB filed
by the Company and Current Reports on Form 8-K (including any amendments to such
reports). References in this filing to the “Company,” “Group,” “we,” “us” and
“our” refer to China Premium Lifestyle Enterprise, Inc. and its
subsidiaries.




RESTATEMENT




The
Company is restating its consolidated financial statements as of March 31, 2007
and for the three month periods ended March 31, 2007 and 2006 in
this amendment to the Company’s Quarterly Report on Form 10-Q/A for
the period ended March 31, 2007. 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 13 of the Notes to the consolidated financial statements
included in this Report.




COMPANY
OVERVIEW AND HISTORY




China
Premium Lifestyle Enterprise, Inc. is in the business of the importation,
distribution and sales of premium brand luxury products in the Hong Kong Special
Administrative Region, the Macau Special Administrative Region and in the
People’s Republic of China, (which for the purposes of this report excludes Hong
Kong, Macau and Taiwan). 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 consists mainly of the importation,
distribution, and after-sales service of Italian “Ferrari” and “Maserati”
branded cars and spare parts in Hong Kong, Macau and China. The Company is also
planning to import, distribute and sell premium brand apparel and other luxury
brand products in Hong Kong, Macau, China and Taiwan.




The
Company was originally formed in the State of Nevada on April 19, 2004 under its
predecessor name, Xact Aid, Inc. (“Xact Aid”).  On April 30, 2004, the
Company issued 1,000 shares of its common stock (representing all of its issued
and outstanding shares) to Addison-Davis Diagnostics, Inc. (f/k/a QT5, Inc.), a
Delaware corporation (“Addison-Davis”), in consideration of Addison-Davis
advancing start-up and operating capital. On November 15, 2004, the Company
acquired the Xact Aid line of first aid products for minor injuries from
Addison-Davis in accordance with an Agreement of Sale and Transfer of Assets
entered into between the Company and Addison-Davis.




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




On
December 22, 2005, the Company acquired 100% of the issued and outstanding
shares of Brooke Carlyle Life Sciences, Inc., a Nevada corporation (“Brooke
Carlyle”), a development stage company with a business plan to develop an online
internet portal containing information on sexually transmitted diseases, which
was designed to generate revenue from advertising from pharmaceutical
companies.




18




The
Company’s management team then determined that it was no longer in the best
interests of the Company and its stockholders to continue pursuing sales and
marketing efforts for the wound-specific first aid kit line of products. In an
effort to bring revenues and profitable operations to the Company, management
sought to effect a transaction that would attract a viable business operation
and liquidate its liabilities. As a result of such decisions, on March 3, 2006,
the Company entered into a non-binding letter of intent with Technorient for a
proposed acquisition of an interest in Technorient via a share exchange by and
among the Company, Technorient and Technorient’s shareholders. On May 4, 2006,
in order to satisfy certain provisions in the Share Exchange Agreement described
below with Technorient, the Company entered into a Stock Purchase Agreement with
Nexgen Biogroup, Inc. (“Nexgen”), for the sale of the 1,000,000 shares of the
common stock of Brooke Carlyle held by the Company, which, at that time,
represented all or substantially all of the assets of the Company, for $1,000
cash, representing a consideration of $0.001 per share (the par value). In
accordance with the terms of the agreement, the Company agreed to: (i) sell,
assign and transfer to Nexgen any and all of its rights, title and interests in
Brooke Carlyle; and (ii) transfer to Nexgen 1,000,000 shares of Brooke Carlyle
common stock.




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




On
September 5, 2006, pursuant to the Amended Exchange Agreement and after all of
the conditions precedent to closing were satisfied (including the completion of
the Company’s sale of all of the capital stock of Brooke Carlyle to Nexgen),
Corich and Mr. Adamczyk, as shareholders of Technorient, transferred 49% of the
outstanding capital stock of Technorient on a fully diluted basis to the Company
in exchange for the 972,728 Series A Preferred Shares. As a result of the
Exchange, the Company became a 49% shareholder of Technorient on a fully-diluted
basis.




In
connection with the Exchange, the Company issued: (i) an aggregate of 972,728
Series A Preferred Shares to the Sellers (in exchange for 49% of the issued and
outstanding shares of Technorient) and OFS; (ii) 561,245 Series A Preferred
Shares (the “HEL Shares”) to Happy Emerald Limited, a British Virgin Islands
company (“HEL”), for consulting services to be provided to Technorient after the
Exchange; and (iii) an aggregate of 21,629,337 shares of common stock in
connection with certain conversions of outstanding debt. After the closing of
the Exchange, the Company’s main business became its 49% ownership interest in
Technorient.




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.  As a result, on May 5,
2009, we entered into a reformation (“Reformation”) of the Amended 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 Series A
Preferred Shares issued to Corich and Mr. Adamczyk were agreed to have been
issued in lieu of the Series A Preferred 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 of the Exchange, and that upon the effectiveness of and
giving effect to the Reverse Stock Split, an aggregate of an additional
3,537,977 (on a post-Reverse Stock Split basis) shares of common stock were
deemed to have been issued.  For a more detailed discussion of the
Reformation, please refer to the Explanatory Note at the beginning of this
Report and the Company’s Current Report on Form 8-K, as filed with the SEC on
May 11, 2009.




The
Company was previously engaged in litigation regarding the HEL Shares (the
“Federal Court Action”).  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 HEL Shares, including all shares of common
stock that were converted therefrom.  For a more detailed discussion of the
Federal Court Action and the settlement, please refer to the Explanatory Note at
the beginning of this Report and the Company’s Current Report on Form 8-K, as
filed with the SEC on March 5, 2010.




19




TECHNORIENT
OVERVIEW




Technorient
is a corporation incorporated in Hong Kong on March 8, 1983. Technorient is the
parent company of Auto Italia Limited (“Auto Italia”), German Motors Limited
(“German Motors”), Italian Motors (Sales & Service) (“Italian Motors”), and
Italian Motors (Sales & Service) Limited (“IML”). Collectively, Auto Italia,
Italian Motors, IML and German Motors are hereafter referred to as the
“Technorient Group”. Originally founded in 1974 by Adamczyk as German Motors,
Technorient was formed as the holding company for Auto Italia, IML and German
Motors in 1985. IML was appointed sole Ferrari importer and distributor for Hong
Kong and Macau in 1992 (and exclusive importer for China between 1994 and 2004),
and Auto Italia was appointed importer and distributor for Maserati in 1996,
having been a dealer for the brand since 1994. In 2003, IML transferred its
entire car trading business to Auto Italia, which in turn set up a new
subdivision, Italian Motors, to continue the business.




IML is a
30% equity holder in Ferrari Maserati Cars International Trading (Shanghai) Co.
Ltd., (the “Shanghai JV”) 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. As the structure of
Shanghai JV precludes direct ownership by the shareholders of a licensed dealer
in China and in view of Technorient’s strategy to develop a luxury brand
platform amongst its high net worth clients, Technorient’s management
subsequently approached Ferrari S.p.A. to dispose of Shanghai JV’s interest so
that it could acquire an independent dealer network and, inter alia, maintain
its direct customer relationships. As part of this arrangement, Technorient
would apply for and receive a number of dealer licenses in key markets in China
such as Dalian (already awarded) and would, in conjunction with Ferrari and
Maserati, continue to build its dealer network to capitalize on its client base
in China and pursue its luxury brand platform.




Pursuant
to the above, IML entered into an agreement with the Shanghai JV parties to
dispose of 29% equity interest in Shanghai JV in July 2006. As of the date
hereof, the disposal has been approved by the relevant authorities and is
waiting for the completion of local formalities. Upon completion of the
disposal, however, IML will continue to hold a 1% equity interest in Shanghai
JV. Beginning in 2006, the Technorient Group was able to act as an authorized
dealer of Ferrari and Maserati cars in certain cities in China that were
allocated in accordance with the Shanghai JV. In January 2006, IML formed Dalian
Auto Italia in China to engage in the distribution of Ferrari and Maserati cars
in Dalian, China. IML owns a 95% equity interest in Dalian Auto
Italia.




Auto
Italia and Italian Motors operate from six locations in Hong Kong and China,
incorporating sales, spare parts, service and body and paint shop facilities for
Ferrari and Maserati.





EMPLOYEES




As of
March 31, 2007, we employed approximately 148 persons on a full-time basis in
Hong Kong and China. We believe we have good relationships with our employees
and no major disputes or work stoppages have occurred since our
inception.




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.




20


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 0.3% 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, and any dividends payments. For example, an appreciation of RMB against the
U.S. dollar or Hong Kong dollars would make any new RMB denominated investments
or expenditures more costly to us, to the extent that we need to convert U.S.
dollars or Hong Kong dollars into RMB for such purposes. In addition, a
strengthening of the U.S. dollar against the Hong Kong Dollar or the Macau
Pataca, if it occurred, would adversely affect the value of your
investment.




CRITICAL
ACCOUNTING POLICIES




See Note
1 of the Notes to Condensed Consolidated Financial Statements
(unaudited).




RECENT
ACCOUNTING PRONOUNCEMENTS




In
February 2006, the FASB issued SFAS 155, Accounting for Certain
Hybrid Financial Instruments - an amendment of FASB Statements 133 and 140,
(“SFAS 155”), which will be effective for the Company beginning January 1, 2007.
The statement permits interests in hybrid financial instruments that contain an
embedded derivative that would otherwise require bifurcation, to be accounted
for as a single financial instrument at fair value, with changes in fair value
recognized in earnings. This election is permitted on an
instrument-by-instrument basis for all hybrid financial instruments held,
obtained, or issued as of the adoption date. The Company does not expect there
will be any significant impact of adopting this standard on its consolidated
financial position, cash flows and results of operations.




In June
2006, the FASB issued Interpretation 48, Accounting for Uncertainty in Income
Taxes — an Interpretation of FASB Statement No. 109 (“FIN 48”), which
clarifies the accounting for uncertainty in tax positions. This Interpretation
requires that the Company recognize in its financial statements the impact of a
tax position if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. The provisions of FIN 48
are effective for the Company on January 1, 2007, with the cumulative
effect of the change in accounting principle, if any, recorded as an adjustment
to opening retained earnings. The Company does not expect there will be any
significant impact of adopting FIN 48 on its consolidated financial position,
cash flows and results of operations.




In
September 2006, the 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 will 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 will require
additional disclosures in both annual and quarterly reports. SFAS 157 will be
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and will be adopted by us beginning in the first quarter of
2008. The Company does not expect there will be any significant impact of
adopting this standard on its consolidated financial position, cash flows and
results of operations.




In
September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 was
issued to eliminate the diversity of practice in how public companies quantify
misstatements of financial statements, including misstatements that were not
material to prior years’ financial statements. The Company will apply the
provisions of SAB 108 to its annual financial statements for the year ending
December 31, 2006. The Company has evaluated the potential impact of SAB 108 and
does not believe the impact of the application of this guidance will be material
to its consolidated financial position, cash flows and results of
operations.




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




21




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, 2007 to three months
ended March 31, 2006




SALES




Three
      Months ended
                                
                                
                                Three
      Months endedMarch 31, 2007
                                
                                
                                March 31, 2006Total
                                  Sales
                                
                                
                                % of Total
                                  Sales
                                
                                
                                Total
                                  Sales
                                
                                
                                % of Total
                                  SalesNew
      and Used Vehicles
                                
                                $
                                15,824,000
                                
                                
                                
                                93
                                %
                                
                                $
                                8,266,000
                                
                                
                                
                                89.4
                                %Parts
      and Services
                                
                                $
                                1,187,000
                                
                                
                                
                                7
                                %
                                
                                $
                                979,000
                                
                                
                                
                                10.6
                                %Total
                                
                                $
                                17,011,000
                                
                                
                                
                                100
                                %
                                
                                $
                                9,245,000
                                
                                
                                
                                100
                                %





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




Net sales for three months ended March
31, 2007 increased by approximately $7,766,000 or 84% to approximately
$17,011,000, compared with the same period of 2006. The increase was
attributable to the new and used vehicles trading segment. The increase was due
to an increase of deliveries of the “Ferrari” 8-cylinder sports car, F430 and
Spider and the launch of the new “Ferrari” 12-cylinder 2-seater sports car, F599
GTB Fiorano in the last quarter of 2006. The increase in parts and service sales
was mainly attributed to the increase of deliveries of Ferrari and Maserati cars
to customers during the last few years, for which our parts and services were
used to maintain.




COST
OF SALES




Cost of sales for three months ended
March 31, 2007 increased to $14,492,000 from $7,734,000 for the three months
ended March 31, 2006, a $6,758,000 or 87% increase was consistent with the
increase in Company’s revenues during this period.




GROSS
PROFIT




Gross profit margin for three months
ended March 31, 2007 fell by 1.5% to 14.8% from 16.3% for the same period of
2006 while the gross profit increased by approximately $1,008,000 to
approximately $2,519,000 for the three months ended March 31, 2007. This
increase is mainly attributed to the new and used vehicles trading
segment.




SELLING
AND MARKETING EXPENSES




Selling and marketing expenses for the
three months ended March 31, 2007 was approximately $142,000, compared to
approximately $107,000 for the same period of 2006. The increase in selling and
marketing expenses was primarily due to the increased exhibition expenses
incurred during this period, which increased from approximately $21,000 in first
quarter of 2006 to approximately $106,000 in first quarter of 2007. This was
mainly due to an event held in Hong Kong in February 2007 for the celebrations
of Ferrari’s 60th
anniversary.




22




GENERAL
AND ADMINISTRATIVE EXPENSES




General and administrative (“G&A”)
expenses include salaries and related staffing expenses, facilities rent, rate
and building management fees, legal, professional services and general corporate
expenses.




G&A
expenses for the three months ended March 31, 2007 was approximately $2,493,000
or 14.7% of net sales compared to approximately $1,926,000 or 21% of net sales
for the same period of 2006. The approximately $567,000 increase in G&A
expenses was primarily due to the growth of our revenues and business expansion
which required an increase in staffing and legal and professional
services.




OTHER
EXPENSES




Other
expenses decreased to approximately $127,000 compared with approximately
$184,000 in first quarter of 2006, a decrease of $57,000. The decrease was
mainly a result of the decreased share of loss of an associate from
approximately $227,000 in first quarter of 2006 to approximately $40,000 for the
same period of 2007. Interest expenses increased from approximately $66,000 in
first quarter of 2006 to approximately $177,000 for the same period of 2007. The
funds from which our increased interest expenses were incurred were used for
working capital purposes.




MINORITY
INTERESTS




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




LIQUIDITY
AND CAPITAL RESOURCES




CASH
FLOWS FROM CONTINUING OPERATING ACTIVITIES




Our operations generated cash resources
of approximately $1,438,000 for the three months ended March 31, 2007, compared
to generating cash resources of approximately $1,886,000 for the three months
ended March 31, 2006, primarily as a net result of the following:




·
            For
      the three months ended March 31, 2007, cash flow provided by sales net of
      operating expenses increased by approximately $284,000 to $2,000. The
      increase was primarily as a result of the increase in our
      sales.




·
            For
      the three months ended March 31, 2007, account receivables decreased by
      approximately $6,847,000, primarily due to the collection of account
      receivable in regarding to the sales recognized in the fourth quarter of
      2006.




·
            For
      the three months ended March 31, 2007, our inventory increased by
      approximately $2,621,000. The increase was consistent with our business
      growth especially in the car trading
segment.




·
            For
      the three months ended March 31, 2007, the increase or decrease of various
      current operating assets and liabilities, included in the aforementioned
      items, resulted in an aggregate increase of cash inflow from operations of
      approximately $1,436,000.




CASH
FLOWS FROM CONTINUING INVESTING ACTIVITIES




For the three months ended March 31,
2007 we expended net cash of approximately $34,000 in investing activities,
mainly for acquisition of property, plant and equipment to support the growth of
our business. For the three months ended March 31, 2006, we utilized
approximately $14,000 in investing activities, mainly for acquisition of
property, plant and equipment.




23




CASH
FLOWS FROM CONTINUING FINANCING ACTIVITIES




During the three months ended March 31,
2007, we repaid approximately $319,000 of our obligations owed on outstanding
debt and provided approximately $2,493,000 advances to affiliates. For the three
months ended March 31, 2006, we made new net drawdown amounting to approximately
$1,044,000 from banks and provided approximately $2,171,000 advances to
affiliates. The advances to affiliates were made to entities that are under
common control, 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 portion depending on
the nature of the advances.




WORKING
CAPITAL REQUIREMENTS




Current
assets exceeded current liabilities at March 31, 2007 by approximately
$1,991,000 a decrease of $120,000 from December 31, 2006. The ratio of our
current assets to our current liabilities was 1.08 to 1 at March 31, 2007 and
December 31, 2006. At March 31, 2007, our current assets of approximately
$25,530,000 included  approximately $9,446,000 in inventory that was funded
by the operating cash flow and trade finance facilities. Our current liabilities
of approximately $23,539,000 included customer deposits.  Given the
exclusive nature and extremely limited production of Ferrari cars, our customers
are willing to place material deposits in advance to the Company in order to
secure their new car orders. This resulted in customer deposits
of approximately $10,827,000.




SEASONALITY




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




EFFECT OF
FLUCTUATION IN FOREIGN EXCHANGE RATES




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




OFF-BALANCE
SHEET ARRANGEMENTS




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




Item
3.  Quantitative and Qualitative Disclosures about Market
Risk.




We currently do not hold or use any
derivative or other financial instruments that expose us to substantial market
risk and we have no foreign exchange contracts. Our financial instruments
consist of cash and cash equivalents, trade receivables and payables, bills
payable, other current assets, other current liabilities, and bank borrowings.
We consider investments in highly liquid instruments purchased with a remaining
maturity of 90 days or less at the date of purchase to be cash equivalents.
However, in order to manage the foreign exchange risks, we may engage in hedging
activities to manage our financial exposure related to currency exchange
fluctuation. In these hedging activities, we might use fixed-price, forward and
option contracts when feasible.




Interest Rates. Our exposure
to market risk for changes in interest rates relates primarily to our short-term
obligations; thus, fluctuations in interest rates would not have a material
impact on the fair value of the Company’s securities. At March 31, 2007, we had
approximately $2,169,000 in cash and cash equivalents. A hypothetical 10%
increase or decrease in interest rates would not have a material impact on our
earnings or loss, or the fair market value or cash flows of these
instruments.




24


Foreign Exchange Rates. While
our reporting currency is the U.S. dollar, to date virtually all of our revenues
and costs are denominated in Hong Kong Dollars and a significant portion of our
assets and liabilities is denominated in Hong Kong Dollars. As a result, we are
exposed to foreign exchange risk as our revenues and results of operations may
be impacted by fluctuations in the exchange rate between U.S. Dollars and Hong
Kong Dollars. If the Hong Kong Dollar depreciates against the U.S. Dollar, the
value of our Hong Kong Dollar revenues and assets as expressed in our U.S.
Dollar financial statements will decline. Thus, our revenues and operating
results may be impacted by exchange rate fluctuations of the Hong Kong Dollar.
While we may choose to do so in the future, the availability and effectiveness
of any hedging transactions may be limited and we may not be able to
successfully hedge our exchange rate risks. Accordingly, we may experience
economic losses and negative impacts on earnings and equity as a result of
foreign exchange rate fluctuations. The effect of foreign exchange rate
fluctuation for the three months ended March 31, 2007 was not material to
us.




Item
4.  Controls and Procedures.




NOTE:
This Item 4. 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 13 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, 2007.  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, 2007, as outlined in Part I, Item 2. 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.




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.




25




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 13 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.




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, 2007.  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, 2007 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.




26




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, 2007.  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, 2007 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.




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.




27


PART
II:  OTHER INFORMATION




Item
      1.
            Legal
      Proceedings.




None.




Item
1A.  Risk Factors.




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




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




None.




Item
      3.
            Defaults
      Upon Senior Securities.




None.




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




None.




Item
      5.
            Other
      Information.




On April 19, 2007, Mr. Sammy Chi Chung
Suen resigned as Director of Technorient because he reached retirement
age.




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.




ExhibitNumber
            
            Description31.1
            
            Certification
      of Chief Executive Officer pursuant to Rules 13A-14(A)/15D-15(E) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.31.2
            
            Certification
      of the Chief Financial Officer pursuant to Rules 13A-14(A)/15D-15(E) of
      the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002, filed herewith.32.1
            
            Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed
      herewith.




28


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 28, 2010
            By:
            /s/
      Richard Man Fai LEERichard
      Man Fai LEEChief
      Executive OfficerDate:
      May 28, 2010
            By:
            /s/
      Joseph Tik Tung WONGJoseph
      Tik Tung WONGChief
      Financial Officer, Treasurer and
Secretary




29