UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q/A


(Amendment
No. 2)





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




For the
quarterly period ended: June 30, 2009




or




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




For the
transition period from ______________ to ______________




Commission
File No. 333-120807




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC.




(Exact
name of Registrant as specified in its charter)




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





10/F,
Wo Kee Hong Building


585-609
Castle Peak Road


Kwai Chung, N.T. Hong
Kong


(Address
of principal executive offices)




(852)
2954-2469


(Registrant’s
telephone number, including area code)




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




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




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




Large
Accelerated Filer oAccelerated Filer o    Non-Accelerated
Filer o    Smaller
Reporting Company x




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




The
number of shares of common stock, $0.005 par value, outstanding as of the close
of business on August 6, 2009 was 23,323,860.







EXPLANATORY
NOTE




As used
in this Amendment No. 2 (the “Form 10-Q/A”) to our Quarterly Report on Form 10-Q
for the six months ended June 30, 2009 (the “Second Quarter 2009 Form 10-Q”),
the terms “we”, “us”, “our” and the “Company” mean China Premium Lifestyle
Enterprise, Inc., a Nevada corporation, and our consolidated subsidiaries, taken
together as a whole.




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




This Form
10-Q/A to our Second Quarter 2009 Form 10-Q is being filed with the Securities
and Exchange Commission (the “SEC”) to amend and restate our consolidated
unaudited interim financial statements as of June 30, 2009 and for the three and
six months ended June 30, 2009 and 2008.




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




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




Background




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




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




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




The
following actions were also taken:




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




·
            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




i




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




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




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




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




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




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




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




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




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




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




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




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.




ii




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 June 30, 2009 and December
      31, 2008, prepayments decreased by $1,468,930 to reflect the return for
      cancellation of the disputed shares of preferred stock and common stock in
      connection with the settlement of the Federal Court
      Action.  Accordingly, at June 30, 2009 and December 31, 2008,
      preferred stock decreased by $248, common stock decreased by
      $28,902, additional paid-in-capital decreased by $1,439,780 and
      stockholders' equity decreased by $1,468,930. Further, all references
      to an authorized class or series of preferred stock and any issued and
      outstanding shares of preferred stock have been deleted from the restated
      balance sheets at June 30, 2009 and December 31,
  2008;




·
            on
      the condensed consolidated statement of operations, for the three months
      and six months ended June 30, 2009, basic and diluted loss per share
      increased by $0.0062 and $0.02, respectively, for the three months
      ended June 30, 2008, basic and diluted earnings per share
      increased by $0.0033 and $0.0052, respectively, and for the six
      months ended June 30, 2008, basic and diluted earnings per share
      increased by $0.0010 and $0.0019, respectively;
  and




·
            for
      the three and six months ended June 30, 2009, the basic and diluted
      weighted average number of outstanding shares decreased by 5,780,250, for
      the three months ended June 30, 2008, the basic and diluted weighted
      average number of outstanding shares decreased by 5,780,250 and
      10,349,869, respectively, and for the six months ended June 30, 2008, the
      basic and diluted weighted average number of outstanding shares decreased
      by 3,696,303 and 8,265,922,
respectively.




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 Second Quarter 2009 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” and
      “Working Capital
      Requirements;”




iii




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




·
            Part
      II, Item 1. Legal Proceedings; and




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




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




iv


CHINA
PREMIUM LIFESTYLE ENTERPRISE, INC.




FORM
10-Q/A




FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2009




TABLE
OF CONTENTS




PART
      I. FINANCIAL INFORMATION
                    
                    
                    1Item
      1. Financial Statements.
                    
                    
                    1Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
                    
                    
                    28Item
      3. Quantitative and Qualitative Disclosures about Market
    Risk.
                    
                    
                    36Item
      4T.  Controls and Procedures
                    
                    
                    36PART
      II. OTHER INFORMATION
                    
                    
                    38Item
      1. Legal Proceedings.
                    
                    
                    38Item
      1A.  Risk Factors.
                    
                    
                    40Item
      5.  Other Information.
                    
                    
                    40Item
      6.  Exhibits.
                    
                    
                    40SIGNATURES
                    
                    
                    41







PART
I.  FINANCIAL INFORMATION
  Item
1.  Financial Statements.
  CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES
  CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
  June
      30, 2009
                                        
                                        
                                        December
      31, 2008(Restated)
                                          (Unaudited)
                                        
                                        
                                        (Restated)ASSETSCurrent
      assets:Cash
      and cash equivalents
                                        
                                        $
                                        1,976,626
                                        
                                        
                                        $
                                        5,827,132Restricted
      cash
                                        
                                        
                                        4,401,745
                                        
                                        
                                        
                                        4,427,439Trade
      receivables, net of provision
                                        
                                        
                                        4,337,098
                                        
                                        
                                        
                                        11,761,228Inventory,
      net
                                        
                                        
                                        18,787,210
                                        
                                        
                                        
                                        12,670,567Prepayments
                                        
                                        
                                        514,074
                                        
                                        
                                        
                                        483,952Other
      current assets
                                        
                                        
                                        7,346,658
                                        
                                        
                                        
                                        6,419,106Amounts
      due from affiliates
                                        
                                        
                                        11,980,930
                                        
                                        
                                        
                                        11,147,103Total
      current assets
                                        
                                        
                                        49,344,341
                                        
                                        
                                        
                                        52,736,527Property
      and equipment, net
                                        
                                        
                                        2,710,270
                                        
                                        
                                        
                                        2,905,927Goodwill
                                        
                                        
                                        39,734
                                        
                                        
                                        
                                        39,734TOTAL
      ASSETS
                                        
                                        $
                                        52,094,345
                                        
                                        
                                        $
                                        55,682,188LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                                        
                                        $
                                        9,623,472
                                        
                                        
                                        $
                                        9,935,435Bills
      payable
                                        
                                        
                                        473,911
                                        
                                        
                                        
                                        1,333,502Trade
      payables
                                        
                                        
                                        5,311,553
                                        
                                        
                                        
                                        3,795,196Deposits
      received
                                        
                                        
                                        20,982,234
                                        
                                        
                                        
                                        19,887,368Other
      current liabilities
                                        
                                        
                                        3,457,964
                                        
                                        
                                        
                                        7,405,454Amounts
      due to affiliates
                                        
                                        
                                        4,693,679
                                        
                                        
                                        
                                        2,433,340TOTAL
      LIABILITIES
                                        
                                        
                                        44,542,813
                                        
                                        
                                        
                                        44,790,295Commitments
      and ContingenciesStockholders'
      equityCommon
      stockAuthorized:
      100,000,000 common stock, par value $0.005. Issued and outstanding:
      23,323,860 shares as at June 30, 2009; (23,323,860 shares as at December
      31, 2008)
                                        
                                        
                                        116,619
                                        
                                        
                                        
                                        116,619Additional
      paid-in-capital
                                        
                                        
                                        4,119,108
                                        
                                        
                                        
                                        4,119,108Accumulated
      other comprehensive income
                                        
                                        
                                        253,856
                                        
                                        
                                        
                                        247,279Accumulated
      deficit
                                        
                                        
                                        (3,039,870
                                        )
                                        
                                        
                                        (695,446
                                        )TOTAL
      CHINA PREMIUM LIFESTYLE ENTERPRISE, INC. STOCKHOLDERS’
      EQUITY
                                        
                                        
                                        1,449,713
                                        
                                        
                                        
                                        3,787,560Noncontrolling
      interests
                                        
                                        
                                        6,101,819
                                        
                                        
                                        
                                        7,104,333TOTAL
      EQUITY
                                        
                                        
                                        7,551,532
                                        
                                        
                                        
                                        10,891,893TOTAL
      LIABILITIES AND EQUITY
                                        
                                        $
                                        52,094,345
                                        
                                        
                                        $
                                        55,682,188
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  1
  CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES
  CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
  Three
      months ended
                                                                  June
      30,
                                                                
                                                                
                                                                Six
      months ended
                                                                  June
      30,2009
                                                                  (Restated)
                                                                
                                                                
                                                                2008
                                                                  (Restated)
                                                                
                                                                
                                                                2009
                                                                  (Restated)
                                                                
                                                                
                                                                2008
                                                                  (Restated)Sales:New
      and used vehicles
                                                                
                                                                $
                                                                35,102,716
                                                                
                                                                
                                                                $
                                                                29,565,593
                                                                
                                                                
                                                                $
                                                                49,824,806
                                                                
                                                                
                                                                $
                                                                49,479,009Parts
      and services and others
                                                                
                                                                
                                                                1,685,642
                                                                
                                                                
                                                                
                                                                1,482,646
                                                                
                                                                
                                                                
                                                                2,969,440
                                                                
                                                                
                                                                
                                                                2,844,561Fashion
      apparel and accessories
                                                                
                                                                
                                                                459,724
                                                                
                                                                
                                                                
                                                                199,691
                                                                
                                                                
                                                                
                                                                881,905
                                                                
                                                                
                                                                
                                                                371,187Net
      sales
                                                                
                                                                
                                                                37,248,082
                                                                
                                                                
                                                                
                                                                31,247,930
                                                                
                                                                
                                                                
                                                                53,676,151
                                                                
                                                                
                                                                
                                                                52,694,757Cost
      of sales:New
      and used vehicles
                                                                
                                                                
                                                                (31,842,214
                                                                )
                                                                
                                                                
                                                                (25,574,673
                                                                )
                                                                
                                                                
                                                                (45,918,391
                                                                )
                                                                
                                                                
                                                                (43,059,955
                                                                )Parts
      and services and others
                                                                
                                                                
                                                                (314,657
                                                                )
                                                                
                                                                
                                                                (360,382
                                                                )
                                                                
                                                                
                                                                (500,464
                                                                )
                                                                
                                                                
                                                                (728,632
                                                                )Fashion
      apparel and accessories
                                                                
                                                                
                                                                (710,677
                                                                )
                                                                
                                                                
                                                                (112,612
                                                                )
                                                                
                                                                
                                                                (1,123,081
                                                                )
                                                                
                                                                
                                                                (244,028
                                                                )Total
      cost of sales
                                                                
                                                                
                                                                (32,867,548
                                                                )
                                                                
                                                                
                                                                (26,047,667
                                                                )
                                                                
                                                                
                                                                (47,541,936
                                                                )
                                                                
                                                                
                                                                (44,032,615
                                                                )Gross
      profit:New
      and used vehicles
                                                                
                                                                
                                                                3,260,502
                                                                
                                                                
                                                                
                                                                3,990,920
                                                                
                                                                
                                                                
                                                                3,906,415
                                                                
                                                                
                                                                
                                                                6,419,054Parts
      and services and others
                                                                
                                                                
                                                                1,370,985
                                                                
                                                                
                                                                
                                                                1,122,264
                                                                
                                                                
                                                                
                                                                2,468,976
                                                                
                                                                
                                                                
                                                                2,115,929Fashion
      apparel and accessories
                                                                
                                                                
                                                                (250,953
                                                                )
                                                                
                                                                
                                                                87,079
                                                                
                                                                
                                                                
                                                                (241,176
                                                                )
                                                                
                                                                
                                                                127,159Total
      gross profit
                                                                
                                                                
                                                                4,380,534
                                                                
                                                                
                                                                
                                                                5,200,263
                                                                
                                                                
                                                                
                                                                6,134,215
                                                                
                                                                
                                                                
                                                                8,662,142Selling,
      general and administrative expenses
                                                                
                                                                
                                                                (5,155,112
                                                                )
                                                                
                                                                
                                                                (4,469,773
                                                                )
                                                                
                                                                
                                                                (9,825,203
                                                                )
                                                                
                                                                
                                                                (8,243,250
                                                                )Operating
      (loss) / earnings
                                                                
                                                                
                                                                (774,578
                                                                )
                                                                
                                                                
                                                                730,490
                                                                
                                                                
                                                                
                                                                (3,690,988
                                                                )
                                                                
                                                                
                                                                418,892Other
      income (expenses)Interest
      expenses and other finance costs
                                                                
                                                                
                                                                (214,085
                                                                )
                                                                
                                                                
                                                                (128,957
                                                                )
                                                                
                                                                
                                                                (405,141
                                                                )
                                                                
                                                                
                                                                (260,720
                                                                )Other
      income
                                                                
                                                                
                                                                343,377
                                                                
                                                                
                                                                
                                                                683,742
                                                                
                                                                
                                                                
                                                                770,055
                                                                
                                                                
                                                                
                                                                1,005,302Total
      other income
                                                                
                                                                
                                                                129,292
                                                                
                                                                
                                                                
                                                                554,785
                                                                
                                                                
                                                                
                                                                364,914
                                                                
                                                                
                                                                
                                                                744,582(Loss)
      / earnings  before income taxes
                                                                
                                                                
                                                                (645,286
                                                                )
                                                                
                                                                
                                                                1,285,275
                                                                
                                                                
                                                                
                                                                (3,326,074
                                                                )
                                                                
                                                                
                                                                1,163,474Provision
      for income taxes
                                                                
                                                                
                                                                (30,254
                                                                )
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (30,254
                                                                )
                                                                
                                                                
                                                                -Net
      (loss) / earnings including noncontrolling interests
                                                                
                                                                
                                                                (675,540
                                                                )
                                                                
                                                                
                                                                1,285,275
                                                                
                                                                
                                                                
                                                                (3,356,328
                                                                )
                                                                
                                                                
                                                                1,163,474Net
      (loss) / earnings  attributable to:China
      Premium Lifestyle Enterprise, Inc. common stockholders
                                                                
                                                                
                                                                (722,273
                                                                )
                                                                
                                                                
                                                                390,391
                                                                
                                                                
                                                                
                                                                (2,344,424
                                                                )
                                                                
                                                                
                                                                161,071Noncontrolling
      interests
                                                                
                                                                
                                                                46,733
                                                                
                                                                
                                                                
                                                                894,884
                                                                
                                                                
                                                                
                                                                (1,011,904
                                                                )
                                                                
                                                                
                                                                1,002,403(675,540
                                                                )
                                                                
                                                                
                                                                1,285,275
                                                                
                                                                
                                                                $
                                                                (3,356,328
                                                                )
                                                                
                                                                $
                                                                1,163,474(Loss)
      / earnings per common stock attributable to China Premium Lifestyle
      Enterprise, Inc. common stockholdersBasic
                                                                
                                                                
                                                                (0.0310
                                                                )
                                                                
                                                                
                                                                0.0167
                                                                
                                                                
                                                                $
                                                                (0.1005
                                                                )
                                                                
                                                                $
                                                                0.0069Diluted
                                                                
                                                                
                                                                (0.0310
                                                                )
                                                                
                                                                
                                                                0.0167
                                                                
                                                                
                                                                $
                                                                (0.1005
                                                                )
                                                                
                                                                $
                                                                0.0069Weighted
      average number of common stock outstandingBasic
                                                                
                                                                
                                                                23,323,860
                                                                
                                                                
                                                                
                                                                23,323,860
                                                                
                                                                
                                                                
                                                                23,323,860
                                                                
                                                                
                                                                
                                                                23,323,860Diluted
                                                                
                                                                
                                                                23,323,860
                                                                
                                                                
                                                                
                                                                23,323,860
                                                                
                                                                
                                                                
                                                                23,323,860
                                                                
                                                                
                                                                
                                                                23,323,860
 
 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 CASH FLOWS (UNAUDITED)
  Six
      months ended
                                        June
      30,2009
                                      
                                      
                                      2008Operating
      activities:Net
      (loss) / earnings including noncontrolling interests
                                      
                                      $
                                      (3,356,328
                                      )
                                      
                                      $
                                      1,163,474Adjustments
      to reconcile net loss to net cash provided by
      operating activitiesDepreciation
      and amortization
                                      
                                      
                                      550,695
                                      
                                      
                                      
                                      404,026Disposal
      of property and equipment
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (130,168
                                      )Provision
      for bad debts written back
                                      
                                      
                                      (14,008
                                      )
                                      
                                      
                                      (28,635
                                      )Provision
      for inventory
                                      
                                      
                                      25,426
                                      
                                      
                                      
                                      -Other
      non-cash items
                                      
                                      
                                      9,746
                                      
                                      
                                      
                                      110,521Changes
      in operating assets and liabilities:Trade
      receivables
                                      
                                      
                                      7,438,138
                                      
                                      
                                      
                                      3,906,582Other
      current assets and prepayments
                                      
                                      
                                      (957,674
                                      )
                                      
                                      
                                      (2,591,092
                                      )Inventory
                                      
                                      
                                      (6,142,069
                                      )
                                      
                                      
                                      (7,201,312
                                      )Trade
      payables
                                      
                                      
                                      1,516,357
                                      
                                      
                                      
                                      2,442,834Other
      current liabilities and deposits received
                                      
                                      
                                      (2,852,625
                                      )
                                      
                                      
                                      2,512,174Net
      cash (used in)/provided by operating activities
                                      
                                      
                                      (3,782,342
                                      )
                                      
                                      
                                      588,404Investing
      activities:Purchases
      of property and equipment
                                      
                                      
                                      (348,816
                                      )
                                      
                                      
                                      (495,143
                                      )Proceeds
      from disposal of property and equipment
                                      
                                      
                                      -
                                      
                                      
                                      
                                      330,858Decrease
      in restricted cash
                                      
                                      
                                      25,694
                                      
                                      
                                      
                                      -Net
      cash used in investing activities
                                      
                                      
                                      (323,122
                                      )
                                      
                                      
                                      (164,285
                                      )Financing
      activities:Advances
      from/(to) affiliates
                                      
                                      
                                      1,426,512
                                      
                                      
                                      
                                      (539,963
                                      )Decrease
      in borrowings and bills payable
                                      
                                      
                                      (1,171,554
                                      )
                                      
                                      
                                      (1,541,874
                                      )Net
      cash provided by/(used in) financing activities
                                      
                                      
                                      254,958
                                      
                                      
                                      
                                      (2,081,837
                                      )Decrease
      in cash and cash equivalents
                                      
                                      
                                      (3,850,506
                                      )
                                      
                                      
                                      (1,657,718
                                      )Cash
      and cash equivalents at beginning of the period
                                      
                                      
                                      5,827,132
                                      
                                      
                                      
                                      6,583,566Cash
      and cash equivalents at end of the period
                                      
                                      $
                                      1,976,626
                                      
                                      
                                      $
                                      4,925,848Supplemental
      disclosure of cash flows information:Cash
      paid for:Interest
                                      
                                      $
                                      367,822
                                      
                                      
                                      $
                                      260,720Income
      taxes
                                      
                                      
                                      30,254
                                      
                                      
                                      
                                      -
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  3
  CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  NOTE
1.  SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
  Basis
of presentation
  The
condensed consolidated financial statements include the accounts of China
Premium Lifestyle Enterprise, Inc. (the “Company”) and its subsidiaries. The
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America.
All significant intercompany transactions and balances have been eliminated. The
accompanying condensed consolidated financial statements have been restated as
described in Note 14.
  The
condensed consolidated financial statements are unaudited and, in our opinion,
include all adjustments, consisting of normal recurring adjustments and accruals
necessary for a fair representation of our condensed consolidated balance
sheets, operating results, and cash flows for the periods presented. Operating
results for the periods presented are not necessarily indicative of the results
that may be expected for 2009. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted in accordance with the rules and regulations of the
Securities and Exchange Commission (the “SEC”). The condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and accompanying notes included in the Company’s Annual
Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended December 31,
2008.
  Use
of estimates
  The
preparation of the condensed consolidated financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the condensed consolidated financial statements and the reported
amounts of revenue and expenses during the reporting periods. Management makes
its best estimate of the outcome for these items based on historical trends and
other information available when the condensed consolidated financial statements
are prepared. Changes in estimates are recognized in accordance with the
accounting principles for the estimate, which is typically in the period when
new information becomes available to management. Management believes the most
significant estimates affecting the condensed consolidated financial statements
include provision for bad debts, provision for inventory write-off, and
accounting for income taxes. Actual results could differ from those
estimates.
  Earnings
(loss) per share
  Basic
earnings (loss) per share is computed by dividing net operating results for the
reporting period attributable to common stockholders by the weighted average
number of shares of common stock outstanding during the period. Diluted earnings
per share is calculated by dividing net operating results for the reporting
period attributable to common stockholders by the weighted average number of
shares of common stock outstanding and the dilutive effect of common stock
equivalents. The computation of diluted loss per share does not assume the
dilutive effect of common stock equivalents as the effect of the common stock
equivalents is antidilutive.
  Segment
reporting
  The
Company determines and classifies its operating segments in accordance with SFAS
No. 131 Disclosures About
Segments Of An Enterprise And Related Information.  The Company
identifies and classifies its operating segments based on the nature of the
products and services with similar economic characteristics.  The
Company’s reportable segments are (1) motor vehicle retailing, which includes
sales of new and used vehicles, provision of vehicle maintenance and repair
services and sales of vehicle parts, and (2) fashion apparel retailing, which
includes sales of fashion apparel and accessories.
  4
  Fair
value of financial instruments
  The
carrying amounts of the Company’s financial instruments including cash and cash
equivalents approximate fair value due to their high liquidity in actively
quoted trading markets and their short maturities. The Company’s trade
receivables, trade payables and accrued liabilities approximate fair value due
to their short maturities. The carrying amount of the short-term borrowings
approximate fair value as this facility bears interest at a variable rate tied
to the current market, and has terms similar to other borrowing arrangements
available to the Company.
  SFAS
No. 157 defines fair value as the price that would be received from selling
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. When determining the fair value
measurements for assets and liabilities required to be recorded at fair value,
the Company considers the principal or most advantageous market in which the
Company would transact and considers assumptions that market participants would
use when pricing the asset or liability, such as inherent risk, transfer
restrictions, and risk of nonperformance. SFAS No. 157 establishes a
valuation hierarchy for disclosure of the inputs to valuation used to measure
fair value. This hierarchy prioritizes the inputs into three broad levels as
follows:
  ·
              Level
      1: quoted prices (unadjusted) in active markets for identical assets or
      liabilities;
  ·
              Level
      2: inputs other than quoted prices included within Level 1 that are either
      directly or indirectly observable;
and
  ·
              Level
      3: unobservable inputs in which little or no market activity exists,
      therefore requiring an entity to develop its own assumptions about the
      assumptions that market participants would use in
  pricing.
  The
classification of a financial asset or liability within the hierarchy is
determined based on the lowest level input that is significant to the fair value
measurement. The carrying amounts of the Company’s financial instruments,
including cash and cash equivalents, approximate fair value due to their high
liquidity in actively quoted trading markets and their short
maturities.
  Reclassifications
  Certain
financial statement line items have been reclassified to conform to the current
period presentation and have no impact on the previously reported consolidated
net sales, operating results, or net financial position.
  NOTE
2.  CONCENTRATION OF RISK
  Concentration
of supplier risk
  The
Company relies on supplies from numerous vendors. For the six months ended June
30, 2009 and 2008, the Company had two vendors that each accounted for more than
10% of total supply purchases. If either of these vendors terminates their
relationship with the Company or if the Company’s supply from these vendors is
interrupted or terminated for any reason, the Company may not have sufficient
time to replace the supply of products from the remaining vendors or other
vendors to be engaged.  Any such interruption would negatively
impact the Company’s ability to sell and distribute its
products.  However, the suppliers’ concentration of credit risk does
not affect the concentration of credit risk with respect to trade payables as
the Company makes the purchases through facilities provided by banks and
financial institutions.
  Concentration
of risk due to geographic location
  The
Company’s business, assets and operations are currently focused on the sales of
new and used vehicles, provision of vehicle maintenance and repair services, and
sales of vehicle parts in Hong Kong, and has recently expanded to the People
Republic of China (“PRC”). Accordingly, the Company’s business is affected to a
significant degree by economic, political and legal developments in Hong Kong
and the PRC.  Among other factors, the Company’s business may be
affected by changes in laws and regulations, anti-inflationary measures,
currency conversion and remittances abroad, and rates and methods of taxation,
among other factors.
  5
  NOTE
3.  RECENT ACCOUNTING PRONOUNCEMENTS
  (a)           Recent
accounting pronouncements adopted
  In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
157, Fair Value
Measurements (“SFAS 157”), which provides guidance about how to measure
assets and liabilities that use fair value. SFAS 157 applies whenever another US
GAAP standard requires (or permits) assets or liabilities to be measured at fair
value but does not expand the use of fair value to any new circumstances. This
standard also requires additional disclosures in both annual and quarterly
reports. SFAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff
Position (“FSP”) SFAS 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements
That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement Under Statement 13(“FSP SFAS 157-1”), which states that SFAS
157 does not address fair value measurements for purposes of lease
classification or measurement. In February 2008, the FASB issued FSP SFAS 157-2,
Effective Date of FASB
Statement No. 157 (“FSP SFAS 157-2”), which delays the effective
date for non-financial assets and non-financial liabilities to fiscal years
beginning after November 15, 2008, except for items that are measured at
fair value in the financial statements on a recurring basis (at least annually).
The Company adopted the provisions of SFAS 157 for its financial assets and
liabilities and those items for which it has measured on a recurring basis
effective January 1, 2008, and the adoption did not have a material impact
on its financial position and results of operations. As provided by FSP SFAS
157-2, the Company adopted SFAS 157 for certain of its non-financial assets and
liabilities on January 1, 2009 and the adoption did not have a material impact
on its financial position, cash flows and results of operations.
  In
December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations (“SFAS
141(R)”). SFAS 141(R) establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any noncontrolling interest in the
acquiree and the goodwill acquired. SFAS 141(R) also establishes disclosure
requirements to enable the evaluation of the nature and financial effects of the
business combination. The Company adopted SFAS 141(R) on January 1, 2009 and the
adoption did not have a material impact on its financial position, cash flows
and results of operations.
  In
December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No.51(“SFAS 160”). SFAS 160 establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to
the noncontrolling interest, changes in a parent’s ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS 160 also establishes disclosure requirements that clearly
identify and distinguish between the interests of the parent and the interests
of the noncontrolling owners. Upon adoption of SFAS No. 160 on January 1, 2009,
the Company reclassified its noncontrolling interest from minority interest to
equity in the accompanying June 30, 2009 and December 31, 2008 condensed
consolidated balance sheets. In addition, the Company has separately disclosed
the amount of consolidated net loss attributable to the Company common
stockholders and its noncontrolling interest in the accompanying June 30, 2009
and 2008 condensed consolidated statements of operations.
  In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities (“SFAS 161”). SFAS 161 is
intended to improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity’s financial position, financial
performance, and cash flows. SFAS 161 achieves these improvements by
requiring disclosure of the fair values of derivative instruments and their
gains and losses in a tabular format. It also provides more information about an
entity’s liquidity by requiring disclosure of derivative features that are
credit risk-related. Finally, it requires cross-referencing within footnotes to
enable financial statement users to locate important information about
derivative instruments. The Company adopted SFAS 161 on January 1, 2009 and the
adoption did not have a material impact on its financial position, cash flows
and results of operations.
  6
  In
April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments(“FSP SFAS 107-1 and APB 28-1”).  The FSP
amends SFAS No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosure about fair value of
financial instruments in interim financial statements.  The Company adopted
FSP SFAS 107-1 and APB 28-1 during the interim period ended June 30, 2009 and
the adoption did not have a material impact on its financial position, cash
flows and results of operations.
  In April
2009, the FASB issued Staff Position No. SFAS 157-4, Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly, (“FSP
SFAS 157-4”). FSP SFAS 157-4 provides guidelines for making fair value
measurements more consistent with the principles presented in SFAS 157.
FSP SFAS 157-4 provides additional authoritative guidance in determining
whether a market is active or inactive, and whether a transaction is distressed,
is applicable to all assets and liabilities (i.e., financial and nonfinancial)
and will require enhanced disclosures. The Company adopted FSP SFAS 157-4 during
the interim period ended June 30, 2009 and the adoption did not have a material
impact on its financial position, cash flows and results of
operations.
  In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“FAS 165”). FAS
165 is intended to establish general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. FAS 165 requires disclosure
of the date through which an entity has evaluated subsequent events and the
basis for selecting that date, that is, whether that date represents the date
the financial statements were issued or were available to be
issued.  FAS 165 is effective for the Company’s second quarter ended
June 30, 2009.
  (b)           Recent
accounting pronouncements not yet effective
  In June
2009, the FASB issued the following pronouncements:
  SFAS
No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of
Generally Accepted Accounting Principles”, a replacement of SFAS No. 162,
“Hierarchy of Generally Accepted Accounting Principles” (“the Codification”).
The Codification is the official single source of authoritative U.S. generally
accepted accounting principles (“GAAP”). All existing accounting standards are
superseded. All other accounting guidance not included in the Codification will
be considered non-authoritative. The Codification also includes all relevant
Securities and Exchange Commission (“SEC”) guidance organized using the same
topical structure in separate sections within the Codification. The Codification
is effective for the Company’s third-quarter 2009 financial
statements.  The Codification is not expected to change
GAAP.  The principal impact on the Company’s financial statements from
the Codification adoption is limited to disclosures as all future references to
authoritative accounting literature will be referenced in accordance with the
Codification.
  SFAS
No. 167, “Amendments to FASB Interpretation No. 46(R)” (“FAS 167”).
FAS 167 amends FASB Interpretation No. 46 (“FIN 46”) (revised December
2003), “Consolidation of Variable Interest entities” (“FIN 46R”), to require an
analysis to determine whether a variable interest gives the entity a controlling
financial interest in a variable interest entity. This statement requires an
ongoing reassessment and eliminates the quantitative approach previously
required for determining whether an entity is the primary
beneficiary.  FAS 167 is effective for the Company’s fiscal year
beginning January 1, 2010.  The Company is currently evaluating
the impact that adopting this standard will have on its consolidated financial
statements.
  SFAS
No. 166, “Accounting for Transfers of Financial Assets” (“FAS 166”). FAS
166 removes the concept of a qualifying special-purpose entity from SFAS
No. 140, “Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities” (“FAS 140”), and removes the exception from
applying FIN 46R. This statement also clarifies the requirements for isolation
and limitations on portions of financial assets that are eligible for sale
accounting.  FAS 166 is effective for our fiscal year beginning
January 1, 2010.  The Company is currently evaluating the impact
that adopting this standard will have on its consolidated financial
statements.
  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.
  7
  NOTE
4.  (LOSS) / EARNINGS PER SHARE
  The
computation of basic and diluted loss per share is as follows for the three
months and six months ended June 30:
  Three
      months ended
                                          June
      30,
                                        
                                        
                                        Six
      months ended
                                          June,
      302009
                                          (Restated)
                                        
                                        
                                        2008
                                          (Restated)
                                        
                                        
                                        2009
                                          (Restated)
                                        
                                        
                                        2008
                                          (Restated)Numerator:Net
      (loss)/earnings attributable to China Premium Lifestyle Enterprise, Inc.
      common stockholders
                                        
                                        $
                                        (722,273
                                        )
                                        
                                        $
                                        390,391
                                        
                                        
                                        $
                                        (2,344,424
                                        )
                                        
                                        $
                                        161,071Denominator:Weighted
      average common stock outstanding
                                        
                                        
                                        23,323,860
                                        
                                        
                                        
                                        23,323,860
                                        
                                        
                                        
                                        23,323,860
                                        
                                        
                                        
                                        23,323,860Basic
      net (loss)/earnings per share
                                        
                                        $
                                        (0.0310
                                        )
                                        
                                        $
                                        0.0167
                                        
                                        
                                        $
                                        (0.1005
                                        )
                                        
                                        $
                                        0.0069Diluted
      net (loss)/earnings per share
                                        
                                        $
                                        (0.0310
                                        )
                                        
                                        $
                                        0.0167
                                        
                                        
                                        $
                                        (0.1005
                                        )
                                        
                                        $
                                        0.0069
 
 NOTE
5.  INVENTORY, NET
  Inventory
by major categories are summarized as follows:
  June
      30,
                                    
                                    
                                    December
      31,2009
                                    
                                    
                                    2008New
      vehicles
                                    
                                    $
                                    9,808,576
                                    
                                    
                                    $
                                    4,003,200Used
      vehicles
                                    
                                    
                                    5,825,363
                                    
                                    
                                    
                                    4,837,562Fashion
      apparel
                                    
                                    
                                    565,818
                                    
                                    
                                    
                                    1,716,163Parts,
      accessories and others
                                    
                                    
                                    2,587,453
                                    
                                    
                                    
                                    2,113,642$
                                    18,787,210
                                    
                                    
                                    $
                                    12,670,567
 
 Vehicles
included in inventory of approximately $2,878,694 and $1,541,204 were pledged to
secure the stocking loan and other loans outstanding as of June 30, 2009 and
December 31, 2008, respectively (See Note 6).
  NOTE
6.  BORROWINGS
  The
Company's borrowings are summarized as follows:
  June
      30,
                                    
                                    
                                    December
      31,2009
                                    
                                    
                                    2008Bank
      borrowings
                                    
                                    $
                                    7,552,173
                                    
                                    
                                    $
                                    8,790,806Stocking
      loans
                                    
                                    
                                    1,813,248
                                    
                                    
                                    
                                    1,144,629Other
      loans
                                    
                                    
                                    258,051
                                    
                                    
                                    
                                    -Short-term
      borrowings
                                    
                                    $
                                    9,623,472
                                    
                                    
                                    $
                                    9,935,435
 
 Vehicles
included in inventory of approximately $2,878,694 and $1,541,204 were pledged to
secure the stocking loan and other loans outstanding as of June 30, 2009 and
December 31, 2008, respectively.
  8
  NOTE
7.  OTHER CURRENT LIABILITIES
  Other
current liabilities by major categories are summarized as follows:
  June
      30,
                                      
                                      
                                      December
      31,2009
                                      
                                      
                                      2008Accruals
                                      
                                      $
                                      985,040
                                      
                                      
                                      $
                                      1,687,143Other
      payables
                                      
                                      
                                      2,472,924
                                      
                                      
                                      
                                      5,718,311$
                                      3,457,964
                                      
                                      
                                      $
                                      7,405,454
 
 Other
payables mainly consist of first registration tax on motor vehicles sold. First
registration tax is applicable to new motor vehicles sold in Hong Kong and is
computed on a progressive rate based on the gross selling price of the new motor
vehicles.
  NOTE
8.  STOCKHOLDERS’ EQUITY
  This Note
should be read in conjunction with Note 9.
  On May 5,
2009, the independent non-executive member of the Board of Directors of the
Company approved the reformation (“Reformation”) of that certain Share Exchange
Agreement, dated July 15, 2006, among the Company, Fred De Luca, Corich
Enterprises, Inc., a British Virgin Islands corporation (“Corich”), Herbert
Adamczyk (“Adamczyk” and, together with Corich, the “Sellers”) and Technorient
Limited, a Hong Kong corporation (“Technorient”) (the “Exchange
Agreement”).  Under the Exchange Agreement, the Company agreed to
issue the Sellers and Orient Financial Services, Ltd. (“OFS”), as a designee of
the Sellers, an aggregate of 972,728 shares of the Company’s purported Series A
Convertible Preferred Stock (the “Preferred Shares”) in exchange for the Sellers
transferring of an aggregate of 226,231 shares of the capital stock of
Technorient to the Company.  Upon conversion, the purported Preferred
Shares were to be convertible into 89,689,881 shares (the “Conversion Shares”)
of the Company’s common stock, par value $0.001 per share (the “Common
Stock”).
  The
Company has determined that: (i) the amendment (the “Preferred Stock Amendment”)
to the Company’s Articles of Incorporation (the “Articles”), dated April 7,
2006, pursuant to which a class of “blank check” preferred stock was purportedly
created, is invalid and of no force or effect because, while Article II, Section
10 of the Company’s By-Laws requires that if the Company’s stockholders elect to
act by written consent they must do so unanimously, the Preferred Stock
Amendment was approved only by the written consent of a majority of the
Company’s stockholders, (ii) the Certificate of Designation (the “Certificate of
Designation”), dated August 16, 2006, purportedly designating 2,000,000 shares
of the Company’s purported “blank check” preferred stock as “Series A
Convertible Preferred Stock”, is invalid and of no force and effect because, at
the time of the filing of the Certificate of Designation, the Company’s Articles
did not authorize the Company’s Board of Directors to designate the rights,
preferences and privileges of the Company’s purported “blank check” preferred
stock, and (iii) the amendment (the “Common Stock Amendment”) to the Company’s
Articles, dated December 18, 2006, pursuant to which the Company purported to
increase the number of shares of authorized common stock from 100,000,000 shares
to 400,000,000 shares, is invalid and of no force or effect because, while
Article II, Section 10 of the Company’s By-Laws requires that if the Company’s
stockholders elect to act by written consent they must do so unanimously, the
Common Stock Amendment was approved only by the written consent of a majority of
the Company’s stockholders.  As a result, the Company has determined
that the Company has never been authorized to issue any shares of any class or
series of preferred stock, including the Preferred Shares, and that the total
number of authorized shares of common stock of the Company is 100,000,000
shares.
  As a
result of the foregoing, the Company determined that the Company has never been
authorized to issue any shares of any class or series of preferred stock,
including the Preferred Shares.
  On
December 7, 2007, the Company effectuated a one-for-five reverse stock split
(the “Reverse Stock Split”) of the Company’s Common Stock.  As a
result of the Reverse Stock Split, each outstanding share of the Company’s
Common Stock, par value $0.001 per share, was converted into 0.20 shares of
Common Stock, par value $0.005 per share.
  9
  Taking
into account: (i) the number of authorized but unissued shares of Common Stock
of the Company as of the Closing Date of the Exchange Agreement and (ii) the
effect of the Reverse Stock Split, the Company, the Sellers, OFS and Technorient
agreed that the shares of Common Stock shall be deemed to have been issued to
the Sellers and OFS, as follows:
  1.           Effective
as of the Closing Date of the Exchange Agreement, the Sellers and OFS are deemed
to have been issued an aggregate of 72,000,000 shares of the Company’s Common
Stock (in lieu of the Preferred Shares and any underlying Conversion Shares), on
a pre-Reverse Stock Split basis, as follows:
  ·
              54,000,000
      shares of Common Stock to Corich;
  ·
              12,240,000
      shares of Common Stock to Adamczyk;
and
  ·
              5,760,000
      shares of Common Stock to OFS.
  2.           Upon
the effectiveness of and giving effect to the Reverse Stock Split, the
72,000,000 shares of pre-Reverse Stock Split Common Stock deemed to have been
issued to the Sellers and OFS effective as of the Closing Date of the Exchange
Agreement are deemed adjusted to an aggregate of 14,400,000 shares, as
follows:
  ·
              Corich’s
      shares were reduced to 10,800,000 shares of Common
  Stock;
  ·
              Adamczyk’s
      shares were reduced to 2,448,000 shares of Common Stock;
    and
  ·
              OFS’
      shares were reduced to 1,152,000 shares of Common
  Stock.
  3.           Upon
the effectiveness of and giving effect to the Reverse Stock Split, the Sellers
and OFS are deemed to have been issued an aggregate of 3,537,977 additional
shares of the Company’s Common Stock, on a post-Reverse Stock Split basis, as
follows:
  ·
              2,611,569
      shares of Common Stock to Corich;
  ·
              636,665
      shares of Common Stock to Adamczyk;
and
  ·
              289,743
      shares of Common Stock to OFS.
  Thus, the
shares of pre-Reverse Stock Split Common Stock deemed issued to the Sellers and
OFS effective as of the Closing Date of the Exchange Agreement (72,000,000), as
adjusted by the Reverse Stock Split (14,400,000), plus the post-Reverse Stock
Split shares of Common Stock deemed issued to the Sellers and OFS upon the
effectiveness of the Reverse Stock Split (3,537,977), equals the total aggregate
number of post-Reverse Stock Split shares of Common Stock the Company agreed to
issue to the Sellers and OFS (17,937,977).
  The
Company’s total authorized capital at June 30, 2009 is 100,000,000 shares of
common stock, par value $0.005 per share.  At June 30, 2009,
23,323,860 shares of common stock were issued and outstanding.
  NOTE
9.  COMMITMENTS AND CONTINGENT LIABILITIES
  Litigation,
Claims and Assessments
  From time
to time the Company may be involved in various disputes and litigation matters
arising in the normal course of business. It is the Company's belief that the
resolution of these matters will not have a material adverse effect on its
financial position or results of operations, however, management cannot provide
assurance that damages that result in a material adverse effect on its financial
position or results of operations will not be imposed in these
matters.  The Company accounts for contingent liabilities when it is
probable that future expenditures will be made and such expenditures can be
reasonably estimated.
  10
  On
December 19, 2008, the Company filed an action, styled China Premium Lifestyle Enterprise,
Inc. v. Happy Emerald Limited, et al., in the United States District
Court, Central District of California, Case No. SACV08-1439 (the “Federal Court
Action”), asserting claims for Securities Fraud, Breach of Contract, Fraud,
Conversion, Unjust Enrichment, Constructive Trust, Breach of Fiduciary Duty and
Declaratory Relief.  The Company named Happy Emerald Ltd., a purported
British Virgin Islands corporate entity (“HEL”), Global Premium Brands Co.,
Inc., a defunct California Corporation (“California Global”), Global Premium
Brands Co., Inc., a Nevada corporation (“Nevada Global”), Fred De Luca, Charles
Miseroy, Delia Rodriguez, Robert G. Pautsch, Richard Cabo and Federico Cabo as
defendants (collectively, the “Defendants”).
  The
Company asserts in the Federal Court Action that the Defendants have acted in
concert to fraudulently obtain shares of the Company’s purported Series A
Convertible Preferred Stock (the “Disputed Preferred Shares”) and certain shares
of the Company’s common stock purportedly issued upon the conversion of certain
of the Disputed Preferred Shares (the “Disputed Conversion Shares” and together
with the Disputed Preferred Shares, the “Disputed Shares”) and, in some
instances, have breached their fiduciary duties to the Company relating to their
conducts involving the Disputed Preferred Shares.  The Company
authorized the issuance of the Disputed Preferred Shares as consideration for
certain future services to be performed by HEL under a July 15, 2006 Consultancy
Services Agreement.  HEL, however, as alleged in the Federal Court
Action, has not performed the required services and the Disputed Preferred
Shares have accordingly never been paid for.  The Company believes
that all of the Disputed Shares are subject to cancellation.  In the
Federal Court Action, the Company alleges that the Defendants have improperly
obtained certificates for the Disputed Preferred Shares, attempted to transfer
the Disputed Preferred Shares between themselves, and sought to have the
restrictive legend removed from a portion of the Disputed Conversion
Shares.  The Company is seeking a declaration of the
parties’ respective rights regarding the Disputed Shares as well as
injunctive relief and damages against the Defendants.
  On May 5,
2009, the Company filed its Second Amended Complaint in the Federal Court Action
(the “SAC”).  On June 25, 2009, the court issued its ruling on a
motion to dismiss the SAC filed by some of the Defendants named in the
SAC.  Following that ruling, the court found that the SAC sufficiently
stated claims for breach of contract, fraud, conversion and breach of fiduciary
duty.
  Certain
defendants in the Federal Court Action filed their Answer to the SAC on July 10,
2009 (the “Answer”).  Of those defendants, Federico G. Cabo, Fred De
Luca and Nevada Global asserted a Counterclaim against the Company, and others,
for slander of title relating to a portion of the Disputed
Shares.  Federico G. Cabo, Fred De Luca and Robert G. Pautsch also
asserted Crossclaims against certain other parties (that did not include the
Company).  The Company and the Defendants that filed the Answer have
entered into a stipulation that will allow the Defendants to file a First
Amended Answer on or before August 17, 2009.  It is anticipated that
HEL and the Defendants will oppose the Company’s position with respect to the
Company’s claims.  The Company is unable to evaluate the likelihood of
an outcome, favorable or unfavorable, to the Company with respect to its claims
at this time, or to estimate the amount or range of a possible
loss.
  As more
fully discussed in Note 8, the Company has determined that the Company has never
been authorized to issue any shares of any class or series of preferred stock,
including the Disputed Preferred Shares.  As a result, in addition to
its other claims against HEL and the Defendants, the Company has asserted in the
SAC that all of the Disputed Shares are void and subject to
cancellation.  The Company is seeking a declaration that all of the
Disputed Shares are void and subject to cancellation.  It is
anticipated that HEL and the Defendants will oppose the Company’s position with
respect to the validity of the Disputed Shares.  The Company is unable
to evaluate the likelihood of an outcome, favorable or unfavorable, to the
Company with respect to the validity of the Disputed Shares at this time, or to
estimate the amount or range of a possible loss.
  11
  In a
related matter, the Company was named as a defendant in a state court action,
styled Federico G. Cabo, et
al. v. China Premium Lifestyle Enterprise, Inc., et al.,California
Superior Court, Ventura County, Case No. 56-2008-00333382-CU-BC-VTA (the “State
Court Action”).  The plaintiffs in the State Court Action (Defendants
in the Federal Court Action) Federico Cabo, Fred De Luca, and Nevada Global,
asserted various claims against multiple defendants relating to the Disputed
Shares purportedly issued to HEL in which these plaintiffs claim an
interest.  The plaintiffs asserted claims for Estoppel, Slander of
Title, Conversion and Constructive Trust against the Company in the State Court
Action.  By agreement with the plaintiffs in the State Court Action,
the State Court Action was dismissed, without prejudice, and it is anticipated
that the same or similar claims will be asserted in the Federal Court
Action.  The Company denies any such alleged wrongdoing and will
vigorously defend these claims if they are asserted in the Federal Court
Action.  The Company, however, is unable to evaluate the likelihood of
an outcome, favorable or unfavorable, to the Company with respect to any such
anticipated claims at this time or to estimate the amount or range of a possible
loss.
  Effective
March 1, 2010, the Company settled the Federal Court Action.  Under
the terms of the settlement: (1) the Defendants agreed to return to the Company
for cancellation 247,798 shares of preferred stock and 4,569,619 shares of
common stock; (2) Mr. De Luca resigned from the Company’s board of directors
effective March 1, 2010; (3) the parties executed a mutual release; and (4) the
Company dismissed the action with prejudice.
  In
December 2006, the Company had delivered 65,454 shares of preferred stock to
Bern Noble, Ltd. (“Bern Noble”) for consulting services rendered in connection
with the Exchange.  In March 2007, Bern Noble converted such shares
into 1,210,631 shares of common stock.  As discussed in the
Explanatory Note at the beginning of this Report and as previously disclosed in
the Company’s Current Report on Form 8-K, as filed with the SEC on May 11, 2009,
the Company later determined that it was never authorized to issue any shares of
preferred stock.  In connection with the settlement, Bern Noble agreed
to return to us for cancellation the 1,210,631 shares of common
stock.  The Company also agreed to replace the shares with an equal
number of new shares of common stock in consideration of services rendered to us
in 2006 in connection with the closing of the Amended Share Exchange
Agreement.  The Company agreed to deliver the replacement shares in
nine monthly installments.
  Operating
Lease Commitments
  The
Company leases its dealership facilities, service center facilities and office
space under non-cancellable operating leases in Hong Kong and PRC. Minimum
future rental payments required under non-cancellable operating leases in effect
as of June 30, 2009 are as follows:
  2009
                      
                      $
                      1,909,8102010
                      
                      
                      3,539,7132011
                      
                      
                      2,090,0022012
                      
                      
                      1,919,4282013
                      
                      
                      1,823,024Later
      years
                      
                      
                      7,635,642$
                      18,917,619
 
 Rent
expense for the three months and six months ended June 30, 2009 and 2008 was
$1,149,319, $698,503, $2,274,173 and $1,346,974, respectively.
  Employment
Agreements
  The
Company maintains employment agreements with its executives which extend through
2009. The agreements provide for a base salary, annual bonus to be determined by
the Board of Directors, termination payments, and other terms and conditions of
employment. In addition, the Company maintains employment agreements with other
key employees with similar terms and conditions.  As of June 30, 2009,
committed compensation to the executives and other key employees totaling
approximately $451,000 remain in effect.
  12
  NOTE
10.  COMPREHENSIVE INCOME INFORMATION
  (a)           The
Company’s comprehensive income is comprised of net operating results and
translation adjustments. Comprehensive income for the six months ended June 30
is as follows:
  China Premium Lifestyle Enterprise, Inc
                                      common stockholdersAccumulated deficit
                                    
                                    
                                    Accumulated other
                                      comprehensive income
                                    
                                    
                                    Noncontrolling
                                      interests
                                    
                                    
                                    TotalAt
      January 1, 2009
                                    
                                    $
                                    (695,446
                                    )
                                    
                                    $
                                    247,279
                                    
                                    
                                    $
                                    7,104,333
                                    
                                    
                                    $
                                    6,656,166Net
      loss
                                    
                                    
                                    (1,622,151
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,058,637
                                    )
                                    
                                    
                                    (2,680,788
                                    )Translation
      adjustments
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,214
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,214
                                    )At
      March 31, 2009
                                    
                                    
                                    (2,317,597
                                    )
                                    
                                    
                                    246,065
                                    
                                    
                                    
                                    6,045,696
                                    
                                    
                                    
                                    3,974,164Net
      (loss)/earnings
                                    
                                    
                                    (722,273
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    46,733
                                    
                                    
                                    
                                    (675,540
                                    )Translation
      adjustments
                                    
                                    
                                    -
                                    
                                    
                                    
                                    7,791
                                    
                                    
                                    
                                    9,390
                                    
                                    
                                    
                                    17,181At
      June 30, 2009
                                    
                                    $
                                    (3,039,870
                                    )
                                    
                                    $
                                    253,856
                                    
                                    
                                    $
                                    6,101,819
                                    
                                    
                                    $
                                    3,315,805
 
 China Premium Lifestyle Enterprise, Inc
                                              common stockholdersAccumulated deficit
                                            
                                            
                                            Accumulated other
                                              comprehensive income
                                            
                                            
                                            Noncontrolling
                                              interests
                                            
                                            
                                            TotalAt
      January 1, 2008
                                            
                                            $
                                            (510,438
                                            )
                                            
                                            $
                                            118,892
                                            
                                            
                                            $
                                            4,918,636
                                            
                                            
                                            $
                                            4,527,090Net
      (loss)/earnings
                                            
                                            
                                            (229,320
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            107,519
                                            
                                            
                                            
                                            (121,801
                                            )Translation
      adjustments
                                            
                                            
                                            -
                                            
                                            
                                            
                                            96,619
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            96,619At
      March 31, 2008
                                            
                                            
                                            (739,758
                                            )
                                            
                                            
                                            215,511
                                            
                                            
                                            
                                            5,026,155
                                            
                                            
                                            
                                            4,501,908Net
      earnings
                                            
                                            
                                            390,391
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            894,884
                                            
                                            
                                            
                                            1,285,275Translation
      adjustments
                                            
                                            
                                            -
                                            
                                            
                                            
                                            32,934
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            32,934At
      June 30, 2008
                                            
                                            $
                                            (349,367
                                            )
                                            
                                            $
                                            248,445
                                            
                                            
                                            $
                                            5,921,039
                                            
                                            
                                            $
                                            5,820,117
 
 (b)           Condensed
consolidated statement of comprehensive income (loss)
  Three months ended
                                  June 30,
                                
                                
                                Six months ended
                                  June 30,2009
                                
                                
                                2008
                                
                                
                                2009
                                
                                
                                2008Net
      (loss) / earnings including noncontrolling interest
                                
                                $
                                (675,540
                                )
                                
                                $
                                1,285,275
                                
                                
                                $
                                (3,356,328
                                )
                                
                                $
                                1,163,474Other
      comprehensive income, net of tax:Translation
      adjustments
                                
                                
                                17,181
                                
                                
                                
                                32,934
                                
                                
                                
                                15,967
                                
                                
                                
                                129,553Comprehensive
      (loss) / income including noncontrolling interest:
                                
                                
                                (658,359
                                )
                                
                                
                                1,318,209
                                
                                
                                
                                (3,340,361
                                )
                                
                                
                                1,293,027Net
      loss/(income)
                                
                                
                                (46,733
                                )
                                
                                
                                (894,884
                                )
                                
                                
                                1,011,904
                                
                                
                                
                                (1,002,403
                                )Translation
      adjustments
                                
                                
                                (9,390
                                )
                                
                                
                                -
                                
                                
                                
                                (9,390
                                )
                                
                                
                                -Comprehensive
      (loss) / earnings attributable to China Premium Lifestyle Enterprise, Inc.
      common stockholders
                                
                                $
                                (714,482
                                )
                                
                                $
                                423,325
                                
                                
                                $
                                (2,337,847
                                )
                                
                                $
                                290,624
  13
  NOTE
11.  BUSINESS SEGMENTS AND GEOGRAPHICAL INFORMATION
  Business
Segments
  The
Company operates in two business segments: Vehicles and Fashion Apparel. The
Company’s reporting segments are strategic business units that offer different
products and services. They are managed separately based on the fundamental
differences in their operations.
  The
Vehicles segment consists primarily of the group of companies doing business as
Auto Italia Limited, Nanjing Auto Italia Car Trading Co., Limited and Dalian
Auto Italia Car Trading Co., Limited.  The Vehicle segment includes sales
of new and used vehicles, provision of vehicle maintenance and repair services
and sales of vehicle parts.
  The
Fashion Apparel segment consists primarily of CPMM (Asia)
Limited.  The Fashion Apparel segment provides wholesale and retailing
of fashion apparel.
  14
  Information
by industry segment is set forth below for the three months and six months ended
June 30, 2009:
  Three months ended June 30, 2009
                                            
                                            Vehicles
                                            
                                            
                                            Fashion
                                              Apparel
                                            
                                            
                                            Corporate
                                            
                                            
                                            Elimination
                                            
                                            
                                            ConsolidatedSalesExternal
      sales
                                            
                                            $
                                            36,788,358
                                            
                                            
                                            $
                                            459,724
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            37,248,082Inter-segment
      sales
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Net
      sales
                                            
                                            
                                            36,788,358
                                            
                                            
                                            $
                                            459,724
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            37,248,082ResultsOperating
      loss
                                            
                                            
                                            (160,336
                                            )
                                            
                                            
                                            (594,865
                                            )
                                            
                                            
                                            (19,377
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (774,578
                                            )Interest
      revenue
                                            
                                            
                                            3,217
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            3,217Interest
      expense
                                            
                                            
                                            (207,028
                                            )
                                            
                                            
                                            (7,057
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (214,085
                                            )Other
      income
                                            
                                            
                                            338,819
                                            
                                            
                                            
                                            1,341
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            340,160Loss
      before income taxes
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            (645,286
                                            )Provision
      for income tax
                                            
                                            
                                            (30,254
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (30,254
                                            )Net
      loss
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            (675,540
                                            )
 
 Six months ended June 30, 2009
                                                
                                                Vehicles
                                                
                                                
                                                Fashion
                                                  Apparel
                                                
                                                
                                                Corporate
                                                
                                                
                                                Elimination
                                                
                                                
                                                ConsolidatedSalesExternal
      sales
                                                
                                                $
                                                52,794,246
                                                
                                                
                                                $
                                                881,905
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                53,676,151Inter-segment
      sales
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
      sales
                                                
                                                
                                                52,794,246
                                                
                                                
                                                $
                                                881,905
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                53,676,151ResultsOperating
      loss
                                                
                                                
                                                (2,304,350
                                                )
                                                
                                                
                                                (943,469
                                                )
                                                
                                                
                                                (443,169
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (3,690,988
                                                )Interest
      revenue
                                                
                                                
                                                15,730
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                15,730Interest
      expense
                                                
                                                
                                                (392,123
                                                )
                                                
                                                
                                                (13,018
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (405,141
                                                )Other
      income
                                                
                                                
                                                726,872
                                                
                                                
                                                
                                                27,453
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                754,325Loss
      before income taxes
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                (3,326,074
                                                )Provision
      for income tax
                                                
                                                
                                                (30,254
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (30,254
                                                )Net
      loss
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                (3,356,328
                                                )
  15
 
 Three months ended June 30, 2008
                                                
                                                Vehicles
                                                
                                                
                                                Fashion
                                                  Apparel
                                                
                                                
                                                Corporate
                                                
                                                
                                                Elimination
                                                
                                                
                                                ConsolidatedSalesExternal
      sales
                                                
                                                $
                                                31,048,239
                                                
                                                
                                                $
                                                199,691
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                31,247,930Inter-segment
      sales
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
      sales
                                                
                                                
                                                31,048,239
                                                
                                                
                                                $
                                                199,691
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                31,247,930ResultsOperating
      earnings/(loss)
                                                
                                                
                                                1,068,241
                                                
                                                
                                                
                                                (414,081
                                                )
                                                
                                                
                                                76,330
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                730,490Interest
      revenue
                                                
                                                
                                                10,778
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                10,778Interest
      expense
                                                
                                                
                                                (124,588
                                                )
                                                
                                                
                                                (4,369
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (128,957
                                                )Other
      income
                                                
                                                
                                                671,791
                                                
                                                
                                                
                                                1,173
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                672,964Earnings
      before income taxes
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                1,285,275Provision
      for income tax
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
      earnings
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                1,285,275
 
 Six months ended June 30, 2008
                                            
                                            Vehicles
                                            
                                            
                                            Fashion
                                              Apparel
                                            
                                            
                                            Corporate
                                            
                                            
                                            Elimination
                                            
                                            
                                            ConsolidatedSalesExternal
      sales
                                            
                                            $
                                            52,323,570
                                            
                                            
                                            $
                                            371,187
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            52,694,757Inter-segment
      sales
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Net
      sales
                                            
                                            
                                            52,323,570
                                            
                                            
                                            $
                                            371,187
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            52,694,757ResultsOperating
      earnings/(loss)
                                            
                                            
                                            1,217,674
                                            
                                            
                                            
                                            (711,704
                                            )
                                            
                                            
                                            (87,078
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            418,892Interest
      revenue
                                            
                                            
                                            42,435
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            42,435Interest
      expense
                                            
                                            
                                            (255,179
                                            )
                                            
                                            
                                            (5,541
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (260,720
                                            )Other
      income
                                            
                                            
                                            960,569
                                            
                                            
                                            
                                            2,298
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            962,867Earnings
      before income taxes
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            1,163,474Provision
      for income tax
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Net
      earnings
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            1,163,474
  16
 
 Vehicles
                                  
                                  
                                  Fashion
                                    Apparel
                                  
                                  
                                  Corporate
                                  
                                  
                                  Consolidated2009Total
      assets (Restated)
                                  
                                  $
                                  50,954,803
                                  
                                  
                                  $
                                  1,139,054
                                  
                                  
                                  $
                                  488
                                  
                                  
                                  $
                                  52,094,345Depreciation
      and amortization
                                  
                                  
                                  517,036
                                  
                                  
                                  
                                  33,659
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  550,695Net
      capital expenditures
                                  
                                  
                                  340,937
                                  
                                  
                                  
                                  7,879
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  348,8162008Total
      assets (Restated)
                                  
                                  $
                                  46,726,035
                                  
                                  
                                  $
                                  1,663,996
                                  
                                  
                                  $
                                  488
                                  
                                  
                                  $
                                  48,390,519Depreciation
      and amortization
                                  
                                  
                                  374,103
                                  
                                  
                                  
                                  29,923
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  404,026Net
      capital expenditures
                                  
                                  
                                  273,785
                                  
                                  
                                  
                                  221,358
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  495,143
 
 Geographic
Information
  No
segment information is provided as the Company only has one geographical
segment.  The Company’s reportable business segments are Vehicle and
Fashion Apparel, which operations are located in the PRC (including Hong Kong
and Macau). Sales were predominately made to customers located in the PRC
(including Hong Kong and Macau).
  17
  NOTE
12.  RELATED PARTY TRANSACTIONS
  The
following is a summary of significant transactions among certain related parties
and the Company during the three months and six months ended June
30:
  Three months ended
                                                                June30,
                                                              
                                                              
                                                              Six months ended
                                                                June 30,Notes
                                                              
                                                              2009
                                                              
                                                              
                                                              2008
                                                              
                                                              
                                                              2009
                                                              
                                                              
                                                              2008Sales
      to:-
      Affiliates
                                                              (a)
                                                              
                                                              $
                                                              188,006
                                                              
                                                              
                                                              $
                                                              11,693
                                                              
                                                              
                                                              $
                                                              189,436
                                                              
                                                              
                                                              $
                                                              15,719Purchases
      from:-
      Affiliates
                                                              (a)
                                                              
                                                              
                                                              101,726
                                                              
                                                              
                                                              
                                                              12,928
                                                              
                                                              
                                                              
                                                              101,726
                                                              
                                                              
                                                              
                                                              14,914Interest
      received from:-
      Affiliates
                                                              (b)
                                                              
                                                              
                                                              159,924
                                                              
                                                              
                                                              
                                                              162,764
                                                              
                                                              
                                                              
                                                              314,120
                                                              
                                                              
                                                              
                                                              288,782Management
      fee paid to:-
      Affiliates
                                                              (c)
                                                              
                                                              
                                                              103,761
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              207,429
                                                              
                                                              
                                                              
                                                              -Management
      fee received from:-
      Affiliates
                                                              (c)
                                                              
                                                              
                                                              46,449
                                                              
                                                              
                                                              
                                                              46,196
                                                              
                                                              
                                                              
                                                              92,884
                                                              
                                                              
                                                              
                                                              92,373Service
      cost charged by:
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              --
      Affiliates
                                                              (c)
                                                              
                                                              
                                                              9,914
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              10,334Rental
      income received from:-
      Affiliates
                                                              (c)
                                                              
                                                              
                                                              38,706
                                                              
                                                              
                                                              
                                                              38,496
                                                              
                                                              
                                                              
                                                              77,402
                                                              
                                                              
                                                              
                                                              76,978Rental
      paid to:-
      Affiliate
                                                              (c)
                                                              
                                                              
                                                              4,203
                                                              
                                                              
                                                              
                                                              6,032
                                                              
                                                              
                                                              
                                                              8,316
                                                              
                                                              
                                                              
                                                              12,665Building
      management fee paid to:-
      Affiliate
                                                              (c)
                                                              
                                                              
                                                              851
                                                              
                                                              
                                                              
                                                              710
                                                              
                                                              
                                                              
                                                              1,702
                                                              
                                                              
                                                              
                                                              1,318Warehouse
      expenses paid to:-
      Affiliate
                                                              (c)
                                                              
                                                              
                                                              3,669
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              9,222
                                                              
                                                              
                                                              
                                                              -
 
 Notes:
  (a)
              The
      transactions were carried out at market price or, where no market price
      was available, at cost plus a percentage profit
  mark-up.
  (b)
              The
      loan advance to an affiliate is unsecured, bears interest at 5.5% per
      annum and repayable on demand.
  (c)
              The
      transactions were carried out at terms agreed between both
      parties.
  NOTE
13.  SUBSEQUENT EVENTS
  The
Company evaluated all events or transactions through the date of this filing,
which is the date the financial statements were issued.  During this
period the Company did not have any material subsequent events that impacted our
condensed consolidated financial statements.
  18
  NOTE
14.  RESTATEMENT OF FINANCIAL STATEMENTS
  Background
  In
September 2006, the Company closed the transactions contemplated by that certain
Share Exchange Agreement, dated July 15, 2006, 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.
  In
January 2007, the Company authorized the delivery of 65,454 shares (the “Bern
Noble Shares”) of the HEL Shares to Bern Noble, Ltd. (“Bern Noble”) for
consulting services rendered by Bern Noble to the Company in connection with the
Share Exchange Agreement.  In March 2007, Bern Noble converted the
Bern Noble Shares into 1,210,631 shares of common stock.
  The
following actions were also taken:
  ·
              on
      April 7, 2006, prior management filed an amendment to the Articles of
      Incorporation purporting to create a class of 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, 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:
  19
  ·
              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.
  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
      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.
  Further,
in connection with the settlement, Bern Noble agreed to return to the Company
for cancellation the 1,210,631 shares of common stock that had originally been
derived from the HEL Shares.  The Company also agreed to replace the
Bern Noble Shares with an equal number of new shares of common stock in
consideration of services rendered to the Company in 2006 in connection with the
closing of the Share Exchange Agreement.  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;
  20




·
            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;




·
            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 June 30, 2009 and December
      31, 2008, prepayments decreased by $1,468,930 to reflect the return for
      cancellation of the disputed shares of preferred stock and common stock in
      connection with the settlement of the Federal Court
      Action.  Accordingly, at June 30, 2009 and December 31, 2008,
      preferred stock decreased by $248, common stock decreased by
      $28,902, additional paid-in-capital decreased by $1,439,780 and
      stockholders' equity decreased by $1,468,930. Further, all references
      to an authorized class or series of preferred stock and any issued and
      outstanding shares of preferred stock have been deleted from the restated
      balance sheets at June 30, 2009 and December 31,
  2008;




·
            on
      the condensed consolidated statement of operations, for the three months
      and six months ended June 30, 2009, basic and diluted loss per share
      increased by $0.0062 and $0.02, respectively, for the three months
      ended June 30, 2008, basic and diluted earnings per share
      increased by $0.0033 and $0.0052, respectively, and for the six
      months ended June 30, 2008, basic and diluted earnings per share
      increased by $0.0010 and $0.0019, respectively;
  and




·
            for
      the three and six months ended June 30, 2009, the basic and diluted
      weighted average number of outstanding shares decreased by 5,780,250, for
      the three months ended June 30, 2008, the basic and diluted weighted
      average number of outstanding shares decreased by 5,780,250 and
      10,349,869, respectively, and for the six months ended June 30, 2008, the
      basic and diluted weighted average number of outstanding shares decreased
      by 3,696,303 and 8,265,922,
respectively.




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


21


The
condensed consolidated balance sheets have been restated as
follows:




Condensed
Consolidated Balance Sheets




As of June 30,
    2009As Previously
                                          Reported
                                        
                                        
                                        Adjustments
                                        
                                        
                                        As RestatedASSETS
                                        
                                        $
                                        
                                        
                                        
                                        $
                                        
                                        
                                        
                                        $Current
      assets:Cash
      and cash equivalents
                                        
                                        
                                        1,976,626
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,976,626Restricted
      cash
                                        
                                        
                                        4,401,745
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,401,745Trade
      receivables, net of provision
                                        
                                        
                                        4,337,098
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,337,098Inventory,
      net
                                        
                                        
                                        18,787,210
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        18,787,210Prepayments
                                        
                                        
                                        1,983,004
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        514,074Other
      current assets
                                        
                                        
                                        7,346,658
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        7,346,658Amounts
      due from affiliates
                                        
                                        
                                        11,980,930
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        11,980,930Total
      current assets
                                        
                                        
                                        50,813,271
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        49,344,341Property
      and equipment, net
                                        
                                        
                                        2,710,270
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,710,270Goodwill
                                        
                                        
                                        39,734
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        39,734TOTAL
      ASSETS
                                        
                                        
                                        53,563,275
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        52,094,345LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                                        
                                        
                                        9,623,472
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        9,623,472Bills
      payable
                                        
                                        
                                        473,911
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        473,911Trade
      payables
                                        
                                        
                                        5,311,553
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        5,311,553Deposits
      received
                                        
                                        
                                        20,982,234
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        20,982,234Other
      current liabilities
                                        
                                        
                                        3,457,964
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,457,964Amounts
      due to affiliates
                                        
                                        
                                        4,693,679
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,693,679TOTAL
      LIABILITIES
                                        
                                        
                                        44,542,813
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        44,542,813Commitments
      and ContingenciesStockholders’
      equityPreferred
      stockAuthorized:
      100,000,000 preferred stock, par value $0.001Issued
      and outstanding: 2009: 247,798 (note 1)
                                        
                                        
                                        248
                                        
                                        
                                        
                                        (248
                                        )
                                        
                                        
                                        -Common
      stockAuthorized:
      100,000,000 common stock, par value $0.005Issued
      and outstanding: 2009: 29,104,110 (note 2)
                                        
                                        
                                        145,521
                                        
                                        
                                        
                                        (28,902
                                        )
                                        
                                        
                                        116,619Additional
      paid-in capital
                                        
                                        
                                        5,558,888
                                        
                                        
                                        
                                        (1,439,780
                                        )
                                        
                                        
                                        4,119,108Accumulated
      other comprehensive income
                                        
                                        
                                        253,856
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        253,856Accumulated
      deficit
                                        
                                        
                                        (3,039,870
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (3,039,870
                                        )TOTAL
      CHINA PREMIUM LIFESTYLE ENTERPRISE, INC. STOCKHOLDERS’
    EQUITY
                                        
                                        
                                        2,918,643
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        1,449,713Noncontrolling
      interests
                                        
                                        
                                        6,101,819
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        6,101,819TOTAL
      STOCKHOLDERS’ EQUITY
                                        
                                        
                                        9,020,462
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        7,551,532TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                        
                                        
                                        53,563,275
                                        
                                        
                                        
                                        (1,468,930
                                        )
                                        
                                        
                                        52,094,345


22





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




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 June 30, 2009 and December 31,
      2008.




2.
            At
      June 30, 2009 and December 31, 2008, giving effect to the transactions
      related to the restatements discussed in this Note 14, there were issued
      and outstanding 23,323,860 shares of common
  stock.




23




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




Condensed
Consolidated Statement of Operations




For the 3 months ended June 30,
      2009As Previously
                                                  Reported
                                                
                                                
                                                Adjustments
                                                
                                                
                                                As RestatedSales:New
      and used vehicles
                                                
                                                $
                                                35,102,716
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                35,102,716Parts
      and services and others
                                                
                                                
                                                1,685,642
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,685,642Fashion
      apparel and accessories
                                                
                                                
                                                459,724
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                459,724Net
      sales
                                                
                                                
                                                37,248,082
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                37,248,082Cost
      of sales:New
      and used vehicles
                                                
                                                
                                                (31,842,214
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (31,842,214
                                                )Parts
      and services and others
                                                
                                                
                                                (314,657
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (314,657
                                                )Fashion
      apparel and accessories
                                                
                                                
                                                (710,677
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (710,677
                                                )Total
      cost of sales
                                                
                                                
                                                (32,867,548
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (32,867,548
                                                )Gross
      profit:New
      and used vehicles
                                                
                                                
                                                3,260,502
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                3,260,502Parts
      and services and others
                                                
                                                
                                                1,370,985
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,370,985Fashion
      apparel and accessories
                                                
                                                
                                                (250,953
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (250,953
                                                )Total
      gross profit
                                                
                                                
                                                4,380,534
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                4,380,534Selling,
      general and administrative expenses
                                                
                                                
                                                (5,155,112
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (5,155,112
                                                )Operating
      loss
                                                
                                                
                                                (774,578
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (774,578
                                                )Other
      income (expenses)Interest
      expenses and other finance costs
                                                
                                                
                                                (214,085
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (214,085
                                                )Other
      income
                                                
                                                
                                                343,377
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                343,377Total
      other income (expenses)
                                                
                                                
                                                129,292
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                129,292Loss
      before income taxes
                                                
                                                
                                                (645,286
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (645,286
                                                )Provision
      for income taxes
                                                
                                                
                                                (30,254
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (30,254
                                                )Net
      loss including noncontrolling interests
                                                
                                                
                                                (675,540
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (675,540
                                                )Net
      (loss) / earnings  attributable to:China
      Premium Lifestyle Enterprise, Inc. common stockholders
                                                
                                                
                                                (722,273
                                                )
                                                
                                                
                                                
                                                
                                                
                                                
                                                (722,273
                                                )Noncontrolling
      interests
                                                
                                                
                                                46,733
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                46,733$
                                                (675,540
                                                )
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                (675,540
                                                )Loss
      per common stock attributable to China Premium Lifestyle Enterprise, Inc.
      common stockholdersBasic
                                                
                                                $
                                                (0.0248
                                                )
                                                
                                                $
                                                (0.0062
                                                )
                                                
                                                $
                                                (0.0310
                                                )Diluted
                                                
                                                $
                                                (0.0248
                                                )
                                                
                                                $
                                                (0.0062
                                                )
                                                
                                                $
                                                (0.0310
                                                )Weighted
      average number of common shares outstandingBasic
                                                
                                                
                                                29,104,110
                                                
                                                
                                                
                                                (5,780,250
                                                )
                                                
                                                
                                                23,323,860Diluted
                                                
                                                
                                                29,104,110
                                                
                                                
                                                
                                                (5,780,250
                                                )
                                                
                                                
                                                23,323,860


24





For the 6 months ended June 30,
      2009As Previously
                                                    Reported
                                                  
                                                  
                                                  Adjustments
                                                  
                                                  
                                                  As RestatedSales:New
      and used vehicles
                                                  
                                                  $
                                                  49,824,806
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  49,824,806Parts
      and services and others
                                                  
                                                  
                                                  2,969,440
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,969,440Fashion
      apparel and accessories
                                                  
                                                  
                                                  881,905
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  881,905Net
      sales
                                                  
                                                  
                                                  53,676,151
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  53,676,151Cost
      of sales:New
      and used vehicles
                                                  
                                                  
                                                  (45,918,391
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (45,918,391
                                                  )Parts
      and services and others
                                                  
                                                  
                                                  (500,464
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (500,464
                                                  )Fashion
      apparel and accessories
                                                  
                                                  
                                                  (1,123,081
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (1,123,081
                                                  )Total
      cost of sales
                                                  
                                                  
                                                  (47,541,936
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (47,541,936
                                                  )Gross
      profit:New
      and used vehicles
                                                  
                                                  
                                                  3,906,415
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  3,906,415Parts
      and services and others
                                                  
                                                  
                                                  2,468,976
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,468,976Fashion
      apparel and accessories
                                                  
                                                  
                                                  (241,176
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (241,176
                                                  )Total
      gross profit
                                                  
                                                  
                                                  6,134,215
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  6,134,215Selling,
      general and administrative expenses
                                                  
                                                  
                                                  (9,825,203
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (9,825,203
                                                  )Operating
      loss
                                                  
                                                  
                                                  (3,690,988
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (3,690,988
                                                  )Other
      income (expenses)Interest
      expenses and other finance costs
                                                  
                                                  
                                                  (405,141
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (405,141
                                                  )Other
      income
                                                  
                                                  
                                                  770,055
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  770,055Total
      other income (expenses)
                                                  
                                                  
                                                  364,914
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  364,914Loss
      before income taxes
                                                  
                                                  
                                                  (3,326,074
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (3,326,074
                                                  )Provision
      for income taxes
                                                  
                                                  
                                                  (30,254
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (30,254
                                                  )Net
      loss including noncontrolling interests
                                                  
                                                  
                                                  (3,356,328
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (3,356,328
                                                  )Net
      (loss) / earnings  attributable to:China
      Premium Lifestyle Enterprise, Inc. common stockholders
                                                  
                                                  
                                                  (2,344,424
                                                  )
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (2,344,424
                                                  )Noncontrolling
      interests
                                                  
                                                  
                                                  (1,011,904
                                                  )
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (1,011,904
                                                  )$
                                                  (3,356,328
                                                  )
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  (3,356,328
                                                  )Loss
      per common stock attributable to China Premium Lifestyle Enterprise, Inc.
      common stockholdersBasic
                                                  
                                                  $
                                                  (0.0805
                                                  )
                                                  
                                                  $
                                                  (0.0200
                                                  )
                                                  
                                                  $
                                                  (0.1005
                                                  )Diluted
                                                  
                                                  $
                                                  (0.0805
                                                  )
                                                  
                                                  $
                                                  (0.0200
                                                  )
                                                  
                                                  $
                                                  (0.1005
                                                  )Weighted
      average number of common shares outstandingBasic
                                                  
                                                  
                                                  29,104,110
                                                  
                                                  
                                                  
                                                  (5,780,250
                                                  )
                                                  
                                                  
                                                  23,323,860Diluted
                                                  
                                                  
                                                  29,104,110
                                                  
                                                  
                                                  
                                                  (5,780,250
                                                  )
                                                  
                                                  
                                                  23,323,860


25





For the 3 months ended June 30,
      2008As Previously
                                                  Reported
                                                
                                                
                                                Adjustments
                                                
                                                
                                                As RestatedSales:New
      and used vehicles
                                                
                                                $
                                                29,565,593
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                29,565,593Parts
      and services and others
                                                
                                                
                                                1,482,646
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,482,646Fashion
      apparel and accessories
                                                
                                                
                                                199,691
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                199,691Net
      sales
                                                
                                                
                                                31,247,930
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                31,247,930Cost
      of sales:New
      and used vehicles
                                                
                                                
                                                (25,574,673
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (25,574,673
                                                )Parts
      and services and others
                                                
                                                
                                                (360,382
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (360,382
                                                )Fashion
      apparel and accessories
                                                
                                                
                                                (112,612
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (112,612
                                                )Total
      cost of sales
                                                
                                                
                                                (26,047,667
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (26,047,667
                                                )Gross
      profit:New
      and used vehicles
                                                
                                                
                                                3,990,920
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                3,990,920Parts
      and services and others
                                                
                                                
                                                1,122,264
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,122,264Fashion
      apparel and accessories
                                                
                                                
                                                87,079
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                87,079Total
      gross profit
                                                
                                                
                                                5,200,263
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                5,200,263Selling,
      general and administrative expenses
                                                
                                                
                                                (4,469,773
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (4,469,773
                                                )Operating
      earnings
                                                
                                                
                                                730,490
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                730,490Other
      income (expenses)Interest
      expenses and other finance costs
                                                
                                                
                                                (128,957
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (128,957
                                                )Other
      income
                                                
                                                
                                                683,742
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                683,742Total
      other income (expenses)
                                                
                                                
                                                554,785
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                554,785Earnings
      before income taxes
                                                
                                                
                                                1,285,275
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,285,275Provision
      for income taxes
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
      earnings including noncontrolling interests
                                                
                                                
                                                1,285,275
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,285,275Net
      earnings  attributable to:China
      Premium Lifestyle Enterprise, Inc. common stockholders
                                                
                                                
                                                390,391
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                390,391Noncontrolling
      interests
                                                
                                                
                                                894,884
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                894,884$
                                                1,285,275
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                1,285,275Earnings
      per common stock attributable to China Premium Lifestyle Enterprise, Inc.
      common stockholdersBasic
                                                
                                                $
                                                0.0134
                                                
                                                
                                                $
                                                0.0033
                                                
                                                
                                                $
                                                0.0167Diluted
                                                
                                                $
                                                0.0115
                                                
                                                
                                                $
                                                0.0052
                                                
                                                
                                                $
                                                0.0167Weighted
      average number of common shares outstandingBasic
                                                
                                                
                                                29,104,110
                                                
                                                
                                                
                                                (5,780,250
                                                )
                                                
                                                
                                                23,323,860Diluted
                                                
                                                
                                                33,673,729
                                                
                                                
                                                
                                                (10,349,869
                                                )
                                                
                                                
                                                23,323,860


26





For the 6 months ended June 30,
      2008As Previously
                                                  Reported
                                                
                                                
                                                Adjustments
                                                
                                                
                                                As RestatedSales:New
      and used vehicles
                                                
                                                $
                                                49,479,009
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                49,479,009Parts
      and services and others
                                                
                                                
                                                2,844,561
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                2,844,561Fashion
      apparel and accessories
                                                
                                                
                                                371,187
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                371,187Net
      sales
                                                
                                                
                                                52,694,757
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                52,694,757Cost
      of sales:New
      and used vehicles
                                                
                                                
                                                (43,059,955
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (43,059,955
                                                )Parts
      and services and others
                                                
                                                
                                                (728,632
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (728,632
                                                )Fashion
      apparel and accessories
                                                
                                                
                                                (244,028
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (244,028
                                                )Total
      cost of sales
                                                
                                                
                                                (44,032,615
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (44,032,615
                                                )Gross
      profit:New
      and used vehicles
                                                
                                                
                                                6,419,054
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                6,419,054Parts
      and services and others
                                                
                                                
                                                2,115,929
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                2,115,929Fashion
      apparel and accessories
                                                
                                                
                                                127,159
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                127,159Total
      gross profit
                                                
                                                
                                                8,662,142
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                8,662,142Selling,
      general and administrative expenses
                                                
                                                
                                                (8,243,250
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (8,243,250
                                                )Operating
      earnings
                                                
                                                
                                                418,892
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                418,892Other
      income (expenses)Interest
      expenses and other finance costs
                                                
                                                
                                                (260,720
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (260,720
                                                )Other
      income
                                                
                                                
                                                1,005,302
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,005,302Total
      other income (expenses)
                                                
                                                
                                                744,582
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                744,582Earnings
      before income taxes
                                                
                                                
                                                1,163,474
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,163,474Provision
      for income taxes
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
      earnings including noncontrolling interests
                                                
                                                
                                                1,163,474
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,163,474Net
      earnings  attributable to:China
      Premium Lifestyle Enterprise, Inc. common stockholders
                                                
                                                
                                                161,071
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                161,071Noncontrolling
      interests
                                                
                                                
                                                1,002,403
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,002,403$
                                                1,163,474
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                1,163,474Earnings
      per common stock attributable to China Premium Lifestyle Enterprise, Inc.
      common stockholdersBasic
                                                
                                                $
                                                0.0059
                                                
                                                
                                                $
                                                0.0010
                                                
                                                
                                                $
                                                0.0069Diluted
                                                
                                                $
                                                0.0050
                                                
                                                
                                                $
                                                0.0019
                                                
                                                
                                                $
                                                0.0069Weighted
      average number of common shares outstandingBasic
                                                
                                                
                                                27,020,163
                                                
                                                
                                                
                                                (3,696,303
                                                )
                                                
                                                
                                                23,323,860Diluted
                                                
                                                
                                                31,589,782
                                                
                                                
                                                
                                                (8,265,922
                                                )
                                                
                                                
                                                23,323,860





[End
of condensed consolidated financial statements.]




27




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




FORWARD-LOOKING
STATEMENTS




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




RESTATEMENTS




The
Company is restating its consolidated financial statements as of June 30, 2009
and for the three and six month periods ended June 30, 2009 and 2008 in
this amendment to the Company’s Quarterly Report on Form 10-Q/A for
the period ended June 30, 2009. All amounts in Management’s Discussion and
Analysis of Financial Condition and Results of Operations that are the
subject of these restatements in the financial statements filed
herewith have been adjusted, as appropriate, for the effects of the
restatement. For a more detailed discussion of the restatements and their
underlying circumstances, please refer to the Explanatory Note at the beginning
of this Report and Note 14 of the Notes to the consolidated financial statements
included in this Report.




COMPANY
OVERVIEW




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




THE
BUSINESS OF TECHNORIENT




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


28


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




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




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




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




THE
BUSINESS OF CPMM ASIA




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




CURRENCY
CONVERSION AND EXCHANGE




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




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


29


CRITICAL
ACCOUNTING POLICIES




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




Trade
receivables and provision for bad debts




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




Inventory,
net




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




Share-based
compensation




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


30


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




Revenue
recognition




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




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




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




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




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




Impairment
of long-lived assets




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




Income
taxes




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




Contingencies




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


31


RESULTS
OF OPERATIONS




Six Months Ended June
30




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




SALES




Six months ended
                            June 30, 2009
                          
                          
                          Six months ended
                            June 30, 2008Total
                            Sales
                          
                          
                          % of
                            Total Sales
                          
                          
                          Total
                            Sales
                          
                          
                          % of
                            Total SalesSales:New
      vehicles
                          
                          $
                          38,559,000
                          
                          
                          
                          71.8
                          %
                          
                          $
                          40,091,000
                          
                          
                          
                          76.1
                          %Used
      vehicles
                          
                          $
                          11,266,000
                          
                          
                          
                          21
                          %
                          
                          $
                          9,388,000
                          
                          
                          
                          17.8
                          %Parts
      and services and others
                          
                          $
                          2,969,000
                          
                          
                          
                          5.5
                          %
                          
                          $
                          2,845,000
                          
                          
                          
                          5.4
                          %Fashion
      Apparel
                          
                          $
                          882,000
                          
                          
                          
                          1.7
                          %
                          
                          $
                          371,000
                          
                          
                          
                          0.7
                          %Total
                          
                          $
                          53,676,000
                          
                          
                          
                          100
                          %
                          
                          $
                          52,695,000
                          
                          
                          
                          100
                          %




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




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




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




COST OF
SALES




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




GROSS
PROFIT




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




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


32


SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES




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




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




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




OTHER
INCOME, NET




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




Three Months Ended June
30




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




SALES




Three months ended
                          June 30, 2009
                        
                        
                        Three months ended
                          June 30, 2008Total
                          Sales
                        
                        
                        % of
                          Total Sales
                        
                        
                        Total
                          Sales
                        
                        
                        % of
                          Total SalesSales:New
      vehicles
                        
                        $
                        28,877,000
                        
                        
                        
                        77.5
                        %
                        
                        $
                        25,692,000
                        
                        
                        
                        82.2
                        %Used
      vehicles
                        
                        $
                        6,225,000
                        
                        
                        
                        16.7
                        %
                        
                        $
                        3,874,000
                        
                        
                        
                        12.4
                        %Parts
      and services and others
                        
                        $
                        1,686,000
                        
                        
                        
                        4.5
                        %
                        
                        $
                        1,483,000
                        
                        
                        
                        4.7
                        %Fashion
      Apparel
                        
                        $
                        460,000
                        
                        
                        
                        1.3
                        %
                        
                        $
                        199,000
                        
                        
                        
                        0.7
                        %Total
                        
                        $
                        37,248,000
                        
                        
                        
                        100
                        %
                        
                        $
                        31,248,000
                        
                        
                        
                        100
                        %




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




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




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


33


COST OF
SALES




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




GROSS
PROFIT




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




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




SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES




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




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




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




OTHER
INCOME, NET




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




LIQUIDITY
AND CAPITAL RESOURCES




CASH
FLOWS FROM OPERATING ACTIVITIES




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


34


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




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




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




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




CASH
FLOWS FROM INVESTING ACTIVITIES




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




CASH
FLOWS FROM FINANCING ACTIVITIES




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




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




WORKING
CAPITAL REQUIREMENTS




Current
assets exceeded current liabilities at June 30, 2009 by approximately
$4,801,000, a decrease of $3,145,000 from December 31, 2008. The ratio of our
current assets to our current liabilities was 1.11 to 1 at June 30,
2009 compared to 1.18 to 1 at December 31, 2008. At June 30,
2009, our current assets of approximately $49,344,000 included approximately
$18,787,000 in inventory that was funded by the operating cash flow and trade
finance facilities. Our current liabilities of approximately $44,543,000
included non-refundable customer deposits. Given the exclusive nature and
extremely limited production of Ferrari cars, our customers are willing to place
material deposits in advance to the Company in order to secure their new car
orders. This resulted in customer deposits of approximately
$20,982,000.




SEASONALITY




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




EFFECT OF
FLUCTUATION IN FOREIGN EXCHANGE RATES




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


35


OFF-BALANCE
SHEET ARRANGEMENTS




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




Item
3.  Quantitative and Qualitative Disclosures about Market
Risk.




Not
applicable to smaller reporting companies.




Item
4T.  Controls and Procedures




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




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




This Form
10-Q/A presents restatements of the financial statements for the covered
period.  In connection with this Form 10-Q/A, our management
reevaluated the effectiveness of our internal control over financial reporting
and our disclosure controls and procedures, as defined in Rule 13a-15(e) under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June
30, 2009.  In assessing whether our internal control over financial
reporting and disclosure controls and procedures were effective as of such date,
our management considered the impact of the restatements to our consolidated
audited financial statements for the period ended June 30, 2009, 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.


36


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




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




Specifically,
the control deficiencies related to:




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




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




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




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




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




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 June 30,
2009.  Accordingly, our management has concluded that our internal
control over financial reporting and our disclosure controls and procedures were
not effective as of June 30, 2009 to provide reasonable assurance that
information required to be disclosed by us in the reports that we file under the
Exchange Act is recorded, processed, and summarized within the appropriate
periods.


37


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 June 30,
2009.  Accordingly, our management has concluded that our internal
control over financial reporting and that our disclosure controls and procedures
were not effective as of June 30, 2009 to provide reasonable assurance that
information required to be disclosed by us in the reports that we file under the
Exchange Act is recorded, processed, and summarized within the appropriate
periods.




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




Changes
in Internal Controls over Financial Reporting




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




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




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




·
            reviewing
      and instituting controls for each
weakness.




PART
II.OTHER INFORMATION




Item
1.  Legal Proceedings.




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


38


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




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




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




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




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




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




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




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


39


Item
1A.  Risk Factors.




Not
applicable to smaller reporting companies.




Item
5.  Other Information.




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




Item
6.  Exhibits.




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


40


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


41


EXHIBIT
INDEX




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