UNITED
STATES





SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549








FORM
10-Q/A


(Amendment
No. 1)


(MARK
ONE)


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


FOR THE
QUARTERLY PERIOD ENDED September 30, 2006





OR





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





COMMISSION
FILE NUMBER: 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
2514 4880


(Registrant’s
telephone number, including area code)




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




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes o  No o




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




Large Accelerated Filer o
                        
                        Accelerated Filer o
                        
                        Non-Accelerated Filero

                            (Do not check if a smaller reporting company.)
                        
                        Smaller Reporting Company x




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




On
September 30, 2006, there were 98,229,180 shares of common stock, $0.001
par value, issued and outstanding.





EXPLANATORY NOTE




As used
in this Amendment No. 1 (the “Form 10-Q/A”) to our Quarterly Report on Form
10-QSB for the nine months ended September 30, 2006 (the “Third Quarter 2006
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 Third Quarter 2006 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 September 30, 2006 and for the
three and nine months ended September 30, 2006 and 2005.




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




NOTE:  The common stock numbers in the
“Background” sections of this Explanatory Note and Note 14 of the financial
statements filed herewith give effect to a one-for-five reverse stock split (the
“Reverse Stock Split”) of our common stock, par value $0.005 per share,
effective on December 7, 2007.  However, unless otherwise indicated,
the common stock numbers in the “Restatements” sections of this Explanatory Note
and Note 14 of the financial statements filed herewith, and in the balance of
this Form 10-Q/A reflect our pre-Reverse Stock Split capitalization, as in
effect during the period covered by this Form 10-Q/A.




Background




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




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




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




The
following actions were also taken:


i




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




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




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




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




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




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




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




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




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




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




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




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




ii




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




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




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




Restatements




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




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




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




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




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




·
            the
      settlement of the Federal Court
Action.




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




·
            on
      the condensed consolidated balance sheets, at September 30, 2006,
      preferred stock decreased by $1,534, common stock increased by
      $72,000 and additional paid-in-capital decreased by $70,466. 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 September 30,
  2006;




·
            on
      the condensed consolidated statement of operations, for the three and nine
      months ended September 30, 2006, basic earnings per share
      decreased by $0.0283 and $0.1857, respectively, diluted earnings per
      share increased by $0.0017 and $0.0043, respectively, and for the three
      and nine months ended September 30, 2005, basic and diluted earnings per
      share increased by $0.0008 and $0.0013,
  respectively;




·
            for
      the three and nine months ended September 30, 2006, the basic weighted
      average number of outstanding shares increased by 90,069,541 and
      95,511,453, respectively, and the diluted weighted average number of
      outstanding shares decreased by 51,369,672 and 45,927,760,
      respectively, and for the three and nine months ended September 30, 2005,
      the basic weighted average number of outstanding shares increased by
      89,689,881 and the diluted weighted average number of outstanding shares
      decreased by 51,749,332; and




iii




·
            on
      the condensed consolidated statement of stockholders' equity, at September
      30, 2006, the number of issued and outstanding shares of preferred stock
      decreased to none from 1,533,973. In addition, at September 30, 2006, the
      number of issued and outstanding shares of common
      stock increased by 72,000,000 to
  98,229,180.




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 Third Quarter 2006 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
      “Introductory
      Comment;”




·
            Part
      I, Item 3. Controls and Procedures;




·
            Part
      II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds;
      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 Third Quarter 2006 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 Third Quarter 2006 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 Third Quarter 2006 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 Third Quarter 2006 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 Third Quarter 2006 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.


(FORMERLY
XACT AID, INC.)




FORM
10-Q/A





FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006





TABLE
OF CONTENTS





PAGENO.PART
      I. FINANCIAL INFORMATION
                1ITEM
      1. Financial Statements.
                1ITEM
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                21ITEM
      3. Controls And Procedures
                25PART
      II. OTHER INFORMATION
                28ITEM
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                28ITEM
      6. Exhibits
                29SIGNATURES
                30







PART
I.  FINANCIAL INFORMATION




ITEM
1.  Financial Statements.




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC.


(FORMERLY XACT AID, INC.)
AND SUBSIDIARIES





CONDENSED
CONSOLIDATED BALANCE SHEET (UNAUDITED)


SEPTEMBER
30, 2006


(Expressed
in US dollars)




$
                            (Restated)ASSETSCurrent
      assets:Cash
      and cash equivalents
                          
                          
                          209,628Trade
      receivables, net of allowance of $18,808
                          
                          
                          2,232,827Inventories
                          
                          
                          8,617,615Amount
      due from ultimate holding company
                          
                          
                          2,765,404Amounts
      due from fellow subsidiaries
                          
                          
                          27,248Other
      current assets
                          
                          
                          3,425,081Total
      current assets
                          
                          
                          17,277,803Property,
      plant and equipment, net
                          
                          
                          2,454,087Investment
      in an associate
                          
                          
                          1,000,421Deferred
      tax asset - non-current
                          
                          
                          812,903TOTAL
      ASSETS
                          
                          
                          21,545,214LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                          
                          
                          3,349,941Other
      current liabilities
                          
                          
                          12,590,465Total
      current liabilities
                          
                          
                          15,940,406Other
      long-term liabilities
                          
                          
                          153,764Total
      liabilities
                          
                          
                          16,094,170Minority
      interests
                          
                          
                          2,770,205Commitments
      and ContingenciesStockholders’
      equityCommon
      stockAuthorized:
      100,000,000 common stock, par value $0.001Issued
      and outstanding: 98,229,180 shares
                          
                          
                          98,261Additional
      paid-in capital
                          
                          
                          7,464,042Accumulated
      other comprehensive income
                          
                          
                          58,947Accumulated
      deficits
                          
                          
                          (4,940,411
                          )TOTAL
      STOCKHOLDERS’ EQUITY
                          
                          
                          2,680,839TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                          
                          
                          21,545,214





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


1


CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC.


(FORMERLY XACT AID, INC.)
AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


(Expressed
in US dollars)





Nine months ended
                      September 30
                    
                    
                    Three months ended
                      September 302006
                    
                    
                    2005
                    
                    
                    2006
                    
                    
                    2005$
                      (Restated)
                    
                    
                    $
                      (Restated)
                    
                    
                    $
                      (Restated)
                    
                    
                    $
                      (Restated)Sales:New
      and used vehicles
                    
                    
                    35,859,615
                    
                    
                    
                    25,666,064
                    
                    
                    
                    13,327,113
                    
                    
                    
                    8,000,002Parts
      and services
                    
                    
                    3,715,532
                    
                    
                    
                    2,887,890
                    
                    
                    
                    1,347,905
                    
                    
                    
                    1,053,029Net
      sales
                    
                    
                    39,575,147
                    
                    
                    
                    28,553,954
                    
                    
                    
                    14,675,018
                    
                    
                    
                    9,053,031Cost
      of sales:New
      and used vehicles
                    
                    
                    (30,863,133
                    )
                    
                    
                    (22,733,762
                    )
                    
                    
                    (11,455,667
                    )
                    
                    
                    (6,852,238
                    )Parts
      and services
                    
                    
                    (1,160,336
                    )
                    
                    
                    (1,027,159
                    )
                    
                    
                    (373,758
                    )
                    
                    
                    (367,909
                    )Total
      cost of sales
                    
                    
                    (32,023,469
                    )
                    
                    
                    (23,760,921
                    )
                    
                    
                    (11,829,425
                    )
                    
                    
                    (7,220,147
                    )Gross
      profit:New
      and used vehicles
                    
                    
                    4,996,482
                    
                    
                    
                    2,932,302
                    
                    
                    
                    1,871,446
                    
                    
                    
                    1,147,764Parts
      and services
                    
                    
                    2,555,196
                    
                    
                    
                    1,860,731
                    
                    
                    
                    974,147
                    
                    
                    
                    685,120Total
      gross profit
                    
                    
                    7,551,678
                    
                    
                    
                    4,793,033
                    
                    
                    
                    2,845,593
                    
                    
                    
                    1,832,884Selling,
      general and administrative expenses
                    
                    
                    (6,592,739
                    )
                    
                    
                    (4,644,806
                    )
                    
                    
                    (2,420,939
                    )
                    
                    
                    (1,775,131
                    )Operating
      earnings
                    
                    
                    958,939
                    
                    
                    
                    148,227
                    
                    
                    
                    424,654
                    
                    
                    
                    57,753Other
      (expenses)/income
                    
                    
                    (100,282
                    )
                    
                    
                    85,403
                    
                    
                    
                    (80,078
                    )
                    
                    
                    97,815Earnings
      before minority interests and income taxes
                    
                    
                    858,657
                    
                    
                    
                    233,630
                    
                    
                    
                    344,576
                    
                    
                    
                    155,568Minority
      interests
                    
                    
                    (437,915
                    )
                    
                    
                    (119,151
                    )
                    
                    
                    (175,734
                    )
                    
                    
                    (79,339
                    )Provision
      (benefit) for income taxes
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Net
      earnings
                    
                    
                    420,742
                    
                    
                    
                    114,479
                    
                    
                    
                    168,842
                    
                    
                    
                    76,229Earnings
      per shareBasic
                    
                    
                    0.0043
                    
                    
                    
                    0.0013
                    
                    
                    
                    0.0017
                    
                    
                    
                    0.0008Diluted
                    
                    
                    0.0043
                    
                    
                    
                    0.0013
                    
                    
                    
                    0.0017
                    
                    
                    
                    0.0008Weighted
      average number of common stock outstandingBasic
                    
                    
                    97,714,710
                    
                    
                    
                    89,689,881
                    
                    
                    
                    96,607,467
                    
                    
                    
                    89,689,881Diluted
                    
                    
                    97,714,710
                    
                    
                    
                    89,689,881
                    
                    
                    
                    96,607,467
                    
                    
                    
                    89,689,881





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


2


CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC.


(FORMERLY XACT AID, INC.)
AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


(Expressed
in US dollars)





Nine months ended
                          September 302006
                        
                        
                        2005$
                        
                        
                        $Cash
      flows from operating activities:Net
      earnings
                        
                        
                        420,742
                        
                        
                        
                        114,479Adjustment
      to reconcile net earnings to net cash used in operating
      activitiesMinority
      interest
                        
                        
                        437,915
                        
                        
                        
                        119,151Depreciation
      expense
                        
                        
                        391,973
                        
                        
                        
                        106,875Other
      adjustments
                        
                        
                        78,924
                        
                        
                        
                        (126,173
                        )Changes
      in operating assets and liabilities:Trade
      receivables
                        
                        
                        3,116,179
                        
                        
                        
                        1,981,710Bill
      receivables
                        
                        
                        —
                        
                        
                        
                        430,749Other
      current assets
                        
                        
                        529,752
                        
                        
                        
                        (1,040,298
                        )Inventories
                        
                        
                        (3,558,837
                        )
                        
                        
                        (2,459,999
                        )Trade
      payables
                        
                        
                        237,153
                        
                        
                        
                        133,834Other
      current liabilities
                        
                        
                        217,201
                        
                        
                        
                        711,998Net
      cash provided by/(used in) operating activities
                        
                        
                        1,871,002
                        
                        
                        
                        (27,674
                        )Cash
      flows from investing activities:Cash
      acquired upon acquisition of a subsidiary
                        
                        
                        1,284
                        
                        
                        
                        —Purchases
      of property, plant and equipment
                        
                        
                        (783,016
                        )
                        
                        
                        (97,648
                        )Advances
      to fellow subsidiaries / related parties
                        
                        
                        (2,770,608
                        )
                        
                        
                        (874,432
                        )Repayments
      from/(advances to) an associate company
                        
                        
                        153,561
                        
                        
                        
                        (1,000,742
                        )Net
      cash used in investing activities
                        
                        
                        (3,398,779
                        )
                        
                        
                        (1,972,822
                        )Cash
      flows from financing activities:Increase
      in short-term borrowings and bills payable
                        
                        
                        1,284,651
                        
                        
                        
                        1,464,889Net
      cash provided by financing activities
                        
                        
                        1,284,651
                        
                        
                        
                        1,464,889Net
      decrease in cash and cash equivalents
                        
                        
                        (243,126
                        )
                        
                        
                        (535,607
                        )Cash
      and cash equivalents, beginning of the period
                        
                        
                        452,754
                        
                        
                        
                        1,078,333Cash
      and cash equivalents, end of the period
                        
                        
                        209,628
                        
                        
                        
                        542,726Cash
      paid for:Interest
                        
                        
                        291,913
                        
                        
                        
                        111,017Income
      taxes
                        
                        
                        —
                        
                        
                        
                        —





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


3





CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC.


(FORMERLY XACT AID, INC.)
AND SUBSIDIARIES




CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2006


(Expressed
in US dollars)





AccumulatedAdditional
                  
                  
                  
                  
                  
                  otherCommon
      stock
                  
                  
                  Preferred
      stock
                  
                  
                  paid-in
                  
                  
                  Accumulated
                  
                  
                  comprehensiveShares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  deficit
                  
                  
                  Income
                  
                  
                  TotalBalance
      at December 31, 2005
                  
                  
                  461,687
                  
                  
                  $
                  5,919,064
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,646,577
                  
                  
                  
                  (5,361,153
                  )
                  
                  
                  46,176
                  
                  
                  
                  2,250,664Effect
      of reverse acquisition:Reverse
      acquisition equity acquired
                  
                  
                  25,767,493
                  
                  
                  
                  (5,892,803
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (5,892,803
                  )Retire
      other reserves of the Company (Restated)
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,332,441
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,332,441Issuance
      of common shares in share relation exchange pursuant to reformation
      agreement (Restated)
                  
                  
                  72,000,000
                  
                  
                  
                  72,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,485,024
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,557,024Comprehensive
      incomeNet
      earnings
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  420,742
                  
                  
                  
                  -
                  
                  
                  
                  420,742Translation
      adjustments
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  12,771
                  
                  
                  
                  12,771Balance
      at September 30, 2006 (Restated)
                  
                  
                  98,229,180
                  
                  
                  
                  98,261
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  7,464,042
                  
                  
                  
                  (4,940,411
                  )
                  
                  
                  58,947
                  
                  
                  
                  2,680,839





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


4


CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC.


(FORMERLY XACT AID, INC.)
AND SUBSIDIARIES




NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 FOR
THE INTERIM PERIOD AS OF SEPTEMBER 30, 2006 AND
 THE
NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND 2005


NOTE
1. BACKGROUND AND BASIS OF PRESENTATION




Background




China
Premium Lifestyle Enterprise, Inc. (formerly Xact Aid, Inc.) (the “Company”) was
formed in the State of Nevada on April 19, 2004 for the purpose of sales and
marketing of wound-specific first aid kit line of products.




On
September 5, 2006, the Company acquired 49% of Technorient Limited, a Hong Kong
Corporation (“Technorient”), through a reverse merger, with the result that the
stockholders of Technorient became the beneficial owners of approximately 49% of
the Company’s common stock. The transaction was completed pursuant to a Share
Exchange Agreement and was determined through arms-length negotiations between
the Company and Technorient. On May 5, 2009, the Company entered into a
Reformation Agreement with certain of the parties to the Share Exchange
Agreement.




The share
exchange resulted in a change of control whereby, in connection with the share
exchange, the Company issued: (i) an aggregate of 89,689,881 shares of common
stock in exchange for 49% of the issued and outstanding shares of Technorient;
and (ii) an aggregate of 21,629,337 shares of common stock in connection with
certain debt conversions. The 89,689,881 shares were issued in two tranches
pursuant to the terms and conditions of the Share Exchange Agreement and the
Reformation Agreement: (i) 72,000,000 shares of common stock were issued at
closing of the share exchange on September 5, 2006; and (ii) an additional
3,537,977 shares of common stock were issued on December 7, 2007 upon the
effectiveness of and giving effect to the Company’s one-for-five reverse stock
split (which shares would have been equal to 17,689,881 shares on a pre-reverse
split basis). At September 30, 2006, 98,229,180 shares of common stock were
issued and outstanding.




Immediately
subsequent to the acquisition, the Company’s former business operations ceased
and the Company’s operations now represent those of Technorient, which is
physically located in Hong Kong. The transaction resulted in the management of
Technorient having control of the financing and operating decisions of the
combined enterprise after the transaction. The transaction was accounted for as
a reverse acquisition, whereby Technorient is assumed to be the accounting
acquirer.




Background
of Technorient




Technorient
is a corporation incorporated in Hong Kong.  Technorient’s immediate
holding company is the Company and its ultimate holding company is Wo Kee Hong
(Holdings) Limited (“WKH”), a company incorporated in Bermuda whose shares are
listed on the Main Board of The Stock Exchange of Hong Kong
Limited.




Technorient
is an investment holding company. Through its subsidiaries, Technorient offers a
diversified range of automotive products and services including sales of new and
used vehicles, vehicle maintenance and repair services, and sales of vehicle
parts. Technorient’s operations are located primarily located in Hong
Kong.




Basis
of Presentation




The
accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly,
they do not include all information and disclosures necessary for a presentation
of the Company’s financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United States.
The accompanying condensed consolidated financial statements have been restated
as described in Note 14.


5




The
accompanying condensed consolidated financial statements of the Company have
been prepared in accordance with the accounting principles generally accepted in
the United States of America. The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
transactions and balances have been eliminated. The reporting and functional
currency of the Company is the U.S. dollar. The reporting and functional
currency (the currency of the primary economic environment in which the entity
operates) of its subsidiaries is in Hong Kong Dollars (“HKD”). Translation
adjustments made upon consolidation are recognized as a separate component of
stockholders’ equity.




In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for all periods presented have been made. Preparing
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue and expenses. Actual
results may differ from these estimates. The results of operations for the
period ended September 30, 2006 are not necessarily indicative of the operating
results that may be expected for the entire year ending December 31, 2006. The
interim financial statements should be read in conjunction with the Company’s
annual financial statements included elsewhere in this filing.




NOTE
2. RECENT ACCOUNTING PRONOUNCEMENTS




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




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




In
September 2006, the FASB issued SFAS 157, Fair Value Measurements (“SFAS 157”),
which provides guidance about how to measure assets and liabilities that use
fair value. SFAS 157 will apply whenever another US GAAP standard requires (or
permits) assets or liabilities to be measured at fair value but does not expand
the use of fair value to any new circumstances. This standard also will require
additional disclosures in both annual and quarterly reports. SFAS 157 will be
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and will be adopted by the Company beginning in the first
quarter of 2008. The Company does not expect there to be any significant impact
of adopting this standard on its consolidated financial position, cash flows and
results of operations.




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




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.


6




NOTE
3. CONCENTRATION OF RISK




Concentration
of Supplier Credit Risk




The
Company relies on supplies from numerous vendors. For the nine months ended
September 30, 2006 and 2005, the Company had two vendors that each accounted for
more than 10% of total supply purchases for the periods. If the vendors
terminate its relationship with the Company or if the Company’s supply from the
vendors is interrupted or terminated for any reason, the Company may not have
sufficient time to replace the supply of products from the remaining vendors.
Any such interruption would negatively impact the Company’s ability to sell and
distribute its products. However, the suppliers’ concentration of credit risk
does not pose any effect to the concentration of credit risk with respect to
trade payables as the Company made the purchases through letters of
credit.




Concentration
of Credit Risk due to Geographic Location




The
Company’s business, assets and operations is currently focused on the sale of
new and used vehicles in Hong Kong and is currently expanding its operations to
People Republic of China (“PRC”), and accordingly, is affected to a significant
degree by any economic, political and legal developments in Hong Kong and
PRC.




NOTE
4. EARNINGS PER SHARE




Basic
earnings per share is computed by dividing net earnings by the weighted average
number of shares of common stock outstanding during the period. Diluted net
earnings per share is computed by dividing net earnings by the weighted average
number of shares of common stock and common stock equivalents, such as options
and warrants, outstanding during the period.




NOTE
5. INVENTORY




Inventories
by major categories at September 30, 2006 are summarized as
follows:




$New
      vehicles
                      
                      
                      3,803,372Used
      vehicles
                      
                      
                      3,316,087Parts,
      accessories and other
                      
                      
                      1,498,1568,617,615





Vehicles
of approximately $1,244,793 were pledged to secure the stocking loan outstanding
as of September 30, 2006 (See Note 10).




NOTE
6. OTHER CURRENT ASSETS




The other
current assets by major categories at September 30, 2006 are summarized as
follows:




Deposits
                          
                          
                          348,129Prepayments
                          
                          
                          671,359Other
      receivables
                          
                          
                          1,988,945Amount
      due from an intermediate holding company
                          
                          
                          27,066Amount
      due from an associate
                          
                          
                          389,582$
                          3,425,081





Prepayments
at September 30, 2006 included approximately $584,700 in relation to legal and
professional services.


7


NOTE
7. PROPERTY, PLANT AND EQUIPMENT, NET




Property,
plant and equipment, at September 30, 2006 are summarized as
follows:




Leasehold
      improvements
                    
                    
                    2,529,677Plant
      and machinery
                    
                    
                    1,196,183Furniture,
      fixtures and office equipment
                    
                    
                    858,324Motor
      vehicles
                    
                    
                    508,346Total
                    
                    
                    5,092,530Less:
      accumulated depreciation
                    
                    
                    (2,638,443
                    )$
                    2,454,087





Depreciation
charged to the expense during the nine months ended September 30, 2006 and 2005
were $391,973 and $106,875, respectively.




NOTE
8. INVESTMENT IN AN ASSOCIATE




Investment
in an associate at September 30, 2006 was $1,000,421.




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




On
December 30, 2005, a subsidiary of the Company and Ferrari entered into the
Equity Interest Transfer Agreement relating to the transfer of 29% equity
interest in the EJV, for a consideration of US$870,000. As of September 30,
2006, the disposal has yet to be approved by the relevant authorities in the PRC
and the disposal has not become effective.




NOTE
9. INCOME TAXES




Deferred
taxation recognized represents foreign unused tax loss carryforwards from prior
years. The unused tax loss carry forwards have unlimited useful lives under the
local regulation at where the unused tax losses were derived. As of September
30, 2006, unused tax loss carryforwards from prior years were approximately
US$6.281 million.




Net
deferred tax asset at September 30, 2006 consists of the following:




$Deferred
      tax asset and liabilities:Loss
      carryforwards
                  
                  
                  1,099,203Gross
      deferred tax asset
                  
                  
                  1,099,203Valuation
      allowance
                  
                  
                  (286,300
                  )Net
      deferred tax asset
                  
                  
                  812,903





Hong Kong
Profits Tax is calculated at 17.5% of the estimated assessable profit arising in
Hong Kong for the period. No provision of income tax has been provided for the
nine months ended September 30, 2006 as the Company has unused tax loss carry
forwards from prior years.




8




NOTE
10. SHORT-TERM BORROWINGS
  The
Company’s short-term borrowings at September 30, 2006 consist of the
following:


$Bank
      borrowings
                  
                  
                  2,433,296Stocking
      loan
                  
                  
                  916,6453,349,941





Vehicles
of approximately $1,244,793 were pledged to secure the stocking loan outstanding
as of September 30, 2006.




The bank
borrowings, which are mainly used to finance the purchase of vehicles, are
secured by pledge of certain fellow subsidiaries’ properties and are
interest-bearing. The interest rates are generally based on the bank’s best
lending rate plus a certain percentage and the credit lines are normally subject
to periodic review. The range of effective interest rates (which are also equal
to contracted interest rates) on the Company’s borrowings is from 8.5% to 9.25%
per annum.




NOTE
11. OTHER CURRENT LIABILITIES




Other
current liabilities by major categories at September 30, 2006 are summarized as
follows:




$Trade
      payables
                    
                    
                    382,783Accruals
                    
                    
                    1,292,803Deposits
      received
                    
                    
                    9,117,281Other
      payables
                    
                    
                    1,796,359Amounts
      due to fellow subsidiaries
                    
                    
                    1,23912,590,465





The
deposits received mainly represent the amounts received from customers in
relation to the purchase of new vehicles. The customer is required to make a
deposit when a sales contract is executed between the customer and the Company
and the amount of deposit being made is in accordance to the terms and
conditions of the sales contract.


9


NOTE
12. COMMITMENTS AND CONTINGENT LIABILITIES




Litigation,
Claims and Assessments




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




Operating
Lease Commitments




The
Company leases its dealership facilities, service center facilities and office
space under non-cancellable operating leases in Hong Kong and PRC. Minimum
future rental payments required under non-cancellable operating leases in effect
as of September 30, 2006 are as follows:




2006
                      
                      $
                      272,0802007
                      
                      
                      972,7902008
                      
                      
                      74,129$
                      1,318,999





Rent
expense for the nine months ended September 30, 2006 amounted to $847,592 (2005:
$618,592).


10


NOTE
13. RELATED PARTY BALANCES AND TRANSACTIONS




The
following is a summary of significant transactions among certain related parties
and the Company during the nine months ended September 30, 2006 and 2005, and
the significant balances among certain related parties and the Company at
September 30, 2006:





2006
                                                                  
                                                                  
                                                                  2005Consolidated
      Income Statements:
                                                                  Note
                                                                  
                                                                  $Sales
      to:-
      Ultimate holding company
                                                                  (a)
                                                                  
                                                                  
                                                                  166,158
                                                                  
                                                                  
                                                                  
                                                                  —-
      Fellow subsidiaries
                                                                  (a)
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  253,846-
      Associate
                                                                  (a)
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  574,169Purchases
      from:-
      Fellow subsidiaries
                                                                  (a)
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  119,231-
      Associate
                                                                  (a)
                                                                  
                                                                  
                                                                  1,044,820
                                                                  
                                                                  
                                                                  
                                                                  —Interest
      received from:-
      Fellow subsidiaries
                                                                  (b)
                                                                  
                                                                  
                                                                  19,783
                                                                  
                                                                  
                                                                  
                                                                  49,050Management
      fee paid to:-
      Ultimate holding company
                                                                  (c)
                                                                  
                                                                  
                                                                  232,258
                                                                  
                                                                  
                                                                  
                                                                  426,597Consolidated
      Balance Sheet:Amounts
      due from fellow subsidiaries:-
      Wo Kee Hong Limited
                                                                  (d)
                                                                  
                                                                  
                                                                  27,248Amounts
      due to fellow subsidiaries:-
      Shinwa Asia Pacific Company Limited
                                                                  (d)
                                                                  
                                                                  
                                                                  —-
      Stoneycroft Estates Limited
                                                                  (d)
                                                                  
                                                                  
                                                                  (14
                                                                  )-
      Wo Kee Advertising Limited
                                                                  (d)
                                                                  
                                                                  
                                                                  —-
      Wo Kee Hong Limited
                                                                  (d)
                                                                  
                                                                  
                                                                  —-
      Wo Kee Services Limited
                                                                  (d)
                                                                  
                                                                  
                                                                  (1,225
                                                                  )(1,239
                                                                  )Amount
      due from/(to) ultimate holding company-
      Wo Kee Hong (Holdings) Limited
                                                                  (d)
                                                                  
                                                                  
                                                                  2,765,404Amount
      due from an intermediate holding company-
      Corich Enterprise Inc.
                                                                  (d)
                                                                  
                                                                  
                                                                  27,066Amount
      due from an associate-
      Ferrari Maserati Cars International Trading (Shanghai) Co.
    Ltd
                                                                  (d)
                                                                  
                                                                  
                                                                  389,582





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 a fellow subsidiary is unsecured, bears interest at 9.25%
      per annum and repayable on demand.




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




(d)
            The
      amounts due are unsecured, interest free and repayable on
      demand.




11


NOTE
14. RESTATEMENT OF FINANCIAL STATEMENTS




NOTE:
The common stock numbers in the “Background” section of this Note 14 give effect
to the Company’s one-for-five reverse stock split (the “Reverse Stock Split”) of
its common stock, par value $0.005 per share, effective on December 7,
2007.  However, the common stock numbers in the “Restatements” section
of this Note 14 reflect the Company’s pre-Reverse Stock Split capitalization, as
in effect during the period covered by this Form 10-Q/A.




Background




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




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




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




The
following actions were also taken:




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




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




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




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




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




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




12




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




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




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




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




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




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




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




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




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


13




Restatements




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




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




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




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




·
            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 September 30, 2006,
      preferred stock decreased by $1,534, common stock increased by
      $72,000 and additional paid-in-capital decreased by $70,466. 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 September 30,
  2006;




·
            on
      the condensed consolidated statement of operations, for the three and nine
      months ended September 30, 2006, basic earnings per share
      decreased by $0.0283 and $0.1857, respectively, diluted earnings per
      share increased by $0.0017 and $0.0043, respectively, and for the three
      and nine months ended September 30, 2005, basic and diluted earnings per
      share increased by $0.0008 and $0.0013,
  respectively;




·
            for
      the three and nine months ended September 30, 2006, the basic weighted
      average number of outstanding shares increased by 90,069,541 and
      95,511,453, respectively, and the diluted weighted average number of
      outstanding shares decreased by 51,369,672 and 45,927,760,
      respectively, and for the three and nine months ended September 30, 2005,
      the basic weighted average number of outstanding shares increased by
      89,689,881 and the diluted weighted average number of outstanding shares
      decreased by 51,749,332; and




·
            on
      the condensed consolidated statement of stockholders' equity, at September
      30, 2006, the number of issued and outstanding shares of preferred stock
      decreased to none from 1,533,973. In addition, at September 30, 2006, the
      number of issued and outstanding shares of common
      stock increased by 72,000,000 to
  98,229,180.




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


14


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




Condensed
Consolidated Balance Sheets


(in
thousands)





As of September 30, 2006As Previously
                  Reported
                
                
                Adjustments
                
                
                As RestatedASSETS
                
                $
                
                
                
                $
                
                
                
                $Current
      assets:Cash
      and cash equivalents
                
                
                209,628
                
                
                
                -
                
                
                
                209,628Trade
      receivables, net of allowance of $18,808
                
                
                2,232,827
                
                
                
                -
                
                
                
                2,232,827Inventories
                
                
                8,617,615
                
                
                
                -
                
                
                
                8,617,615Amount
      due from ultimate holding company
                
                
                2,765,404
                
                
                
                -
                
                
                
                2,765,404Amounts
      due from fellow subsidiaries
                
                
                27,248
                
                
                
                -
                
                
                
                27,248Other
      current assets
                
                
                3,425,081
                
                
                
                -
                
                
                
                3,425,081Total
      current assets
                
                
                17,277,803
                
                
                
                -
                
                
                
                17,277,803Property,
      plant and equipment, net
                
                
                2,454,087
                
                
                
                -
                
                
                
                2,454,087Investment
      in an associate
                
                
                1,000,421
                
                
                
                -
                
                
                
                1,000,421Deferred
      tax asset – non-current
                
                
                812,903
                
                
                
                -
                
                
                
                812,903TOTAL
      ASSETS
                
                
                21,545,214
                
                
                
                -
                
                
                
                21,545,214LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                
                
                3,349,941
                
                
                
                -
                
                
                
                3,349,941Other
      current liabilities
                
                
                12,590,465
                
                
                
                -
                
                
                
                12,590,465Total
      current liabilities
                
                
                15,940,406
                
                
                
                -
                
                
                
                15,940,406Other
      long-term liabilities
                
                
                153,764
                
                
                
                -
                
                
                
                153,764TOTAL
      LIABILITIES
                
                
                16,094,170
                
                
                
                -
                
                
                
                16,094,170Minority
      interests
                
                
                2,770,205
                
                
                
                -
                
                
                
                2,770,205Commitments
      and ContingenciesStockholders’
      equityPreferred
      stockAuthorized:
      100,000,000 common stock, par value $0.001Issued
      and outstanding: 2006: 1,533,973 (note 1)
                
                
                1,534
                
                
                
                (1,534
                )
                
                
                -Common
      stock
                
                
                26,261
                
                
                
                72,000
                
                
                
                98,261Authorized:
      100,000,000 common stock, par value $0.001Issued
      and outstanding: 2006: 26,229,180 (note 2)Additional
      paid-in capital
                
                
                7,534,508
                
                
                
                (70,466
                )
                
                
                7,464,042Accumulated
      other comprehensive income
                
                
                58,947
                
                
                
                -
                
                
                
                58,947Accumulated
      deficit
                
                
                (4,940,411
                )
                
                
                -
                
                
                
                (4,940,411
                )TOTAL
      STOCKHOLDERS’ EQUITY
                
                
                2,680,839
                
                
                
                -
                
                
                
                2,680,839TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                
                
                21,545,214
                
                
                
                -
                
                
                
                21,545,214





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 September 30,
  2006.




2.
            At
      September 30, 2006, giving effect to the transactions related to the
      restatements discussed in this Note 14, there were issued and outstanding
      98,229,180 shares of common
stock


15


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




Condensed
Consolidated Statement of Operations


(in
thousands)





For the 9 months ended September 30, 2006As Previously
                      Reported
                    
                    
                    Adjustments
                    
                    
                    As RestatedSales:New
      and used vehicles
                    
                    $
                    35,859,615
                    
                    
                    $
                    -
                    
                    
                    $
                    35,859,615Parts
      and services
                    
                    
                    3,715,532
                    
                    
                    
                    -
                    
                    
                    
                    3,715,532Net
      sales
                    
                    
                    39,575,147
                    
                    
                    
                    -
                    
                    
                    
                    39,575,147Cost
      of sales:New
      and used vehicles
                    
                    
                    (30,863,133
                    )
                    
                    
                    -
                    
                    
                    
                    (30,863,133
                    )Parts
      and services
                    
                    
                    (1,160,336
                    )
                    
                    
                    -
                    
                    
                    
                    (1,160,336
                    )Total
      cost of sales
                    
                    
                    (32,023,469
                    )
                    
                    
                    -
                    
                    
                    
                    (32,023,469
                    )Gross
      profit:New
      and used vehicles
                    
                    
                    4,996,482
                    
                    
                    
                    -
                    
                    
                    
                    4,996,482Parts
      and services
                    
                    
                    2,555,196
                    
                    
                    
                    -
                    
                    
                    
                    2,555,196Total
      gross profit
                    
                    
                    7,551,678
                    
                    
                    
                    -
                    
                    
                    
                    7,551,678Selling,
      general and administrative expenses
                    
                    
                    (6,592,739
                    )
                    
                    
                    -
                    
                    
                    
                    (6,592,739
                    )Operating
      earnings
                    
                    
                    958,939
                    
                    
                    
                    -
                    
                    
                    
                    958,939Other
      income (expenses)
                    
                    
                    (100,282
                    )
                    
                    
                    -
                    
                    
                    
                    (100,282
                    )Earnings
      before minority interests and income taxes
                    
                    
                    858,657
                    
                    
                    
                    -
                    
                    
                    
                    858,657Minority
      interests
                    
                    
                    (437,915
                    )
                    
                    
                    -
                    
                    
                    
                    (437,915
                    )Provision
      for income taxes
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      earnings
                    
                    $
                    420,742
                    
                    
                    $
                    -
                    
                    
                    $
                    420,742Earnings
      per shareBasic
                    
                    $
                    0.19
                    
                    
                    $
                    (0.1857
                    )
                    
                    $
                    0.0043Diluted
                    
                    $
                    0.00
                    
                    
                    $
                    0.0043
                    
                    
                    $
                    0.0043Weighted
      average number of common shares outstandingBasic
                    
                    
                    2,203,257
                    
                    
                    
                    95,511,453
                    
                    
                    
                    97,714,710Diluted
                    
                    
                    143,642,470
                    
                    
                    
                    (45,927,760
                    )
                    
                    
                    97,714,710


16





For the 3 months ended September 30,
      2006As Previously
                              Reported
                            
                            
                            Adjustments
                            
                            
                            As RestatedSales:New
      and used vehicles
                            
                            $
                            13,327,113
                            
                            
                            $
                            -
                            
                            
                            $
                            13,327,113Parts
      and services
                            
                            
                            1,347,905
                            
                            
                            
                            -
                            
                            
                            
                            1,347,905Net
      sales
                            
                            
                            14,675,018
                            
                            
                            
                            -
                            
                            
                            
                            14,675,018Cost
      of sales:New
      and used vehicles
                            
                            
                            (11,455,667
                            )
                            
                            
                            -
                            
                            
                            
                            (11,455,667
                            )Parts
      and services
                            
                            
                            (373,758
                            )
                            
                            
                            -
                            
                            
                            
                            (373,758
                            )Total
      cost of sales
                            
                            
                            (11,829,425
                            )
                            
                            
                            -
                            
                            
                            
                            (11,829,425
                            )Gross
      profit:New
      and used vehicles
                            
                            
                            1,871,446
                            
                            
                            
                            -
                            
                            
                            
                            1,871,446Parts
      and services
                            
                            
                            974,147
                            
                            
                            
                            -
                            
                            
                            
                            974,147Total
      gross profit
                            
                            
                            2,845,593
                            
                            
                            
                            -
                            
                            
                            
                            2,845,593Selling,
      general and administrative expenses
                            
                            
                            (2,420,939
                            )
                            
                            
                            -
                            
                            
                            
                            (2,420,939
                            )Operating
      earnings
                            
                            
                            424,654
                            
                            
                            
                            -
                            
                            
                            
                            424,654Other
      income (expenses)
                            
                            
                            (80,078
                            )
                            
                            
                            -
                            
                            
                            
                            (80,078
                            )Earnings
      before minority interests and income taxes
                            
                            
                            344,576
                            
                            
                            
                            -
                            
                            
                            
                            344,576Minority
      interests
                            
                            
                            (175,734
                            )
                            
                            
                            -
                            
                            
                            
                            (175,734
                            )Provision
      for income taxes
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Net
      earnings
                            
                            $
                            168,842
                            
                            
                            $
                            -
                            
                            
                            $
                            168,842Earnings
      per shareBasic
                            
                            $
                            0.03
                            
                            
                            $
                            (0.0283
                            )
                            
                            $
                            0.0017Diluted
                            
                            $
                            0.00
                            
                            
                            $
                            0.0017
                            
                            
                            $
                            0.0017Weighted
      average number of common shares outstandingBasic
                            
                            
                            6,537,926
                            
                            
                            
                            90,069,541
                            
                            
                            
                            96,607,467Diluted
                            
                            
                            147,977,139
                            
                            
                            
                            (51,369,672
                            )
                            
                            
                            96,607,467


17





For
      the 9 months ended September 30, 2005As Previously
                        Reported
                      
                      
                      Adjustments
                      
                      
                      As RestatedSales:New
      and used vehicles
                      
                      $
                      25,666,064
                      
                      
                      $
                      -
                      
                      
                      $
                      25,666,064Parts
      and services
                      
                      
                      2,887,890
                      
                      
                      
                      -
                      
                      
                      
                      2,887,890Net
      sales
                      
                      
                      28,553,954
                      
                      
                      
                      -
                      
                      
                      
                      28,553,954Cost
      of sales:New
      and used vehicles
                      
                      
                      (22,733,762
                      )
                      
                      
                      -
                      
                      
                      
                      (22,733,762
                      )Parts
      and services
                      
                      
                      (1,027,159
                      )
                      
                      
                      -
                      
                      
                      
                      (1,027,159
                      )Total
      cost of sales
                      
                      
                      (23,760,921
                      )
                      
                      
                      -
                      
                      
                      
                      (23,760,921
                      )Gross
      profit:New
      and used vehicles
                      
                      
                      2,932,302
                      
                      
                      
                      -
                      
                      
                      
                      2,932,302Parts
      and services
                      
                      
                      1,860,731
                      
                      
                      
                      -
                      
                      
                      
                      1,860,731Total
      gross profit
                      
                      
                      4,793,033
                      
                      
                      
                      -
                      
                      
                      
                      4,793,033Selling,
      general and administrative expenses
                      
                      
                      (4,644,806
                      )
                      
                      
                      -
                      
                      
                      
                      (4,644,806
                      )Operating
      earnings
                      
                      
                      148,227
                      
                      
                      
                      -
                      
                      
                      
                      148,227Other
      income (expenses)
                      
                      
                      85,403
                      
                      
                      
                      -
                      
                      
                      
                      85,403Earnings
      before minority interests and income taxes
                      
                      
                      233,630
                      
                      
                      
                      -
                      
                      
                      
                      233,630Minority
      interests
                      
                      
                      (119,151
                      )
                      
                      
                      -
                      
                      
                      
                      (119,151
                      )Provision
      for income taxes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Net
      earnings
                      
                      $
                      114,479
                      
                      
                      $
                      -
                      
                      
                      $
                      114,479Earnings
      per shareBasic
                      
                      $
                      0.00
                      
                      
                      $
                      0.0013
                      
                      
                      $
                      0.0013Diluted
                      
                      $
                      0.00
                      
                      
                      $
                      0.0013
                      
                      
                      $
                      0.0013Weighted
      average number of common shares outstandingBasic
                      
                      
                      N/A
                      
                      
                      
                      89,689,881
                      
                      
                      
                      89,689,881Diluted
                      
                      
                      141,439,213
                      
                      
                      
                      (51,749,332
                      )
                      
                      
                      89,689,881


18





For the 3 months ended September 30,
      2005As Previously
                          Reported
                        
                        
                        Adjustments
                        
                        
                        As RestatedSales:New
      and used vehicles
                        
                        $
                        8,000,002
                        
                        
                        $
                        -
                        
                        
                        $
                        8,000,002Parts
      and services
                        
                        
                        1,053,029
                        
                        
                        
                        -
                        
                        
                        
                        1,053,029Net
      sales
                        
                        
                        9,053,031
                        
                        
                        
                        -
                        
                        
                        
                        9,053,031Cost
      of sales:New
      and used vehicles
                        
                        
                        (6,852,238
                        )
                        
                        
                        -
                        
                        
                        
                        (6,852,238
                        )Parts
      and services
                        
                        
                        (367,909
                        )
                        
                        
                        -
                        
                        
                        
                        (367,909
                        )Total
      cost of sales
                        
                        
                        (7,220,147
                        )
                        
                        
                        -
                        
                        
                        
                        (7,220,147
                        )Gross
      profit:New
      and used vehicles
                        
                        
                        1,147,764
                        
                        
                        
                        -
                        
                        
                        
                        1,147,764Parts
      and services
                        
                        
                        685,120
                        
                        
                        
                        -
                        
                        
                        
                        685,120Total
      gross profit
                        
                        
                        1,832,884
                        
                        
                        
                        -
                        
                        
                        
                        1,832,884Selling,
      general and administrative expenses
                        
                        
                        (1,775,131
                        )
                        
                        
                        -
                        
                        
                        
                        (1,775,131
                        )Operating
      earnings
                        
                        
                        57,753
                        
                        
                        
                        -
                        
                        
                        
                        57,753Other
      income (expenses)
                        
                        
                        97,815
                        
                        
                        
                        -
                        
                        
                        
                        97,815Earnings
      before minority interests and income taxes
                        
                        
                        155,568
                        
                        
                        
                        -
                        
                        
                        
                        155,568Minority
      interests
                        
                        
                        (79,339
                        )
                        
                        
                        -
                        
                        
                        
                        (79,339
                        )Provision
      for income taxes
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Net
      earnings
                        
                        $
                        76,229
                        
                        
                        $
                        -
                        
                        
                        $
                        76,229Earnings
      per shareBasic
                        
                        $
                        0.00
                        
                        
                        $
                        0.0008
                        
                        
                        $
                        0.0008Diluted
                        
                        $
                        0.00
                        
                        
                        $
                        0.0008
                        
                        
                        $
                        0.0008Weighted
      average number of common shares outstandingBasic
                        
                        
                        N/A
                        
                        
                        
                        89,689,881
                        
                        
                        
                        89,689,881Diluted
                        
                        
                        141,439,213
                        
                        
                        
                        (51,749,332
                        )
                        
                        
                        89,689,881


19





For
      the 9 months ended September 30, 2006Additional
                      
                      
                      
                      
                      
                      Accumulated
                        other
                      
                      
                      TotalPreferred
      stock
                      
                      
                      Common
      stock
                      
                      
                      paid-in
                      
                      
                      Accumulated
                      
                      
                      comprehensive
                      
                      
                      stockholders’Shares
                      
                      
                      Amount
                      
                      
                      Shares
                      
                      
                      Amount
                      
                      
                      capital
                      
                      
                      deficit
                      
                      
                      income
                      
                      
                      equityAs
      Previously Reported
                      
                      
                      1,533,973
                      
                      
                      
                      1,534
                      
                      
                      
                      26,229,180
                      
                      
                      
                      26,261
                      
                      
                      
                      7,534,508
                      
                      
                      
                      (4,940,411
                      )
                      
                      
                      58,947
                      
                      
                      
                      2,680,839Adjustments
                      
                      
                      (1,533,973
                      )
                      
                      
                      (1,534
                      )
                      
                      
                      72,000,000
                      
                      
                      
                      72,000
                      
                      
                      
                      (70,466
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -As
      Restated
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      98,229,180
                      
                      
                      
                      98,261
                      
                      
                      
                      7,464,042
                      
                      
                      
                      (4,940,411
                      )
                      
                      
                      58,947
                      
                      
                      
                      2,680,839





[End
of condensed consolidated financial statements.]


20


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




SAFE
HARBOR STATEMENT




In
addition to historical information, the information included in this Form 10-QSB
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Forward-looking statements involve numerous risks and uncertainties and should
not be relied upon as predictions of future events. Certain such forward-looking
statements can be identified by the use of forward-looking terminology such as
“believes”, “expects”, “may”, “might”, “will”, “should”, “seeks”, “intends”,
“plans”, “pro forma”, “estimates”, or “anticipates” or other variations thereof
or comparable terminology, or by discussions of strategy, plans or intentions.
Such forward-looking statements are necessarily dependent on assumptions, data
or methods that may be incorrect or imprecise and may be incapable of being
realized. The following factors, among others, could cause actual results and
future events to differ materially from those set forth or contemplated in the
forward-looking statements: need for a significant amount of additional capital,
lack of revenues and our ability to generate future revenues, uncertainty of
development and availability of additional content networks, ability to
distribute additional set-top boxes, regulatory issues in the United States and
other countries commercialization and technology difficulties, the results of
financing efforts and the effectiveness of our marketing strategies, changes or
advances made by other in IPTV and internet technologies, general competitive
and economic conditions. Readers are cautioned not to place undue reliance on
forward-looking statements, which reflect our management’s analysis only. We
assume no obligation to update forward-looking statements.




Restatements




The
Company is restating its consolidated financial statements as of September 30,
2006 and for the three and nine month periods ended September 30, 2006 and 2005
in this amendment to the Company’s Quarterly Report on Form 10-Q/A for
the period ended September 30, 2006. 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.




Introductory
Comment




On
September 5, 2006, the Company acquired 49% of Technorient Limited, a Hong Kong
Corporation (“Technorient”), through a reverse merger, with the result that the
stockholders of Technorient became the beneficial owners of approximately 49% of
the Company’s common stock. The transaction was completed pursuant to a Share
Exchange Agreement and was determined through arms-length negotiations between
the Company and Technorient. On May 5, 2009, the Company entered into a
Reformation Agreement with certain of the parties to the Share Exchange
Agreement.




The share
exchange resulted in a change of control whereby, in connection with the share
exchange, the Company issued: (i) an aggregate of 89,689,881 shares of common
stock in exchange for 49% of the issued and outstanding shares of Technorient;
and (ii) an aggregate of 21,629,337 shares of common stock in connection with
certain debt conversions. The 89,689,881 shares were issued in two tranches
pursuant to the terms and conditions of the Share Exchange Agreement and the
Reformation Agreement: (i) 72,000,000 shares of common stock were issued at
closing of the share exchange on September 5, 2006; and (ii) an additional
3,537,977 shares of common stock were issued on December 7, 2007 upon the
effectiveness of and giving effect to the Company’s one-for-five reverse stock
split (which shares would have been equal to 17,689,881 shares on a pre-reverse
split basis). At September 30, 2006, 98,229,180 shares of common stock were
issued and outstanding.




Immediately
subsequent to the acquisition, the Company’s former business operations ceased
and the Company’s operations now represent those of Technorient, which is
physically located in Hong Kong. The transaction resulted in the management of
Technorient having control of the financing and operating decisions of the
combined enterprise after the transaction. The transaction was accounted for as
a reverse acquisition, whereby Technorient is assumed to be the accounting
acquirer.


21




Technorient
has a fiscal year end of December 31 and the Company has a fiscal year end of
June 30. The Company’s year end will be changed to December 31.




Overview




Critical
Accounting Policies




Management’s
discussion and analysis of our financial condition and results of operations are
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosures of contingent assets and
liabilities. On an ongoing basis, management evaluates its estimates, including
those related to impairment of long-lived assets, including finite lived
intangible assets, accrued liabilities and certain expenses. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ
materially from these estimates under different assumptions or
conditions.




Our
significant accounting policies are summarized in Note 2 of our unaudited
financial statements for the year ended December 31, 2005.




Results
of Operations




Comparison
of Nine Months Ended September 30, 2006 vs. Nine Months Ended September 30,
2005




SALES





Nine Months ended
                    September 30, 2006
                  
                  
                  Nine Months ended
                    September 30, 2005New
      and used vehicles
                  
                  $
                  35.9
      M
                  
                  
                  
                  91
                  %
                  
                  $
                  25.7
      M
                  
                  
                  
                  90
                  %Parts
      and service
                  
                  $
                  3.7
      M
                  
                  
                  
                  9
                  %
                  
                  $
                  2.9
      M
                  
                  
                  
                  10
                  %Total
                  
                  $
                  39.6
      M
                  
                  
                  
                  100
                  %
                  
                  $
                  28.6
      M
                  
                  
                  
                  100
                  %





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




Net sales
were approximately $39,600,000 and $28,600,000 for the nine months ended
September 30, 2006 and 2005, respectively. Net sales for the nine months ended
September 30, 2006 increased by $11 million or 38% to $39.6 million, compared
with the same period of 2005. The increase in sales was mainly contributed by
the new and used vehicles trading segment. The increase in new car sales was
fueled by the launch of new models, including the Ferrari F430 and Superamerica
in the second half of 2005.




Increase
in parts and service sales reflects the impact from the additional high-tech 3S
(Sales, Service and Spare parts) centre that was opened in October
2005.




COST
OF SALES




Cost of
sales for nine months ended September 30, 2006 increased to approximately $32
million from approximately $23.8 million for nine months ended September 30,
2005, $8.2 million or 34% increase which was consistent with the increase in
revenues.




GROSS
PROFIT




For the
nine months ended September 30, 2006, gross profit was approximately $7.6
million as compared to approximately $4.8 million for the same period of 2005,
an increase of $2.8 million or 58%. Gross margin was 19.1% for the nine months
ended September 30, 2006, an increase of 2.3% from 16.8% for the same period of
2005.


22


The
increase in gross margin was mainly contributed by the new and used vehicles
trading segment. This was caused by the launch of F430 Challenge, a highly
acclaimed left hand drive racing car, in first half of 2006.




The
fluctuation of the value of Euro had certain positive impact on gross margin on
the parts and service segment as nearly all parts purchase cost were denominated
in Euros while the revenue was denominated in HKD.




SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES




Selling,
general and administrative expenses for the nine months ended September 30, 2006
was approximately $6.6 million or 16.7% of net sales compared to approximately
$4.6 million or 16% of net sales for the same period of 2005. In general, the
approximately $2 million or 43% increase in selling, general and administrative
expenses was primarily due to the growth of revenues and rapid business
expansion that had reflected in our increased marketing expenses, staff cost,
rental expenses and depreciation.




Marketing
expenses were approximately $480,000 for the nine months ended September 30,
2006, as compared to approximately $250,000 for the same period of 2005, an
increase of $230,000 or 92%.




Due to
the inauguration of new 3S centre in October 2005, the staff cost was increased
from approximately $1.5 million for nine months ended September 30, 2005 to
approximately $2.3 million for the same period of 2006, and rent, rate and
building management fee, increased from approximately $0.7 million for nine
months ended September 30, 2005 to approximately $1 million for the same period
of 2006. Depreciation expense increased to approximately $400,000 for the nine
months ended September 30, 2006, compared with depreciation expense of
approximately $110,000 for the same period of 2005 due to the HKD2.1 million new
investments in fixed asset in the new showroom and service centre.




OTHER
EXPENSES/INCOME




Other
expenses for the nine months ended September 30, 2006 increased to approximately
$100,000 as compared with other income of approximately $85,000 for the same
period of 2005. The $185,000 increase was mainly caused by the increased
interest expenses. The interest expense for the nine months ended September 30,
2006 increased by approximately $180,000 to approximately $290,000 from
approximately $110,000 for the same period of 2005. The funds for which the
increased interest expense was incurred were used for working capital purposes,
as well as new investment in fixed assets, to support the expansion of our
business.




MINORITY
INTERESTS




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




NET
PROFIT




Net
profit for the nine months ended September 30, 2006 increased by approximately
$307,000 to a net profit of approximately $421,000 from approximately $114,000
for the same period of 2005 due to the factors discussed above.




Results
of operations for the three months ended September 30, 2006 as compared to the
three months ended September 30, 2005.




SALES





Three Months ended
                    September 30,2006
                  
                  
                  Three Months ended
                    September30, 2005New and used vehicles
                  
                  $
                  13.3 M
                  
                  
                  
                  90
                  %
                  
                  $
                  8.0 M
                  
                  
                  
                  88
                  %Parts
      and service
                  
                  $
                  1.4
      M
                  
                  
                  
                  10
                  %
                  
                  $
                  1.1
      M
                  
                  
                  
                  12
                  %Total
                  
                  $
                  14.7
      M
                  
                  
                  
                  100
                  %
                  
                  $
                  9.1
      M
                  
                  
                  
                  100
                  %


23





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




Net sales
were approximately $14,700,000 and $9,100,000 for the three months ended
September 30, 2006 and 2005, respectively. Net sales for the three months ended
September 30, 2006 increased by $5.6 million or 62% to $14.7 million, compared
with the same period of 2005. The increase in sales was mainly contributed by
the new and used vehicles trading segment.




Increase
in parts and service sales reflects the impact from the additional high-tech 3S
(Sales, Service and Spare parts) centre that was inaugurated in October
2005.




COST
OF SALES




Cost of
sales for three months ended September 30, 2006 increased to approximately $11.8
million from approximately $7.2 million for three months ended September 30,
2005, $ 4.6 million or 64% increase which was consistent with the increase in
revenues.




GROSS
PROFIT




For the
three months ended September 30, 2006, gross profit was approximately $2.9
million as compared to approximately $1.8 million for the same period of 2005,
an increase of $1.1 million or 61%. Gross margin was 19.7% for the three months
ended September 30, 2006 that was comparable with the gross margin of 19.8% for
the same period of 2005.




SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES




Selling,
general and administrative expenses for the three months ended September 30,
2006 was approximately $2.4 million or 16.3% of net sales compared to
approximately $1.8 million or 19.8% of net sales for the same period of 2005. In
general, the approximately $0.6 million or 33% increase in selling, general and
administrative expenses was primarily due to the growth of revenues and rapid
business expansion that had reflected in our increased marketing expenses, staff
cost, rental expenses and depreciation.




Marketing
expenses were approximately $261,000 for the three months ended September 30,
2006, as compared to approximately $129,000 for the same period of 2005, an
increase of $132,000 or 102%.




Due to
the inauguration of new 3S centre in October 2005, the staff cost was increased
from approximately $500,000 for three months ended September 30, 2005 to
approximately $790,000 for the same period of 2006, and rent, rate and building
management fee, increased from approximately $280,000 for three months ended
September 30, 2005 to approximately $350,000 for the same period of 2006.
Depreciation expense increased to approximately $150,000 for the three months
ended September 30, 2006, compared with depreciation expense of approximately
$30,000 for the same period of 2005.




OTHER
EXPENSES/INCOME




Other
expenses for the three months ended September 30, 2006 increased to
approximately $80,000 as compared with other income of approximately $98,000 for
the same period of 2005. The increase of $178,000 was mainly caused by the
increased interest expenses and share of the loss from associate. The interest
expense for the three months ended September 30, 2006 increased by approximately
$81,000 to approximately $113,000 from approximately $32,000 for the same period
of 2005. The Company's share of the loss of approximately $34,000 was
from the result of associate for three months ended September 30, 2006 as
compared to the share of the gain of approximately $70,000 for the same period
of 2005, an increase of 104,000.




MINORITY
INTERESTS




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


24


NET
PROFIT




Net
profit for the three months ended September 30, 2006 increased by approximately
$93,000 to a net profit of approximately $169,000 from approximately $76,000 for
the same period of 2005 due to the factors discussed above.




LIQUIDITY AND CAPITAL
RESOURCES




OPERATING
- Our operations generated cash resources of approximately $1,871,000 for the
nine months ended September 30, 2006, as compared to a negative operating cash
flow of approximately $28,000 for the nine months ended September 30, 2005,
primarily as a net result of the following:




·
            For
      the nine months ended September 30, 2006, cash flow provided by sales
      increased by approximately $1,116,000 to approximately $1,330,000. The
      increase was primarily as a result of the increase in
    sales.




·
            For
      the nine months ended September 30, 2006, inventory increased by
      approximately $3.6 million. The increase was consistent with our business
      growth especially for car trading
segment.




·
            For
      the nine months ended September 30, 2006, the increase or decrease of
      various current operating assets and liabilities, included the
      aforementioned items, resulted in an aggregate increase of cash inflow
      from operations of approximately
$540,000.




INVESTING
- During the nine months ended September 30, 2006, we expended net cash of
approximately $3,400,000 in the investing activities, including approximately
$2,600,000 advances to group companies and associates. For the nine months ended
September 30, 2005, we utilized approximately $2,000,000 in investing
activities, mainly included approximately $1,800,000 advances to group companies
and associates.




FINANCING
- During the nine months ended September 30, 2006, we made new net drawdown
amounting to approximately $1,300,000 from banks. For the nine months ended
September 30, 2005, the Company made new net drawdown amounting to approximately
$1,500,000 from banks.




WORKING
CAPITAL - Current assets exceeded current liabilities at September 30, 2006 by
approximately $1,340,000, an increase of $650,000 from December 31, 2005. The
ratio of our current assets to our current liabilities was 1.08 to 1 at
September 30, 2006, 1.05 to 1 at December 31, 2005. At September 30,
2006, our current assets of approximately $17.3 million
included approximately $8.6 million inventory that was funded by the
operating cash flow and trade finance facilities. Our current liabilities of
approximately $15.9 million included approximately $9.1 million of 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 $9.1 million, which deposits are
included in “other current liabilities” of the Company as at September 30,
2006.




ITEM
3.  Controls And Procedures




NOTE:
This Item 3. 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.


25


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
September 30, 2006.  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 September 30,
2006, 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.




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.


26


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 September 30, 2006. 
Accordingly, our management has concluded that our internal control over
financial reporting and our disclosure controls and procedures were not
effective as of September 30, 2006 to provide reasonable assurance that
information required to be disclosed by us in the reports that we file under the
Exchange Act is recorded, processed, and summarized within the appropriate
periods.




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




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




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


27


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 September 30, 2006. 
Accordingly, our management has concluded that our internal control over
financial reporting and that our disclosure controls and procedures were not
effective as of September 30, 2006 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
2.  Unregistered Sales of Equity Securities and Use of
Proceeds




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




On September 5, 2006, pursuant to the
Amended Exchange Agreement and after all of the conditions precedent to closing
were satisfied, Corich and Mr. Adamczyk, as shareholders of Technorient,
transferred 49% of the outstanding capital stock of Technorient on a fully
diluted basis to the Company in exchange for the 972,728 Series A Preferred
Shares. As a result of the Exchange, the Company became a 49% shareholder of
Technorient on a fully-diluted basis. In connection with the Exchange, the
Company issued: (i) an aggregate of 972,728 Series A Preferred Shares to the
Sellers (in exchange for 49% of the issued and outstanding shares of
Technorient) and OFS; (ii) 561,245 Series A Preferred Shares (the “HEL Shares”)
to Happy Emerald Limited, a British Virgin Islands company (“HEL”), for
consulting services to be provided to Technorient after the Exchange; and (iii)
an aggregate of 21,629,337 shares of common stock in connection with certain
conversions of outstanding debt. The Company believes that all recipients of
shares in the Exchange were accredited investors. The issuance of the securities
in the Exchange was exempt from registration under the Securities Act of 1933,
as a transaction not involving a public offering under Section 4(2). After the
closing of the Exchange, the Company’s main business became its 49% ownership
interest in Technorient.


28


As discussed in the Explanatory Note at
the beginning of this Report and as previously disclosed in the Company’s
Current Report on Form 8-K, as filed with the SEC on May 11, 2009, the Company
later determined that it was never authorized to issue any shares of preferred
stock.  As a result, on May 5, 2009, we entered into a reformation
(“Reformation”) of the Amended Exchange Agreement pursuant to which the parties
agreed that the 17,937,977 shares of common stock (on a post-Reverse Stock Split
basis) underlying the Series A Preferred Shares issued to Corich and Mr.
Adamczyk were agreed to have been issued in lieu of the Series A Preferred
Shares themselves.  Pursuant to the Reformation, the parties agreed that an
aggregate of 14,400,000 shares of our common stock (on a post-Reverse Stock
Split basis) were deemed to have been issued on the closing of the Exchange, and
that upon the effectiveness of and giving effect to the Reverse Stock Split, an
aggregate of an additional 3,537,977 (on a post-Reverse Stock Split basis)
shares of common stock were deemed to have been issued.  For a more
detailed discussion of the Reformation, please refer to the Explanatory Note at
the beginning of this Report and the Company’s Current Report on Form 8-K, as
filed with the SEC on May 11, 2009.




The
Company was previously engaged in litigation regarding the HEL Shares (the
“Federal Court Action”).  On March 1, 2010, we settled the Federal Court
Action.  Under the terms of the settlement, the defendants agreed to return
to us for cancellation all of the HEL Shares, including all shares of common
stock that were converted therefrom.  For a more detailed discussion of the
Federal Court Action and the settlement, please refer to the Explanatory Note at
the beginning of this Report and the Company’s Current Report on Form 8-K, as
filed with the SEC on March 5, 2010.




ITEM
6. Exhibits




Exhibit No.
                    
                    Description31.1
                    
                    Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act31.2
                    
                    Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act32.1
                    
                    Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley
Act


29


SIGNATURES




Pursuant to the requirements of
Section 13 or 15(d) 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. (FORMERLY XACT AID,
    INC.)(Registrant)Date:
      May 28, 2010
                By:
                /s/ Richard Man Fai
  LEERichard
      Man Fai LEE
                  Chief
      Executive Officer and
Director




Date:
      May 28, 2010
                    By:
                    /s/ Joseph Tik Tung
    WONGJoseph
      Tik Tung WONG
                      Chief
      Financial Officer, Treasurer and
Secretary


30