Shiner International, Inc. - FORM 10-Q

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EX-31.2 - EXHIBIT 31.2 - Shiner International, Inc.	v231723_ex31-2.htm
EX-32.1 - EXHIBIT 32.1 - Shiner International, Inc.	v231723_ex32-1.htm
EX-32.2 - EXHIBIT 32.2 - Shiner International, Inc.	v231723_ex32-2.htm
EX-31.1 - EXHIBIT 31.1 - Shiner International, Inc.	v231723_ex31-1.htm
EXCEL - IDEA: XBRL DOCUMENT - Shiner International, Inc.	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x	Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2011

o	Transition report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______ to _______.

001-33960

(Commission file number)

SHINER INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Nevada	98-0507398
(State or other jurisdiction	(IRS Employer
of incorporation or organization)	Identification No.)

19/F, Didu Building, Pearl River Plaza,

No. 2 North Longkun Road

Haikou, Hainan Province

China 570125

(Address of principal executive offices)

011-86-898-68581104

(Issuer’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Yes x No o

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

Yes x No o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

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

Yes o No x

On August 9, 2011, 27,541,491 shares of the registrant's common stock were outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	(Removed and Reserved)	34
Item 5.	Other Information	35
Item 6.	Exhibits

SHINER INDUSTRIAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

	June 30,			December 31,
	2011			2010
	(unaudited)
ASSETS

CURRENT ASSETS:
Cash & cash equivalents	$	3,530,083		$	8,622,035
Accounts receivable, net of allowance for doubtful accounts of $242,166 and $262,502		7,378,067			10,005,572
Advances to suppliers		9,549,621			3,462,074
Notes receivable		16,055			26,056
Inventory, net		10,192,183			7,355,601
Prepaid expenses & other current assets		581,558			610,066

Total current assets		31,247,567			30,081,404

Property and equipment, net		27,853,758			19,399,717
Construction in progress		8,830,698			4,017,721
Advance for the purchase of equipment		700,340			1,356,989
VAT receivable		1,565,928			-
Intangible assets, net		5,154,374			1,061,855

TOTAL ASSETS	$	75,352,665		$	55,917,686

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	5,468,823		$	5,350,064
Other payables		8,197,807			4,655,300
Unearned revenue		1,758,858			295,609
Accrued payroll		158,421			141,884
Short-term loans		7,735,000			6,826,500

Total current liabilities		23,318,909			17,269,357

Long-term loans		9,142,770			-

Total Liabilities		32,461,679			17,269,357

Commitments and contingencies

EQUITY:
Shiner stockholders' equity:
Common stock, par value $0.001; 75,000,000 shares authorized, 27,603,336 shares issued and 27,541,491 shares outstanding at June 30, 2011 and December 31, 2010		27,603			27,603
Additional paid-in capital		14,322,874			14,321,484
Treasury stock (61,845 shares)		(58,036	)		(58,036	)
Other comprehensive income		4,763,182			4,060,637
Statutory reserve		3,145,153			2,905,861
Retained earnings		18,918,637			17,353,554
Total Shiner stockholders' equity		41,119,413			38,611,103
Noncontrolling interest		1,771,573			37,226
Total equity		42,890,986			38,648,329

TOTAL LIABILITIES AND EQUITY	$	75,352,665		$	55,917,686

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

SHINER INDUSTRIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER

COMPREHENSIVE INCOME (LOSS)

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(unaudited)			(unaudited)			(unaudited)			(unaudited)

Net Revenue	$	17,867,227		$	13,213,898		$	33,774,072		$	24,800,617

Cost of good sold		15,347,733			10,971,574			28,887,471			20,671,040
Gross profit		2,519,494			2,242,324			4,886,601			4,129,577

Operating expenses
Selling		548,952			463,895			993,628			867,665
General and administrative		666,360			786,217			1,383,399			1,227,589
Total operating expenses		1,215,312			1,250,112			2,377,027			2,095,254

Income from operations		1,304,182			992,212			2,509,574			2,034,323

Non-operating income (expense):
Other income, net		(122,778	)		178,420			71,833			264,611
Interest income		2,191			3,630			8,464			5,916
Interest expense		(271,329	)		(54,515	)		(414,280	)		(97,344	)
Exchange loss		116,508			(22,259	)		60,713			(29,720	)
Total non-operating income (expense)		(275,408	)		105,276			(273,270	)		143,463

Income before income tax		1,028,774			1,097,488			2,236,304			2,177,786

Income tax expense		222,402			158,329			433,238			316,534

Net income		806,372			939,159			1,803,066			1,861,252

Net (income) loss attributed to noncontrolling interest		(7,001	)		-			1,309			-

Net income attributed to Shiner	$	799,371		$	939,159		$	1,804,375		$	1,861,252

Comprehensive income (loss)
Net income	$	806,372		$	939,159		$	1,803,066		$	1,861,252
Foreign currency translation gain (loss)		476,031			121,735			702,545			112,398

Comprehensive income	$	1,282,403		$	1,060,894		$	2,505,611		$	1,973,650

Weighted average shares outstanding :
Basic		27,541,491			24,588,155			27,541,491			24,588,155
Diluted		27,541,491			24,588,155			27,541,491			24,590,946

Earnings per share attributed to Shiner common stockholders
Basic	$	0.03		$	0.04		$	0.07		$	0.08
Diluted	$	0.03		$	0.04		$	0.07		$	0.08

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

SHINER INDUSTRIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

					Additional					Other							Total
	Common Stock				Paid in		Treasury			Comprehensive		Statutory		Retained			Stockholders'		Noncontrolling		Total
	Shares		Amount		Capital		Stock			Income		Reserve		Earnings			Equity		Interest		Equity
Balance, December 31, 2010		27,603,336	$	27,603	$	14,321,484	$	(58,036	)	$	4,060,637	$	2,905,861	$	17,353,554		$	38,611,103	$	37,226	$	38,648,329

Stock compensation expense for options issued to directors		-		-		1,390		-			-		-		-			1,390		-		1,390

Foreign currency translation gain		-		-		-		-			702,545		-		-			702,545		12,579		715,124

Net income		-		-		-		-			-		-		1,804,375			1,804,375		-1,309		1,803,066

Non controlling interest acquired with acquisition						-		-			-		-		-			-		1,723,077		1,723,077.0

Transfer to statutory reserve		-		-		-		-			-		239,292		(239,292	)		-		-		-

Balance, June 30, 2011(unaudited)		27,603,336	$	27,603	$	14,322,874	$	(58,036	)	$	4,763,182	$	3,145,153	$	18,918,637		$	41,119,413	$	1,771,573	$	42,890,986

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

SHINER INDUSTRIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2011			2010
	(unaudited)			(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,803,066		$	1,861,252
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation		1,151,187			801,496
Amortization		46,606			37,752
Stock compensation expense		1,390			12,636
Change in working capital components:
Accounts receivable		2,967,525			(1,370,769	)
Inventory		(2,353,513	)		(1,987,357	)
Advances to suppliers		(5,942,213	)		411,907
Other assets		165,556			(166,932	)
VAT receivable		(1,547,708	)		-
Accounts payable		(186,329	)		1,937,742
Unearned revenue		1,433,840			467
Other payables		1,409,669			(78,763	)
Accrued payroll		2,460			4,617

Net cash used in operating activities		(1,048,464	)		1,464,048

CASH FLOWS FROM INVESTING ACTIVITIES
Payment (issuance) of notes receivable		25,684			(228,141	)
Purchase of Shimmer Sun Ltd		(1,300,000	)		-
Cash acquired in acquisition of Shimmer Sun Ltd		248,742			-
Payments for property and equipment		(8,830,790	)		(176,571	)
Payments for construction in progress		(4,002,547	)		(3,083,701	)
(Increase)/decrease in restricted cash		-			733,405

Net cash used in investing activities		(13,858,911	)		(2,755,008	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term loans		(6,880,500	)		-
Proceeds from short-term loans		7,645,000			1,466,900
Proceeds from notes payable		9,036,390			-

Net cash provided by financing activities		9,800,890			1,466,900

Effect of exchange rate changes on cash and cash equivalents		14,533			12,996

NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS		(5,091,952	)		188,936

CASH & CASH EQUIVALENTS, BEGINNING BALANCE		8,622,035			3,059,796

CASH & CASH EQUIVALENTS, ENDING BALANCE	$	3,530,083		$	3,248,732

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	397,998		$	-
Income taxes paid	$	439,962		$	-

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

Note 1 - Organization and Basis of Presentation

The unaudited consolidated financial statements were prepared by Shiner International, Inc., a Nevada corporation (the “Company” or “Shiner”), pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) were omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K. The results for the six months ended June 30, 2011, are not necessarily indicative of the results to be expected for the full year ending December 31, 2011.

Organization and Line of Business

Shiner was incorporated in the State of Nevada on November 12, 2003. The Company, through its subsidiaries is engaged in the manufacture of BOPP tobacco film, coated films, color printing products, advanced film, and water-based latex products selling to customers throughout China, Asia, Australia, Europe, the Middle East and North America. Our products are sold to companies in the following industries: food, tobacco, chemical, agribusiness, medical, pharmaceutical, personal care, electronics, automotive, construction, graphics, music and video publishing and other consumer goods. .

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Shiner and its subsidiaries as follows:

	Place	Percentage
Subsidiary	Incorporated	Owned	Parent
Shiner International, Inc.	Nevada, USA
Shiner Industrial Co.	China	100%	Shiner International, Inc.
Shiny Day	China	100%	Shiner International, Inc.
Modern Hi-Tech	China	100%	Shiny Day
Zhuhai	China	100%	Shiny Day
Neng Film	China	70%	Shiner International, Inc.
Shimmer Sun Limited	China	100%	Shiner International, Inc.
Jingyue	China	100%	Shimmer Sun Limited
Shunhao	China	100%	Jingyue
Yongxin	China	100%	Shunhao
Ningbo	China	65%	Yongxin

The accompanying consolidated financial statements were prepared in conformity with US GAAP. The Company’s functional currency is the Chinese Yuan Renminbi (“RMB”); however, the accompanying consolidated financial statements were translated and presented in United States Dollars ($ or “USD”).

Noncontrolling Interest

On September 20, 2010, the Company commenced operations of a majority-owned subsidiary, Shanghai Juneng Functional Film Company, Ltd. (“Shanghai Juneng”), with Shanghai Shifu Film Material, Co., Ltd., (‘Shanghai Shifu”). Under the terms of the agreement, Shiner owns 70% of Shanghai Juneng, and Shanghai Shifu owns the remaining 30%. The general manager of Shanghai Juneng reports directly to Shiner’s Chief Executive Officer. Shanghai Juneng will focus on pursuing sales opportunities among China’s leading food producers in the Yangtze River Delta, one of China’s largest economic centers.

On May 2, 2011, Shiner acquired 100% of the stock of Shimmer Sun Ltd. ("Shimmer") for $3.2 million. The Company paid $1.3 million in cash and has a payment of $1.9 million to the former shareholder which is recorded in “other payables” on the accompanying consolidated balance sheets. The acquisition gives Shiner a 65% controlling interest in Shimmer's subsidiary company, Ningbo Neisuoer Latex Co., Ltd. ("Ningbo Neisuoer"). The transaction was accounted for under the acquisition method of accounting, with the purchase price allocated based on the fair value of the individual assets acquired and liabilities assumed.

The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation,” which establishes standards governing the accounting for and reporting of noncontrolling interests (NCIs) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also required changes to certain presentation and disclosure requirements.

The net income (loss) attributed to the NCI was separately designated in the accompanying statements of operations and other comprehensive income. Losses attributable to the NCI in a subsidiary may exceed the NCI’s interests in the subsidiary’s equity. The excess attributable to the NCI is attributed to those interests. The NCI shall continue to be attributed its share of losses even if that attribution results in a deficit NCI balance.

Principles of Consolidation

The accompanying consolidated financial statements include the account of Shiner International, Inc. and its subsidiaries. All significant intercompany transactions and balances were eliminated in consolidation.

Foreign Currency Translation

The accounts of the Company’s Chinese subsidiaries are maintained in the RMB and the accounts of the U.S. parent company are maintained in the USD. The accounts of the Chinese subsidiaries are translated into USD in accordance with Accounting Standards Codification (“ASC”) Topic 830 “Foreign Currency Matters,” with the RMB as the functional currency for the Chinese subsidiaries. According to Topic 830, all assets and liabilities are translated at the exchange rate on the balance sheet date, stockholders’ equity is translated at historical rates and statement of operations items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the statement of operations.

Note 2 - Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Accounts Receivable

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.

Advances to Suppliers

The Company makes advances to certain suppliers for the purchase of its materials. The advances to suppliers are interest free and unsecured.

Inventory

Inventory is valued at the lower of the inventory’s cost (weighted average basis) or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower.

Notes Receivable

Notes receivable consist of bank notes received from customers as payment of on their accounts receivable balance. The notes are guaranteed by a bank and bear no interest. The notes are generally due within six months from the date of issuance.

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are expenses as incurred; additions, renewals and improvements are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

Operating equipment			10 years
Vehicles			8 years
Office equipment			5 years
Buildings and improvements			20 years

The following are the details regarding the Company’s property and equipment at June 30, 2011 and December 31, 2010:

	June 30,			December 31,
	2011			2010
				(Audited)
Operating equipment	$	13,695,519		$	13,028,014
Vehicles		195,530			162,799
Office equipment		250,282			189,301
Buildings		18,604,523			9,597,807
Building and equipment improvements		601,851			667,050
		33,347,705			23,644,971
Less accumulated depreciation		(5,493,947	)		(4,245,254	)
	$	27,853,758		$	19,399,717

Construction-in-Progress and Government Grants

Construction-in-progress mainly consists of amounts expended to build a new manufacturing workshop in Hainan and the constructing of a new product line for a Biaxially Oriented Polyproplylene (“BOPP”) tobacco line. The costs incurred and capitalized to construction in progress at June 30, 2011 is $8.8 million, which includes the facility and the equipment. Once the project is completed, the project will be transferred from “Construction-in-progress” to “Property and equipment. The first phase of the project was completed during 2010. The total cost of the new Hainan manufacturing workshop and the BOPP tobacco line is expected to be approximately $25.1 million. In October 2009, the Company received a government grant for this project of approximately $4.3 million from the Hainan Province Finance Bureau (“HPFB”). The Company is required to provide detailed expenses of the construction project to the HPFB. At the end of the project, the government will determine if the funds were used in accordance with the grant. At June 30, 2011 and December 31, 2010, the $4.3 million government grant was recorded as “Other payables” on the accompanying consolidated financial statements. If the government determines that the funds have been used for their intended purpose, the amount of the government grant is then amortized into other income over the useful life of the asset on the same basis being used to depreciate the asset.

Long-Lived Assets

The Company applies the provisions of ASC Topic 360, “Property, Plant, and Equipment,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced to recognize the cost of disposal. Based on its review, the Company believes that as of June 30, 2011 and December 31, 2010 (audited), there was no significant impairment of its long-lived assets.

Intangible Assets

Intangible assets consist of rights to use three plots of land in Haikou City by the Municipal Administration of China for state-owned land. For two of these plots, the Company’s rights run through January 2059 and, for the third plot, the Company’s rights run through October 2060. The Company evaluates intangible assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets, and goodwill is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, advances to suppliers, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. In addition, the Company has long-term debt with financial institutions. The carrying amounts of the line of credit and other long-term liabilities approximate their fair values based on current rates of interest for instruments with similar characteristics.

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC Topic 480, “Distinguishing Liabilities from Equity,” and ASC Topic 815, “Derivatives and Hedging.”

As of June 30, 2011 and December 31, 2010, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value.

Revenue Recognition

The Company’s revenue recognition policies comply with SEC Staff Accounting Bulletin 104 (codified in FASB ASC Topic 480). Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

Sales revenue consists of the invoiced value of goods, which is net of value-added tax (“VAT”). All of the Company’s products are sold in the People’s Republic of China (“PRC”) and are subject to Chinese VAT of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing their end product. The Company recorded VAT payable and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the receivables.

Sales and purchases are recorded net of VAT collected and paid. VAT taxes are not affected by the income tax holiday.

Sales returns and allowances was $0 for the six months ended June 30, 2011 and 2010. The Company does not provide unconditional right of return, price protection or any other concessions to its dealers or other customers.

Other Income

The other income and (expenses) for the three and six months ended June 30, 2011 is $(122,778) and $71,833, respectively, and $178,420 and $246,611, respectively, for the three and six months ended June 30, 2010. The Company recognizes other income in the period the Company has earned the revenue and collectability is reasonably assured.

Advertising Costs

The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the three and six months ended June 30, 2011 and 2010, were not significant.

Research and Development

The Company expenses its research and development costs as incurred. Research and development costs for the three and six months ended June 30, 2011 were $306,738 and $463,818, respectively, and $377,443 and $487,277 for the three and six months ended June 30 2010, respectively.

Stock-Based Compensation

The Company records stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation.” ASC 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees. There were 60,000 options outstanding as of June 30, 2011.

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes.” ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is more than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.

Basic and Diluted Earnings Per Share

Earnings per share is calculated in accordance with the ASC Topic 260, “Earnings Per Share.” Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. There were 60,000 options and 521,664 warrants outstanding as of June 30, 2011 with weighted-average exercise prices of $1.25 and $1.70, respectively. There were 190,000 options and 970,050 warrants outstanding as of June 30, 2010 with weighted-average exercise prices of $2.73 and $6.00, respectively. The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations for the three and six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,
	2011				2010
			Per Share				Per Share
	Shares		Amount		Shares		Amount
Basic earnings per share		27,541,491	$	0.03		24,588,155	$	0.04
Effect of dilutive stock options
and warrants		-		-		-		-
Diluted earnings per share		27,541,491	$	0.03		24,588,155	$	0.04

	Six Months Ended June 30,
	2011				2010
			Per Share				Per Share
	Shares		Amount		Shares		Amount
Basic earnings per share		27,541,491	$	0.07		24,588,155	$	0.08
Effect of dilutive stock options
and warrants		-		-		2,791		-
Diluted earnings per share		27,541,491	$	0.07		24,590,946	$	0.08

Foreign Currency Translation

The accounts of the Company’s Chinese subsidiaries are maintained in RMB and the accounts of the U.S. parent company are maintained in USD. The accounts of the Chinese subsidiaries were translated into USD in accordance with ASC Topic 830, “Foreign Currency Matters,” with the RMB as the functional currency for the Chinese subsidiaries. According to ASC Topic 830, all assets and liabilities were translated at the exchange rate on the balance sheet date, stockholders’ equity is translated at historical rates and statement of operations items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the statement of operations.

Foreign Currency Transactions and Comprehensive Income

US GAAP generally requires recognized revenue, expenses, gains and losses be included in net income. Certain statements, however, require entities to report specific changes in assets and liabilities, such as gain or loss on foreign currency translation, as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income. The functional currency of the Company’s Chinese subsidiaries is the RMB. Translation gains of $4,763,182 and $4,060,637 at June 30, 2011 and December 31, 2010, respectively, are classified as an item of other comprehensive income in the stockholders’ equity section of the consolidated balance sheets.

Statement of Cash Flows

In accordance with ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rates. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.

Segment Reporting

ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company has determined it has five reportable segments. See Note 13.

Dividends

The Company's Chinese subsidiaries have restrictions on the payment of dividends to the Company. China has adopted currency and capital transfer regulations that may require the Company's Chinese subsidiaries to comply with complex regulations for the movement of capital. These regulations include a public notice issued in October 2005 by the State Administration of Foreign Exchange (“SAFE”) requiring PRC residents, including both legal persons and natural persons, to register with the competent local SAFE branch before establishing or controlling any company outside of China. Although the Company believes its Chinese subsidiaries are in compliance with these regulations, should these regulations or the interpretation of them by courts or regulatory agencies change, the Company may not be able to pay dividends outside of China.

Recent Accounting Pronouncements

In December 2010, the FASB issued updated guidance on when and how to perform certain steps of the periodic goodwill impairment test for public entities that may have reporting units with zero or negative carrying amounts. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010, with early adoption prohibited. The adoption of this standard update did not impact the Company’s consolidated financial statements.

In December 2010, the FASB also issued guidance to clarify the reporting of pro forma financial information related to business combinations of public entities and to expand certain supplemental pro forma disclosures. This guidance is effective prospectively for business combinations that occur on or after the beginning of the fiscal year beginning on or after December 15, 2010, with early adoption permitted. It is applicable to the Company’s fiscal year beginning January 1, 2011. The Company adopted this standard and included the required disclosures for its recent acquisition. See Note 7.

In May 2011, the FASB issued guidance to amend certain measurement and disclosure requirements related to fair value measurements to improve consistency with international reporting standards. This guidance is effective prospectively for public entities for interim and annual reporting periods beginning after December 15, 2011, with early adoption by public entities prohibited. The Company is currently evaluating this guidance, but does not expect its adoption will have a material effect on its consolidated financial statements.

In June 2011, the FASB issued new guidance on the presentation of comprehensive income that will require a company to present components of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. There are no changes to the components that are recognized in net income or other comprehensive income under current GAAP. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011, with early adoption permitted. The Company is currently evaluating this guidance, but does not expect its adoption will have a material effect on its consolidated financial statements.

Note 3 - Inventory

Inventory at June 30, 2011 and December 31, 2010 consisted of the following:

	June 30,			December 31,
	2011			2010
				(Audited)
Raw Material	$	4,079,716		$	3,099,222
Work in process		1,152,033			842,793
Finished goods		5,183,181			3,547,916
		10,414,930			7,489,931
Less: Obsolescence Reserve		(222,747	)		(134,330	)
	$	10,192,183		$	7,355,601

Note 4 - Intangible Assets

Intangible assets at June 30, 2011 and December 31, 2010 consisted of the following:

	June 30,			December 31,
	2011			2010
				(Audited)
Purchased Intangibles	$	4,075,199		$	-
Right to use land		1,134,378			1,112,371
Less: Accumulated amortization		(55,203	)		(50,516	)
Intantible assets, net	$	5,154,374		$	1,061,855

Pursuant to the acquisition discussed in Note 7, the Company recorded purchased intangibles.

Pursuant to the regulations, the PRC government owns all land. The Company has recognized the amounts paid for the acquisition of rights to use land as an intangible asset and amortizing such rights over the period the Company has use of the land, which range from 54 to 57 years.

Note 5 – Other Payables

Other payables consist of the following at June 30, 2011 and December 31, 2010:

	June 30,		December 31,
	2011		2010
Payable for acquisition of Shimmer Sun	$	1,900,000	$	-
Special purpose fund for Shi Zi Ling workshop		4,501,770		4,414,470
Hainan Ri Xin Hotel Management Co.		1,240,694		-
Miscellaneous		555,343		240,830
	$	8,197,807	$	4,655,300

The $1,900,000 payable is the amount due to the former shareholder of Shimmer Sun. See Note 7. The $4,501,770 payable is the liability recorded pursuant to the funds received as part of a government grant. See “Construction-in-Progress and Government” Grants in Note 2. The $1,240,694 represents amounts borrowed from a company for the purchase of raw materials.

Note 6 - Loans

Short-term loans at June 30, 2011 and December 31, 2010 (audited) consisted of the following:

	June 30,		December 31,
	2011		2010
The term of the loan is from December 20, 2010 to December 19, 2011, with an interest rate of 5.56% at December 31, 2010. The loan is collateralized by buildings and equipment	$	-	$	1,972,100

The term of the loan is from November 12, 2010 to November 11, 2011, with an interest rate of 5.56% at December 31, 2010. The loan is collateralized by buildings and equipment		-		455,100

The term of the loan is from September 20, 2010 to September 19, 2011, with an interest rate of 5.56% at December 31, 2010. The loan is collateralized by buildings and equipment		-		606,800

The term of the loan is from July 21, 2010 to July 20, 2011, with an interest rate of 5.56% at December 31, 2010. The loan is collateralized by buildings and equipment		-		758,500

The term of the loan is from June 24,2010 to June 24, 2011, with an interest rate of 5.56% at December 31, 2010. The loan is collateralized by buildings and equipment		-		1,517,000

The term of the loan is from May 07, 2010 to May 6, 2011, with an interest rate of 5.841% at December 31, 2010. The loan is collateralized by buildings and equipment		-		1,517,000

The term of the loan is from December 20, 2010 to December 19, 2011, with an interest rate of 5.56% at June 30, 2011. The loan is collateralized by equipment		2,011,100		-

The term of the loan is from February 28, 2011 to February 28, 2012, with an interest rate of 6.06% at June 30, 2011. The loan is collateralized by equipment		4,176,900		-

The term of the loan is from June 30, 2011 to June 30, 2012, with an interest rate of 8.203% at June 30, 2011. The loan is collateralized by buildings and equipment		1,547,000		-
	$	7,735,000	$	6,826,500

Long-term loans at June 30, 2011 and December 31, 2010 (audited) consisted of the following:

	June 30,		December 31,
	2011		2010
The term of the loan is from January 24,2011 to January 24,2018, with an interest rate of 6.60% at June 30, 2011. The loan is collateralized by buildings and land use rights	$	2,475,200	$	-

The term of the loan is from February 10, 2011 to February 10, 2018, with an interest rate of 6.60% at June 30, 2011. The loan is collateralized by buildings and land use rights		2,784,600		-

The term of the loan is from February 16, 2011 to February 16, 2018, with an interest rate of 6.60% at June 30, 2011. The loan is collateralized by buildings and land use rights		2,243,150		-

The term of the loan is from February 17, 2011 to February 17, 2018, with an interest rate of 6.60% at June 30, 2011. The loan is collateralized by buildings and land use rights		1,222,130		-

The term of the loan is from March 25, 2011 to March 25, 2018, with an interest rate of 6.60% at June 30, 2011. The loan is collateralized by buildings and land use rights		417,690		-
	$	9,142,770	$	-

On August 2, 2010, Hainan Shiner Industrial Co., Ltd. (“Hainan Shiner”), the Company’s wholly owned subsidiary, entered into a credit facility with the Hainan Branch of the Bank of China. The credit facility is comprised of seven-year 70 million RMB, or approximately $10.8 million, secured revolving credit facility. Hainan Shiner may not make any draw downs under this facility after December 31, 2011. Hainan Shiner may only use the loan proceeds to improve the technology of its BOPP film and to purchase certain equipment necessary for these improvements. Proceeds under the facility not used for these purposes may be subject to a misappropriation penalty interest rate of 100% of the current interest rate on the loan.

The initial interest rate on each withdrawal from the facility will be the 5-year benchmark lending rate announced by the People’s Bank of China on the date of such withdrawal, and is subject to adjustment every 12 months based upon the benchmark. Additional interest will be paid on an overdue loan under this credit facility of 50% of the current interest rate on the loan. Hainan Shiner and certain of its affiliates, including the Company, have provided guarantees and certain land, buildings, and property as collateral under this facility.

The credit facility includes financial covenants that prohibit Hainan Shiner from making distributions to its sole shareholder if (a) its after-tax net income for the fiscal year is zero or negative, (b) its after-tax net income is insufficient to make up its accumulated loss for the last several fiscal years, (c) its income before tax is not utilized in paying off the capital, interest and expense of the lender, or (d) the income before tax is insufficient to pay the capital, interest and expense of the lender.

During the six months ended June 30, 2011, the Company has drawn down approximately $9.1 million and at June 30, 2011, there is approximately $1.7 million of available credit for future draw downs.

Note 7 – Purchase of Shimmer Sun Ltd

On May 2, 2011, Shiner acquired 100% of the stock of Shimmer Sun Ltd. ("Shimmer") for $3.2 million. The Company paid $1.3 million in cash and has a payable of $1.9 million to the former shareholder which is recorded in “other payables” on the accompanying consolidated balance sheets. The acquisition, through Shimmer’s wholly owned subsidiaries, gives Shiner a 65% controlling interest in Shimmer's subsidiary, Ningbo Neisuoer Latex Co., Ltd. ("Ningbo Neisuoer"). The Company acquired Shimmer as part of its overall strategy of seeking opportunities for vertical intergration.

The transaction was accounted for under the acquisition method of accounting, with the purchase price allocated based on the fair value of the individual assets acquired and liabilities assumed. The acquisition-date fair value of the total consideration was $3.2 million, which was allocated as follows:

Cash & cash equivalents	$	248,743
Accounts receivable		104,714
Advances to suppliers		1,876
Notes receivable		15,211
Inventory		304,707
Prepaid expenses & other current assets		108,061
Property and equipment, net		293,741
Intangible assets		4,075,199
Accounts payable		(46,338	)
Other payables		(168,258	)
Unearned revenue		(3,525	)
Accrued payroll		(11,054	)
Minority interest		(1,723,077	)
	$	3,200,000

The intangible asset related to the purchase of the subsidiary is a preliminary allocation that is subject to change upon the completion of a formal appraisal.

water-based latexThe operating results of Shimmer and its subsidiaries are included in the accompanying consolidated statements of operations from the acquisition date. Shimmer’s operating results from the acquisition date to June 30, 2011 are as follows:

Revenue	$	321,091
Cost of goods sold		258,164
Gross profit		62,927
Operating expenses		43,122
Income from operations		19,805
Net income	$	13,974

The pro forma financial information presented below show the consolidated operations of the Company as if the Shimmer acquisition had occurred as of January 1, 2010:

	Six Months Ended June 30,
	2011		2010
Revenues	$	34,119,513	$	25,756,027
Gross profit		4,979,886		4,365,101
Income from operations		2,511,587		2,128,260
Provision for income taxes		437,396		331,837
Net income		1,800,528		1,929,985
Basic earnings (loss) per share	$	0.07	$	0.08

Note 8 - Stock Options and Warrants

Stock Options

The following is a summary of the Company’s stock option activity for the six months ended June 30, 2011:

	Options Outstanding		Weighted Average Exercise Price Price		Aggregate Intrinsic Value
Outstanding at December 31, 2010		60,000	$	1.25
Granted		-		-
Canceled		-		-
Exercised		-		-
Outstanding at June 30, 2011		60,000	$	1.25	$	-
Exercisable at June 30, 2011		50,000	$	1.25	$	-

The number and weighted average exercise prices of all options outstanding as of June 30, 2011, are as follows:

Options Outstanding
Range of Exercise Price		Number Outsanding June 30, 2011		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
$	1.25		60,000	$	1.25		2.18
			60,000

The number and weighted average exercise prices of all options exercisable as of June 30, 2011, are as follows:

Options Exercisable
Range of Exercise Price		Number Outsanding June 30, 2011		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
$	1.25		50,000	$	1.25		1.98
			50,000

The compensation expense for the unvested options as of June 30, 2011, was $1,391, which will be recognized through December 31, 2011.

Warrants

The following is a summary of the Company’s warrant activity for the six months ended June 30, 2011:

	Warrants Outstanding		Weighted Average Exercise Price Price		Weighted Average Remaining Contractual Life (Years)
Outstanding at December 31, 2010		521,664	$	1.70
Granted		-		-
Canceled		-		-
Exercised		-		-
Outstanding at June 30, 2011		521,664	$	1.70		1.99
Exercisable at June 30, 2011		521,664	$	1.70		1.99

Note 9 - Employee Welfare Plans

The expense for employee common welfare was $33,571 and $96,700 for the three and six months ended June 30, 2011 and $22,660 and $60,368 for the three and six months ended June 30, 2010, respectively. The Company did not record a welfare payable as of June 30, 2011 or December 31, 2010 (audited). The Chinese government abolished the 14% welfare plan policy in 2007. The Company is not required to establish welfare and common welfare reserves.

Note 10 - Statutory Common Welfare Fund

As stipulated by the Company Law of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following:

Making up cumulative prior years’ losses, if any;

ii.

Allocations to the “statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the reserve reaches 50% of the Company’s registered capital;

iii.

Allocations of 5% to 10% of income after tax, as determined under PRC accounting rules and regulations, to the Company’s “statutory common welfare fund,” which is established for the purpose of providing employee facilities and other collective benefits to the Company’s employees; and

iv.

Allocations to the discretionary surplus reserve, if approved in the stockholders’ general meeting.

The Company appropriated $239,292 and $35,176 as reserve for the statutory surplus reserve and statutory common welfare fund for the six months ended June 30, 2011 and 2010, respectively.

Note 11 - Current Vulnerability Due to Certain Concentrations

There were no customers that exceeded 10% of the Company’s sales for the three and six months ended June 30, 2011. One customer accounted for 13% and 10% of the Company’s sales for the three and six months ended June 30, 2010, respectively.

One vendor provided 20% and 18% of the Company’s raw material purchases for the three and six months ended June 30, 2011, respectively. There was no vendor which accounted for 10% or more of the Company’s raw material purchases for the three and six months ended June 30, 2010.

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC and by the general state of the PRC’s economy. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Note 12 - Contingent Liabilities

At June 30, 2011, the Company is contingently liable to banks for discounted notes receivable and to vendors for endorsed notes receivable of $1,090,898.

Note 13 – Segment Information

The Company reclassified its business segment information at the end of 2010 to more closely align its financial reporting with its business structure. Prior period amounts have been restated to conform to the current presentation. We recognized our products as five segments: BOPP tobacco films, water-based latex, coated film, color printed packaging, and advanced film. The water-based latex is one of the raw materials used in coated film to make the packaging more environmentally friendly and the barrier property better; therefore, 55% of the water-based latex products manufactured by Ningbo Neisuoer are sold to Hainan Shiner Industrial and Zhuhai Huanuo.

The following tables summarize the Company’s segment information for the three and six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Revenues from unrelated entities
BOPP tobacco film	$	7,649,358	$	4,034,394	$	15,684,886	$	8,174,495
Water-based latex		173,437		-		173,437		-
Coated film		6,899,334		5,115,554		11,818,925		9,789,653
Color printed packaging		1,472,768		1,042,437		3,128,942		1,729,688
Advanced film		1,672,330		3,021,513		2,967,882		5,106,781
	$	17,867,227	$	13,213,898	$	33,774,072	$	24,800,617

Intersegment revenues
BOPP tobacco film	$	1,980,087	$	3,533,470	$	3,877,174	$	6,696,011
Water-based latex		218,897		-		218,897		-
Coated film		1,381,007		495,763		1,770,597		2,557,511
Color printed packaging		675,443		177,254		949,525		1,619,187
Advanced film		-		-		-		-
	$	4,255,434	$	4,206,487	$	6,816,193	$	10,872,709

Total Revenues
BOPP tobacco film	$	9,629,445		$	7,567,864		$	19,562,060		$	14,870,506
Water-based latex		392,334			-			392,334			-
Coated film		8,280,341			5,611,317			13,589,522			12,347,164
Color printed packaging		2,148,211			1,219,691			4,078,467			3,348,875
Advanced film		1,672,330			3,021,513			2,967,882			5,106,781
Less Intersegment revenues		(4,255,434	)		(4,206,487	)		(6,816,193	)		(10,872,709	)
	$	17,867,227		$	13,213,898		$	33,774,072		$	24,800,617

Income (loss) from operations
BOPP tobacco film	$	1,106,347		$	529,535		$	2,211,860		$	1,317,152
Water-based latex		11,556			-			11,556			-
Coated film		394,951			130,274			657,745			174,102
Color printed packaging		(140,987	)		(126,929	)		(290,094	)		(253,858	)
Advanced film		(1,080	)		418,868			80,593			811,948
Holding Company		(66,605	)		40,464			(162,086	)		(15,021	)
	$	1,304,182		$	992,212		$	2,509,574		$	2,034,323

Interest income
BOPP tobacco film	$	1,645		$	1,242		$	3,910		$	1,839
Water-based latex		1,087			-			1,087			-
Coated film		471			1,527			1,871			2,202
Color printed packaging		281			59			734			119
Advanced film		552			406			817			1,149
Holding Company		(1,844	)		396			45			607
	$	2,191		$	3,630		$	8,464		$	5,916

Interest Expense
BOPP tobacco film	$	254,765		$	16,065		$	322,900		$	31,179
Water-based latex		-			-			-			-
Coated film		13,357			25,309			57,907			46,180
Color printed packaging		(1,439	)		-			16,905			-
Advanced film		4,646			13,140			16,568			19,984
Holding Company		-			-			-			-
	$	271,329		$	54,514		$	414,280		$	97,343

Income tax expense (benefit)
BOPP tobacco film	$	204,686		$	138,369		$	323,545		$	181,019
Water-based latex		2,454			-			2,454			-
Coated film		16,211			(34,970	)		95,450			23,927
Color printed packaging		-			-			-			-
Advanced film		(949	)		54,930			11,789			111,588
Holding Company		-			-			-			-
	$	222,402		$	158,329		$	433,238		$	316,534

Net Income (loss)
BOPP tobacco film	$	740,267		$	609,981		$	1,704,535		$	1,106,793
Water-based latex		8,892			-			8,892			-
Coated film		348,388			63,165			505,815			200,799
Color printed packaging		(130,824	)		(56,618	)		(306,265	)		(113,236	)
Advanced film		(100,547	)		281,866			51,845			681,525
Holding Company		(66,805	)		40,765			(160,447	)		(14,629	)
	$	799,371		$	939,159		$	1,804,375		$	1,861,252

Provision for depreciation
BOPP tobacco film	$	221,353		$	102,198		$	496,629		$	214,367
Water-based latex		2,052			-			2,052			-
Coated film		359,517			159,245			422,080			317,602
Color printed packaging		42,169			66,008			121,415			132,016
Advanced film		7,633			78,128			109,010			137,511
Holding Company		-			-			-			-
	$	632,725		$	405,579		$	1,151,187		$	801,496

	As of June 30, 2011		As of December 31, 2010
Total Assets
BOPP tobacco film	$	25,655,728	$	14,680,846
Water-based latex		785,766
Coated film		21,804,537		24,720,052
Color printed packaging		6,272,278		4,805,203
Advanced film		5,631,434		10,141,213
Holding Company		13,680,090		1,570,372
	$	73,829,833	$	55,917,686

Note 14 - Geographical Sales

The geographical distribution of Shiner’s revenue for the three and six months ended June 30, 2011 and 2010 is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
Geographical Areas	2011		2010		2011		2010
Chinese Mainland		15,135,167	$	10,513,973		28,219,566	$	19,728,967
Asia (outside Mainland China)		1,347,094		903,815		2,574,668		2,248,358
Africa		142,172		67,822		142,172		67,822
Middle East		378,655		473,352		953,748		788,813
Australia		564,614		667,653		980,912		1,099,637
North America		280,254		516,351		881,672		699,544
South America		19,271		26,158		21,334		26,158
Europe		-		44,774		-		141,318
		17,867,227	$	13,213,898		33,774,072	$	24,800,617

Note 15 – Subsequent Events

The Company has evaluated all subsequent events that occurred up to the time of the Company's issuance of its financial statements.

CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” anticipate,” believe,” estimate,” continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in our other SEC filings. The following discussion should be read in conjunction with our Financial Statements and related notes thereto included elsewhere in this Quarterly Report. Throughout this Quarterly Report we will refer to Shiner International, Inc., together with its subsidiaries, as “Shiner,” the “Company,” “we,” “us,” and “our.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a Nevada corporation engaged in the packaging and anti-counterfeit plastic film business in the People's Republic of China ("China") through our operating subsidiaries. We were incorporated on November 12, 2003 in Nevada. Since July 23, 2007, our principal place of business has been in China. As a result of a share exchange transaction, we changed our name to Shiner International, Inc. on July 24, 2007. Our principal executive offices are located at 19th Floor, Didu Building, Pearl River Plaza, No. 2 North Longkun Road, Haikou, Hainan Province, China 570125. Our telephone number is +86-898-68581104. Our website is http: www.shinerinc.com.

Our primary business consists of the manufacture and distribution of technology driven advanced packaging film products in five business segments – BOPP tobacco films, water-based latex, coated film, color printed packaging, and advanced film. The following table sets forth our five segments and the percentages of total revenue each segment generated for the six months ended June 30, 2011 and 2010:

	Percent of Total Revenue
Segment	2011		2010
BOPP tobacco film		46%		33%
Water-based latex		1%		-
Coated film		35%		39%
Color printed packaging		9%		7%
Advanced film		9%		21%

All of our operations are based in China and each of our subsidiaries was formed under the laws of China. We currently conduct our business through Hainan Shiner Industrial Co., Ltd. (“Shiner Industrial”), which was incorporated on May 21, 2003 and is headquartered in Haikou, Hainan Province, Hainan Shiny-day Color Printed Packaging Co., Ltd. (“Shiny-day”), which was incorporated on March 19, 2004, and is headquartered in Hailou, Hainan Province, Zhuhai Huanuo Packaging Material Co., Ltd. (“Zhuhai”), which was incorporated on December 25, 2006 and is headquartered in Zhuhai, Guangdong Province, and Ningbo Neisuoer Latex Co., Ltd. ("Ningbo Neisuoer"), which was incorporated on February 2, 2008 and is headquartered in Ningbo City, Zhejiang Province. Shiner Industrial, Shiny-day and Zhuhai currently produce four of our five products: BOPP tobacco film, coated films, color printed packaging and advanced films). Ningbo Nersuoer currently produces water-based latex.

On September 20, 2010, we commenced operations of Shanghai Juneng Functional Film Company, Ltd., a majority-owned subsidiary organized under the laws of China (“Shanghai Juneng”). We own 70% of Shanghai Juneng and Shanghai Shifu Film Material, Co., Ltd. (‘Shanghai Shifu”) owns the remaining 30%. The general manager of Shanghai Juneng reports directly to our Chief Executive Officer. Shanghai Juneng is focused on pursuing sales opportunities among the domestic food safety packaging markets and targets China’s leading food producers.

On May 2, 2011, Shiner acquired 100% of the stock of Shimmer Sun Ltd. ("Shimmer") for $3.2 million. The Company paid $1.3 million in cash and has a note payable of $1.9 million to the former shareholder which is recorded in “other payables” on the accompanying consolidated balance sheets. The acquisition, through Shimmer’s wholly owned subsidiaries, gives Shiner a 65% controlling interest in Shimmer's subsidiary company, Ningbo Neisuoer. The transaction was accounted for under the acquisition method of accounting, with the purchase price allocated based on the fair value of the individual assets acquired and liabilities assumed.

Ningbo Neisuoer is a recognized leader in the field of specialty water-based latex, which is used to produce advanced coated films. Water-based latex is one of the raw materials used in coated film to make the packaging more environmentally friendly and to enhance the barrier property. In particular, water-based latex products are more environmentally friendly than oil-based coatings and offer superior moisture-barrier properties for packaging dry foods and other moisture-sensitive products without compromising the efficiency of the packaging production line. 55% of the water-based latex products manufactured by Ningbo Neisuoer are sold to Shiner Industrial and Zhuhai. The synergies resulting from this acquisition are expected to bring real benefits to our valued customers and demonstrate our continued commitment to technological excellence. This acquisition will enable us to lower our raw material costs and further expand our production capacity. We are seeking vertical integration opportunities that help us deliver new and innovative packaging products to better serve our customers worldwide. This acquisition is an important step in that regard. Ningbo Neisuoer expects 2011 sales to be approximately 35 million RMB ($5.3 million USD) with a 35% gross margin.

We are a principal manufacturer of BOPP tobacco film, coated films, color printing products and advanced film, selling to customers throughout China, Asia, Australia, Europe, the Middle East and North America. Our products are sold to companies in the following industries: food, tobacco, chemical, agribusiness, medical, pharmaceutical, personal care, electronics, automotive, construction, graphics, music and video publishing and other consumer goods. The Ministry of Science and Technology of China has certified Shiner Industrial, one of our subsidiaries, as a Nationally-Focused Advanced High Technology Enterprise under the State Torch Program, which promotes the development and application of science- and technology-focused businesses in China.

We hold 16 patents and have 10 patent applications pending that relate to certain of our products and manufacturing processes that have been issued by the State Intellectual Property Office of China. Although our patents and processes provide us with a competitive advantage, the loss of any single patent would not have a material adverse effect on our business as a whole.

Our current production capacity consists of:

five coated film lines with a total capacity of 15,000 tons a year;

one BOPP tobacco film production line with a total capacity of 3,500 tons a year;

one BOPP film production line with a total capacity of 7,000 tons a year;

three color printing lines;

four anti-counterfeit film lines with a total capacity of 2,500 tons a year; and

Two water-based latex reaction kettles with a total capacity of 3,000 tons a year.

Results of Operations

Three months ended June 30, 2011 compared to the three months ended June 30, 2010

	Three Months Ended June 30,						$			%
	2011			2010			Change			Change
Revenues	$	17,867,227		$	13,213,898		$	4,653,329			35.2	%
Cost of goods sold		15,347,733			10,971,574			4,376,159			39.9	%
Gross profit		2,519,494			2,242,324			277,170			12.4	%
Selling, general and administratrive expenses		1,215,312			1,250,112			(34,800	)		-2.8	%
Interest expense, net of interest income		269,138			50,885			218,253			428.9	%
Other income (expense), net		(122,778	)		178,420			(301,198	)		-168.8	%
Exchange loss (gain)		116,508			(22,259	)		138,767			-623.4	%
Income tax expense		222,402			158,205			64,197			40.6	%
Net income attributed to Shiner	$	799,371		$	939,283		$	(139,912	)		-14.9	%

Revenues

Revenues for the three months ended June 30, 2011 increased 35.2%, or $4.7 million, to $17.9 million compared to $13.2 million in the comparable period of 2010. The increase was mainly a result of increased sales of the BOPP tobacco films, coating films and color printing products. BOPP tobacco revenue increased 89.6%, or $3.6 million, in the three months ended June 30, 2011 to $7.6 million from $4.0 million in the comparable period of 2010. Coated film revenue increased 34.9%, or $1.8 million, to $6.9 million in the three months ended June 30, 2011 from $5.1 million in the comparable period of 2010. Revenue for our new product, water-based latex, was $0.2 million for the three months ended June 30, 2011. Our color printing product revenue increased 41.3%, or $0.5 million, to $1.5 million in the three months ended June 30, 2011 from $1.0 million in of the comparable period of 2010. Our advanced film revenues decreased 44.8%, or $1.3 million, to $1.7 million in the three months ended June 30, 2011 from $3.0 million in the comparable period of 2010.

The increase in revenue was primarily caused by an increase in domestic product volume. Approximately 84.7%, or $15.1 million, of our total sales in the three months ended June 30, 2011 were made domestically to Chinese companies. In the second quarter of 2010, approximately 79.6%, or $10.5 million, of our total sales were made domestically. The Company provides coated film to its largest customer who manufactures snack cakes and our remaining top three customers are tobacco manufacturers who use our BOPP tobacco film.

Internationally, we sell only three lines of products: anti-counterfeit film, coated film, and color printing. International sales for the three months ended June 30, 2011 were $2.7 million, or 15.3%, of our total revenues in 2011 and represented a $0.03 million or 1.0% increase from the $2.7 million in international sales in the second quarter of 2010. The increase was not significant. All international sales are indirect using a network of distributors and converters.

Our five largest customers accounted for 9%, 6%, 4%, 3% and 3% of our revenue for the three months ended June 30, 2011 and 13%, 8%, 7.5%, 5% and 5% of our revenue for the three months ended June 30, 2010.

Cost of Goods Sold

Cost of goods sold increased $4.4 million, or 39.9%, from $11.0 million for the three months ended June 30, 2010 to $15.3 million in the three months ended June 30, 2011. The cost of goods sold was 85.9% and 83.0% of our revenue in the second quarter of 2011 and 2010, respectively. The principal cost component of our cost of goods sold is raw materials cost which includes petroleum. The increase in cost of goods sold year to year was primarily caused by an increase in raw material costs largely due to petroleum price fluctuations. We estimate that an increase in the price of crude oil of $10 per barrel would cause our raw material cost to increase by approximately 6%. There has been some increase in the cost of our raw materials as a result of an increase in crude oil prices throughout the year. There has not been a significant difference in the cost of goods sold percentages among our different product lines and therefore, any increase or decrease in our raw material costs would be expected to have a corresponding impact to our different product lines’ profitability.

The packaging industry requirements for the food industry mandate the use of non-benzene based products. In an effort to be environmentally friendly and to improve work conditions in our factory, Shiner proactively switched to non-benzene based ink products in a corporate effort to be green. This change also positively contributed to our compliance with the food safety laws, as our food packaging operations are conducted in the same facility. We had a favorable response from all of our customers at the time.

The percentage increase in our cost of goods sold for the three months ended June 30, 2011 was influenced by the following events:

The increase in raw material costs due to petroleum price fluctuations;

The increase in the cost of labor; and

The added depreciation of phase I of the Hainin manufacturing facility was amortized into the cost of goods sold.

Gross Profit

Our gross profit for the three months ended June 30, 2011 was $2.5 million, resulting in a gross margin of 14.1%, a decrease of 2.9% from the gross margin of 17.0% for the three months ended June 30, 2010. The decrease in gross margin was primarily a consequence of an increase in overhead unit rates as a result of increased labor costs and depreciation of phase I of the Hainin manufacturing facility.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses decreased by 2.8%, or $34,800, to $1.22 million for the three months ended June 30, 2011 compared to $1.25 million in the comparable period of 2010. The decrease in selling, general and administrative expenses was not significant.

Interest Expense, net

Interest expense, net for the three months ended June 30, 2011 increased by 428.9%, or $218,253, to $269,138 compared to $50,885 in the comparable period of 2010. We obtained additional short-term and long term loans in the three months ended June 30, 2011 compared with the comparable period in 2010.

Other Income

Other income decreased by $301,198, or 168.8%, to an expense of $122,778 for the three months ended June 30, 2011 compared to income of $178,420 in the comparable period of 2010. During the three months ended June 30, 2010, we received approximately $73,465 from a former landlord for vacating leased space, which was paid in full during 2010.

Income Tax Expense

For the three months ended June 30, 2011, we recorded a tax provision of $222,402 compared to $158,329 in the comparable period of 2010. Our effective tax rates for the three months ended June 30, 2011 and 2010 were 22% and 14%, respectively.

Net Income

The decrease in our net income for the three months ended June 30, 2011 compared to the net income in the comparable period of 2010 was mainly due to increased labor costs, depreciation of phase I of the Hainin manufacturing facility, and no other income in the three months ended June 30, 2011 from a former landlord which other income was received in the comparable period in 2010.

Six months ended June 30, 2011 compared to the six months ended June 30, 2010

	Six Months Ended June 30,					$			%
	2011		2010			Change			Change
Revenues	$	33,774,072	$	24,800,617		$	8,973,455			36.2	%
Cost of goods sold		28,887,471		20,671,040			8,216,431			39.7	%
Gross profit		4,886,601		4,129,577			757,024			18.3	%
Selling, general and administratrive expenses		2,377,027		2,095,254			281,773			13.4	%
Interest expense, net of interest income		405,816		91,428			314,388			343.9	%
Other income, net		71,833		264,611			(192,778	)		-72.9	%
Exchange loss (gain)		60,713		(29,720	)		90,433			-304.3	%
Income tax expense		433,238		316,534			116,704			36.9	%
Net income attributed to Shiner	$	1,804,375	$	1,861,252		$	(56,877	)		-3.1	%

Revenues

Revenues for the six months ended June 30, 2011 increased 36.2%, or $9.0 million, to $33.8 million compared to $24.8 million in the comparable period of 2010. This increase was mainly a result of increased sales in the domestic market. BOPP tobacco revenue increased 91.9%, or $7.5 million, in the six months ended June 30, 2011 to $15.7 million from $8.2 million in the comparable period of 2010. Coated film revenue increased 20.7%, or $2.0 million, to $11.8 million in the six months ended June 30, 2011 from $9.8 million in the comparable period of 2010. Our water-based latex revenue is $0.2 million for the six months ended June 30, 2011. Our color printing product revenue increased 80.9%, or $1.4 million, to $3.1 million in the six months ended June 30, 2011 from $1.7 million in the comparable period of 2010. Our advanced film revenues decreased 41.8%, or $2.1 million, to $3.0 million in the six months ended June 30, 2011 from $5.1 million in the comparable period of 2010.

The increase in revenue was primarily caused by an increase in domestic product volume. Approximately 83.6%, or $28.2 million, of our total sales in the six months ended June 30, 2011 were made domestically to Chinese companies. In the first six months of 2010, approximately 79.6%, or $19.7 million, of our total sales were made domestically. The Company provides coated film to its largest customer who manufactures snack cakes and its remaining top 3 customers are tobacco manufacturers who use our BOPP tobacco film.

Internationally, we sell only three lines of products: anti-counterfeit film, coated film, and color printing. International sales for the six months ended June 30, 2011 were $5.6 million, or 16.4%, of our total revenues in 2011 and represented a $0.5 million or 9.5% increase from the $5.1 million in international sales in 2010. The increase was not significant. All international sales are indirect using a network of distributors and converters.

Our five largest customers accounted for 7%, 5%, 4%, 4% and 3% of our revenue for the six months ended June 30, 2011 and 10%, 6%, 5%, 4% and 4% of our revenue for the six months ended June 30, 2010.

Cost of Goods Sold

Cost of goods sold increased $8.2 million, or 39.8%, from $20.7 million for the six months ended June 30, 2010 to $28.9 million in the first six months of 2011. The cost of goods sold was 85.5% and 83.3% of our revenue in the first six months of 2011 and 2010, respectively. The principal cost component of our cost of goods sold is raw materials cost which includes petroleum. The increase in cost of goods sold year to year was primarily caused by an increase in raw material costs due to petroleum price fluctuations. We estimate that an increase in the price of crude oil of $10 per barrel would cause our raw material cost to increase by approximately 6%. There has been some increase in the cost of our raw materials as a result of an increase in crude oil prices throughout the year. There is not a significant difference in the cost of goods sold percentages among our different product lines and therefore, any increase or decrease in our raw material costs has a similar impact to our different product lines’ profitability.

The percentage increase in our cost of goods sold for the six months ended June 30, 2011 was influenced by the following events:

The increase in raw material costs due to petroleum price fluctuations;

The increase in the cost of labor; and

The added depreciation of phase I of the Hainin manufacturing facility which amortized into the cost of goods sold.

Gross Profit

Our gross profit for the six months ended June 30, 2011 was $4.9 million, resulting in a gross margin of 14.5%, a decrease of 2.2% from the gross margin of 16.7% for the six months ended June 30, 2010. The decrease in gross margin was a consequence of an increase in overhead unit rates as a result of increased labor costs and depreciation of phase I of the Hainin manufacturing facility.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses increased by 13.4%, or $0.3 million, to $2.4 million for the six months ended June 30, 2011, compared to $2.1 million in the comparable period of 2010. General and administrative expenses include rent, management and staff salaries, insurance, marketing, accounting, legal, and research and development expenses. Although we have strict standards to control our general and administrative expenses, we have increased our research and development expenditures as compared to the comparable period of 2010.

Interest Expense, net

Interest expense, net for the six months ended June 30, 2011 increased by 343.9%, or $314,388, to $405,816 compared to $91,428 in 2010. We have obtained additional short-term and long-term loans in the six months ended June 30, 2011 compared with the comparable period in 2010.

Other Income

Other income decreased by $192,778, or 72.9%, to $71,833 for the six months ended June 30, 2011 compared to $264,611 in the comparable period of 2010. During the six months ended June 30, 2010, we received approximately $146,690 from a former landlord for vacating leased space, which was paid in full during 2010.

Income Tax Expense

For the six months ended June 30, 2011, we recorded a tax provision of $433,238 compared to $316,534 in 2010. Our effective tax rates for the six months ended June 30, 2011 and 2010 were 19% and 15%, respectively.

Net Income

The decrease in our net income for the six months ended June 30, 2011 compared to the net income in the comparable period of 2010 was immaterial.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of June 30, 2011 that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

Liquidity and Capital Resources

Cash Flows

At June 30, 2011, we had $3.5 million in cash and cash equivalents on hand compared to $8.6 million at December 31, 2010. Our principal demands for liquidity are: increasing capacity, purchasing raw materials, sales distribution and the possible acquisition of new subsidiaries in our industry, as well as other general corporate purposes. As of June 30, 2011, we had working capital of $7.9 million, a decrease of $4.9 million from December 31, 2010. The decrease in working capital is primarily due to the use of current assets such as cash, other payables and short-term loans to purchase non-current assets. During the six months ended June 30, 2011, we used cash of approximately $1 million in operations, $13 million in investing activities, and paid down short-term loans of approximately $6.9 million. We financed these activities by issuing short-term loans of approximately $7.6 million, long-term loans of approximately $9 million and cash of approximately $5.1 million. We anticipate we will have adequate working capital to fund our operations and growth over the next 12 months.

Net cash flows used in operating activities for the six months ended June 30, 2011 was $1.0 million, which was comprised primarily of net income of $1.8 million, depreciation expense of $1.2 million, and a decrease in working capital components of $4.1 million.

We used $13.9 million from our investing activities during the six months ended June 30, 2011 primarily for the acquisition of property and equipment, including construction in progress. We are building a new BOPP tobacco film production line that we expect to be completed in the third quarter of 2011. The new line will be a BOPP film production line in a fully automated plant equipped with state-of-the-art production machinery. The total cost of this new facility without the new BOPP tobacco product line is expected to be approximately $12 million. We have a 70 million RMB ($10.8 million) credit facility that we can draw down upon to pay for the new BOPP tobacco product line as part of the new workshop (see discussion under “Liabilities” below).

Net cash provided by financing activities was $9.8 million from the issuance of short and long-term loans. $6.8 million was paid to terminate short term loans offset by $16.6 million provided by the issuance of short-term loans and long-term loans under the credit facility bearing interest rates between 5.56% and 8.20%.

Assets

As of June 30, 2011, our accounts receivable decreased by $2.6 million compared with the balance as of December 31, 2010. The decrease in accounts receivable during the six months ended June 30, 2011 was due primarily to our heightened focus on collection of accounts receivable. We intend to continue our efforts to maintain accounts receivable at reasonable levels in relation to our sales.

Liabilities

Our accounts payable increased by $0.1 million during the six months ended June 30, 2011. The increase in accounts payable during the six months ended June 30, 2011 was due primarily to increased sales. As the market demand increased, we purchased more raw materials for production. Our other payables increased due to the $1.9 million payable to the former shareholder of Shimmer and by the $1.2 million payable to Hainan Ri Xin Hotel Management Co. for the purchase of raw materials.

We have entered into a formal agreement with a vendor whereby we agreed to purchase new equipment for approximately $13.2 million. We already paid approximately $1.3 million toward the purchase of this equipment and have issued a letter of credit for the remaining amount. The equipment is expected to be installed in the third quarter of 2011, and be operational in the fourth quarter of 2011.

On August 2, 2010, Hainan Shiner Industrial Co., Ltd. (“Hainan Shiner”), our wholly owned subsidiary, entered into a credit facility with the Hainan Branch of the Bank of China. The credit facility is comprised of a seven-year 70 million RMB, or approximately $10.8 million, secured revolving credit facility. Hainan Shiner may not make any draw downs under this facility after December 31, 2011. During the six months ended June 30, 2011, the Company has drawn down approximately $9.1 million, and at June 30, 2011 there is approximately $1.7 million of available credit for future draw downs. Hainan Shiner may only use the loan proceeds to improve the technology of its BOPP film and to purchase certain equipment necessary for these improvements. Proceeds under the facility not used for these purposes may be subject to a misappropriation penalty interest rate of 100% of the current interest rate on the loan.

The initial interest rate on each withdrawal from the facility will be the 5-year benchmark lending rate announced by the People’s Bank of China on the date of such withdrawal, and is subject to adjustment every 12 months based upon this benchmark. Additional interest will be paid on any overdue loan under this credit facility of 50% of the current interest rate on the loan. Hainan Shiner and certain of its affiliates, including the Company, have provided guarantees and certain land, buildings, and property as collateral under this facility.

During the six month period ended June 30, 2011, we paid down approximately $6.8 million of our short-term loans and borrowed an additional $7.7 million in short-term loans. These loans will come due between December 19, 2011 and June 30, 2012.

We intend to meet our liquidity requirements, including capital expenditures related to the purchase of equipment, purchase of raw materials, and the expansion of our business, through cash flow provided by operations, and our current credit facility.

The majority of our revenues and expenses were denominated primarily in RMB, the currency of the PRC.

There is no assurance that exchange rates between the RMB and the USD will remain stable. We do not engage in currency hedging. Inflation has not had a material impact on our business.

Critical Accounting Policies

Accounts Receivable

Advances to Suppliers

The Company makes advances to certain suppliers for the purchase of its materials. The advances to suppliers are interest free and unsecured.

Inventory

Revenue Recognition

The Company’s revenue recognition policies comply with SEC Staff Accounting Bulletin 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

Sales revenue consists of the invoiced value of goods, which is net of value-added tax (“VAT”). All of the Company’s products are sold in the PRC and are subject to Chinese VAT of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing their end product. The Company recorded VAT payable and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the receivables.

Sales and purchases are recorded net of VAT collected and paid. VAT taxes are not affected by the income tax holiday.

Stock-Based Compensation

Income Taxes

Basic and Diluted Earnings Per Share

Earnings per share is calculated in accordance with the ASC Topic 260, “Earnings Per Share.” Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. There were 60,000 options and 521,664 warrants outstanding as of June 30, 2011. There were 190,000 options and 970,050 warrants outstanding as of December 31, 2010. The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations for the three and six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,
	2011				2010
			Per Share				Per Share
	Shares		Amount		Shares		Amount
Basic earnings per share		27,541,491	$	0.03		24,588,155	$	0.04
Effect of dilutive stock options and warrants		-		-		-		-
Diluted earnings per share		27,541,491	$	0.03		24,588,155	$	0.04

	Six Months Ended June 30,
	2011				2010
			Per Share				Per Share
	Shares		Amount		Shares		Amount
Basic earnings per share		27,541,491	$	0.07		24,588,155	$	0.08
Effect of dilutive stock options and warrants		-		-		2,791		-
Diluted earnings per share		27,541,491	$	0.07		24,590,946	$	0.08

Recent Accounting Pronouncements

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Not required

Item 4.

Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by this quarterly report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1.

Legal Proceedings

There have been no material changes from the disclosure provided in Part 1, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2010, as amended.

Item 1A.

Risk Factors

Not required

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

(Removed and Reserved)

Item 5.

Other Information

None.

Item 6.

Exhibits

Exhibit		Description of Exhibit

2.1		Share Transfer Agreement, dated as of May 2, 2011, by and between Fu Zhiyong and Shiner International, Inc. (incorporated by reference to Exhibit 2.3 of Shiner's Quarterly Report on Form 10-Q (Commission File No. 001-33960) filed with the SEC on May 16, 2011)

3.1		Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.3 of Shiner's Current Report on Form 8-K (Commission File No. 001-33960) filed with the SEC on July 27, 2007)

3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of Shiner's Current Report on Form 8-K (Commission File No. 001-33960) filed with the SEC on July 27, 2007)

31.1		Certification of our Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended, filed herewith

31.2		Certification of our Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended, filed herewith

32.1		Certification of our Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

32.2		Certification of our Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

101		Interactive Data Files regarding (a) our Balance Sheets as of June 30, 2011 and December 31, 2010, (b) our Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010, (c) our Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010 and (d) the Notes to such Financial Statements, filed herewith.

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized..

	Shiner International, Inc.

August 15, 2011	By: /s/ Qingtao Xing
	Name: Qingtao Xing
	Title: President and Chief Executive Officer

	Shiner International, Inc.

August 15, 2011	By: /s/ Xuezhu Xu
	Name: Xuezhu Xu
	Title: Interim Chief Financial Officer

Shiner International, Inc. - FORM 10-Q - August 15, 2011

Attached files

Shiner International, Inc. Reports