UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q




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




For the
quarterly period ended: March 31, 2010




or




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




For the
transition period from ______________ to ______________




Commission
File No. 333-120807




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC.


(Exact
name of Registrant as specified in its charter)





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




10/F,
Wo Kee Hong Building


585-609
Castle Peak Road


Kwai Chung, N.T. Hong
Kong


(Address
of principal executive offices)




(852)
2954-2469


(Registrant’s
telephone number, including area code)





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




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   ̈No   ̈





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





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




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





The
number of shares of Common Stock, $0.005 par value, outstanding as of the close
of business on May 17, 2010 was 24,534,491.








CHINA
PREMIUM LIFESTYLE ENTERPRISE, INC.




FORM
10-Q




FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2010




TABLE
OF CONTENTS





PagePART
      I: FINANCIAL INFORMATIONItem
      1.
                    Financial
      Statements
                    4Item
      2.
                    Management’s
      Discussion and Analysis of Financial Condition and Results
      of Operations
                    22Item
      3.
                    Quantitative
      and Qualitative Disclosures about Market Risk
                    29Item 4.
                    Controls
      and Procedures
                    29PART
      II: OTHER INFORMATIONItem 1.
                    Legal
      Proceedings
                    30Item 1A.
                    Risk
      Factors
                    31Item
      2.
                    Unregistered
      Sales of Equity Securities and Use of Proceeds
                    31Item
      3.
                    Defaults
      Upon Senior Securities
                    31Item
      4.
                    (Removed
      and Reserved)
                    31Item
      5.
                    Other
      information
                    31Item
      6.
                    Exhibits
                    32SIGNATURES
                    33




2





Explanatory
Note





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


3


PART
I:  FINANCIAL INFORMATION




Item
1.   Financial Statements.




CHINA
PREMIUM LIFESTYLE ENTERPRISE, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)





March 31,
                  
                  
                  December 31,2010
                  
                  
                  2009(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                  
                  $
                  6,759,226
                  
                  
                  $
                  3,982,214Restricted
      cash
                  
                  
                  4,394,574
                  
                  
                  
                  4,399,054Trade
      receivables, net of provision
                  
                  
                  1,936,761
                  
                  
                  
                  5,496,182Inventory,
      net
                  
                  
                  21,241,609
                  
                  
                  
                  18,124,145Prepayments
                  
                  
                  297,613
                  
                  
                  
                  282,631Other
      current assets
                  
                  
                  4,678,817
                  
                  
                  
                  4,161,493Amounts
      due from affiliates
                  
                  
                  11,128,791
                  
                  
                  
                  12,349,734Total
      current assets
                  
                  
                  50,437,391
                  
                  
                  
                  48,795,453Property
      and equipment, net
                  
                  
                  4,057,023
                  
                  
                  
                  4,378,155Goodwill
                  
                  
                  39,657
                  
                  
                  
                  39,700TOTAL
      ASSETS
                  
                  $
                  54,534,071
                  
                  
                  $
                  53,213,308LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Short-term
      borrowings
                  
                  $
                  10,936,138
                  
                  
                  $
                  11,208,645Bills
      payable
                  
                  
                  1,471,434
                  
                  
                  
                  1,256,939Trade
      payables
                  
                  
                  3,708,923
                  
                  
                  
                  3,712,429Deposits
      received
                  
                  
                  23,772,446
                  
                  
                  
                  24,313,027Other
      current liabilities
                  
                  
                  6,544,936
                  
                  
                  
                  4,696,114Amounts
      due to affiliates
                  
                  
                  4,199,238
                  
                  
                  
                  4,177,612Total
      current liabilities
                  
                  
                  50,633,115
                  
                  
                  
                  49,364,766Long-term
      borrowing
                  
                  
                  804,211
                  
                  
                  
                  933,121TOTAL
      LIABILITIES
                  
                  
                  51,437,326
                  
                  
                  
                  50,297,887Commitments
      and ContingenciesStockholders'
      equityCommon
      stockAuthorized:
      100,000,000 common stock, par value $0.005Issued
      and outstanding: 24,534,491 shares as at March 31, 2010; (23,323,860
      shares as at December 31, 2009)
                  
                  
                  122,672
                  
                  
                  
                  116,619Additional
      paid-in-capital
                  
                  
                  4,113,055
                  
                  
                  
                  4,119,108Accumulated
      other comprehensive income
                  
                  
                  248,142
                  
                  
                  
                  244,371Accumulated
      deficit
                  
                  
                  (6,483,411
                  )
                  
                  
                  (6,428,091
                  )TOTAL
      CHINA PREMIUM LIFESTYLE ENTERPRISE, INC.STOCKHOLDERS’ EQUITY
                  
                  
                  (1,999,542
                  )
                  
                  
                  (1,947,993
                  )Noncontrolling
      interests
                  
                  
                  5,096,287
                  
                  
                  
                  4,863,414TOTAL
      EQUITY
                  
                  
                  3,096,745
                  
                  
                  
                  2,915,421TOTAL
      LIABILITIES AND EQUITY
                  
                  $
                  54,534,071
                  
                  
                  $
                  53,213,308





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


4


CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)





Three months ended
                  March 31,2010
                
                
                2009Sales:New
      and used vehicles
                
                $
                21,644,308
                
                
                $
                14,722,090Parts
      and services and others
                
                
                2,379,545
                
                
                
                1,283,798Fashion
      apparel and accessories
                
                
                98
                
                
                
                422,181Net
      sales
                
                
                24,023,951
                
                
                
                16,428,069Cost
      of sales:New
      and used vehicles
                
                
                (19,928,366
                )
                
                
                (14,076,177
                )Parts
      and services and others
                
                
                (185,258
                )
                
                
                (185,807
                )Fashion
      apparel and accessories
                
                
                (582
                )
                
                
                (412,404
                )Total
      cost of sales
                
                
                (20,114,206
                )
                
                
                (14,674,388
                )Gross
      profit:New
      and used vehicles
                
                
                1,715,942
                
                
                
                645,913Parts
      and services and others
                
                
                2,194,287
                
                
                
                1,097,991Fashion
      apparel and accessories
                
                
                (484
                )
                
                
                9,777Total
      gross profit
                
                
                3,909,745
                
                
                
                1,753,681Selling,
      general and administrative expenses
                
                
                (4,279,437
                )
                
                
                (4,670,091
                )Operating
      loss
                
                
                (369,692
                )
                
                
                (2,916,410
                )Other
      income (expenses)Interest
      expenses and other finance costs
                
                
                (209,415
                )
                
                
                (191,056
                )Other
      income
                
                
                741,043
                
                
                
                426,678Total
      other income (expenses)
                
                
                531,628
                
                
                
                235,622Earnings
      / (loss) before income taxes
                
                
                161,936
                
                
                
                (2,680,788
                )Provision
      for income taxes
                
                
                9,162
                
                
                
                -Net
      earnings / (loss) including noncontrolling interests
                
                
                171,098
                
                
                
                (2,680,788
                )Net
      earnings / (loss) attributable to:China
      Premium Lifestyle Enterprise, Inc common stockholders
                
                
                (55,320
                )
                
                
                (1,622,151
                )Noncontrolling
      interests
                
                
                226,418
                
                
                
                (1,058,637
                )$
                171,098
                
                
                $
                (2,680,788
                )Loss
      per share of common stock attributable to China Premium Lifestyle
      Enterprise, Inc common stockholdersBasic
                
                $
                (0.0023
                )
                
                $
                (0.0695
                )Diluted
                
                $
                (0.0023
                )
                
                $
                (0.0695
                )Weighted
      average number of shares of common stock outstandingBasic
                
                
                23,731,938
                
                
                
                23,323,860Diluted
                
                
                23,731,938
                
                
                
                23,323,860





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


5


CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)





Three months ended
                    March 31,2010
                  
                  
                  2009Operating
      activities:Net
      earnings / (loss) including noncontrolling interests
                  
                  $
                  171,098
                  
                  
                  $
                  (2,680,788
                  )Adjustments
      to reconcile net loss to net cash provided by
      operating activitiesDepreciation
      and amortization
                  
                  
                  361,182
                  
                  
                  
                  268,393Provision
      for bad debts written back
                  
                  
                  -
                  
                  
                  
                  (1,014
                  )Provision
      for inventory
                  
                  
                  -
                  
                  
                  
                  38,040Other
      non-cash items
                  
                  
                  14,950
                  
                  
                  
                  (2,651
                  )Changes
      in operating assets and liabilities:Trade
      receivables
                  
                  
                  3,559,421
                  
                  
                  
                  9,310,661Other
      current assets and prepayments
                  
                  
                  (532,306
                  )
                  
                  
                  (365,906
                  )Inventory
                  
                  
                  (3,117,464
                  )
                  
                  
                  (7,473,900
                  )Trade
      payables
                  
                  
                  (3,506
                  )
                  
                  
                  (389,254
                  )Other
      current liabilities and deposits received
                  
                  
                  1,308,241
                  
                  
                  
                  (1,825,930
                  )Net
      cash provided by / (used in) operating activities
                  
                  
                  1,761,616
                  
                  
                  
                  (3,122,349
                  )Investing
      activities:Purchases
      of property and equipment
                  
                  
                  (44,731
                  )
                  
                  
                  (258,581
                  )Decrease
      in restricted cash
                  
                  
                  4,480
                  
                  
                  
                  (9,297
                  )Net
      cash used in investing activities
                  
                  
                  (40,251
                  )
                  
                  
                  (267,878
                  )Financing
      activities:Advances
      from affiliates
                  
                  
                  1,242,569
                  
                  
                  
                  1,298,724Decrease
      in borrowings and bills payable
                  
                  
                  (186,922
                  )
                  
                  
                  (655,187
                  )Net
      cash provided by financing activities
                  
                  
                  1,055,647
                  
                  
                  
                  643,537Increase
      / (decrease) in cash and cash equivalents
                  
                  
                  2,777,012
                  
                  
                  
                  (2,746,690
                  )Cash
      and cash equivalents at beginning of the period
                  
                  
                  3,982,214
                  
                  
                  
                  5,827,132Cash
      and cash equivalents at end of the period
                  
                  $
                  6,759,226
                  
                  
                  $
                  3,080,442Supplemental
      disclosure of cash flows information:Cash
      paid for:Interest
                  
                  $
                  209,415
                  
                  
                  $
                  191,056Income
      taxes
                  
                  
                  -
                  
                  
                  
                  -





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




6




CHINA PREMIUM LIFESTYLE
ENTERPRISE, INC. AND SUBSIDIARIES





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





NOTE
1.  SUMMARY OF PRINCIPAL ACCOUNTING POLICIES





Basis
of presentation





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





The
condensed consolidated financial statements are unaudited and, in our opinion,
include all adjustments, consisting of normal recurring adjustments and accruals
necessary for a fair representation of our condensed consolidated balance
sheets, operating results, and cash flows for the periods presented. Operating
results for the periods presented are not necessarily indicative of the results
that may be expected for 2010. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted in accordance with the rules and regulations of the
Securities and Exchange Commission (the “SEC”). The condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and accompany notes included in the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2009.





Use
of estimates





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





Earnings
(loss) per share





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


7





Segment
reporting





The
Company determines and classifies its operating segments in accordance with
Accounting Standard Codification (“ASC”) 280 Segment Reporting (“ASC
280”).  The Company identifies and classifies its operating segments
based on the nature of the products and services with similar economic
characteristics.  The Company’s reportable segments are (i) motor
vehicles retailing, which includes sales of new and used vehicles and provision
of vehicle maintenance and repair services; and (ii) sales of vehicle parts and
fashion apparel retailing, which includes sales of fashion apparel and
accessories.




Fair
value of financial instruments





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





ASC 820
Fair Value Measurements and Disclosures (“ASC 820”) defines fair value as the
price that would be received from selling an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. When determining the fair value measurements for assets and
liabilities required to be recorded at fair value, the Company considers the
principal or most advantageous market in which the Company would transact and
consider assumptions that market participants would use when pricing the asset
or liability, such as inherent risk, transfer restrictions, and risk of
nonperformance. ASC 820 establishes a valuation hierarchy for disclosure of the
inputs to valuation used to measure fair value. This hierarchy prioritizes the
inputs into three broad levels as follows:




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




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




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




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





Reclassifications





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


8


NOTE
2.  CONCENTRATION OF RISK





Concentration
of supplier risk





The
Company relies on supplies from numerous vendors.  For the three
months ended March 31, 2010 and 2009, the Company had two vendors that each
accounted for more than 10% of total supply purchases. If any of the vendors
terminate their relationships with the Company or if the Company’s supply from
the vendors is interrupted or terminated for any reason, we may not have
sufficient time to replace the supply of products from the remaining vendors.
Any such interruption would negatively impact our ability to sell and distribute
our products. However, the suppliers’ concentration of credit risk does not pose
any effect to the concentration of credit risk with respect to trade payables as
the Company made the purchases through facilities provided by banks and
financial institutions.





Concentration
of risk due to geographic location





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





NOTE
3.  RECENT ACCOUNTING PRONOUNCEMENTS





(a)
Recent accounting pronouncements adopted




(i)
            In
      June 2009, the FASB issued Statement No. 167, “Amendments to FASB
      Interpretation No. 46(R)”. Statement No. 167 amends FASB
      Interpretation No. 46 (“FIN 46”) (revised December 2003),
      “Consolidation of Variable Interest entities” (“FIN 46R”) to require an
      analysis to determine whether a variable interest gives the entity a
      controlling financial interest in a variable interest entity. This
      statement requires an ongoing reassessment and eliminates the quantitative
      approach previously required for determining whether an entity is the
      primary beneficiary. Statement No. 167 is effective for our fiscal year
      beginning January 1, 2010. The Company adopted Statement No. 167 on
      January 1, 2010 and the adoption did not have a material impact on its
      financial position, cash flows and results of
  operations.





(ii)
            In
      June 2009, the FASB issued Statement No. 166, “Accounting for
      Transfers of Financial Assets”. Statement No. 166 removes the concept of a
      qualifying special-purpose entity from Statement No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities” and removes the exception from applying FIN 46R. This
      statement also clarifies the requirements for isolation and limitations on
      portions of financial assets that are eligible for sale accounting.
      Statement No. 166 is effective for our fiscal year beginning
      January 1, 2010.  The Company adopted Statement No. 166 on
      January 1, 2010 and the adoption did not have a material impact on its
      financial position, cash flows and results of
  operations.





(iii)
            In
      August 2009, the FASB issued ASU No. 2009-05, Measuring
      Liabilities at Fair Value, which provides additional guidance on how
      companies should measure liabilities at fair value under ASC 820. The ASU
      clarifies that the quoted price for an identical liability should be used.
      However, if such information is not available, an entity may use, the
      quoted price of an identical liability when traded as an asset, quoted
      prices for similar liabilities or similar liabilities traded as assets, or
      another valuation technique (such as the market or income approach). The
      ASU also indicates that the fair value of a liability is not adjusted to
      reflect the impact of contractual restrictions that prevent its transfer
      and indicates circumstances in which quoted prices for an identical
      liability or quoted price for an identical liability traded as an asset
      may be considered level 1 fair value measurements.  For the
      Company, this ASU is effective October 1, 2009.  The
      Company adopted ASU No. 2009-05 on January 1, 2010 and the adoption did
      not have a material impact on its financial position, cash flows and
      results of operations.


9





(iv)
            In
      September 2009, the FASB issued Accounting Standards Update (“ASU”)
      No. 2009-12, Investments in Certain
      Entities That Calculate Net Asset Value per Share (or its
      Equivalent) (“ASU 2009-12”) which amends FASB ASC Topic Fair Value Measurements and
      Disclosures. ASU 2009-12 provides additional guidance on estimating
      the fair value of certain alternative investments, such as hedge funds,
      private equity investments and venture capital funds. The updated guidance
      allows the fair value of such investments to be determined using the net
      asset value (“NAV”) as a practical expedient, unless it is probable the
      investment will be sold at a value other than the NAV. In addition, the
      guidance requires disclosures by major category of investment regarding
      the attributes of the investments within the scope of the guidance,
      regardless of whether the fair value of the investment is measured using
      the NAV or other fair value technique. ASU 2009-12 shall be effective for
      interim and annual periods ending after December 15, 2009. Early
      application is permitted in financial statements for earlier interim and
      annual periods that have not been issued. If an entity elects to early
      adopt the measurement amendments in this update, the entity is permitted
      to defer the adoption of the disclosure provisions until periods ending
      after December 15, 2009. The Company adopted ASU 2009-12 on January
      1, 2010 and the adoption did not have a material impact on its financial
      position, cash flows and results of
operations.





(b)  Recent
accounting pronouncements not yet effective





(i)
            In
      October 2009, the FASB issued ASU No. 2009-13,
      Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging
      Issues Task Force, that provides amendments to the criteria for separating
      consideration in multiple-deliverable arrangements. As a result of these
      amendments, multiple-deliverable revenue arrangements will be separated in
      more circumstances than under existing U.S. GAAP. The ASU does this by
      establishing a selling price hierarchy for determining the selling price
      of a deliverable. The selling price used for each deliverable will be
      based on vendor-specific objective evidence if available, third-party
      evidence if vendor-specific objective evidence is not available, or
      estimated selling price if neither vendor-specific objective evidence nor
      third-party evidence is available. A vendor will be required to determine
      its best estimate of selling price in a manner that is consistent with
      that used to determine the price to sell the deliverable on a standalone
      basis. This ASU also eliminates the residual method of allocation and will
      require that arrangement consideration be allocated at the inception of
      the arrangement to all deliverables using the relative selling price
      method, which allocates any discount in the overall arrangement
      proportionally to each deliverable based on its relative selling price.
      Expanded disclosures of qualitative and quantitative information regarding
      application of the multiple-deliverable revenue arrangement guidance are
      also required under the ASU. The ASU does not apply to arrangements for
      which industry specific allocation and measurement guidance exists, such
      as long-term construction contracts and software transactions. For the
      Company, ASU No. 2009-13 is effective beginning January 1, 2011.
      The Company may elect to adopt the provisions prospectively to new or
      materially modified arrangements beginning on the effective date or
      retrospectively for all periods presented. The Company is currently
      evaluating the impact of this standard, but would not expect it to have a
      material impact on the Company’s consolidated results of operations or
      financial condition.





(ii)
            In
      January 2010, the FASB issued ASU No. 2010-6, Improving
      Disclosures About Fair Value Measurements, that amends existing disclosure
      requirements under ASC 820 by adding required disclosures about items
      transferring into and out of levels 1 and 2 in the fair value hierarchy;
      adding separate disclosures about purchase, sales, issuances, and
      settlements relative to level 3 measurements; and clarifying, among other
      things, the existing fair value disclosures about the level of
      disaggregation. For the Company, this ASU is effective for the first
      quarter of 2010, except for the requirement to provide level 3 activity of
      purchases, sales, issuances, and settlements on a gross basis, which is
      effective beginning the first quarter of 2011. Since this standard impacts
      disclosure requirements only, its adoption will not have a material impact
      on the Company’s consolidated results of operations or financial
      condition.


10





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





NOTE
4.  LOSS PER SHARE





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





Three months ended
                    March 31,2010
                  
                  
                  2009Numerator:Net
      loss attributable to China Premium Lifestyle Enterprise, Inc common
      stockholders
                  
                  $
                  (55,320
                  )
                  
                  $
                  (1,622,151
                  )Denominator:Weighted
      average common stock outstanding
                  
                  
                  23,731,938
                  
                  
                  
                  23,323,860Basic
      net loss per share
                  
                  $
                  (0.0023
                  )
                  
                  $
                  (0.0695
                  )Diluted
      net loss per share
                  
                  $
                  (0.0023
                  )
                  
                  $
                  (0.0695
                  )





NOTE
5.  INVENTORY, NET





Inventory
by major categories are summarized as follows:





March 31,
                        
                        
                        December 31,2010
                        
                        
                        2009New
      vehicles
                        
                        $
                        13,126,660
                        
                        
                        $
                        10,237,561Used
      vehicles
                        
                        
                        5,436,544
                        
                        
                        
                        5,127,326Parts,
      accessories and others
                        
                        
                        2,678,405
                        
                        
                        
                        2,759,258$
                        21,241,609
                        
                        
                        $
                        18,124,145





Vehicles
included in inventory of $4,424,541 and $4,956,258 were pledged to secure the
stocking loan and other loans outstanding as of March 31, 2010 and December 31,
2009, respectively (See Note 6).


11





NOTE
6.  BORROWINGS





The
Company’s borrowings are summarized as follows:





March 31,
                  
                  
                  December 31,2010
                  
                  
                  2009Bank
      borrowings
                  
                  $
                  4,725,351
                  
                  
                  $
                  5,081,938Stocking
      loans
                  
                  
                  5,710,246
                  
                  
                  
                  5,374,489Unsecured
      bank borrowings
                  
                  
                  1,304,752
                  
                  
                  
                  1,427,477Other
      loans
                  
                  
                  -
                  
                  
                  
                  257,86211,740,349
                  
                  
                  
                  12,141,766Bank
      borrowings due after one year
                  
                  
                  (804,211
                  )
                  
                  
                  (933,121
                  )Short-term
      borrowings
                  
                  $
                  10,936,138
                  
                  
                  $
                  11,208,645





Vehicles
included in inventory of $4,424,541 and $4,956,258 were pledged to secure the
stocking loan and other loan outstanding as of March 31, 2010 and December 31,
2009, respectively.





NOTE
7.  OTHER CURRENT LIABILITIES





Other
current liabilities by major categories are summarized as follows:





March 31,
                    
                    
                    December 31,2010
                    
                    
                    2009Accruals
                    
                    $
                    810,275
                    
                    
                    $
                    1,150,702Other
      payables
                    
                    
                    5,734,661
                    
                    
                    
                    3,545,412$
                    6,544,936
                    
                    
                    $
                    4,696,114





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





NOTE
8. STOCKHOLDERS’ EQUITY





General





The
Company’s total authorized capital at March 31, 2010, is 100,000,000 shares of
common stock, par value $0.005.  At March 31, 2010,
24,534,491 shares of common stock were issued and outstanding.




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.


12




In
December 2006, 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 us in connection with the Share
Exchange Agreement.  In March 2007, Bern Noble converted the Bern
Noble Shares into 1,210,631 shares of common stock.




The
following actions were also taken:




·
            on
      April 7, 2006, prior management filed an amendment to the Company’s
      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 Company’s
      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, an amendment to the Company’s Articles of Incorporation
      was filed by the Company 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 prior management, including Fred De Luca, Charles Miseroy,
Robert G. Pautsch and Federico Cabo, and certain other defendants.  In
the Federal Court Action, the Company alleged that:




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




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




During
the pendency of the Federal Court Action, the Company’s legal advisors
discovered and advised the Company 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 by the written consent of a majority of the Company’s
      then-stockholders, whereas the Company’s By-Laws require stockholder
      actions by 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 or
effect.  Further, the Company was advised that it had never been
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 it was never
authorized to issue any shares of common stock in excess of 100,000,000
shares.


13


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 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, an aggregate of 14,400,000 shares of the Company’s common
      stock were deemed to have been issued on the closing date of the Share
      Exchange Agreement, and upon the effectiveness of and giving effect to the
      Reverse Stock Split on December 7, 2007, an aggregate of 3,537,977
      additional shares of common stock were deemed to have been issued;
      and




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




On March
1, 2010, the Company settled the Federal Court Action.  Under the
terms of the settlement, the defendants returned to the Company for cancellation
certificates representing 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 the Company in 2006 in connection with the closing of the
Share Exchange Agreement.  The Company is delivering the shares in
nine monthly instalments commencing in March 2010.





NOTE
9.  COMMITMENTS AND CONTINGENT LIABILITIES





Litigation,
Claims and Assessments





This Note
should be read in conjunction with Note 8.




Settlement
of Federal Court Action




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


14


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




In
December 2006, the Company had delivered 65,454 shares of purported preferred
stock to Bern Noble, for consulting services rendered in connection with the
Exchange.  In March 2007, Bern Noble converted such shares into
1,210,631 shares of common stock.  As previously disclosed in the
Company’s Current Report on Form 8-K, filed on May 11, 2009, the Company later
determined that it was never authorized to issue any shares of preferred
stock.




In the
settlement, Bern Noble agreed to return to us for cancellation the 1,210,631
shares of common stock (which were derived from unauthorized shares of preferred
stock), and the Company agreed to issue Bern Noble an equal number of new shares
of common stock in consideration of the services previously rendered to the
Company in 2006.  The Company is delivering the new shares in nine
monthly installments, commencing on March 15, 2010.




Addison-Davis
Litigation




On
or about December 1, 2009, the Company was made aware that it was named as a
co-defendant in a state court action,Addison-Davis Diagnostics, Inc. v.
Edward W. Withrow, III, et al. , California Superior Court, Ventura
County, Case No. 56-2009-00361702-CU-FR-VTA.  The Company was formally
served in the action on April 28, 2010.  In the action, the plaintiff,
which is our former parent company, alleges that the plaintiff’s former
chief executive officer, with the assistance of certain other third parties,
engaged in multiple fraudulent transactions involving the plaintiff and the
plaintiff’s securities between 2004 and 2006.  As a result of such
alleged conduct, the plaintiff alleges that the plaintiff’s former chief
executive officer was able to fraudulently obtain shares of the plaintiff’s
common stock and certain of the plaintiff’s assets.  The plaintiff
alleges that as a result of the alleged conduct, the plaintiff was forced to
seek bankruptcy protection in September, 2006.  The plaintiff named
the Company as a co-defendant in four of the thirteen causes of action in the
complaint (plaintiff’s claims for conversion, constructive trust, unjust
enrichment and accounting).





Although
the Company was formally served with the complaint on April 28, 2010, at a
hearing held on May 14, 2010, the court ruled that certain parties’ motions to
dismiss the complaint were granted.  The court gave plaintiff 30 days
to amend its complaint.  The Company’s obligation to file a response
has been suspended until 30 days after being served with an amended
complaint.  The Company denies any alleged wrongdoing in connection
with the claims asserted in the action and will vigorously defend those
claims.  The Company is unable to evaluate the likelihood of an
outcome, favorable or unfavorable, at this time or to estimate the amount or
range of a possible loss.  However, an adverse result in this
proceeding could have a material adverse effect on the Company’s
operations





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.


15





Operating
Lease Commitments





The
Company leases its dealership facilities, service center facilities and office
space under non-cancellable operating leases in Hong Kong and
PRC.  Minimum future rental payments required under non-cancellable
operating leases in effect as of March 31, 2010 are as follows:





2010
                
                $
                3,563,7232011
                
                
                2,241,6932012
                
                
                1,918,3872013
                
                
                1,821,2982014
                
                
                1,633,996Later
      years
                
                
                5,991,318$
                17,170,415





Rent
expense for the three months ended March 31, 2010 and 2009 was $791,507 and
$1,124,854, respectively.





Employment
Agreements





The
Company maintains employment agreements with its executives which extend through
2010. The agreements provide for a base salary, annual bonus to be determined by
the Board of Directors, termination payments, and other terms and conditions of
employment. In addition, the Company maintains employment agreements with other
key employees with similar terms and conditions.  As of March 31,
2010, committed compensation to the executives and other key employees totaling
approximately $42,058 (December 31, 2009: $261,792) remain in
effect.





NOTE
10. COMPREHENSIVE INCOME INFORMATION





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





China Premium Lifestyle Enterprise, Inc
                    common stockholdersAccumulated deficit
                  
                  
                  Accumulated other
                    comprehensive income
                  
                  
                  Noncontrolling
                    interests
                  
                  
                  TotalAt
      January 1, 2010
                  
                  $
                  (6,428,091
                  )
                  
                  $
                  244,371
                  
                  
                  $
                  4,863,414
                  
                  
                  $
                  (1,320,306
                  )Net
      loss
                  
                  
                  (55,320
                  )
                  
                  
                  -
                  
                  
                  
                  226,418
                  
                  
                  
                  171,098Translation
      adjustments
                  
                  
                  -
                  
                  
                  
                  3,771
                  
                  
                  
                  6,455
                  
                  
                  
                  10,226At
      March 31, 2010
                  
                  $
                  (6,483,411
                  )
                  
                  $
                  248,142
                  
                  
                  $
                  5,096,287
                  
                  
                  $
                  (1,138,982
                  )




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




16





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





Three months ended
                    March 31,2010
                  
                  
                  2009Net
      earnings / (loss) including noncontrolling interest
                  
                  $
                  171,098
                  
                  
                  $
                  (2,680,788
                  )Other
      comprehensive income, net of tax:Translation
      adjustments
                  
                  
                  10,226
                  
                  
                  
                  (1,214
                  )Comprehensive
      earnings / (loss) including noncontrolling interest
                  
                  
                  181,324
                  
                  
                  
                  (2,682,002
                  )Comprehensive
      loss / (income) attributable to noncontrolling interest:Net
      (income) / loss
                  
                  
                  (226,418
                  )
                  
                  
                  1,058,637Translation
      adjustments
                  
                  
                  (6,455
                  )
                  
                  
                  -Comprehensive
      loss attributable to China Premium Lifestyle Enterprise, Inc common
      stockholders
                  
                  $
                  (51,549
                  )
                  
                  $
                  (1,623,365
                  )





NOTE
11. BUSINESS SEGMENTS AND GEOGRAPHICAL INFORMATION





Business
Segments





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





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





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





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





ThreemonthsendedMarch31,2010
                
                Vehicles
                
                
                Fashion
                  Apparel
                
                
                Corporate
                
                
                Elimination
                
                
                ConsolidatedSalesExternal
      sales
                
                $
                24,023,853
                
                
                $
                98
                
                
                $
                -
                
                
                $
                -
                
                
                $
                24,023,951Inter-segment
      sales
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      sales
                
                
                24,023,853
                
                
                $
                98
                
                
                
                -
                
                
                
                -
                
                
                
                24,023,951ResultsOperating
      loss
                
                
                (96,264)
                
                
                
                (2,589)
                
                
                
                (270,839)
                
                
                
                -
                
                
                
                (369,692)Interest
      revenue
                
                
                2,771
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,771Interest
      expense
                
                
                (209,415)
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (209,415)Other
      income
                
                
                737,703
                
                
                
                569
                
                
                
                -
                
                
                
                -
                
                
                
                738,272Earnings
      before income taxes
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                161,936Provision
      for income tax
                
                
                9,162
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                9,162Net
      earnings
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                171,098




17





ThreemonthsendedMarch31,2009
                
                Vehicles
                
                
                Fashion
                  Apparel
                
                
                Corporate
                
                
                Elimination
                
                
                ConsolidatedSalesExternal
      sales
                
                $
                16,005,888
                
                
                $
                422,181
                
                
                $
                -
                
                
                $
                -
                
                
                $
                16,428,069Inter-segment
      sales
                
                
                21,346
                
                
                
                -
                
                
                
                -
                
                
                
                (21,346)
                
                
                
                -Net
      sales
                
                
                16,027,234
                
                
                $
                422,181
                
                
                
                -
                
                
                
                (21,346)
                
                
                
                16,428,069ResultsOperating
      loss
                
                
                (2,142,804)
                
                
                
                (348,604)
                
                
                
                (423,792)
                
                
                
                (1,210)
                
                
                
                (2,916,410)Interest
      revenue
                
                
                12,513
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                12,513Interest
      expense
                
                
                (185,095)
                
                
                
                (5,961)
                
                
                
                -
                
                
                
                -
                
                
                
                (191,056)Other
      income
                
                
                388,053
                
                
                
                26,112
                
                
                
                -
                
                
                
                -
                
                
                
                414,165Loss
      before income taxes
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (2,680,788)Provision
      for income tax
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (2,680,788)





Vehicles
                                          
                                          
                                          Fashion
                                            Apparel
                                          
                                          
                                          Corporate
                                          
                                          
                                          Consolidated2010Total
      assets
                                          
                                          $
                                          54,425,332
                                          
                                          
                                          $
                                          108,022
                                          
                                          
                                          $
                                          717
                                          
                                          
                                          $
                                          54,534,071Depreciation
      and amortization
                                          
                                          
                                          361,182
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          361,182Net
      capital expenditures
                                          
                                          
                                          44,731
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          44,7312009Total
      assets
                                          
                                          $
                                          49,467,298
                                          
                                          
                                          $
                                          1,875,142
                                          
                                          
                                          $
                                          488
                                          
                                          
                                          $
                                          51,342,928Depreciation
      and amortization
                                          
                                          
                                          251,959
                                          
                                          
                                          
                                          16,434
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          268,393Net
      capital expenditures
                                          
                                          
                                          258,581
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          258,581





Geographic
Information:





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


18





NOTE
12.  RELATED PARTY TRANSACTIONS





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





Three months ended
                                March 31,Notes
                              
                              
                              2010
                              
                              
                              2009Sales
      to:-
      Affiliates
                              
                              (a)
                              
                              
                              $
                              7,003
                              
                              
                              $
                              1,430Purchases
      from:-
      Affiliates
                              
                              (a)
                              
                              
                              
                              -
                              
                              
                              
                              -Interest
      received from:-
      Affiliates
                              
                              (b)
                              
                              
                              
                              -
                              
                              
                              
                              154,196Management
      fee paid to:-
      Affiliates
                              
                              (c)
                              
                              
                              
                              90,374
                              
                              
                              
                              103,668Management
      fee received from:-
      Affiliates
                              
                              (c)
                              
                              
                              
                              -
                              
                              
                              
                              46,435Service
      cost charged by:-
      Affiliates
                              
                              (c)
                              
                              
                              
                              -
                              
                              
                              
                              420Rental
      income received from:-
      Affiliates
                              
                              (c)
                              
                              
                              
                              -
                              
                              
                              
                              38,696Rental
      paid to:-
      Affiliate
                              
                              (c)
                              
                              
                              
                              -
                              
                              
                              
                              4,113Building
      management fee paid to:-
      Affiliate
                              
                              (c)
                              
                              
                              
                              -
                              
                              
                              
                              851Warehouse
      expenses paid to:-
      Affiliate
                              
                              (c)
                              
                              
                              
                              -
                              
                              
                              
                              5,553





Notes:





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





(b)
            The
      loan advance to an affiliate is unsecured, interest free (2009: bearing
      interest at 5.5% per annum) and repayable on
  demand.





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


19


NOTE
13. SUBSEQUENT EVENTS





We have
performed an evaluation of subsequent events through May 17, 2010, which
is the date the financial statements were issued.





Restatement





On April
20, 2010, the Company’s management concluded that the Company’s audited
financial statements for the years ended December 31, 2006, 2007 and 2008, and
its unaudited interim financial statements for the periods ended March 31, 2006
through September 30, 2009, should not be relied upon and should be restated
primarily because certain corporate actions taken by the Company’s prior
management and majority shareholders were approved in a manner that contravened
our bylaws and resulted in the invalid issuance of shares of our capital
stock.  These various matters made the financial statements inaccurate
in connection with, among other things, the effect of the share exchange
transaction among the Company, Fred De Luca, Corich Enterprises, Inc., a British
Virgin Islands corporation, Herbert Adamczyk and Technorient Limited, a Hong
Kong corporation, that closed on September 5, 2006.





Upon
further analysis, on May 14, 2010, the Company’s management concluded that
reliance on the Company’s unaudited interim financial statements for the period
ended March 31, 2006 should not have been withdrawn and that no restatements
should be made to the financial statements for such period.  However,
management concluded that certain notes in the Company’s 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,
management concluded that certain notes in the Company’s 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.





Certificates
of Correction to Articles of Incorporation





On April
29, 2010, the Company filed four (4) Certificates of Correction with the Nevada
Secretary of State to correct certain items in its Articles of
Incorporation.  Each Certificate of Correction corrects a separate
filing made with the Nevada Secretary of State.





The first
Certificate of Correction corrects the Certificate of Amendment that was filed
with the Nevada Secretary of State on April 7, 2006.  The Certificate
of Amendment, as originally filed, provided that the total number of shares we
were authorized to issue was 200,000,000 shares, comprised of 100,000,000 shares
of common stock, par value $0.001, and 100,000,000 shares of preferred stock,
par value $0.001.  The Certificate of Amendment purported to amend the
Company’s original Articles of Incorporation, as filed with the Nevada Secretary
of State on April 19, 2004, which provided that the total number of shares the
Company was authorized to issue was 100,000,000 shares of common stock, par
value $0.001.  As discussed in its prior filings with the Securities
and Exchange Commission (the “SEC”), the Company determined that the Certificate
of Amendment was invalid and of no force or effect because the Certificate of
Amendment was approved by a majority of its stockholders acting by written
consent in contravention of Article II, Section 10 of the Company’s By-Laws,
which requires that actions taken by written consent of the stockholders be
unanimous.  As a result, the Company determined that it has never been
authorized to issue any shares of any class or series of preferred
stock.  Based on this determination, the total number of shares that
the Company was authorized to issue, as stated in the Certificate of Amendment,
was inaccurate.  The first Certificate of Correction corrects the
inaccuracy by providing that the total number of shares the Company was
authorized to issue as of April 7, 2006 was 100,000,000 shares of common stock,
par value $0.001.


20







The
second Certificate of Correction corrects the Certificate of Designation that
was filed with the Nevada Secretary of State on August 16, 2006.  The
Certificate of Designation, as originally filed, provided that 2,000,000 shares
of the Company’s purported class of 100,000,000 shares of “blank check”
preferred stock were designated as “Series A Convertible Preferred Stock.” 
As discussed in prior filings with the SEC, the Company determined that the
Certificate of Designation is invalid and of no force and effect because, at the
time of the filing of the Certificate of Designation, the Company’s Articles of
Incorporation did not authorize the issuance of any shares of any class or
series of preferred stock or authorize the Board of Directors to designate the
rights, preferences and privileges of any shares of any purported class of
“blank check” preferred stock.  As a result, the Company determined that
the Certificate of Designation should not have been filed and that the total
number of shares the Company was authorized to issue, as stated in the
Certificate of Designation, was inaccurate.  The second Certificate of
Correction corrects the inaccuracy by providing that the Certificate of
Designation should not have been filed and that the total number of shares the
Company was authorized to issue as of August 16, 2006 was 100,000,000 shares of
common stock, par value $0.001.





The third
Certificate of Correction corrects the Certificate of Amendment that was filed
with the Nevada Secretary of State on December 18, 2006.  The Certificate
of Amendment, as originally filed, provided that the total number of shares the
Company was authorized to issue was 500,000,000 shares, comprised of 400,000,000
shares of common stock, par value $0.001, and 100,000,000 shares of preferred
stock, par value $0.001.  Further, as discussed in prior filings with the
SEC, the Company also determined that the Certificate of Amendment, dated
December 18, 2006, is invalid and of no force or effect because the Certificate
of Amendment was approved by a majority of its stockholders acting by written
consent in contravention of Article II, Section 10 of the Company’s By-Laws,
which requires that actions taken by written consent of the stockholders be
unanimous.  As a result, the Company determined that it has never been
authorized to issue any shares of any class or series of preferred stock or any
shares of common stock in excess of 100,000,000 shares.  Based on that
determination, the total number of shares which the Company was authorized to
issue, as stated in the Certificate of Amendment, dated December 18, 2006, was
inaccurate.  The third Certificate of Correction corrects the inaccuracy by
providing that the total number of shares the Company was authorized to issue as
of December 18, 2006 was 100,000,000 shares of common stock, par value
$0.001.





The
fourth Certificate of Correction corrects the Certificate of Change Pursuant to
NRS 78.209 that was filed with the Nevada Secretary of State on December 7,
2007.  The Certificate of Change, as originally filed: (i)  effected a
reverse stock split pursuant to which each five (5) shares of common stock, par
value $0.001, then outstanding were automatically converted into one (1) share
of common stock, par value $0.005; and (ii) provided that no changes were made
in the number of the Company’s authorized shares.  As a result, the
Certificate of Change incorrectly provided that the total number of shares the
Company was authorized to issue was 500,000,000 shares, comprised of 400,000,000
shares of common stock, par value $0.005, and 100,000,000 shares of preferred
stock, par value $0.001.  As discussed above, the Company determined that
the Certificates of Amendment, dated April 7 and December 18, 2006, were invalid
and of no force or effect and that, as a result, the Company was never
authorized to issue any shares of any class or series of preferred stock or any
shares of common stock in excess of 100,000,000 shares.  Based on that
determination, the total number of shares which the Company was authorized to
issue, as stated in the Certificate of Change, was inaccurate.  However,
the authorization of the reverse stock split and the change of the par value of
the common stock from $0.001 to $0.005 was validly effected by the vote of the
majority of the Company’s stockholders at its Annual Meeting of Stockholders on
December 7, 2007.  The fourth Certificate of Correction corrects the
inaccuracy by providing that the total number of shares the Company is currently
authorized to issue is 100,000,000 shares of common stock, par value
$0.005.





End
of condensed consolidated financial statements.


21


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




FORWARD-LOOKING
STATEMENTS




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




COMPANY
OVERVIEW




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




THE
BUSINESS OF TECHNORIENT




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


22




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




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




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




In October 2007, King Express was
appointed by AgustaWestland as its exclusive distributor for the complete fleet
of AgustaWestland commercial helicopters in Hong Kong and Macau. It also
has the right to sell to the highly strategic Pearl River Delta region of
Southern China on a non-exclusive basis. Currently, the AgustaWestland
helicopters business is still in its preparatory stage with the likely arrival
of the first helicopter anticipated during 2011.




CURRENCY
CONVERSION AND EXCHANGE




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




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


23




CRITICAL
ACCOUNTING POLICIES




In
preparing our financial statements, we make estimates, assumptions and judgments
that can have a significant effect on our revenues, income or loss from
operations, and net income or net loss, as well as on the value of certain
assets on our balance sheet. We believe that there are several accounting
policies that are critical to an understanding of our historical and future
performance as these policies affect the reported amounts of revenues, expenses,
and significant estimates and judgments applied by management. While there are a
number of accounting policies, methods and estimates affecting our
financial statements, the following policies are considered critical. In
addition, you should refer to our accompanying condensed consolidated balance
sheet as of March 31, 2010 and the condensed consolidated statements of
operations for the three months ended March 31, 2010 and 2009, and the
related notes thereto, for further discussion of our accounting
policies.




Trade
receivables and provision for bad debts




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




Inventory,
net




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




Share-based
compensation




We have
adopted ASC 718 “Compensation-Stock Compensation”, for our share-based
compensation. We utilized the modified prospective method approach, pursuant to
which we record compensation for all share-based awards granted based on their
fair value. The estimate of the fair value of the share-based compensation
requires the input of subjective assumptions. Changes in the subjective
assumptions could materially affect the estimate of fair value of share-based
compensation; however, based on an analysis using changes in certain assumptions
that could be reasonably possible in the near term, we believe the effect on the
share-based compensation recognized would not have been
material.


24




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




Revenue
recognition




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




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




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




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




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




Impairment
of long-lived assets




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




Income
taxes




We are
required to estimate income tax provisions and amounts ultimately payable or
recoverable in numerous jurisdictions, including Hong Kong. We account for
income taxes under the provision of ASC 740 “Income Taxes”, resulting in two
components of income tax expenses: current and deferred.  Current income
tax expense approximates taxes to be paid or refunded for the relevant periods.
 Deferred income tax expense results from changes in deferred tax assets
and liabilities between periods.  Deferred income tax assets and
liabilities are computed for differences between the financial statements
carrying amounts and the tax bases of existing assets and liabilities that will
result in taxable or deductible amount in the future, as well as from net
operating loss and tax credit carryforwards, and are measured in accordance with
the enacted tax laws and at the rates applicable in the years in which the
differences are expected to be recovered or settled.  A deferred tax
asset is recognized if it is more likely than not that a benefit will be
realized.  Otherwise, we will record a valuation allowance when the
utilization of the deferred tax asset is uncertain.  Additional timing
differences, future earnings trends and/or tax strategies could warrant a need
for establishing an additional valuation allowance or a
reserve.


25




Contingencies




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




RESULTS
OF OPERATIONS




Results
of operations - comparison of three months ended March 31, 2010 to
three months ended March 31, 2009:




SALES




Threemonthsended
                  March31,2010
                
                
                Threemonthsended
                  March31,2009Total
                  Sales
                
                
                %of
                  TotalSales
                
                
                Total
                  Sales
                
                
                %of
                  TotalSalesSales:New
      vehicles
                
                $
                18,814,600
                
                
                
                78.3
                %
                
                $
                9,682,000
                
                
                
                58.9
                %Used
      vehicles
                
                $
                2,829,700
                
                
                
                11.8
                %
                
                $
                5,040,000
                
                
                
                30.7
                %Parts
      and services and others
                
                $
                2,379,600
                
                
                
                9.9
                %
                
                $
                1,284,000
                
                
                
                7.8
                %Fashion
      Apparel
                
                $
                100
                
                
                
                -
                %
                
                $
                422,000
                
                
                
                2.6
                %Total
                
                $
                24,024,000
                
                
                
                100
                %
                
                $
                16,428,000
                
                
                
                100
                %




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




Net sales
for the three months ended March 31, 2010 increased by approximately
$7,596,000 or 46.2% to approximately $24,024,000, compared with approximately
$16,428,000 for the same period of 2009.  The increase was primarily
attributable to the increased sales from our new vehicle trading
segment.




New
vehicles sales increased approximately $9,133,000 or 94.3% from approximately
$9,682,000 in the first quarter of 2009 to approximately $18,815,000 in the same
period of 2010, while the quantity of new vehicles sold increased 63.2% for the
same period.  Used vehicles sales decreased approximately $2,210,000 or
43.8% from the first quarter of 2009 to approximately $2,830,000 in the same
period of 2010.  The quantity of used vehicles sold decreased by 28%
in  the same period from the 2009 period.  The increase in sales
of new vehicles was mainly attributed to the increase of factory production
in the first quarter of 2010.





Parts and
services sales for the three months ended March 31, 2010 increased by
approximately $1.1 million, or 85.0%, to approximately $2.4
million compared with approximately $1.3 million for the same period of
2009.  The increase in parts and service sales was mainly attributable to
the additional capacity provided by our new 3S centre that became fully
operational in the last quarter of 2009.


26


COST OF
SALES




Cost of
sales for the three months ended March 31, 2010 increased to approximately
$20,114,000 from approximately $14,674,000 for the three months ended March 31,
2009, a $5,440,000 or 37.1% increase, which was relatively consistent with the
increase in Company’s revenues during the same period.





GROSS
PROFIT




Gross
profit margin for the three months ended March 31, 2010 increased by 5.6%
to 16.3% from 10.7% for the same period of 2009.  Gross profit increased by
approximately  $2,156,000 from approximately $1,753,000 in the 2009 period
to approximately $3,910,000 for the three months ended March 31, 2010.
 This increase was mainly attributable to our used vehicles trading segment
and parts and services sales segment that was positively impacted by the
improvement in the economy and the improvement of our service
efficiency.




SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES




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




S,G&A
for the three months ended March 31, 2010 was approximately $4,279,000, compared
to approximately $4,670,000 for the same period of 2009. The approximate
$391,000 increase in S,G&A expenses was primarily due to decreased rental
expenses.





Our rent,
rate and building management fees decreased from approximately $1,195,000 for
the three months ended March 31, 2009 to $851,000 for the same period of
2010.  The decrease in such fees were mainly due to the closing of certain
retail shops of the fashion apparel business.




OTHER
INCOME, NET




Other
income for the three months ended March 31, 2010 increased to approximately
$532,000 compared to approximately $236,000 for the same period of 2009, a total
increase of $296,000. The increase was primarily due to the combination of
increased other operating income offset by increased interest expenses and other
finance costs. The other operating income was  comprised of commission
income, exchange gain and forfeitures of sales deposits.  Such income
increased from $427,000 for the three months ended 2009 to $741,000 for the same
period of 2010 that was mainly due to increased commission income from $62,000
for the three months ended March 31, 2009 to approximately $392,000 for the same
period of 2010. Interest expenses and other finance costs increased from
approximately $191,000 for the three months ended March 31, 2009 to
approximately $209,000 for the same period of 2010. The funds from which our
increased interest expenses were incurred were used for working capital
purposes.





LIQUIDITY
AND CAPITAL RESOURCES




CASH
FLOWS FROM OPERATING ACTIVITIES




Our
operations generated cash resources of approximately $1,762,000 for the
three months ended March 31, 2010, compared to utilizing cash resources of
approximately $3,122,000 for the three months ended March 31, 2009, primarily as
a net result of the following:


27


·
            For
      the three months ended March 31, 2010, cash flow provided by sales net of
      operating expenses increased by approximately $2,925,000 to
      approximately $547,000.  The increase was primarily as a result
      of the increase in sales.




·
            For
      the three months ended March 31, 2010, accounts receivable decreased by
      approximately $3,559,000, primarily due to the collection of account
      receivables relating to the sales recognized in the fourth
      quarter.




·
            For
      the three months ended March 31, 2010, our inventory increased by
      approximately $3,117,000.  The increase was consistent with our
      business growth especially in the car trading
  segment.




·
            For
      the three months ended March 31, 2010, the increase or decrease of various
      current operating assets and liabilities, included in the aforementioned
      items, resulted in an aggregate increase of cash inflow from operations of
      approximately $1,215,000.




CASH
FLOWS FROM INVESTING ACTIVITIES




For the
three months ended March 31, 2010, we expended net cash of approximately $40,000
in investing activities mainly for the acquisition of property and equipment to
support the the growth of our business. For the three months ended March 31,
2009, we utilized approximately $268,000 in investing activities, mainly for
acquisition of property and equipment to support the development of the PRC
motor business.





CASH
FLOWS FROM FINANCING ACTIVITIES




During
the three months ended March 31, 2010, we repaid approximately $187,000 of our
obligations owed on outstanding debt as compared to approximately $655,000 for
the three months ended March 31, 2009.




For the
three months ended March 31, 2010, we received approximately $1,243,000 net
advances from affiliates. For the three months ended March 31, 2009, we received
approximately $1,299,000 net advances from affiliates. The advances from / to
affiliates were made from / to entities that are under common management,
where Mr. Richard Man Fai Lee, the Company’s Chief Executive Officer, is the
common director of the Company and the affiliates. These advances included
interest bearing and non interest bearing portions depending on the nature of
the advances.





WORKING
CAPITAL REQUIREMENTS




Current
liabilities exceeded current assets at March 31, 2010 by approximately
$196,000, a decrease of approximately $373,000 from December 31, 2009. The ratio
of our current assets to our current liabilities was 0.996 to 1 at March
31, 2010 compared to 0.989 to 1 at December 31, 2009. At March
31, 2010, our current assets of approximately $50,437,000 included approximately
$21,242,000 in inventory that was funded by the operating cash flow and trade
finance facilities. Our current liabilities of approximately $50,633,000
included non-refundable customer deposits. Given the exclusive nature and
extremely limited production of Ferrari cars, our customers are willing to place
material deposits in advance in order to secure their new car orders.  This
resulted in customer deposits of approximately $23,772,000.





SEASONALITY




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


28




EFFECT OF
FLUCTUATION IN FOREIGN EXCHANGE RATES




We have no foreign exchange
contracts.  Our financial instruments consist of cash and cash equivalents,
trade receivable and payables, bills payable, other current assets, other
current liabilities, and bank borrowings.  We consider investments in
highly liquid instruments purchased with a remaining maturity of 90 days or less
at the date of purchase to be cash equivalents. However, in order to manage the
foreign exchange risks, we may engage in hedging activities to manage our
financial exposure related to currency exchange fluctuation. In these hedging
activities, we might use fixed-price, forward and option contracts when
feasible.




While our
reporting currency is the U.S. dollar, to date virtually all of our revenues and
costs are denominated in Hong Kong Dollars and a significant portion of our
assets and liabilities is denominated in Hong Kong Dollars. As a result, we are
exposed to foreign exchange risk as our revenues and results of operations may
be impacted by fluctuations in the exchange rate between U.S. Dollars and Hong
Kong Dollars.  If the Hong Kong Dollar depreciates against the U.S. Dollar,
the value of our Hong Kong Dollar revenues and assets as expressed in our U.S.
Dollar financial statements will decline. Thus, our revenues and operating
results may be impacted by exchange rate fluctuations of the Hong Kong Dollar.
While we may choose to do so in the future, the availability and effectiveness
of any hedging transactions may be limited and we may not be able to
successfully hedge our exchange rate risks. Accordingly, we may experience
economic losses and negative impacts on earnings and equity as a result of
foreign exchange rate fluctuations. The effect of foreign exchange rate
fluctuation for the three months ended March 31, 2010 was not material to
us.




OFF-BALANCE
SHEET ARRANGEMENTS




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




Item
3. Quantitative and Qualitative Disclosures about Market Risk.




Not applicable to smaller reporting
companies.




Item
4.   Controls and Procedures




Controls
and Procedures




As of March 31, 2010, we carried out an
evaluation, under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, of the
effectiveness of the design and operation of our “disclosure controls and
procedures,” as such term is defined under Exchange Act Rules 13a-15(e) and
15d-15(e).




Based on this evaluation, our chief
executive officer and chief financial officer concluded that, as of March 31,
2010, such disclosure controls and procedures were effective to ensure that
information required to be disclosed by us in the reports we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the SEC, and accumulated
and communicated to our management, including our chief executive officer and
chief financial officer, as appropriate to allow timely decisions regarding
required disclosure.


29


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.




Changes
in Internal Control Over Financial Reporting




There were no changes in our internal
controls over financial reporting during the quarter ended March 31, 2010 that
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.




PART
II - OTHER INFORMATION




Item
1. Legal Proceedings.





This Item should be read in conjunction
with Notes 8 and 9 to the Company’s Condensed Consolidated Financial Statements
(Unaudited) as of March 31, 2010.





Addison-Davis
Litigation





On or
about December 1, 2009, the Company was made aware that it was named as a
co-defendant in a state court action,Addison-Davis Diagnostics,
Inc. v. Edward W. Withrow, III, et al., California Superior Court,
Ventura County, Case No. 56-2009-00361702-CU-FR-VTA.  The Company was
formally served in the action on April 28, 2010.  In the action, the
plaintiff, which is the Company’s former parent company, alleges that the
plaintiff’s former chief executive officer, with the assistance of certain other
third parties, engaged in multiple fraudulent transactions involving the
plaintiff and the plaintiff’s securities between 2004 and 2006.  As a
result of such alleged conduct, the plaintiff alleges that the plaintiff’s
former chief executive officer was able to fraudulently obtain shares of the
plaintiff’s common stock and certain of the plaintiff’s assets.  The
plaintiff alleges that as a result of the plaintiff’s former chief executive
officer’s alleged conduct, the plaintiff was forced to seek bankruptcy
protection in September 2006.  The plaintiff named the Company as a
co-defendant in four of the thirteen causes of action in the complaint
(plaintiff’s claims for conversion, constructive trust, unjust enrichment and
accounting).





Although
the Company was formally served with the complaint on April 28, 2010, at a
hearing held on May 14, 2010, the court ruled that certain parties’ motions to
dismiss the complaint were granted.  The court gave plaintiff 30 days to
amend its complaint.  The Company’s obligation to file a response has been
suspended until 30 days after being served with an amended complaint.  The
Company denies any alleged wrongdoing in connection with the claims asserted in
the action and will vigorously defend those claims.  The Company is unable
to evaluate the likelihood of an outcome, favorable or unfavorable, to it at
this time or to estimate the amount or range of a possible loss.  However,
an adverse result in this proceeding could have a material adverse effect on the
Company’s operations.





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


30





Item
1A. Risk Factors.




Not
applicable to smaller reporting companies.




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





This Item should be read in conjunction
with Notes 8 and 9 to the consolidated financial statements included in this
Report.





As previously disclosed in our Current
Report on Form 8-K, as filed with the SEC on March 5, 2010, on March 1, 2010, in
connection with the settlement of the Federal Court Action, Bern Noble agreed to
return to us for cancellation 1,210,631 shares of common stock.  We also
agreed to replace the shares with an equal number of new shares of common stock
in consideration of services rendered to us in 2006 in connection with the
closing of the Amended Share Exchange Agreement.  We agreed to deliver the
replacement shares in nine monthly installments.  The shares were
issued in reliance on an exemption from registration pursuant to Section 4(2) of
the Securities Act of 1933, as amended, and Rule 506 of Regulation D
thereunder.





Item
3. Defaults Upon Senior Securities.





None.





Item
4. (Removed and Reserved).





Item
5. Other Information.




Not
applicable.


31


Item
6. Exhibits.





Exhibit
                    No.
                  
                  Description31.1
                  
                  Certification
      of Chief Executive Officer pursuant to Rule 15D-15 of the Securities
      Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.31.2
                  
                  Certification
      of the Chief Financial Officer pursuant to Rule 15D-15 of the Securities
      Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.32.1
                  
                  Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed
      herewith.


32


SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





CHINA
      PREMIUM LIFESTYLE ENTERPRISE, INC.,a
      Nevada corporationDate:
      May 17, 2010
                  
                  By:
                  /s/
      Richard Man Fai LeeRichard
      Man Fai LeeChief
      Executive OfficerDate:
      May 17, 2010
                  
                  By:
                  /s/
      Joseph Tik Tung WongJoseph
      Tik Tung WongChief
      Financial Officer, Treasurer and
Secretary


33