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EX-31.2 - EXHIBIT 31.2 - Shiner International, Inc.v231723_ex31-2.htm
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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
 
 
 
2

 
 
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.
 
 
3

 

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.
 
 
4

 
 
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.

 
5

 
 
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.
 
 
6

 
 
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. 
 
 
7

 
 
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.

 
8

 
 
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.
 
 
9

 
 
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.
 
 
10

 
 
 
· 
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.

 
11

 
 
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  
 
 
12

 
 
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.

 
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  
 
 
14

 

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.
 
 
15

 

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     $ -  
 
 
16

 
 
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.
 
 
17

 
 
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  

 
18

 
 
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.
 
 
19

 
 
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:

 
i.
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.
 
 
20

 
 
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  
 
 
21

 
 
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
 

 
22

 
 
 
 
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