UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
DC 20549


FORM
10-K





[X]          ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934


For
the fiscal year ended December 31, 2007





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




For
the transition period from_____________to_____________________.





Commission
File No. 001-33960





Shiner
International, Inc.
 (Exact
Name of Registrant as Specified in Its Charter)




Nevada
            
            98-0507398(State
      or Other Jurisdiction
              of  Incorporation
      or Organization)
            
            (I.R.S.
      Employer Identification No.)




19/F, Didu Building, Pearl River Plaza, No.
2 North Longkun Road


Haikou,
Hainan Province,China570125


(Address
of Principal Executive Offices, including zip code)





011-86-898-68581104
 (Registrant’s
Telephone Number, Including Area Code)


Securities
      registered under Section 12(b) of the Exchange
  Act:Common
      Stock, $0.001 par value
            The
      Nasdaq Stock Market LLC(Title
      of each class)
            (Name
      of each exchange on which registered)Securities
      registered under Section 12(g) of the Exchange
      Act:  None





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities
Act.


YesoNoþ





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the
Act.


YesoNoþ





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.      YesþNoo





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (Section 229.405) is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. þ





Indicate
by check mark whether the registrant is a large accelerated filer, accelerated
filer, a non-accelerated filer, or a smaller reporting company. See 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  oNon-accelerated
      filer  o
            (Do
      not check if a smaller reporting company)
            Smaller
      reporting company   þ





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





On March
24, 2008, 24,650,000 shares of the registrant’s common stock were
outstanding.


The
aggregate market value of the voting stock held by non-affiliates as of June 29,
2007 was approximately $44,000.





Documents
Incorporated by Reference


None





The
statements contained in this Annual Report on Form 10-K that are not historical
facts are “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 with respect to our financial
condition, results of operations and business, which can be identified by the
use of forward-looking terminology, such as “estimates,” “projects,” “plans,”
“believes,” “expects,” “anticipates,” “intends,” or the negative thereof or
other variations thereon, or by discussions of strategy that involve risks and
uncertainties.  Management wishes to caution the reader of the
forward-looking statements that such statements, which are contained in this
annual report, reflect our current beliefs with respect to future events and
involve known and unknown risks, uncertainties and other factors, including, but
not limited to, economic, competitive, regulatory, technological, key employee,
and general business factors affecting our operations, markets, growth,
services, products, licenses and other factors discussed in our other filings
with the Securities and Exchange Commission ("SEC"), and that these statements
are only estimates or predictions.  No assurances can be given
regarding the achievement of future results, as actual results may differ
materially as a result of risks facing us, and actual events may differ from the
assumptions underlying the statements that have been made regarding anticipated
events.





These
forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause our actual results to be materially different from
any future results expressed or implied by us in those statements. Some of these
risks are described in “Risk Factors” in Item 1A of this annual
report.





These
risk factors should be considered in connection with any subsequent written or
oral forward-looking statements that we or persons acting on our behalf may
issue. All written and oral forward looking statements made in connection with
this annual report that are attributable to us or persons acting on our behalf
are expressly qualified in their entirety by these cautionary
statements.  Given these uncertainties, we caution investors not to
unduly rely on our forward-looking statements. We do not undertake any
obligation to review or confirm analysts’ expectations or estimates or to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this document or to reflect the
occurrence of unanticipated events. Further, the information about our
intentions contained in this document is a statement of our intention as of the
date of this document and is based upon, among other things, the existing
regulatory environment, industry conditions, market conditions and prices, the
economy in general and our assumptions as of such date. We may change our
intentions, at any time and without notice, based upon any changes in such
factors, in our assumptions or otherwise.





PART
I





In this
Annual Report on Form 10-K, we will refer to Shiner International, Inc., a
Nevada corporation, as "Shiner," "our company," "we," "us," and
"our."





Item
1.  Business.





General





We were
incorporated as Cartan Holdings Inc. on November 12, 2003 in
Nevada.  Since July 23, 2007, our principal place of business has been
based in the People's Republic of China (the "PRC").  On July 23,
2007, we completed a share exchange transaction with Sino Palace Holdings Ltd.,
a British Virgin Islands corporation, pursuant to which, we acquired four
companies located in the PRC that are engaged in that country's research,
manufacture, sale and distribution of technology driven advanced packaging film
products.  As the result of this reverse acquisition, we changed our
name to Shiner International, Inc. on July 24, 2006.  Our headquarters
are located at 19th Floor, Didu Building, Pearl River Plaza, No. 2 North Longkun
Road, Haikou, Hainan Province, PRC 570125, Telephone:
+86-898-68581104.  Our primary business consists of the research and
development, manufacture, marketing, sale and distribution of technology driven
advanced packaging film products, including coated films, shrink-wrap films,
common films, anti-counterfeit laser holographic films and color printed
packaging films.





We
develop, manufacture and distribute packaging film and color printed packaging
through our four operating subsidiaries, Hainan Shiner Industrial Co., Ltd.
(“Shiner Industrial”), Hainan Shiny-day Color Printing Packaging Co., Ltd.
(“Shiny-day”), Zhuhai Modern Huanuo Packaging Material Co., Ltd. (“Zhuhai”) and
Hainan Modern Hi-Tech Industrial Co., Ltd. (“Modern”). Our products include
coated film, shrink-wrap film, common film, anti-counterfeit laser holographic
film and color printed packaging materials. All of our operations are based in
the




1




PRC and
each of our subsidiaries was formed under the laws of the PRC. We currently
conduct our business through the following four operating subsidiaries in the
PRC (collectively, the “Shiner Group”):




·
            Shiner
      Industrial, incorporated under the laws of the PRC on May 21, 2003, is
      headquartered in Haikou, Hainan Province,
PRC;


·
            Shiny-day,
      incorporated under the laws of the PRC on March 19, 2004, is headquartered
      in Haikou, Hainan Province, PRC;


·
            Zhuhai,
      incorporated under the laws of the PRC on December 25, 2006, is
      headquartered in Zhuhai, Guangdong Province, PRC;
  and


·
            Modern,
      incorporated under the laws of the PRC on October 27, 2006, intends to
      locate its operations in the Shiziling Feidi Industrial Park of Haikou,
      Hainan Province by April 2008.





We
operate in several markets within the packaging film segment: Bi-axially
Oriented Polypropylene (“BOPP”) based films, coated films, anti-counterfeit
films and color printed packaging materials. For the nine months ended September
30, 2007, color printed packaging products made up approximately 36.6% of our
revenues, BOPP tobacco film made up approximately 25.7% of our revenues, coated
film accounted for approximately 33.5% of our revenues and anti-counterfeit film
sales equaled approximately 4.2% of our revenues. As of March 24, 2008, our
production capacity consisted of:




·
            Three
      coated film lines with total capacity of 6,000 tons per
      year;


·
            One
      BOPP tobacco film production line with total capacity of 3,500
      tons per year;


·
            One
      BOPP film production line with total capacity of 7,000 tons per
      year;


·
            Three
      color printing lines; and


·
            Three
      anti-counterfeit film lines with total capacity of 700 tons per
      year.





Overall,
our growth strategy is focused on: (i) continuing our efforts to gain
international market share in coated film through better pricing strategy and
excellent after-sale service; (ii) expanding sales in anti-counterfeit film,
especially to high-end brand spirits and cigarette manufacturers; (iii)
developing next generation films; and (iv) acquiring an anti-counterfeit
technology company. While we are not focused on growing our BOPP product sales,
the BOPP film business provides us with steady cash flow to cover operating
costs and allows us to explore other, more sophisticated film technology
products. Although we rely on the revenue generated from our BOPP based films
and coated film sales, we are also focused on developing and exploiting our
anti-counterfeit film technology and other more sophisticated film products. As
a result, we expect to generate more significant revenues and greater profit
margins from our anti-counterfeit film products over the next year because of
the specialized and proprietary nature of these products. We believe that we
will attribute our future growth to sales of our anti-counterfeit film
products.





History





We were
incorporated in Nevada on November 12, 2003 as Cartan Holdings Inc. We were
initially formed as an exploration stage company involved in the search for
mineral deposits. On July 23, 2007, we completed a share exchange transaction
with Sino Palace Holdings Ltd., a British Virgin Islands corporation, pursuant
to which we acquired the Shiner Group located in the PRC. On July 24, 2007, we
changed our name to “Shiner International, Inc.” This transaction is commonly
referred to as a “reverse acquisition” in which all of the outstanding capital
stock of the Shiner Group was effectively exchanged for a controlling interest
in our company, which was a publicly held “shell” corporation within the meaning
of within the meaning of Rule 12b-2 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), at the time of the transaction.  After
giving effect to the completion of the reverse acquisition, we directly own the
equity interests in Shiner Industrial, Shiny-day and Zhuhai, and will continue
to conduct our operations through the Shiner Group as our operating
subsidiaries.





Prior to
our reverse acquisition with Sino Palace, we owned a 100% undivided right, title
and interest in and to the mineral property known as the “Cartan mineral claim.”
Our interest in the property consisted of the right to explore for and remove
minerals from the property.  The Cartan mineral claim expired on
December 15, 2007. From and after the closing date of the reverse acquisition,
our primary operations consist of the operations of each of the subsidiaries of
the Shiner Group.




2




Business
Overview





Shiner
Industrial produces four main types of packaging film: common BOPP film for
package over-wraps, coated films, shrink-wrap and anti-counterfeit films.




BOPP
refers to the manufacture of polypropylene (“PP”) films using an orienting
system. BOPP is manufactured by three different processes, with resulting films
having different properties. Production can be achieved through the bubble
process, the sequential-machine direction orienting trans-direction (“MDTD”)
stentering process, or the simultaneous MDTD orienting-stentering process.
Shiner Industrial uses the sequential or the double bubble process, in which a
polypropylene film is oriented in two directions (machine and transverse
directions). BOPP films are widely applicable for printing, lamination and
over-wrap packaging. The main benefits of BOPP films are its
stiffness, durability, high tensile strength and clear optics. BOPP films
range from 15 to 50 microns, and can be single or double coated with co-extruded
structures, in transparent, opaque, or metalized varieties. Additionally, BOPP
films can be treated with acrylic and Poly-vinylidene Chloride (“PVDC”) coatings
for increased sealing and barrier properties. The films use mainly homo-polymer
PP and random co-polymer PP.





Anti-counterfeit
film is a specialty product derived from BOPP film. Because piracy is a major
concern both within the PRC and internationally, many companies are attempting
to combat this problem on national and global levels. Many companies currently
rely on holographing technology to address piracy and counterfeiting concerns.
However, we believe that our technology more effectively protects our customers
from piracy and counterfeiting. We have applied proprietary technology in order
to develop specialized anti-counterfeiting film products.





Shiny-day
fulfills printing needs of multiple manufacturers, primarily consumer goods
companies, located in the PRC and serves as a convenient add-on feature for
customers looking for one-stop service in fulfilling their packaging and
colorprinting
needs. Shiny-day has two color printing lines.





Zhuhai
has one BOPP film production line with an annual capacity of 7,000 tons. We
formed Zhuhai to meet a substantial amount of our BOPP film raw material needs,
including demand for BOPP Tobacco Film.




Modern
currently performs sales and marketing for products produced by other Shiner
Group entities. Modern does not presently own any operating assets. We formed
Modernin 2006 in
order to take advantage of special tax treatment in the PRC for technology
assets. We have applied for this special tax treatment with the municipal
government and intend to implement operations in Haikou City when and if we
receive such approval. While there can be no assurance that our application will
be approved by the PRC government, we are confident that Modern will receive
this approval, which we expect to receive in the second quarter of fiscal
2008.





Industry
Overview





Economies
with a higher per capita gross domestic product have a greater demand for
packaging films. Packaging films are used mainly by food and consumer products
manufacturers primarily to preserve texture, flavor, hygiene, convenience and
safety of consumer products, such as foods, medicine, tobacco and cosmetics.
Packaging films generally consist of clear flexible films based on
petrochemical-based polymers (polyolefin). Through the process of forming
plastic films in cross-machine directions (biaxial orientation), the underlying
tensile strength of the film can be strengthened and the resulting film product
forms the basis for most packaging films.




Industrial
growth is a key driver of demand for coated and laminated film materials. In the
PRC during the past 3 to 5 years, the increasing demand for coated and laminated
film has predominantly been driven by:





·
            international
      consumer goods companies relocating operations into mainland
      China;


·
            concerted
      efforts by the PRC's government to improve safety, hygiene and sanitation
      in consumer products in order to reduce contamination and
      spoilage;


·
            growth
      in consumer incomes in the PRC during the past 5 to 10 years have led
      consumers to
      demand more convenience (e.g. individual packaged snacks) and attractive
      packaging without adding weight;
and




·
            concern
      over protection from product
tampering.




3




From the
manufacturer to the grocer and to the consumer’s home, airtight plastic
packaging helps keep foods and other products fresh and free from contamination
without adding bulk.




Coated Films, Tobacco and other BOPP
Based Films





The
packaging film industry in the PRC is concentrated among relatively few domestic
companiesand
scattered smaller producers with limited capacity. Significant initial capital
and technological requirements are necessary to produce coated, shrink-wrap and
anti-counterfeit films that meet national and international criteria. Stricter
industry regulations and increased product specifications by end-users are
eliminating many of the industry’s smaller players.





We derive
a substantial portion of our annual revenues from the coated and BOPP based
films markets. We plan to continue operating in these markets in order to
provide us with the capital necessary to broaden our anti-counterfeit film
business.





Anti-counterfeit Film





Piracy
and counterfeit products have resulted in both significant economic losses to
manufacturers and health problems to consumers on a global basis. Consequently,
a market for anti-counterfeiting film packaging and other related products has
developed. Accordingly, we believe it would be valuable for us to place greater
emphasis on growing our current anti-counterfeit film packaging
business.





Products





Our
products include a variety of packaging films that are used by food and consumer
products manufacturers to preserve texture, flavor, hygiene, convenience and to
protect their products. The films are used in a variety of industries, such as
bakery, beverage, candy/confections, cheese, cosmetics/personal, compact discs,
dairy, fruits/vegetables, nuts, pharmaceuticals and tobacco. In addition, we
provide printing services for a variety of consumer products.





For most
packaging films, BOPP film serves as the base film from which anti-counterfeit,
coated, tobacco and other specialty films are designed. There are multiple
manufacturers of BOPP film in the PRC qualified to meet international standards.
However, packaged goods require different porosity levels for water vapor,
gases, as well as fragrance and heat resistance barriers depending on whether
the item is edible (such as packaged dates, crackers, sweet cakes, freeze-dried
coffee) or a non-food product (such as medicine, tobacco, or dried flowers).
Shiner Industrial uses BOPP as the base film from which more sophisticated
films, such as anti-counterfeit, coated and tobacco films, are
produced.





Anti-counterfeit Film





Anti-counterfeit
film is a BOPP film embossed with a high technology, multi-dimensional insignia
that creates eye-catching illusions and makes it easier to increase brand
identity. It is generally used in the packaging of high-end cigarettes, DVDs and
other frequently imitated or pirated products.





Coated Film





Coated
film is a functional packaging film in which a thin layer of polyolefin-based
film is sealed either on one or both sides of the film with a varying type
of chemical substance (coating layer). Depending on which coating
layer is used, coated films have greater endurance and tensile
strength and can be produced in heat-resistant, shrink-wrapped, pealable or
other varieties. Coated films are known for their superior moisture, vapor,
flavor and aroma barrier traits, as well as their clarity and superior
printability. The base film is generally either BOPP, Bi-oriented polyethylene
terephthalate polyester film (“PET”) or nylon (“BOPA”), depending on the needs
of the end-user. When BOPP film is used, it can be coated with Acrylic (“AC”),
PVDC or Thermoplastic Poly Vinyl Alcohol (“PVOH”). PVDC is a type of recognized
packaging material with high barrier properties for water vapor, oxygen, aroma
or flavor and other gases such as nitrogen and carbon dioxide. PVOH is used for
its excellent oxygen barrier properties. When an AC layer is applied, it works
as a protective armor and is well-suited for multiple types of




4




water-based
inks or ultra-violet inks to print upon. The use of water-based inks is
preferred by most customers because of its cost savings and its
environmentally-beneficial advantages as compared to oil-based
inks.  To our knowledge, we are the only producer of AC coated film in
the PRC.  In terms of its function as an oxygen barrier,
BOPP film has an average of 2000 ml oxygen infiltrate for every square meter.
PVDC has an average of 10 ml oxygen infiltrate for every square meter. PVOH has
an average of 0.7 ml oxygen infiltrate for every square meter. All films can be
surface-printed, reverse-printed or used unprinted.





BOPP Tobacco Film





BOPP Tobacco Film is a box over-wrap
film designed to meet the industry requirements for packaging appearance,
product freshness and clear optics.





Color Printing Services





Color printing services consist of
surface printing and reverse printing services used mainly by consumer goods
manufacturers and beverage companies.





Manufacturing





For most
packaging films, BOPP film serves as the base film from which anti-counterfeit,
coated, tobacco and other specialty films are designed. There are multiple
manufacturers of BOPP film in the PRC qualified to meet international standards.
Shiner Industrial, Shiny-day and Zhuhai use film machines and film lines to
manufacture the packaging and specialty films.





As of
March 24, 2008, Shiner Industrial had three anti-counterfeit film machines,
three coated film lines, one BOPP tobacco film line and one 10-color color
printing line. Our coated film lines have the ability to apply single-coated
(one-side, either inside or outside) or double-coated (both inside and outside)
layers in a variety of plastic materials depending on the end-user’s need, such
as PVDC, PVOH or AC.





As of
March 24, 2008, Shiny-day had two 8-color printing lines; Zhuhai had one BOPP
film production line with a capacity of 7,000 tons per year; and Modern did not
have any operating assets.





Sales
and Marketing





Since the
inception of our film packaging line of business, we have concentrated on
forming an experienced, knowledgeable and customer-oriented marketing team. As
of March 24, 2008, we had 22 individuals in our marketing group, of which 17
have been working in the industry for five years or more and are familiar with
buyers’ changing needs and concerns. In order to effectively serve the needs of
different customers, marketing functions are divided into four
units:





·
            Coated
      films;


·
            BOPP
      and tobacco films;


·
            Color
      printing; and


·
            International.





Our
international marketing unit services both the coated and BOPP film products. In
addition, we have formed a marketing team for our anti-counterfeit film products
that targets well-known brand liquor and tobacco companies as well as the
entertainment industry to cover products such as DVDs and CDs.





Coated Films





We have
established relationships with consumer goods manufacturers who comprise the
majority of the coated film customers in the PRC. Potential customer data is
frequently updated through market research we perform to identify customers and
sales calls to potential customers.




5





Various
packaged goods have a number of different requirements, ranging from different
porosity levels for oxygen, water vapor, and other gases to fragrance and heat
resistance barriers. The specific requirements depend on whether the packaging
is intended for edible items or non-food products. As a result, our marketing
team’s experience plays a key role in gaining access to and servicing such
customers.




Shiny-day’s
marketing personnel typically serves both our coated film products and print
services customers in the PRC in order to provide them with the convenience of
“full service” from a single vendor.





BOPP Tobacco Films





We have
established a well-respected reputation in the PRC BOPP tobacco films industry
and are generally able to deal directly with our customer base, as opposed to
dealing through intermediaries. Since we have already received the approval of
the government of the PRC, quality requirements, price requirements, service and
relationships play a greater role in maintaining established customers and
obtaining new ones. Because of the attractive location of our plant and
facilities in Haikou on Hainan Island, generally known as the “Hawaii” of China,
we frequently invite potential customers to visit and inspect our operations
first-hand.  We also host many of the annual tobacco and other large
industry management conventions.





Anti-counterfeit Films





Piracy is
a serious problem in the Chinese consumer marketplace, resulting in economic
losses to manufacturers and health and safety costs to consumers. In an effort
to address this problem and to protect the patent holders, Shiner Industrial has
developed a unique patented anti-counterfeit packaging film. Our film has
received several recognition awards from national organizations in the PRC and
has the beneficial characteristics of other BOPP films, such as heat and
temperature resistance, shrink-wrap, flavor and aroma barrier.





Shiner
Industrial was nominated as the National Standardization Creator for both coated
and anti-counterfeit films by the Industrial’s Standards Administration of the
PRC (“SAC”) in June 2007. This nomination recognizes that Shiner Industrial’s
products are created on the forefront of technology, are perfected through its
strong technological strength in the functional packaging films industry, and
heighten the barriers of entry for new market entrants.





In August
2006, we were awarded the 2004-2005 Annual Technology Advancing Certificate by
People’s Government of Haikou for our BOPP Laser Holographic anti-counterfeit
shrinkable film. Additionally, our BOPP laser anti-counterfeit film was selected
to be listed in the China Reputable Products Database by China Enterprises Union
on April 18, 2006. In June 2005, we were honored as the National New Product by
The Ministry of Science and Technology of the PRC and Ministry of Commerce of
the PRC for our BOPP laser anti-counterfeit film.





We
believe that in the next five years, anti-counterfeit film products will play a
much larger role in our sales growth. As such, we have formed a marketing team
that targets well-known brand liquor and tobacco companies as well as the
entertainment industry to cover such products as DVDs and CDs.





Color Printing





While the
color printing industry tends to have a high degree of price elasticity, our
customers are generally brand name consumer goods companies that seek quality
printing. Through our market research, we identify potential customers, and
marketing is often performed together with the coated and BOPP film teams by
making joint sales calls.





International





In late
2004, we began to attend international packaging exhibitions and trade fairs
held in Europe and the Americas, mainly to inform global customers of our
service capabilities and effective distribution system in the international
market. We also sought to communicate the quality, service and price advantages
of our films in a face-to-face setting. This methodology has proven highly
effective in gaining new customers, and also in reaching multiple converters and
distributors located in the U.S., Europe and South Africa.




6





In 2006
and 2007, we spent over $160,000 and $260,000, respectively, on international
marketing and promotion and we have budgeted $400,000 for such expenses in 2008,
which includes travel, industry advertising, and exhibition fees.





Competitive
Advantages





We
believe that we are able to effectively compete in both the domestic Chinese and
international markets by means of proven quality, cost advantages and a service
team that addresses customers before, during and after the sale process in order
to build long-term customer relationships. Our customer-oriented perspective
permeates each business unit and is largely responsible for our ability to
penetrate new markets and successfully build on sales to new
customers.





·
            Quality - In the
      domestic Chinese market, our products generally exceed accepted industry
      standards, while in the international market, our products have received
      international and U.S. Food and Drug Administration ("FDA") certification
      and have proven to equal or even exceed the quality of industry
      leaders.


·
            Price - In the PRC, we
      have a lower operating cost basis than most competitors due to economies
      of scale and the design of our own production lines. In the international
      market, we are able to take advantage of lower labor and operating costs
      in comparison with Western industry leaders and our prices are
      approximately 25% lower on same product
sales.


·
            Customer Service - For
      each business line, we have an accomplished sales and after-sales service
      team that is trained to promptly respond to
  customers.


·
            One-Stop Service - By
      providing film making, packaging, and printing services, we are able save
      customers both lead-time and costs.


·
            Research - We have 14
      patents, seven patent applications pending and two trademarks issued by
      the PRC. Our research and development team includes over 20 engineers, of
      which several hold masters degrees in related fields. In 2006, we entered
      into a five-year research agreement with China’s Science & Technology
      University, under which we own the proprietary rights to all findings to
      dedicated research projects, which are undertaken at our request. We will
      pay estimated fees of $12,850 annually under our research
      agreement.





Suppliers





Major raw
materials required in the manufacturing processes for our packaging products
include petroleum-based resins and mixing chemicals, which are primarily
supplied to us by large chemical companies. For these raw materials, we
generally maintain purchase contracts for a period of no greater than six
months. However, for many other materials, we can generally choose from multiple
producers and such orders are placed on an “as-needed” monthly
basis.





As all
BOPP films, including tobacco and anti-counterfeit, are petroleum based, the
effects of any short-term fluctuations in the price of oil will be averaged into
the earnings over the period due to the cyclical nature of production, inventory
and sales. Any long-term increases in the price of oil will have an adverse
impact on our earnings. However, as there are currently no synthetics or
substitute materials available in the market, management believes that any
long-term increase in the price of oil will be made up for by an increase in
sales prices by all producers across the board.





The base
materials for many of Shiner Industrial’s products are derived from petroleum.
Approximately 60% of the raw materials for Shiner Industrial’s BOPP tobacco film
operations are imported from multi-national chemical companies such as Sumitomo
Chemical Co., Ltd. In contrast, only about 7.1% of raw materials for coated
films are imported because the current base BOPP film can be supplied through
qualified domestic suppliers in the PRC. Due to increases in demand for our BOPP
tobacco films in 2007, we were forced to purchase 2,700additional tons of BOPP
film from PRC domestic third party sources in order to satisfy the production
needs of our coated film business.





Shiny-day
purchases all of its raw materials domestically in the PRC. There are numerous
suppliers for each raw material internationally and in the PRC domestic market.
We generally select a supplier based on the best




7


combination
of quality, price and service. There are no raw materials used in Shiny-day’s
production process that are provided by any sole source suppliers.





In the
future, we anticipate that our new BOPP film line operated by our Zhuhai
subsidiary, with the capacity to provide 7,000 tons of BOPP film annually, will
produce enough basic BOPP film to satisfy the needs of the coated film group and
color printing group and alleviate the need to source BOPP film from third
parties. We estimate that this will save us approximately $65 per ton in raw
material costs.




In
general, we do not have long term contracts with our suppliers. We maintain
relationships with two to three approved suppliers for each raw material
purchased and generally experience no delay in meeting our production needs on a
timely basis.





Customers





Our
customers are composed mainly of consumer products manufacturers, distributors,
printers and converters. About 60% of our customers are located in the PRC, with
the remainder located in Southeast Asia, Europe and North America. While our
coated, tobacco, and anti-counterfeit packaging films are sold in the
international market, our color printing business mainly serves customers in the
PRC who are looking for one-stop service to fulfill their printing and packaging
needs by a single vendor.





Coated Film - The PRC





We are
the leading producer of coated films in the PRC with approximately 30% of market
share of the PRC domestic coated film output in 2007. The PRC’s domestic
competitors exist only in the form of smaller rivals with an average capacity of
several hundred tons. Approximately 80% of our sales are made directly to
customers, with 20% sold through domestic distributors servicing one-off
small-scale packaging operations. We believe we are a premier producer of coated
films nationally, and enjoy a reputation both for first-rate quality and
service.





We
maintain contracts with our larger customers generally for periods ranging from
six months to one year. Smaller customers, or those that constitute less than 2%
of our sales, are subject to pre-payment on all orders. Our largest customer in
the PRC, Dongguan XuFuJi Foods Co., Ltd. (“XuFuJi”), a manufacturer of snacks
and cakes, accounted for approximately 30% of our coated film sales in the
PRC and 10% of our total sales in 2007. While we anticipate that sales to
XuFuJi will continue to grow at the rate of 20% annually, we expect sales to
XuFuJi to decline as a percentage of our total sales as we continue to grow our
customer base.





We enter
into contracts bi-annually with XuFuJi based on their six month forecast
production needs and work closely with them throughout the year to meet their
anticipated needs.





Coated Film -
International





During
2007, approximately 10 customers accounted for approximately 30% of our total
coated film sales with an average sale amount of $400,000 per customer.
Approximately 10% of exported coated films are sold to printing and packaging
companies located in the U.S. with the remainder sold to companies located in
Southeast Asia, Turkey, South Africa, and Australia. Approximately 50% of
exported coated film sales are made to the “converter” industry, which
represents mass packaging operations mainly in Southeast Asia and Eastern Europe
that serve as packaging hubs for products sold in the U.S. and European markets.
Rolls of finished coated film are sent to the converters where they print, cut,
fold, and insert re-sealable zips to form pouches for items such as dried
fruits, nuts, beverages and dairy products like cheese and yogurt. In 2006 and
2007, our international sales have more than doubled and account for 50% of all
of our coated film sales.





BOPP Tobacco Film - the
PRC





As
tobacco remains one of the state-controlled industries in the PRC, all of our
PRC domestic BOPP tobacco film sales are made to provincial cigarette
manufacturers who can buy only from pre-approved domestic manufacturers meeting
the quality and technical specifications as well as the standard price
requirements of the government of the PRC. In 2007, we acquired the business of
two additional PRC provincial cigarette manufacturers




8


and
have verbally contracted to sell over 3,500 tons of film to the government of
the PRC during 2007. In 2007, our sales in the PRC accounted for over 86% of
BOPP Tobacco sales, or approximately $10.2 million.




BOPP Tobacco Film -International





In the
international market, we sell to cigarette manufacturers in Southeast Asia,
Africa and Taiwan. Our largest international customer, Vintaba Tobacco of
Vietnam (“Vintaba”), accounted for approximately $1.56 million in sales during
2007, which represented approximately 13.2% of our BOPP sales and approximately
3.64% of overall sales.





Anti-counterfeit Film





We
introduced anti-counterfeit film products in 2005 as a superior alternative to
the industry’s hologram printed films. Our largest customer in the
PRC domestic market is Shanghai Epic Manufacturing Operations, an affiliate
of Sony Music International, and our largest customer in the international
market is Vintaba. Our anti-counterfeit product sales more than doubled in 2007
to over $3.5 million, of which Vintaba accounted for approximately 29.63% of
such sales. A majority of our customers are brand name producers seeking to
protect copyrights and reduce the occurrence of pirated product. We plan to
target tobacco, alcohol and entertainment companies as sources of new
sales.





Color Printing





The main
customers of our color printing business are brand-name food and commodity
companies in the PRC that have strict requirements for quality and service.
We believe that our customers are also attracted to the one-stop service that we
offer by fulfilling both their packaging film and printing
requirements.





Our two
largest customers, Guangzhou LiBai Enterprise Group Co., Ltd. (“LiBai”) and the
Coconut Palm Group Company Limited (“Coconut Group”), accounted for 93% and
3.5%, respectively, of color printing sales in 2007.We have a contract with
LiBai to continue to meet their operating needs through 2010. Coconut Group
generally renews its specific operating needs on a bi-annual basis.





Research
and Development





To
maintain a competitive advantage in the marketplace and keep pace with current
developments, we engage in continuous research and development. We take great
pride in our research ability both in the production line and in the finished
product. Our internal engineers have designed two of the coated film production
lines. By designing our own production lines, we intend to reduce our fixed
asset investment by approximately 35% and better meet our specific manufacturing
needs. The director of our research department has over 15 years of working
experience in the industry.





During
2006 and 2007, we spent approximately $120,600 and $121,618, respectively, on
research and development projects with the majority expended on new product
trials and experimental manufacturing techniques, including fog prevention, high
heat shrinkable and powder wrapping films. In 2008, we plan to spend
approximately $400,000 in the area of new product trials. All research and
development costs are funded through our operating cash flow and are expensed as
incurred.




In
addition to in-house research and development, we have sponsored several
projects with research institutions and universities in the PRC to which we
retain all proprietary rights for the research funded by us. We also have a
formal agreement with China’s Science & Technology University through 2010
for which we have proprietary rights to all findings based upon dedicated
research conducted on our behalf. We also have informal alliances with Fudan
University in Shanghai, Sun Yat Sen University (Zhong Shan) in Guangzhou and
Tsinghua University in Beijing.




9





Intellectual
Property





We hold
14 patents on both products and production equipment that have been issued by
the State Intellectual Property Office of the PRC. We have additional products
and production equipment for which seven patent applications are currently
pending and we expect to receive during the first half of 2008. We also
have two trademarks issued by the State Intellectual Property Office of the
PRC.





Employees




We have a
centralized labor management system for all operating units. Labor and
employment affairs of each subsidiary are managed by our central human resources
department.





As of
March 24, 2008, we had 492 full-time employees. Of these employees, 250
employees are employed by Shiner Industrial, 193 employees are employed by
Shiny-day and 49 employees are employed by Zhuhai. Modern has no employees.
Our employees work in the functional units as indicated in the table
below.





Department
            
            Total
      Number
            Shiner
      Industrial
            Shiny-day
            ZhuhaiManagement
            
            
            7
            
            
            5
            
            
            2
            
            
            0All
      administration
            
            
            25
            
            
            13
            
            
            10
            
            
            2Sales
            
            
            22
            
            
            16
            
            
            6
            
            
            0Production
            
            
            438
            
            
            216
            
            
            175
            
            
            47Total
      Employees
            
            
            492
            
            
            250
            
            
            193
            
            
            49




Government
and Environmental Regulation





Through
the laws and regulations of the PRC and the provincial government of Haikou
City, our products are subject to regulation by governmental agencies
responsible for food packaging and hygiene.





In
general, the quality and hygiene requirements of customers, especially those
located internationally, exceed government requirements in the PRC. Our PVDC and
all coated films have already met the approval of FDA requirements as well as
those required for food products sold in the European Economic Community
("EEC").





As such,
the business registrations, production process, and certain products are
certified on a regular basis and must be in compliance with state governments
and industry agencies. Shiner Industrial has been assessed and certified as
meeting the requirements of ISO 9001:2000 for designing and manufacture of BOPP
films, PVDC coated film, BOPP laser holographic anti-counterfeit film for
package by SGS. The certificate is valid until January 2009.




We are
also subject to China’s National Environmental Protection Law as well as a
number of other national and local laws and regulations regarding pollutant
discharge for air, water and noise pollution. We believe that we are in
compliance with such laws and regulations.





In 2007,
we incurred expenses of approximately $10,000 to comply with governmental and
environmental regulations in the PRC.





Competition





Coated Film





We are
the leading producer of coated films in the PRC with domestic competition only
in the form of smaller rivals with an average capacity of several hundred tons.
We believe that we have numerous competitive advantages over our smaller
domestic rivals with regard to total capacity, service, market research,
quality, research and production line design.




10





In the
international market we face strong competition from industry leaders such as
Dupont Energy Co., Innovia Films Ltd. and Exxon Mobil Corporation. Each of these
corporations has much larger production capacity than us, and each has a strong
reputation as they have significant experience in the coated films market.
Distinct from many other Chinese producers, we are able to effectively compete
in the international arena. We believe that our combination of
internationally-certified product quality with the FDA and EEC, experienced
after-sales service team and product selection in a low-cost setting will
continue to attract multinational buyers and propel sales growth.





BOPP Tobacco Film





As
tobacco remains a state-owned and operated industry in the PRC, the government
buys only from approved PRC domestic vendors and competition exists only in the
form of other domestic film companies. In addition, each province is required to
maintain two to three suppliers, thus competition among qualified players is
limited. In the domestic market there are several qualified large producers
including:





·
            Jian su Zhongda New Material
      Group Co., Ltd., a Nanjing-based company listed in the Shanghai
      Stock Exchange. It is the largest manufacturer of BOPP Tobacco film in the
      PRC;


·
            Fo Shan Plastics Group Co.,
      Ltd., listed in the Shanghai Stock
  Exchange;


·
            Zhanjiang
      Packaging Enterprises Ltd., in
  Guangdong;


·
            Yunnan Kunlene Film
      Industries Co., Ltd., in
Yunnan;


·
            Yunnan Hongta Plastics Co.,
      Ltd., in Yunnan; and


·
            Hubei Firsta
      Packaging Co., Ltd., in
Hubei.





As we
have attained certification as a government supplier, a certain level of annual
salesare
guaranteed to us from the government of the PRC. However, the process of
maintaining and building the volume of sales has become largely a matter of
industry relationships in which we have extensive experience.




In the
international market, we face competition from large multi-nationals as well as
Southeast Asian and Japanese firms. We believe we have an absolute price
advantage over our Western competitors due to our lower production costs.
Accordingly, it is Asian-based producers that pose the greater degree of
competition. As we increase both our production capacity and marketing efforts,
we expect our international sales to continue to grow. However, we will continue
to focus more of our efforts on expanding our anti-counterfeit and specialty
films as opposed to our international market for BOPP tobacco film.




Anti-counterfeit
Film




Because
our anti-counterfieting product is unique, we do not face direct competition.
However, established international producers such as Applied Extrusion
Technologies, Inc. and Innovia Films Ltd. do produce their own anti-counterfeit
films based mainly on printed holograms, which are relatively simple to
duplicate. Rather than direct competition, we are focusing on market awareness
and educating buyers as to the superior quality of our products over these
hologram-based counterfeit films. The advantages of our BOPP anti-counterfeit
laser holograph films include:





·
            Specially
      designed BOPP basic film which has all the excellent characteristics of
      high polish shrinkable films, increasing the aesthetic feeling of packaged
      products. BOPP basic films can endure oil ink erosion and have a barrier
      to vapor and oxygen, which will maintain the aroma and extend storage
      life;


·
            The
      laser holograph layer improves the anti-static ability and prevents the
      conglutination of films; and


·
            To
      produce BOPP anti-counterfeit films, the manufacturers need to buy BOPP
      film production lines that are expensive for smaller players in this
      field.





With
traditional laser holography using anti-counterfeit signs, counterfeit
manufacturers can easily purchase these signs from the printing companies. In
fact, counterfeit manufacturers can even illegally buy the motherboard from
these printing companies, so that they can be easily copied. In comparison, BOPP
laser holograph anti-counterfeit films uses specially designed BOPP basic films
and laser holograph technology with secret microcode which effectively prevents
the duplication of the design.




11





Compared
with other chemical or oil ink printing anti-counterfeit technology, our
products are environmentally friendlier since consumers can directly tear the
films and throw them away.





Compared
with code and call center technology, consumers find it easier to identify
the products. The consumers do not need to call an anti-counterfeit center and
also have the added benefits of BOPP film.





Color Printing





We are
the largest color printing service provider in Hainan province and rank
approximately 20th in the overall Chinese market. Due to low operating costs,
the printing industry is highly fragmented with approximately 4,000 soft
packaging and printing companies in the PRC.





With over
4,000 domestic printers, competition in the PRC is fierce and industry margins
are low. Accordingly, we maintain our printing services mainly as a convenience
for current film customers who are more concerned with quality, service, and
one-stop printing and packaging service than with price.





Large
printers in the PRC include Huanshan Yongxing in Anhui province, whose main
customers include The Proctor & Gamble Company in Guangzhou Langqi, as well
as Haining Changhai Packaging and Printing Co., Ltd. in Zhejiang
province.




12


Item
1A.                      Risk
Factors.





You should carefully consider the
risks described below before making an investment decision. The risks described
below are not the only ones facing our company and some risks and uncertainties
are inherent in our business. Additional risks not presently known to us or that
we currently believe are immaterial may also impair our business operations. Our
business could be harmed by any of these risks. The following sets forth factors
related to our business, operations, financial position or future financial
performance or cash flows which could cause an investment in our securities to
decline and result in a loss. In assessing these risks, you should also refer to
the other information contained in this Annual Report on Form 10-K, including
our consolidated financial statements and related notes.





General Risks Related to Our
Business





We
cannot be certain that our product innovations and marketing successes will
continue.





We
believe that our past performance has been based on, and our future success will
depend upon, in part, our ability to continue to improve our existing products
through product innovation and to develop, market and produce new products. We
cannot assure you that we will be successful in the introduction, marketing and
production of any new products or product innovations, or that we will develop
and introduce in a timely manner innovations to our existing products which
satisfy customer needs or achieve market acceptance. Although we have developed
products that have met customers’ requirements in the past, there is no
assurance that any of our research and development efforts will necessarily lead
to any new or enhanced products or generate sufficient market share to justify
commercialization. We must continually improve our current products and develop
and introduce new or enhanced products that address the requirements of our
customers and are competitive in terms of functionality, performance, quality
and price in order to maintain and increase our market share. If our new
products are unable to gain market acceptance, we would be forced to write-off
the related inventory and would not be able to generate future revenue from our
investment in research and development. In such event, we would be unable to
increase our market share and achieve and sustain profitability. Our failure to
develop new products and introduce them successfully and in a timely manner
could harm our ability to grow our business and could have a material adverse
effect on our business, results of operations and financial
condition.





Our
anti-counterfeiting technology may not satisfy the changing needs of our
customers.





With any
anti-counterfeiting/product authentication technology, including the technology
of our current and proposed products, there are risks that the technology may
not successfully address all of our customers’ needs. While we have already
established successful relationships with Chinese customers with regard to our
products, our customers’ ultimate needs may change or vary, thus introducing
variables which may affect the ability of our proposed products to address all
of our customers’ ultimate technology needs in an economically feasible
manner.





Our
growth strategy and future success depends upon commercial acceptance of
products incorporating technologies we have developed and are continuing to
develop. Technological trends have had and will continue to have a significant
impact on our business. Our results of operations and ability to remain
competitive are largely based upon our ability to accurately anticipate customer
and market requirements. Our success in developing, introducing and selling new
and enhanced products depends upon a variety of factors, including:





·
            accurate
      technology and product selection;


·
            timely
      and efficient completion of product design and
  treatment;


·
            timely
      and efficient implementation of manufacturing
  processes;


·
            product
      performance; and


·
            product
      support and effective sales and
marketing.





We may
not be able to accurately forecast or respond to commercial and technological
trends in the industries in which we operate.




13








We
may not be able to keep pace with rapid technological changes in the
anti-counterfeiting product industry.





The
anti-counterfeiting/product authentication industry is a relatively new industry
and market, especially in the PRC and other parts of Asia, and thus continues to
evolve in terms of customer/market needs, applications, and technology. We
believe that we have hired or engaged personnel and outside consultants who have
experience and are recognized within the industry to be experts in the
anti-counterfeiting/product authentication industry. With respect to technology,
while we continue to seek out and develop “next generation” technology through
acquisition, strategic partnerships, and our own research and development, there
is no guarantee that we will be able to keep pace with technological
developments and market demands in this evolving industry and market.
Technological changes, process improvements, or operating improvements that
could adversely affect us include:





·
            development
      of new technologies by our
competitors;


·
            changes
      in product requirements of our customers;
and


·
            improvements
      in the alternatives to our
technologies.





We may
not have sufficient funds to devote to research and development, or our research
and development efforts may not be successful in developing products in the
time, or with the characteristics, necessary to meet customer needs. If we do
not adapt to such changes or improvements, our competitive position, operations
and prospects would be materially affected.





Intense
competition in the anti-counterfeiting and packaging markets may adversely
affect our operating results.





We
operate in highly competitive and rapidly evolving fields, and new developments
are expected to continue at a rapid pace. We believe that there are few barriers
to entry into many of our markets. As a result, we may experience competition
resulting from new manufacturers of various types of film in our product lines.
Competitors may succeed in developing alternative technologies and products that
are more effective, easier to use or less expensive than those which have been
or are being developed by us or that would render our technology and products
obsolete and non-competitive. Any of these actions by our competitors could
adversely affect our sales.





In
addition, we face competition from a substantial number of companies, which sell
similar and substitute packaging products. Although we believe that we have
developed strategic relationships in the PRC to best penetrate the PRC market,
we face competition from other providers, some of which have greater financial
and human resources, have had a longer operating history, and have greater name
recognition than we do. Many of these competitors have substantially greater
financial and technical resources, production and marketing capabilities, and
may have extensive production facilities, well-developed sales and marketing
staffs and substantial financial resources. Competitive products are also
available from a number of local manufacturers. This results in competition that
is highly price sensitive. We also compete on the basis of quality, service,
timely delivery and differentiation of product properties.





An
increase in competition could result in material selling price reductions or
loss of our market share. This could materially adversely affect our operations
and financial condition.





We
are a major purchaser of many commodities that we use for raw materials in the
manufacturing process of our products, and price changes for the commodities we
depend on may adversely affect our profitability.





With the
rapid growth of the PRC's economy, the demand for certain raw materials is great
while the supply may be more limited. This may affect our ability to secure the
necessary raw materials we need in a cost-effective manner, including chemicals
and other items needed for production of our products at the volume of purchase
orders that we anticipate receiving.





For
example, the PET resin is currently used as a raw material in the PRC's textile
industry, and the market prices of PET resin may fluctuate due to changes in
supply and demand conditions in that industry. Any sudden shortage of supply, or
significant increase in demand, of PET resin and additives may result in higher
market prices and thereby increase our cost of sales. The prices of PET resin
and additives are, to a certain extent, affected by the price movement of crude
oil.




14





If there
is a significant increase in the cost of our raw materials and we are unable to
pass on such increase to our customers on a timely basis or at all, our profit
margins and results of operations will be adversely affected.





Rising
energy prices could adversely affect our operating results.





In the
last few years, energy prices have risen dramatically, which has resulted in
increased raw materials costs for our branded products. Petroleum is the prime
ingredient in many plastics that we use to make our products,  including
AC, PET and BOPP. International market prices for crude oil have been subject to
wide swings in the last three years, due in large part to the conflict in Iraq
and pricing increase agreed to among oil producing and consuming countries. We
estimate that an increase in the price of crude oil of $10.00 per barrel could
cause our gross margin to decline by up to 6% on the sale of these products.
There has been some increase in the cost of our raw materials as a result of
significant crude oil price spikes, and our ability to hedge against these
fluctuations by either entering into long-term supply contracts or otherwise
offsetting our exposure to these commodity price variations has been extremely
limited. Rising oil prices in the international market will continue to increase
our operating costs, which would reduce our operating income and net income if
we are unable to offset these increased costs with price increases for our
products.





Our
success depends on our management team and other key personnel, the loss of any
of whom could disrupt our business operations.





Our
success to date has been largely attributable to and our future success will
depend in substantial part on the continued service of our senior management and
founders. The loss of the services of one or more of our key personnel could
impede implementation and execution of our business strategy and result in the
failure to reach our goals. We do not carry key person life insurance with
respect to any of our officers or employees and we do not have any
employment agreements with these individuals. Our future success will also
depend on the continued ability to attract, retain and motivate highly qualified
personnel in many fields of our operations. The rapid growth of the economy in
the PRC has caused intense competition for qualified personnel. We cannot assure
you that we will be able to retain our key personnel or that we will be able to
attract, train or retain qualified personnel in the future.





We may not be able to adequately
protect our technology and other proprietary rights.





Our
success will depend in part on our ability to obtain and protect our products,
methods, processes and other technologies, to preserve our trade secrets, and to
operate without infringing on the proprietary rights of third parties both
domestically in the PRC and abroad. We rely on patents, trademarks and licenses
to protect our intellectual property. We also have patent applications pending
in the PRC, and have worked and continue to work closely with PRC patent
officials to preserve our intellectual property rights. If we are unable to
adequately protect or enforce our intellectual property rights with respect to
our products, methods, processes and other technologies, our prospects for
revenue growth could be significantly diminished. Additionally, if our products,
methods, processes and other technologies infringe on the intellectual property
rights of other parties, we could incur substantial costs.





Our
ability to compete in our markets and to achieve future revenue growth will
depend, in significant part, on our ability to protect our proprietary
technology and operate without infringing upon the intellectual property rights
of others. The legal regime in the PRC for the protection of intellectual
property rights is still at its early stage of development. Intellectual
property protection became a national effort in the PRC in 1979 when the PRC
adopted its first statute on the protection of trademarks. Since then, the PRC
has adopted its Patent Law, Trademark Law and Copyright Law and promulgated
related regulations such as Regulation on Computer Software Protection,
Regulation on the Protection of Layout Designs of Integrated Circuits and
Regulation on Internet Domain Names. The PRC has also acceded to various
international treaties and conventions in this area, such as the Paris
Convention for the Protection of Industrial Property, Patent Cooperation Treaty,
Madrid Agreement and its Protocol Concerning the International Registration of
Marks. In addition, when the PRC became a party to the World Trade Organization
in 2001, the PRC amended many of its laws and regulations to comply with the
Agreement on Trade-Related Aspects of Intellectual Property Rights. Despite many
laws and regulations promulgated and other efforts made by the PRC over the
years to tighten up its regulation and protection of intellectual property
rights, private parties may not enjoy intellectual property rights in the PRC to
the same extent as they would in many Western countries, including the United
States, and enforcement of such laws and regulations in the PRC have not
achieved the levels reached in those countries. Both the administrative agencies
and the court system in the PRC are




15


not
well-equipped to deal with violations or handle the nuances and complexities
between compliant technological innovation and non-compliant
infringement.





There is
no assurance that the measures that we have put into place to protect our
intellectual property rights will be sufficient. As the number of patents,
trademarks, copyrights and other intellectual property rights in our industry
increases, and as the coverage of these rights and the functionality of the
products in the market further overlap, we believe that business entities in our
industry may face more frequent infringement claims. Litigation to enforce our
intellectual property rights could result in substantial costs and may not be
successful. If we are not able to successfully defend our intellectual property
rights, we might lose rights to technology that we need to conduct and develop
our business. This may seriously harm our business, operating results and
financial condition, and enable our competitors to use our intellectual property
to compete against us.





Entry
of new BOPP and anti-counterfeiting film producers in the PRC may increase the
supply of, and decrease the prices of, BOPP and anti-counterfeiting film in the
industry, and hence lead to a decline in our profit margins.





We
believe that we are currently one of the few producers of BOPP and
anti-counterfeiting film in the PRC with research and development capabilities.
Our past financial performance is attributable to our market position in the
industry. Over time, there may be new entrants into our industry, whether as a
result of increased access to the production technology of BOPP and
anti-counterfeiting film or otherwise. Accordingly, we may experience increased
competition, and the entry of new BOPP and anti-counterfeiting producers will
also lead to an increase in the industry supply of BOPP and anti-counterfeiting
film resulting in more competitive pricing. We believe that our major
competitors in the BOPP film manufacturing market in the PRC include Jian su
Zhongda New Material Group Co., Ltd., Fo Shan Plastics Group Co., Ltd.,
Zhanjiang Packaging Materials Enterprises Ltd., Yonnan Kunlene Film Industries
Co., Ltd., Yunnan Hongta Plastics Co., Ltd. and Hubei Firsta Packaging Co., Ltd.
We may have to price our products in response to competitive market conditions
and this may lead to a decline in our profit margins. In the event that we are
unable to successfully compete or retain effective control over the pricing of
our products, our profit margins will decrease and our revenues and net income
may also decrease.





In
addition, the PRC has gradually lifted its import restrictions, lowered import
tariffs and relaxed foreign investment restrictions after its entry into the
World Trade Organization in December 2001. This may lead to increased
competition from foreign companies in our industry, some of which are
significantly larger and financially stronger than us. If we fail to compete
effectively with these companies in the future, our current business and future
growth potential could be adversely affected.





In
each of our product lines, we have a large amount of sales concentrated in a
small number of customers.





In each
of our product lines, we have a large number of sales concentrated in a small
number of customers. For example, approximately 82% of our anti-counterfeiting
film sales in 2006 were to one customer. In 2006, approximately 40% of our
coated film sales in the PRC were to one customer and approximately 20% of our
overall coated film sales were to ten international customers. In 2006,
approximately 12% of our BOPP Tobacco Film Sales were to one customer and
approximately 79% of our color printing sales were to one customer. During the
nine months ended September 30, 2007, approximately 72% of our
anti-counterfeiting film sales were to one customer. Approximately 30% of our
coated film sales in the PRC were to one customer and approximately 33% of our
overall coated film sales were to ten international customers. Approximately 10%
of our BOPP Tobacco Film Sales were to one customer and approximately 93% of our
color printing sales were to one customer. Any decrease in the demand for our
BOPP Tobacco Film will significantly affect our financial performance. Although
demand for our BOPP Tobacco Film for packaging of tobacco products has gradually
been increasing, any significant fall in the consumption of tobacco, in
particular, whether as a result of health concerns or otherwise, could result in
a decline in the sales of our products and adversely impact our financial
condition, business and operation.





A
disruption in the supply of utilities, fire or other calamity at our
manufacturing plant would disrupt production of our products and adversely
affect our sales.





Our films
are manufactured solely at our production facility located in Haikou City and
Zhuhai City in the PRC. While we have not experienced any calamities in the past
which disrupted production, any disruption in the




16


supply
of utilities, in particular, electricity or power supply or any outbreak of
fire, flood or other calamity resulting in significant damage at our facilities,
would severely affect our production of BOPP film, color printing or
anti-counterfeit film lines. As a result, we could incur substantial liabilities
that could reduce or eliminate the funds available for product development, or
result in a loss of equipment and properties.





While we
maintain insurance policies covering losses with respect to damage to our
properties, machinery and inventories of raw materials and products, we cannot
assure you that our insurance would be sufficient to cover all of our potential
losses.





We
have limited experience in operating outside mainland China, and failure to
achieve our international marketing and sales strategy may have an adverse
effect on our business growth in the future.





Our
future growth depends, to a considerable extent, on our ability to develop both
the domestic and overseas markets. We are currently exploring new business
opportunities outside mainland China for our BOPP film, color printing or
anti-counterfeit film products. We have a limited number of customers outside
the PRC, mainly in the United States and Europe. However, we have limited
experience in operating outside mainland China, have limited experience with
foreign regulatory environments and market practices, and cannot guarantee that
we will be able to penetrate any international market. In connection with our
initial efforts to expand overseas, we have encountered many obstacles,
including cultural and linguistic differences, difficulties in keeping abreast
of market, business and technical developments in foreign jurisdictions, and
political and social disturbances. Failure in the development of international
markets may have an adverse effect on our business growth in the
future.





We
can provide no assurance that our internal control over our financial reporting
will be effective when Section 404 of the Sarbanes-Oxley Act of 2002 becomes
applicable to us. Establishing internal controls over our financial reporting is
likely to increase our costs.





Section
404 of the Sarbanes-Oxley Act of 2002 (“SOX”) and the rules issued thereunder
have required certain changes in the corporate governance, securities disclosure
and compliance practices of United States public companies. Our compliance with
these rules and stock exchange listing standards are likely to increase our
general and administrative costs, and we expect these costs to continue to
increase in the future. In particular, our management is required to conduct an
evaluation of the effectiveness of our internal control over financial reporting
as of each year-end, beginning December 31, 2008. From that point, we will be
required to include in our annual report on Form 10-K a report on our
management’s assessment of the effectiveness of our internal control over
financial reporting. Our independent registered public accounting firm will also
issue an audit report on management’s assessment and on our internal control
over financial reporting. We expect that SOX and other such laws, rules and
regulations promulgated thereunder will increase legal and financial compliance
costs and will make our corporate governance activities more difficult,
time-consuming and costly. We also expect that these new requirements will make
it more difficult and expensive for us to obtain director and officer liability
insurance in the United States.





We will
shortly begin to undertake significant efforts in preparation for the
requirements of Section 404. We cannot be certain as to the timing of the
completion of our evaluation, testing and remediation actions or the impact
these may have on our operations. Furthermore, given the complexities and
inherent risks associated with the operation of internal control over financial
reporting, we can provide no assurance that our internal control over financial
reporting will be effective when Section 404 becomes applicable to us. Moreover,
we can provide no assurance as to any matters that might be reported in our
management’s assessment of our internal control over financial reporting or our
independent registered public accounting firm’s audit report. If we are unable
to implement the requirements relating to internal controls and all other
provisions of Section 404 in a timely fashion or achieve adequate compliance
with these requirements or other requirements of SOX, we might become subject to
sanctions or investigation by regulatory authorities such as the SEC or NASD.
Any such action could materially adversely affect our reputation, financial
condition and the value of our securities, including our common stock.
Additionally, ineffective internal control over financial reporting could cause
investors to lose confidence in our reported financial information which could
result in a lower trading price for our securities.




17





We
are subject to many environmental and safety regulations that may result in
unanticipated costs or liabilities, that could reduce our
profitability.





We are
subject to extensive federal, local and foreign laws, regulations, rules and
ordinances relating to pollution, protection of the environment and the
generation, storage, handling, transportation, treatment, disposal and
remediation of hazardous substances and waste materials. Actual or alleged
violations of environmental laws or permit requirements could result in
restrictions or prohibitions on plant operations, substantial civil or criminal
sanctions, as well as, under some environmental laws, the assessment of strict
liability and/or joint and several liability. Moreover, changes in environmental
regulations could inhibit or interrupt our operations, or require us to modify
our facilities or operations. Accordingly, environmental or regulatory matters
may cause us to incur significant unanticipated losses, costs or liabilities,
that could reduce our profitability.





In
addition, we could incur significant expenditures in order to comply with
existing or future environmental or safety laws. Capital expenditures and costs
relating to environmental or safety matters will be subject to evolving
regulatory requirements and will depend on the timing of the promulgation and
enforcement of specific standards which impose requirements on our operations.
Capital expenditures and costs beyond those currently anticipated may therefore
be required under existing or future environmental or safety laws.





Furthermore,
we may be liable for the costs of investigating and cleaning up environmental
contamination on or from our properties or at off-site locations where we
disposed of or arranged for the disposal or treatment of hazardous materials or
from disposal activities that pre-dated our purchase of our businesses. We may
therefore incur additional costs and expenditures beyond those currently
anticipated to address all such known and unknown situations under existing and
future environmental laws.





Risks Related to Conducting Our
Business in the PRC





We
are subject to international economic and political risks over which we have
little or no control and may be unable to alter our business practice in time to
avoid the possibility of reduced revenues.





A
substantial portion of our business is conducted in the PRC. Doing business
outside the United States, particularly in the PRC, subjects us to various risks
including changing economic and political conditions, major work stoppages,
exchange controls, currency fluctuations, armed conflicts and unexpected changes
in United States and foreign laws relating to tariffs, trade restrictions,
transportation regulations, foreign investments and taxation. We have no control
over most of these risks and may be unable to anticipate changes in
international economic and political conditions. Therefore, we may be unable to
alter our business practice in time to avoid the possibility of reduced
revenues.





The
PRC’s economic policies could affect our business.





Generally,
all of our assets are located in the PRC and a substantial amount of our revenue
is derived from our operations in the PRC. Accordingly, our results of
operations and prospects are subject, to a significant extent, to the economic,
political and legal developments in the PRC.





While the
PRC’s economy has experienced significant growth in the past twenty years, such
growth has been uneven, both geographically and among various sectors of the
economy. The PRC's government has implemented various measures to encourage
economic growth and guide the allocation of resources. Some of these measures
benefit the overall economy of the PRC, but they may also have a negative effect
on us. For example, operating results and financial condition may be adversely
affected by the government control over capital investments or changes in tax
regulations. The economy of the PRC has been changing from a planned economy to
a more market-oriented economy. In recent years, the PRC government has
implemented measures emphasizing the utilization of market forces for economic
reform, the reduction of state ownership of productive assets, and the
establishment of corporate governance in business enterprises; however, a
substantial portion of productive assets in the PRC are still owned by our
government. In addition, the PRCgovernment
continues to play a significant role in regulating industry development by
imposing industrial policies. It also exercises significant control over the
PRC’s economic growth through the allocation of resources, the control of
payment of foreign currency-denominated




18


obligations,
the setting of monetary policy and the provision of preferential treatment to
particular industries or companies.





We
may have difficulty establishing adequate management, legal and financial
controls in the PRC.





The PRC
historically has not adopted a Western style of management and financial
reporting concepts and practices, as well as in modern banking, computer and
other control systems. We may have difficulty in hiring and retaining a
sufficient number of qualified employees to work in the PRC. As a result of
these factors, we may experience difficulty in establishing management, legal
and financial controls, collecting financial data and preparing financial
statements, books of account and corporate records and instituting business
practices that meet Western standards.





Our
bank accounts are not insured or protected against loss.





We
maintain our cash with various banks and trust companies located in the PRC. Our
cash accounts are not insured or otherwise protected. Should any bank or trust
company holding our cash deposits become insolvent, or if we are otherwise
unable to withdraw funds, we would lose the cash on deposit with that particular
bank or trust company.





As
we have limited business insurance coverage in the PRC, any loss which we suffer
may not be insured or may be insured to only a limited extent.





The
insurance industry in the PRC is still in an early state of development and
insurance companies located in the PRC offer limited business insurance
products. In the event of damage or loss to our properties, our insurance may
not provide as much coverage as if we were insured by insurance companies in the
United States.





Tax
laws and regulations in the PRC are subject to substantial revision, some of
which may adversely affect our profitability.





The PRC
tax system is in a state of flux, and it is anticipated that the PRC's tax
regime will be altered in the coming years. Tax benefits that we presently enjoy
may not be available in the wake of these changes, and we could incur tax
obligations to our government that are significantly higher than anticipated.
These increased tax obligations could negatively impact our financial condition
and our revenues, gross margins, profitability and results of operations may
be adversely affected as a
result.





Certain
tax exemptions that we presently enjoy in the PRC are scheduled to expire over
the next several years.





Since a
substantial portion of our operations are located in a privileged economic zone,
we are entitled to certain tax benefits. These tax benefits are presently
scheduled to expire over the next several years. For example, Shiny-day was
exempt from provincial tax and had a 100% exemption from federal taxes in the
PRC from January 1, 2005 to December 31, 2006. It presently enjoys a 50%
exemption from federal tax from January 1, 2007 to December 31, 2009. Shiner
Industrial currently has a 50% exemption from federal tax from January 1, 2006
to December 31, 2008. When these exemptions expire, our income tax expenses will
increase, reducing our net income below what it would be if we continued to
enjoy these exemptions.





We
may face judicial corruption in the PRC.





Another
obstacle to foreign investment in the PRC is corruption. There is no assurance
that we will be able to obtain recourse in any legal disputes with suppliers,
customers or other parties with whom we conduct business, if desired, through
the PRC’s poorly developed and sometimes corrupt judicial systems.





If
relations between the United States and the PRC worsen, investors may be
unwilling to hold or buy our stock and our stock price may
decrease.





At
various times during recent years, the United States and the PRC have had
significant disagreements over political and economic issues. Controversies may
arise in the future between these two countries. Any political




19


or
trade controversies between the United States and the PRC, whether or not
directly related to our business, could reduce the price of our common
stock.





The
government of the PRC could change its policies toward private enterprise or
even nationalize or expropriate private enterprises, which could result in the
total loss of our and your investment.





Our
business is subject to significant political and economic uncertainties and may
be affected by political, economic and social developments in the PRC. Over the
past several years, the government of the PRC has pursued economic reform
policies including the encouragement of private economic activity and greater
economic decentralization. The government of the PRC may not continue to pursue
these policies or may significantly alter them to our detriment from time to
time with little, if any, prior notice.





Changes
in policies, laws and regulations or in their interpretation or the imposition
of confiscatory taxation, restrictions on currency conversion, restrictions or
prohibitions on dividend payments to stockholders, or devaluations of currency
could all cause a decline in the price of our common stock, should a market for
our common stock ever develop. Nationalization or expropriation could even
result in the total loss of your investment.





The
nature and application of many laws of the PRC create an uncertain environment
for business operations and they could have a negative effect on
us.





The legal
system in the PRC is a civil law system. Unlike the common law system, the civil
law system is based on written statutes and decided legal cases have little
value as precedents. In 1979, the PRC began to promulgate a comprehensive system
of laws and has since introduced many laws and regulations to provide general
guidance on economic and business practices in the PRC and to regulate foreign
investment. Progress has been made in the promulgation of laws and regulations
dealing with economic matters such as corporate organization and governance,
foreign investment, commerce, taxation and trade. The promulgation of new laws,
changes of existing laws and the abrogation of local regulations by national
laws could cause a decline in the price of our common stock. Since these laws,
regulations and legal requirements are relatively recent, their interpretation
and enforcement involve significant uncertainty.





As
we import goods into and export goods out of the PRC, fluctuation of the
Renminbi may affect our financial condition by affecting the volume of
cross-border money flow.





Although
we use the United States dollar for financial reporting purposes, many of the
transactions effected by our operating subsidiaries are denominated in the PRC’s
Renminbi. The value of the Renminbi fluctuates and is subject to changes in the
PRC’s political and economic conditions. We do not currently engage in hedging
activities to protect against foreign currency risks. Even if we chose to engage
in such hedging activities, we may not be able to do so effectively. Future
movements in the exchange rate of the Renminbi could adversely affect our
financial condition as we may suffer financial losses when transferring money
raised outside of the PRC into the country or when paying vendors for services
performed outside of the PRC.





We
may not be able to obtain regulatory approvals for our products.





The
manufacture and sale of our products in the PRC are regulated by the PRC and the
local provincial governments. Although our licenses and regulatory filings are
current, the uncertain legal environment in the PRC and our industry may be
vulnerable to local government agencies or other parties who wish to renegotiate
the terms and conditions of, or terminate their agreements or other
understandings with us.





It
will be extremely difficult to acquire jurisdiction and enforce liabilities
against our officers, directors and assets based in the PRC.





As our
executive officers and several of our directors, including the chairman of our
Board of Directors, are Chinese citizens, it may be difficult, if not
impossible, to acquire jurisdiction over these persons in the event a lawsuit is
initiated against us and/or our officers and directors by a stockholder or group
of stockholders in the United States. Also, because our operating subsidiaries
and assets are located in the PRC, it may be extremely difficult or impossible
for you to access those assets to enforce judgments rendered against us or our
directors or




20


executive
offices by United States courts. In addition, the courts in the PRC may not
permit the enforcement of judgments arising out of United States federal and
state corporate, securities or similar laws. Accordingly, United States
investors may not be able to enforce judgments against us for violation of
United States securities laws.





We
may face obstacles from the communist system in the PRC.





Foreign
companies conducting operations in the PRC face significant political, economic
and legal risks. The Communist regime in the PRC, including a cumbersome
bureaucracy, may hinder Western investment.





Risks Related to our
Securities





Our
common stock price is subject to significant volatility, which could result in
substantial losses for investors.





Prices
for our shares are determined in the marketplace and may accordingly be
influenced by many factors, including, but not limited to:





·
            the
      depth and liquidity of the market for the
  shares;


·
            quarter-to-quarter
      variations in our operating
results;


·
            announcements
      about our performance as well as the announcements of our competitors
      about the performance of their
businesses;


·
            investors’
      evaluations of our future prospects and the food industry
      generally;


·
            changes
      in earnings estimates by, or failure to meet the expectations of,
      securities analysts;


·
            our
      dividend policy; and


·
            general
      economic and market conditions.





In
addition, the stock market often experiences significant price fluctuations that
are unrelated to the operating performance of the specific companies whose stock
is traded. These market fluctuations could adversely affect the trading price of
our shares.





The price
at which investors purchase shares of our common stock may not be indicative of
the price that will prevail in the trading market. Investors may be unable to
sell their shares of common stock at or above their purchase price, which may
result in substantial losses.





Shares
of our common stock lack a significant trading market.





Shares of
our common stock are not eligible as yet for trading on any national securities
exchange. Our common stock is eligible for quotation in the over-the-counter
market on the Over-The-Counter Bulletin Board pursuant to Rule 15c2-11 of the
Securities Exchange Act of 1934. This market tends to be highly illiquid. There
can be no assurance that an active trading market in our common stock will
develop, or if such a market develops, that it will be sustained. In addition,
there is a greater chance for market volatility for securities that trade on the
Over-The-Counter Bulletin Board as opposed to securities that trade on a
national exchange or quotation system. This volatility may be caused by a
variety of factors, including the lack of readily available quotations, the
absence of consistent administrative supervision of “bid” and “ask” quotations,
and generally lower trading volume.





Future
sales of shares of our common stock by our stockholders could cause our stock
price to decline.





We cannot
predict the effect, if any, that market sales of shares of our common stock or
the availability of shares of common stock for sale will have on the market
price prevailing from time to time. Sales of shares of our common stock in the
public market covered under an effective registration statement, or the
perception that those sales may occur, could cause the trading price of our
common stock to decrease or become lower than it might be in the absence of
those sales or perceptions.




21





We
may issue additional shares of our capital stock or debt securities to raise
capital or complete acquisitions, which would reduce the equity interest of our
stockholders.





Our
certificate of incorporation authorizes the issuance of up to 75,000,000 shares
of common stock, par value $.001 per share. There are approximately 50,350,000
authorized and unissued shares of our common stock which have not been reserved
and are available for future issuance. Although we have no commitments as of the
date of this offering to issue our securities, we may issue a substantial number
of additional shares of our common stock to complete a business combination or
to raise capital. The issuance of additional shares of our common
stock:





·
            may
      significantly reduce the equity interest of investors in this offering;
      and


·
            may
      adversely affect prevailing market prices for our common
      stock.





The
application of the “penny stock” rules could adversely affect the market price
of our common stock and increase your transaction costs to sell those
shares.





Holders
of shares of our common stock may have difficulty selling those shares because
our common stock will probably be subject to the penny stock rules. Shares of
our common stock are subject to rules adopted by the SEC that regulate
broker-dealer practices in connection with transaction in “penny stocks.” Penny
stocks are generally equity securities with a price of less than $5.00 which are
not registered on a national securities exchange, provided that current price
and volume information with respect to transactions in those securities is
provided by the exchange or system. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document prepared by the
SEC, which contains the following:





·
            a
      description of the nature and level of risk in the market for penny stocks
      in both public offerings and secondary
trading;


·
            a
      description of the broker’s or dealer’s duties to the customer and of the
      rights and remedies available to the customer with respect to violation to
      such duties or other requirements of securities
  laws;


·
            a
      brief, clear, narrative description of a dealer market, including “bid”
      and “ask” prices for penny stocks and the significance of the spread
      between the “bid” and “ask” price;


·
            a
      toll-free telephone number for inquiries on disciplinary
      actions;


·
            definitions
      of significant terms in the disclosure document or in the conduct of
      trading in penny stocks; and


·
            such
      other information and is in such form (including language, type, size and
      format), as the SEC shall require by rule or
  regulation.





Prior to
effecting any transaction in penny stock, the broker-dealer also must provide
the customer with the following:





·
            the
      bid and offer quotations for the penny
stock;


·
            the
      compensation of the broker-dealer and our salesperson in the
      transaction;


·
            the
      number of shares to which such bid and ask prices apply, or other
      comparable information relating to the depth and liquidity of the market
      for such stock; and


·
            monthly
      account statements showing the market value of each penny stock held in
      the customer’s account.





In
addition, the penny stock rules require that, prior to a transaction in a penny
stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser.  The broker-dealer must receive the purchaser’s written
acknowledgment of the receipt of a risk disclosure statement, a written
agreement to transactions involving penny stocks, and a signed and dated copy of
a written suitability statement. These disclosure requirements may have the
effect of reducing the trading activity in the secondary market for a stock that
becomes subject to the penny stock rules.




22





Our
directors own a significant amount of our common stock, giving them influence or
control in corporate transactions and other matters, and their interests could
differ from those of other stockholders.





Our
directors own a large percentage of our outstanding common stock. As a result,
they are in a position to significantly influence the outcome of matters
requiring a stockholder vote, including the election of directors, the adoption
of any amendment to our articles of incorporation or bylaws, and the approval of
significant corporate transactions. Their control may delay or prevent a change
of control on terms favorable to our other stockholders and may adversely affect
your voting and other stockholders rights.





Capital
outflow policies in the PRC may hamper our ability to declare and pay dividends
to our shareholders.





The PRC
has adopted currency and capital transfer regulations. These regulations may
require us to comply with complex regulations for the movement of capital.
Although our management believes that we will be in compliance with these
regulations, we may not be able to pay dividends to our shareholders outside of
the PRC if these regulations or the interpretations of them by courts or
regulatory agencies change. In addition, under current PRC law, we must retain a
reserve equal to 10 percent of net income after taxes, not to exceed 50 percent
of registered capital. Accordingly, this reserve will not be available to be
distributed as dividends to our shareholders. We presently do not intend to pay
dividends in the foreseeable future. Our management intends to follow a policy
of retaining all of our earnings to finance the development and execution of our
strategy and the expansion of our business.





Item
IB.    Unresolved Staff Comments.





None.





Item
2.       Properties.





Our
properties are located primarily in Haikou City in the Hainan
Province,  and Zhuhai City in the Guangdong Province as described
below.





Shiner
Industrial





We have
been granted the right to use two plots of land in Haikou City by the Municipal
Administration of the PRC for state-owned land through January 2059 and October
2060 on which we own four buildings dedicated to film production and office
facilities. We own three coated film production lines, three anti-counterfeit
film production lines, one BOPP tobacco film line and all production equipment
and research facilities at the site. We also rent one color printing line from
Hainan Rixin Co., Ltd.





Shiny-day





We do not
own any land, but rather lease a factory and one color printing line from Hainan
Rixin Co., Ltd. for current operations. These leases extend through December 31,
2009 for which we pay annual rent and equipment usage fees of approximately
$14,000 and $59,000, respectively. At March 24, 2008, we owned one color
printing line and related equipment, a warehouse and telecommunications
equipment.





Zhuhai





We lease
a factory for our production operations in Zhuhai City for a period of 10 years
through 2016. Annual rent for this space is approximately $387,000. We own one
BOPP basic film production line in Zhuhai in order to produce our own BOPP basic
film and to eliminate the need to rely on the PRC domestically in
2007.





Modern





Modern
does not own or rent any property, however, it intends to conduct operations in
Haikou beginning in April 2008.




23





Item
3.      Legal Proceedings.





From time
to time, we may become involved in various lawsuits and legal proceedings, which
arise in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm business. We are currently not aware of
any such legal proceedings or claims that will have, individually or in the
aggregate, a material adverse effect on our business, financial condition or
operating results.





Item
4.      Submission of Matters to a Vote of Security
Holders.





There
were no matters submitted to the vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year ended December 31, 2007.


24


PART
II





Item
      5.
            Market
      for Common Equity, Related Stockholder Matters and Issuer Repurchases of
      Equity Securities.




Market
Information







On
February 12, 2008, our Common Stock became eligible for quotation on the Nasdaq
Capital Market under the symbol “BEST.” The following table sets forth the high
and low bid prices per share of our Common Stock for the periods indicated,
which information was provided by NASDAQ Trading and Market Services. Prior to
August 29, 2007, the shares traded very infrequently and the actual price
information is not readily available. The quotations set forth below reflect
inter-dealer prices, without retail mark-up, markdown or commission and may not
represent actual transactions.





Year
      ended December 31, 2007High
      Bid
            
            Low Bid3rd
      Quarter (commencing August 29, 2007)
            
            $5.51
            
            $4.514th
      Quarter
            
            $9.90
            
            $5.40





On March
24, 2008, the closing price of our common stock as reported on the Nasdaq
Capital Market was $3.5399.





As of
March 24, 2008, there were 24,650,000shares of our
common stock outstanding held by approximately 103 shareholders of
record.  The number of our shareholders of record excludes any
estimate by us of the number of beneficial owners of shares held in street name,
the accuracy of which cannot be guaranteed.





Dividends





For the
year ended December 31, 2007, we paid dividends on our common stock in the
aggregate amount of approximately $1.6 million. However, we currently anticipate
that any future earnings will be retained for the development of our business
and do not anticipate paying any dividends on the common stock in the
foreseeable future.





Securities
Authorized for Issuance under Equity Compensation Plans





Information
regarding securities authorized for issuance under our equity compensation plans
is disclosed in the section captioned, “Item 11. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.”





Repurchases
of Equity Securities





None.





Recent
Sales of Unregistered Securities; Use of Proceeds from Registered
Securities





On
November 19, 2007, we granted options to purchase an aggregate of 30,000 shares
of our common stock to each of Messrs. Cunat, Rizzello and Staloff, our
directors, in connection with their appointment to our board of directors. Such
options are 5-year options that vest equally over three years and have an
exercise price of $7.00 per share. Such issuances were made in reliance upon the
exemption from registration pursuant to Section 4(2) of the Securities Act on
the basis that the issuances did not involve a public offering.





On
October 22, 2007, we completed a final closing of a private placement offering
of units pursuant to which we sold an aggregate of 3,500,000 units to 76
accredited investors at an offering price of $3.00 per unit for aggregate gross
proceeds of $10,500,000. Each unit consisted of one share of our common stock
and a warrant to purchase 15% of one share of our common stock at an exercise
price of $6.00 per share. Accordingly, we issued an aggregate of 3,500,000
shares of our common stock and warrants to purchase 525,000 shares of our common
stock




25


to
the 76 accredited investors who participated in this offering. In addition, we
compensated four registered broker-dealers that assisted us in the sale of
securities in this private placement offering by (i) paying them cash equal to
8% of the gross proceeds from the sale of units placed and (ii) issuing them
warrants to purchase that number of shares of our common stock equal to 15% of
the units placed, as follows:





Selected Finder
            
            Cash
            
            
            WarrantsMaxim
      Group LLC
            
            $
            178,400
            
            
            
            111,500Four
      Tong Investments Ltd.
            
            
            153,600
            
            
            
            96,000Global
      Hunter Securities, LLC
            
            
            300,880
            
            
            
            188,050Basic
      Investors, Inc.
            
            
            79,200
            
            
            
            49,500$
            712,080
            
            
            
            445,050





The
warrants granted to these broker-dealers have the same terms and conditions as
the warrants granted in the offering. The net proceeds of this private placement
offering will be used for market development, product research, working capital,
the potential acquisition of a BOPP Production Line in Zhuhai, the potential
acquisition of an anti-counterfeit technology company and equipment purchases
for coated film. This private placement offering was exempt from the
registration under the Securities Act pursuant to Rule 506 of Regulation D
promulgated thereunder. No advertising or general solicitation was employed in
the offer or sale of securities. The offer and sale of securities was made to a
limited number of persons, all of whom were accredited investors and transfer of
the securities was restricted in accordance with the requirements of Regulation
D.





In July
2007, pursuant to the terms of the Share Exchange Agreement with Sino Palace
Holdings Ltd., we issued an aggregate of 16,500,000 shares of common stock to
eight non-U.S. persons (as contemplated by Rule 902 under the Securities Act of
1933). These issuances were exempt from registration requirements under
Regulation S under the Securities Act of 1933, as amended. The shares issued
pursuant to Regulation S were issued in an “offshore transaction” as defined in,
and pursuant to, Rule 902 under the Securities Act of 1933, on the basis that
the purchaser was not offered the shares in the United States and did not
execute or deliver any agreement in the United States.





Item
6.  Selected Financial Data.





Not
required.




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




The following
discussion and analysis of our financial condition and results of operations
should be read in conjunction with our consolidated financial statements and
related notes appearing elsewhere in this annual report.  This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties, and assumptions.  The actual results may differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including but not limited to the risks discussed in
this report.





Overview





We develop,
manufacture and distribute packaging film and color printed packaging through
our four operating subsidiaries, Shiner Industrial, Shiny-day, Zhuhai and
Modern. Our products include coated film, shrink-wrap film, common film,
anti-counterfeit laser holographic film and color printed packaging materials.
All of our operations are based in the PRC and each of our subsidiaries was
formed under the laws of the PRC.





We
currently conduct our business through the following four operating subsidiaries
in the PRC:





·
            Shiner
      Industrial located in Haikou, Hainan
Province;


·
            Shiny-day
      also located in Haikou, Hainan
Province;


·
            Zhuhai
      located in Zhuhai, Guangdong Province;
and


·
            Modern
      located in Haikou, Hainan Province.




26





We
operate in several markets within the packaging film segment: BOPP based films,
coated films, anti-counterfeit films and color printed packaging materials. For
the year ended December 31, 2007, color printed packaging products made up
approximately 33.4% of our revenues, BOPP tobacco film made up approximately
27.6% of our revenues, coated film accounted for approximately 30.8% of our
revenues and anti-counterfeit film sales equaled approximately 8.2% of our
revenues.





Our
current production capacity consists of:





·
            Three
      coated film lines with total capacity of 6,000 tons a
  year;


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


·
            One
      BOPP film production line with capacity of 7,000 tons a
    year;


·
            Three
      color printing lines; and


·
            Three
      anti-counterfeit film lines.





We are
targeting growth through four main channels: (i) the continuation of our efforts
to gain international market share in coated film through better pricing
strategy and excellent after-sale service; (ii) the expansion of our sales in
anti-counterfeit film, especially to high-end brand spirits and cigarette
manufacturers; (iii) the development of next generation films, and (iv) the
acquisition of an anti-counterfeit technology company.





Critical
Accounting Policies





In
presenting our financial statements in conformity with accounting principles
generally accepted in the United States, we are required to make estimates and
assumptions that affect the amounts reported therein. Several of the estimates
and assumptions we are required to make relate to matters that are inherently
uncertain as they pertain to future events. However, events that are outside of
our control cannot be predicted and, as such, they cannot be contemplated in
evaluating such estimates and assumptions. If there is a significant unfavorable
change to current conditions, it will likely result in a material adverse impact
to our consolidated results of operations, financial position and liquidity. We
believe that the estimates and assumptions we used when preparing our financial
statements were the most appropriate at that time. Presented below are those
accounting policies that we believe require subjective and complex judgments
that could potentially affect reported results.





Basis
of Presentation





The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America.
Our functional currency is the Chinese Renminbi, however the accompanying
consolidated financial statements have been translated and presented in United
States Dollars ($).





Use
of Estimates





Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these consolidated financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, including those
related to impairment of long-lived assets, and allowance for doubtful accounts.
We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions; however,
we believe that our estimates, including those for the above-described items,
are reasonable.





Areas
that require estimates and assumptions include valuation of accounts receivable
and inventory, determination of useful lives of property and equipment,
estimation of certain liabilities and sales returns.




27





Foreign
Currency Transactions





As of
December 31, 2007 and 2006, our accounts were maintained, and their financial
statements were expressed in the Chinese Yuan Renminbi (RMB). Such financial
statements were translated into U.S. Dollars (USD) in accordance with Statement
of Financial Accounts Standards ("SFAS") No. 52, "Foreign Currency Translation,"
with the RMB as the functional currency. According to the Statement, all assets
and liabilities were translated at the exchange rate on the balance sheet date,
stockholder's equity was translated at the historical rates and statement of
operations items were translated at the weighted average exchange rate for the
year. The resulting translation adjustments are reported under other
comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive
Income.”





Allowance
For Doubtful Accounts





We
continually monitor customer payments and maintain a reserve for estimated
losses resulting from our customers’ inability to make required payments. In
determining the reserve, we evaluate the collectibility of our accounts
receivable based upon a variety of factors. In cases where we become aware of
circumstances that may impair a specific customer’s ability to meet its
financial obligations, we record a specific allowance against amounts due. For
all other customers, we recognize allowances for doubtful accounts based on our
historical write-off experience in conjunction with the length of time the
receivables are past due, customer creditworthiness, geographic risk and the
current business environment. Actual future losses from uncollectible accounts
may differ from our estimates.





Inventories





Inventories
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out method. We evaluate our ending inventories for estimated
excess quantities and obsolescence. Our evaluation includes the analysis of
future sales demand by product, within specific time horizons. Inventories in
excess of projected future demand are written down to net realizable value. In
addition, we assess the impact of changing technology on inventory balances and
write-down inventories that are considered obsolete. Inventory obsolescence and
excess quantities have historically been minimal.





Long-Lived
Assets





We
periodically assess potential impairments to its long-lived assets in accordance
with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal
of Long-Lived Assets.” SFAS No. 144 requires, among other things, that an entity
perform an impairment review whenever events or changes in circumstances
indicate that the carrying value may not be fully recoverable. Factors
considered by us include, but are not limited to: significant underperformance
relative to expected historical or projected future operating results;
significant changes in the manner of use of the acquired assets or the strategy
for our overall business; and significant negative industry or economic trends.
When we determine that the carrying value of a long-lived asset may not be
recoverable based upon the existence of one or more of the above indicators of
impairment, we estimate the future undiscounted cash flows expected to result
from the use of the asset and its eventual disposition. If the sum of the
expected future undiscounted cash flows and eventual disposition is less than
the carrying amount of the asset, we recognize an impairment loss. An impairment
loss is reflected as the amount by which the carrying amount of the asset
exceeds the fair market value of the asset, based on the fair market value if
available, or discounted cash flows. To date, there has been no impairment of
long-lived assets.





Useful
lives of property and equipment are based on historical experience and industry
norms. Changes in useful lives due to changes in technology or other factors can
affect future depreciation estimates.





Revenue
Recognition





Our
revenue recognition policies are in compliance with SEC Staff Accounting
Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to
customers when a formal arrangement exists, the price is fixed or determinable,
delivery is completed, no other significant obligations exist, and
collectibility is reasonably




28


assured.
Payments received before all of the relevant criteria for revenue recognition
are satisfied are recorded as unearned revenue.  The company’s sales
contracts do not have any special terms or right of return. The Company does not
offer any volume rebates to its customers. Sales are recorded net of Value Added
Tax. Sales returns and allowances have historically been
insignificant.





Stock-Based
Compensation





We
account for our stock-based compensation in accordance with SFAS No. 123R,
“Share-Based Payment, an Amendment of FASB Statement No. 123.” We recognize 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
90,000 options outstanding as of December 31, 2007.





Recent
Accounting Pronouncements





In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the
overfunded or underfunded status of a defined benefit postretirement plan (other
than a multiemployer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business entity or
changes in unrestricted net assets of a not-for-profit organization. This
statement also requires an employer to measure the funded status of a plan as of
the date of its year-end statement of financial position, with limited
exceptions. The provisions of SFAS No. 158 are effective for employers with
publicly traded equity securities as of the end of the fiscal year ending after
December 15, 2006. The adoption of this statement had no effect on our reported
financial position or results of operations.




In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements“. The
objective of SFAS No. 157 is to increase consistency and comparability in fair
value measurements and to expand disclosures about fair value measurements. SFAS
No. 157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS No. 157 applies under other accounting pronouncements
that require or permit fair value measurements and does not require any new fair
value measurements. The provisions of SFAS No. 157 are effective for fair value
measurements made in fiscal years beginning after November 15, 2007. The
adoption of this statement is not expected to have a material effect on our
future reported financial position or results of operations.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities“. This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. We are currently assessing the impact of SFAS
No. 159 on our financial position and results of operations.





In June
2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for Use in Future
Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
nonrefundable advance payments for goods or services used or rendered for
research and development activities should be expensed when the advance payment
is made or when the research and development activity has been
performed.  Management is currently evaluating the effect of this
pronouncement on our financial statements.





In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations.” SFAS No. 141 (Revised 2007) changes how a reporting
enterprise accounts for the acquisition of a business. SFAS No. 141
(Revised 2007) requires an acquiring entity to recognize all the assets acquired
and liabilities assumed in a transaction at the acquisition-date fair value,
with limited exceptions, and applies to a wider range of transactions or events.
SFAS No. 141 (Revised 2007) is effective for fiscal years beginning on or
after December 15, 2008. Early adoption and retrospective application is
prohibited.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies




29


that
a noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  Based on current conditions, we do not expect the
adoption of SFAS 160 to have a significant impact on our results of operations
or financial position.





Results
of Operations





Year
Ended December 31, 2007 Compared to Year Ended December 31, 2006





2007
            
            2006
            
            $
      Change
            
            %
      ChangeRevenues
            
            $
            42,762,615
            
            $
            33,951,965
            
            $
            8,810,650
            
            
            26.0Cost
      of goods sold
            
            
            34,225,643
            
            
            27,328,787
            
            
            6,896,856
            
            
            25.2Gross
      profit
            
            
            8,536,972
            
            
            6,623,178
            
            
            1,913,794
            
            
            28.9Selling,
      general and administrative expenses
            
            
            3,375,492
            
            
            2,773,496
            
            
            601,996
            
            
            21.7Interest
      expense, net
            
            
            64,984
            
            
            1,443
            
            
            63,541
            
            
            4,403.4Other
      income (expense)
            
            
            72,713
            
            
            278,545
            
            
            (205,832)
            
            
            (73.9)Income
      tax expense
            
            
            409,294
            
            
            214,504
            
            
            194,790
            
            
            90.8Net
      income
            
            $
            4,540,129
            
            $
            3,561,335
            
            $
            978,794
            
            
            27.5





Revenues





The
increase in revenues during the year ended December 31, 2007 compared to the
same period last year was due to a 37.4% increase in the sales of coated film, a
48.8% increase in tobacco BOPP sales and a 86.4% increase in the sales of
anti-counterfeit film. The increase in revenues was due to higher sales volumes
and increases in the average unit prices. For BOPP products, we derived a gain
of approximately $825,000 from an increase in average unit price across the
entire market compared to the same period last year, and $3,040,000 from an
increase in sales volume. Coated film sales grew by $1,275,000 due to higher
unit prices and $2,314,000 due to higher sales
volumes.  Anti-counterfeit film unit prices were equal to last year
but sales still grew by $1,627,000 due to higher sales volumes.





International
sales for the year ended December 31, 2007 totaled $9,161,159 accounting for
approximately 21.4% of total revenues in comparison to $6,024,022 or 17.7% for
the year ended December 31, 2006.  The increase in international sales
of 52.1% or $3,137,137 was primarily due to a 103.0% increase in coated films
sales and a 24.5% increase in BOPP sales.





Cost
of Goods Sold





Cost of
goods sold during the years ended December 31, 2007 and 2006 were 80.0% and
80.5%, respectively.





Gross
Profit





Our gross
profit and gross margin during the year ended December 31, 2007 was $8,536,972
and 20.0%, respectively, compared to the gross profit and gross margin during
the year ended December 31, 2006 of $6,623,178 and 19.5%,
respectively.





Selling,
General and Administrative Expenses





Our
selling, general and administrative expenses increased by 21.7% or $601,996 to
$3,375,492 for the year ended December 31, 2007 compared to $2,773,496 for the
year ended December 31, 2006. General and administrative expenses include rent,
management and staff salaries, general insurance, marketing, accounting and
legal expenses. Selling expenses for the year ended December 31, 2007 decreased
by 15.6% to $1,331,904 in comparison to the same period in 2006 due to continued
implementation of better cost controls and management.




30


General
and administrative expenses for the year ended December 31, 2007 increased by
$848,677 or 71.0% to $2,043,588 in comparison to the same period in 2006. The
increase in general and administrative expense is due to the legal and audit
expenses associated with being a publicly traded United States reporting company
that we did not incur during the same period last year, offset by continued
implementation of better cost controls and management.





Interest
Expense





The
decrease in interest expense during the year ended December 31, 2007 was due to
the pay down of approximately $3.6 million of related party debt during
2007.





Other
Income (Expense)





The
increase in Other Income was due to sale of leftover materials and unusable
film. The prices of these materials have increased because of an increase in the
price of oil in the same period.





Income
Tax Expense





The
effective tax rate for the year ended December 31, 2007 was equivalent to 8.3%
as opposed to 5.7% for the year ended December 31, 2006. Since we operate in a
privileged economic zone, we will continue to enjoy certain tax privileges
albeit at a reduced rate.





Net
Income





The
increase in our net income for the year ended December 31, 2007 as compared to
the same period for 2006 resulted from higher sales for the period, offset by an
increase in operating expenses of $601,996.





Off-Balance
Sheet Arrangements





There
were no off-balance sheet arrangements during the year ended December 31, 2007
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
is material to our interests.





Liquidity
and Capital Resources





Cash
Flows





At
December 31, 2007, we had $4,607,434 cash and cash equivalents on hand. Our
principal demands for liquidity are to increase capacity, raw materials
purchases, sales distributions and the possible acquisition of new subsidiaries
in our industry as opportunities present themselves, as well as general
corporate purposes. As of December 31, 2007, we had one short-term loan of
$822,528, with an interest rate of 6.732%, originally due July 15, 2007 and
collateralized by our buildings, land use rights and equipment. The loan was
rolled over and is now due on January 15, 2008. As of December 31, 2007, we had
working capital of $14,678,947, an increase of $14,801,853 compared to our
working capital at December 31, 2006.





On
October 22, 2007, we completed a final closing of a private placement offering
of units pursuant to which we sold an aggregate of 3,500,000 units at an
offering price of $3.00 per unit for aggregate gross proceeds of $10,500,000.
Each unit consisted of one share of our common stock, par value $.001 per share,
and a three year warrant to purchase 15% of one share of common stock at an
exercise price of $6.00 per share. Accordingly, we issued an aggregate of
3,500,000 shares of common stock and warrants to purchase 525,000 shares of our
common stock to the 76 accredited investors who participated in this offering.
In addition, the Company compensated four finders that assisted in the sale of
securities in this private placement offering by (i) paying them cash equal to
8% of the gross proceeds from the sales of units placed and (ii) issuing them
warrants to purchase that number of shares of our common stock equal to 15% of
the units placed as follows:




31





Selected
      Finder
            
            Cash
            
            
            WarrantsMaxim
      Group LLC
            
            $
            178,400
            
            
            
            111,500Four
      Tong Investments Ltd.
            
            
            153,600
            
            
            
            96,000Global
      Hunter Securities, LLC
            
            
            300,880
            
            
            
            188,050Basic
      Investors, Inc.
            
            
            79,200
            
            
            
            49,500$
            712,080
            
            
            
            445,050





The
warrants granted to these finders have the same terms and conditions as the
warrants granted in the offering.





We
anticipate that the net proceeds of this private placement offering will be used
in the following manner:





·
            $3,500,000
      for the purchase of the currently leased BOPP production line in
      Zhuhai,


·
            $1,140,000
      for the acquisition of the fourth coated film
  line,


·
            $400,000
      for coated and anti-counterfeit films R&D,
  and


·
            $400,000
      for marketing.





The
remaining amount will be used for working capital and the acquisition of an
anti-counterfeit partner with strong distribution channels. We intend to meet
our liquidity requirements for the next twelve months, 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 existing cash and cash equivalents. We anticipate that we have adequate
working capital to fund our operations and growth for at least the next twelve
months.





Net cash
provided by operating activities for the year ended December 31, 2007 was
primarily due an increase of accounts receivable, inventory and advances to
suppliers of $1,846,491, $1,526,188, and $1,068,576, respectively offset by a an
increase in other payables and tax and welfare payable of $1,178,796 and
$750,571, respectively.





Net cash
used in investing activities during the year ended December 31, 2007 was due to
the acquisition of property and equipment and advance for payment of equipment
for $241,627 and $3,275,783, respectively, offset by collections of $59,166
on notes receivable.





Net cash
provided by financing activities during the year ended December 31, 2007 was due
to issuance of shares for $9,684,189, net of offering costs of $815,811 offset
by repayments of $3,634,418 for related parties’ (stockholder’s) advances and
$2,237,086 used in the payment of dividends.





Assets





As of
December 31, 2007, our accounts receivable increased by $1,846,491 as
compared to the balance as of December 31, 2006. The increase in accounts
receivable at December 31, 2007 was due to increased sales compared to the same
period in 2006. We intend to continue our efforts to maintain accounts
receivable at reasonable levels in relation to our sales.  Advances to
suppliers increased by $4,129,265 and inventory increased by $1,526,188 during
the year ended December 31, 2007. Our inventory increased during this period as
we purchased more raw materials than we normally require in anticipation of
increases in the price of crude oil in the international market.





Liabilities





Our
accounts payable increased by $57,102 during the year ended December 31, 2007.
Other payables increased by $1,178,796 as a result of short-term borrowings from
unrelated companies. Unearned revenues (payments received before all the
relevant criteria for revenue recognition are satisfied) grew by $55,822 and tax
and welfare payable increased by $750,571 over the same period.





The
majority of our revenues and expenses were denominated primarily in Renminbi
(“RMB”), the currency of the PRC. There is no assurance that exchange rates
between the RMB and the U.S. Dollar will remain stable. We do not engage in
currency hedging. Inflation has not had a material impact on our
business.




32


Item
7A.  Quantitative and Qualitative Disclosures About Market
Risk.





We are
exposed to market risks related to changes in interest rates and foreign
currency exchange rates, however, we believe those risks to be not material in
relation to our operations. We do not have any derivative financial
instruments.





Interest
Rate Risk





As of
December 31, 2007, we held no money market securities or short term
available for sale marketable securities. Due to the short term duration of our
investment portfolio, an immediate 10% change in interest rates would not have a
material effect on the fair market value of our portfolio. Therefore, we would
not expect our operating results or cash flows to be affected to any significant
degree by the effect of a sudden change in market interest rates on our
securities portfolio.





Foreign
Currency Exchange Risk





All of
our revenues are denominated in Chinese Renminbi and, as a result, we have
certain exposure to foreign currency exchange risk with respect to current
revenues. A majority of our expenses are payable in foreign currency. We do not
use forward exchange contracts to hedge exposures denominated in foreign
currencies or any other derivative financial instruments for trading or
speculative purposes. The effect of an immediate 10% change in exchange rates
would not have a material impact on our future operating results or cash
flows





Item
8.      Financial Statements and Supplementary
Data.





PageReport
      of Independent Registered Public Accounting Firm
            F-1Financial
      Statements:Consolidated
      Balance Sheet as of December 31, 2007
            F-2Consolidated
      Statements of Income and Other Comprehensive Income for the years ended
              December
      31, 2007 and 2006
            F-3Consolidated
      Statement of Stockholders’ Equity for the years ended December 31, 2007
      and 2006
            F-4Combined
      Statements of Cash Flows for the years ended December 31, 2007 and
      2006
            F-5Notes
      to Combined Financial Statements
            F-6
      to F-21




Item
9.      Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.




On July
24, 2007, we dismissed Manning Elliott LLP (“Manning Elliott”) as our
independent accountants. Manning Elliott had previously been engaged as the
principal accountant to audit our financial statements. The reason for the
dismissal of Manning Elliott is that, following the consummation of the reverse
acquisition on July 24, 2007, (i) the former stockholders of the Shiner Group
owned a significant amount of the outstanding shares of our common stock and
(ii) our primary business became the business previously conducted by the Shiner
Group. The independent registered public accountant of the Shiner Group was the
firm of Goldman Parks Kurland Mohidin (“GPKM”). We believe that it is in our
best interest to have GPKM continue to work with our business, and we therefore
retained GPKM as our new principal independent registered accounting firm,
effective July 24, 2007. GPKM is located at 16133 Ventura Boulevard, Suite 880,
Encino, California, 91436. The decision to change accountants was approved by
our board of directors on September 28, 2007.





The
report of Manning Elliott for our fiscal years ended March 31, 2005 and 2006,
respectively, contained no adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles,
but was qualified due to a going concern uncertainty.





In
connection with its audits for the past two recent fiscal years and in the
subsequent interim period ended September 28, 2007, there have been no
disagreements with Manning Elliott on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope and procedure,
which disagreements, if not resolved to




33


the
satisfaction of Manning Elliott, would have caused them to make reference
thereto in their report on the financial statements for such years.





Item
      9A.
            Controls
      and Procedures.





Disclosure
Controls and Procedures





As of
December 31, 2007, we carried out an evaluation, under the supervision and
with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) of the Exchange Act. Based upon that evaluation, our principal
executive officer and principal financial officer concluded that, as of the end
of the period covered by this report, although no significant deficiencies or
material weaknesses have been found in our disclosure controls and procedures,
additional controls and procedures are required to improve our recordkeeping
systems to ensure timely and effective reporting of information.  In
addition, management also concluded that additional financial personnel are
required, particularly at the executive level, with experience with U.S. public
companies and an appropriate level of knowledge, experience and training in the
application of generally accepted accounting principles (“GAAP”) in the
U.S.  To address such concerns, we intend to engage a consultant to
evaluate our internal controls and procedures and to assist in making
improvements to the quality of our controls, policies and
procedures.  We are in the process of improving supervision,
education, and training of accounting staff.  In addition, we have
initiated a search for a senior financial executive with experience with U.S.
GAAP and U.S. public company reporting and compliance obligations.





Management’s Annual Report on
Internal Control over Financial Reporting.





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f)
of the Exchange Act. Under the supervision and with the participation of our
management, including our principal executive officer and principal financial
officer, we have begun to implement a system of internal control over our
financial reporting.  However, in light of the fact that our operating
business only recently became a public company as a result of a reverse
acquisition on July 23, 2007, the SEC has agreed to extend the time in
which we are required to be compliant with Section 404 of the Sarbanes-Oxley Act
of 2002 (“SOX”) pursuant to Release No. 33-8760, issued on December 15, 2006 by
the SEC (the “Adopting Release”).  The Adopting Release adopted
amendments to the Securities Exchange Act of 1934 to provide a transition period
for newly public companies to comply with the internal control over financial
reporting requirements of Section 404 of SOX.





The SEC
agreed that we are considered a newly public company for the purposes of Section
404 of SOX since we were a shell company (as defined under Rule 405 of the
Securities Act of 1933, as amended) prior to July 23, 2007, the date on which we
effected a reverse acquisition.  Accordingly, we are not required to
report on our internal control over financial reporting requirements until our
annual report for the year ending December 31, 2008.





Item
      9B.
            Other
      Information.





None.




34


PART
III


Item
10.  Directors, Executive Officers and Corporate
Governance.


Executive
Officers and Directors





The
following sets forth certain biographical information concerning our directors
and executive officers as of March 25, 2008:





Name
            
            Position
            
            AgeJian
      Fu
            
            Chief
      Executive Officer and Director
            
            44XueZhu
      Xu
            
            Chief
      Financial Officer
            
            46MingBiao
      Li
            
            Chief
      Operating Officer
            
            42Ying
      Yuet
            
            Chairman
      of the Board of Directors
            
            54Brian
      G. Cunat
            
            Director
            
            51Joseph
      S. Rizzello
            
            Director
            
            60Arnold
      Staloff
            
            Director
            
            63





Jian Fu, 44, has served as
our Chief Executive Officer since July 2007. Prior to that, Mr. Fu served as
Chief Executive Officer and as a director of Sino Palace Holdings Limited from
January 2004 to July 2007. He worked at Hainan Plastic Industrial Co., Ltd. as
Vice-Chairman of the Hainan Modern Technology Group from 1998 to December 2003
and as General Manager from 1985 to 1997. Mr. Fu received his undergraduate
degree in Plastic Engineering Technique from South China Institute of Technology
in 1985. He received an Advanced Certificate of MBA studies from Renmin
University in 2004.





XueZhu Xu, 45, has served as
our Chief Financial Officer since July 2007. Prior to that, Ms. Xu served as
Chief Financial Officer of Sino Palace from January 2004 to July 2007. She
worked at Hisense Company Limited as Chief Financial Officer from 1996 to
December 2003. From 1990 to 1996 Ms. Xu worked as Accounting Manager at Hainan
Hisense Group. She worked as the Accounting Manager in Hainan WenChang Foreign
Trade Co. from 1981 to 1990. Ms. Xu graduated from Hainan Supply and Marketing
School in 1981 with a Bachelor’s Degree in Accounting. She received an Advanced
certificate of MBA studies from Renmin University in 2004.





MingBiao Li, 42, has served
as our Chief Operating Officer since January 1, 2008, having served as our Vice
President of Technology from July 2007 through December 2007. Prior to that, Mr.
Li served as General Manager of Shiner International from January 2003 to March
2005 and Chairman of Shiner International from July 2004 to July 2007. He served
as General Manager of Shiny-day from September 2003 to May 2004. From October
1997 to December 2002, he worked in Hainan Weilin Electron Co. as General
Manager. Mr. Li served as Section Chief of the Project Investment and Evaluation
group of the Guangxi Auto & Tractor Research Institution from 1995 to 1997.
From 1990 to 1995, he headed up the automated equipment group at the Guangxi
Auto & Tractor Research Institution. Mr. Li graduated from Tsinghua
University in 1987 with a Bachelor’s degree in Automotive Engineering. He later
obtained his Master’s in Transport Engineering from Beijing University in
1991.





Ying Yuet, 54, has served as
our Chairman since July 2007. Prior to that, Mr. Ying served as Chairman and as
a director of Sino Palace from January 2004 to July 2007. He served as Chairman
of Nainan Modern Technology, the state-owned predecessor company of Sino Palace
from 1996 to December 2003. Mr. Ying received his Bachelor’s Degree in
Management from the Institute of the CPC Party School in April 2004. He received
an Advanced certificate of MBA studies from Renmin People’s University in 2004
during a one-year study program he attended.




Brian G. Cunat, 51, has
served as the President of Cunat, Inc., a land development, construction and
property management firm since 1976. Since October 2007, he also has served as
Chairman of Golden Eagle Community




35


Bank,
a full service bank that he founded. From 1996 to November 2005, he was the Vice
Chairman of the Board for Illinois State Bank, a bank that he founded in 1996.
From 1993 to March 2004, Mr. Cunat was President of Royal Japan Corporation, a
real estate development and property management firm based in Japan. In 1991, he
founded Shamrock Health & Fitness Corporation, a full service health and
fitness club. In 1984, he founded Westlane Bowling Center, a successful bowling
facility business where he served as its President from inception to January
2006. Mr. Cunat has been active on many charitable and community organizations,
including Kiwanis International President, Family Services and Community Mental
Health, Home Builders Association, and Chicagoland Apartment Association. In
1997, he received the Entrepreneur of the Year Award from Ernst & Young and
Inc. Magazine.





Joseph S. Rizzello, 60, has
served as the Chief Executive Officer of National Stock Exchange, Inc. (“NSX”),
the first all-electronic stock exchange in the United States and one of the
largest stock markets in the United States since October 2006. Mr. Rizzello also
has currently served as the Chairman of the Board of Directors and Chief
Executive Officer of NSX Holdings, Inc., the parent company to NSX, since
October 2006. Prior to that, Mr. Rizzello served as Special Advisor to the NSX
Chief Executive Officer and Board of Directors from September 2004 to October
2006. He served as a Director on NSX’s Board from January 2002 to September
2004. From January 2001 to December 2003, Mr. Rizzello was Managing Director of
Pershing LLC, a Bank of New York subsidiary and a leading global provider of
securities processing and investment-related products and services. In addition,
he served as President of Pershing Trading Company, LP (PTC) from January 2002
to December 2003. Before joining Pershing, Mr. Rizzello served as a Principal at
Vanguard Brokerage Services (VBS), the brokerage arm of The Vanguard Group,
Inc., in charge of Vanguard’s broker-dealer from 1998 to 2001. Earlier in his
career, he served as Executive Vice President of Business Development, Products
Development and Strategy at the Philadelphia Stock Exchange from 1985 through
1998 and President of the Philadelphia Board of Trade, the Philadelphia Stock
Exchange’s futures subsidiary from 1987 through 1998. Mr. Rizzello was employed
by Thomson McKinnon Securities, Inc. from 1974 to 1985 and served as Vice
President of Sales and Branch Manager, where he built one of the firm’s top
producing offices. In addition, Mr. Rizzello has served on a number of boards
including the International Visitors Council, the Community College of
Philadelphia Foundation, Temple University’s Business Curriculum Advisory Board
and the Philadelphia chapter of the Pennsylvania Partnership on Economic
Education.





Arnold Staloff, 63, has
served on the Board of Directors of Lehman Brothers Derivative Products Inc.
since 1998, Lehman Brothers Financial Products Inc. since 1994 and Exchange Lab
Inc. since September 2001. Mr. Staloff served as Chairman of SFB Market Systems,
Inc., a firm that manages all options symbols within the United States, from
December 2005 to May 2007. He served as President and Chief Executive Officer of
Bloom Staloff Corporation, an equity and options market making firm and foreign
currency options floor broker from 1990 to February 2003. Throughout various
periods of time from 1990 to 2003, Mr. Staloff served as a member of the Board
of Governors, Executive Committee and Chairman of the Foreign Currency Options
Committee of the Philadelphia Stock Exchange and its Finance, Marketing,
Steering and New Products Committees. In 1995, Mr. Staloff was featured as the
inventor of currency options in “The Vandals’ Crown” (Millman, Free Press,
1995). From 1989 to 1990, Mr. Staloff served as President and Chief Executive
Officer of Commodity Exchange Inc. Prior to that, Mr. Staloff served as an
officer of the Philadelphia Stock Exchange from 1971 to 1989. He served as the
President of the Philadelphia Board of Trade from 1985 to 1989. From 1968 to
1971, Mr. Staloff began his career with the SEC, Trading and Markets Division.
In addition, Mr. Staloff has served as a board member of other organizations
such as the Options Clearing Corporation, the Composite Tape Association, the
Options Price Reporting Authority, the National Futures Association, the Swiss
Commodities, Futures and Options Association, and the Variety Club for
Handicapped Children. Mr. Staloff holds a Bachelor of Business Administration
from the University of Miami.




Our
directors are elected by the vote of a plurality in interest of the holders of
our voting stock and hold office for a term of one year and until a successor
has been elected and qualified. Our executive officers are appointed annually by
the board of directors, at our annual meeting, to hold such office until an
officer’s successor has been duly appointed and qualified, unless an officer
sooner dies, resigns or is removed by the Board. Messrs. Cunat, Rizzello and
Staloff qualify as “independent” directors within the meaning of Nasdaq
Marketplace Rule 4200(a)(15).




36





Code
of Ethics





On
November 28, 2007, our board of directors adopted a Code of Conduct applicable
to all members of the board of directors, our executive officers and employees.
The Code of Conduct is filed as Exhibit 14 to this Annual Report on Form
10-K.





Committees
of the Board of Directors





The board
of directors has established an Audit Committee, a Compensation Committee and a
Nominating Committee. The Audit Committee is responsible for recommending
independent auditors for selection by the board of directors, reviewing with the
independent auditors the scope and results of the audit engagement, monitoring
our financial policies and internal control procedures, and reviewing and
monitoring the provisions of non-audit services performed by our independent
auditors. The Compensation Committee is responsible for reviewing and
recommending salaries, bonuses and other compensation for our officers. The
Compensation Committee is also responsible for administering our stock option
plan and for establishing terms and conditions of all stock options granted
under this plan. The Nominating Committee
is responsible for reviewing and recommending directors to be nominated to the
board of directors. All of the members of the Audit Committee, the Compensation
Committee and the Nominating Committee are non-employee directors. Mr. Staloff
has been appointed to sit on the audit committee to serve as the audit committee
financial expert. Mr. Staloff is considered independent within the meaning of
Rule 4200(a)(15) of the National Association of Securities Dealers listing
standards, as amended.





Our board
of directors has appointed the following members to the following designated
committees:





Audit
            
            Messrs.
      Cunat, Rizzello and Staloff, with Mr. Staloff as
  Chairman.Compensation:
            
            Messrs.
      Cunat, Rizzello and Staloff, with Mr. Rizzello as
  Chairman.Nominating:
            
            Messrs.
      Cunat, Rizzello and Staloff, with Mr. Cunat as
  Chairman.





Audit
Committee Financial Expert





The board
of directors has an Audit Committee, which is comprised of Messrs. Cunat,
Rizzello and Staloff. The board of directors has examined the composition of the
Audit Committee in light of the listing standards of the Nasdaq Stock Market and
the regulations under the Exchange Act applicable to audit committees. Based
upon this examination, the board of directors has determined that each member of
the Audit Committee is an “independent” director within the meaning of such
listing standards and the Exchange Act and the rules and regulations thereunder.
Mr. Staloff qualifies as an “audit committee financial expert” as that term is
defined in applicable regulations of the SEC.


37







Item
11.  Executive Compensation.


Summary
Compensation Table





The table
below summarizes all compensation awarded to, earned by, or paid to our current
and former principal executive officers, our two most highly compensated
executive officers other than our current chief executive officer (collectively,
the "named executive officers") for all services rendered in all capacities to
the Company and Shiner Group, as our predecessor, for the fiscal years ended
December 31, 2006 and December 31, 2007.





Name
      and Principal Position
            Fiscal
              Year
            
            Salary
            
            Bonus
            
            Total($)
            
            ($)
            
            ($)Jian
      Fu, Chief Executive Officer1
            
            2007
            
            $
            5,162
            
            $
            7,788
            
            $
            12,9502006
            
            
            3,846
            
            
            1,212
            
            
            5,058XueZhu
      Xu,,Chief Financial Officer2
            
            2007
            
            
            5,121
            
            
            7,629
            
            
            12,7502006
            
            
            3,690
            
            
            1,212
            
            
            4,902MingBiao
      Li, Chief Operating Officer3
            
            2007
            
            
            4,908
            
            
            7,470
            
            
            12,3782006
            
            
            3,644
            
            
            1,164
            
            
            4,808Zubeda
      Mohamed-Lakhani, former President
            
            2007
            
            
            0
            
            
            0
            
            
            0and Chief Executive Officer4
            
            2006
            
            
            0
            
            
            0
            
            
            0





1
            Prior
      to July 24, 2007, Mr. Fu served as the Chief Executive Officer of Shiner
      International, Inc., which was acquired by us on July 24, 2007.
      Compensation in 2006 represented compensation paid to Mr. Fu by the Shiner
      Group. Compensation in 2007 represented compensation paid to Mr. Fu by the
      Shiner Group and the Company.2
            Prior
      to July 24, 2007, Ms. Xu served as the Chief Financial Officer of Shiner
      International, Inc., which was acquired by us on July 24, 2007.
      Compensation in 2006 represented compensation paid to Ms. Xu by the Shiner
      Group. Compensation in 2007 represented compensation paid to Ms. Xu by the
      Shiner Group and the Company.3
            Prior
      to July 24, 2007, Mr. Li served as the Vice President of Technology of
      Shiner International, Inc., which was acquired by us on July 24, 2007.
      Compensation in 2006 represented compensation paid to Mr. Li by the Shiner
      Group. Compensation in 2007 represented compensation paid to Mr. Fu by the
      Shiner Group and the Company.4
            Ms.
      Mohamed-Lakhani resigned as our President and Chief Executive Officeron
      July 24, 2007. Ms. Mohamed-Lakhani was our sole executive officer for the
      fiscal year ended December 31, 2006 and did not receive any compensation
      for services provided to us in 2006 or 2007. We did not have any
      employment or consulting agreement with Ms. Mohamed-Lakhani.





Narrative
Disclosure to Summary Compensation Table





The compensation provided to our named
executive officers consists solely of a cash salary and cash bonus. We have not
granted any stock options or other equity-based compensation to the named
executive officers.





We
currently have employment agreements with our executive officers, but do not
provide for any compensatory plans or arrangements resulting from the
resignation, retirement or any other termination of any of our executive
officers, from a change-in-control, or from a change in any executive officer’s
responsibilities following a change-in-control.





Outstanding
Equity Awards at Fiscal Year-End





We have
not granted any stock options or other equity-based compensation to our named
executive officers.




38





Director
Compensation





The
following table contains information concerning the compensation of our
directors who received compensation during 2007, excluding directors who are
named executive officers.





Name
            
            Fees
      Earned or Paid in Cash
            
            
            Option
              Awards(1)
            
            
            All
      Other Compensation
            
            
            Total($)
            
            
            ($)
            
            
            ($)
            
            
            ($)Brian
      Cunat
            
            $
            30,000
            
            
            $
            159,570
            
            
            $
            0
            
            
            $
            189,570Joseph
      Rizello
            
            $
            30,000
            
            
            $
            159,570
            
            
            $
            0
            
            
            $
            189,570Arnold
      Staloff
            
            $
            40,000
            
            
            $
            159,570
            
            
            $
            0
            
            
            $
            199,570Ying
      Yuet, Chairman of the Board
            
            $
            16,034
            
            
            $
            0
            
            
            $
            0
            
            
            $
            16,034





(1)
            The
      dollar amounts recorded in the table for the option awards have been
      computed in accordance with the Statement of Financial Accounting
      Standards No.123 (as revised in 2004) (“SFAS No.123R”). Under SFAS 123R,
      our compensation cost relating to an option award is generally computed
      over the period of time in which the named executive officer is required
      to provide service to us in exchange for the award. For more information
      about the assumptions used to determine the cost these awards reported in
      the table, see Note 2, “Summary of Significant Accounting Policies” to the
      financial statements contained in this Annual Report on Form
      10-K.





Narrative
Description to Director Compensation Table





For his
services as a director and as the Chairman of the Audit Committee, Mr. Staloff
is entitled to receive $40,000 in cash per annum, to be paid in equal quarterly
installments, of which $10,000 is to be paid for his services as Chairman of the
Audit Committee. In addition, on November 19, 2007, Mr. Staloff received options
to purchase 30,000 shares of our common stock, expiring on November 19, 2012, at
an exercise price of $7.00 per share, with a three year vesting
schedule.





For his
services as a director, Mr. Cunat is entitled to receive $30,000 in cash per
annum, to be paid in equal quarterly installments. In addition, on November 19,
2007, Mr. Cunat received options to purchase 30,000 shares of our common stock,
expiring on November 19, 2012, at an exercise price of $7.00 per share, with a
three year vesting schedule.




For his
services as a director, Dr. Rizzello is entitled to receive $30,000 in cash per
annum, to be paid in equal quarterly installments. In addition, on November 19,
2007, Mr. Rizzello received options to purchase 30,000 shares of our common
stock, expiring on November 19, 2012, at an exercise price of $7.00 per share,
with a three year vesting schedule.




For his
services as Chairman of our board of directors, Mr. Yuet is entitled to receive
$5,703 in cash per annum, to be paid in equal monthly installments. In addition,
Mr. Yuet may receive an annual bonus.  For the fiscal year ended
December 31, 2007, Mr. Yuet received a bonus of $10,331.





Our
remaining directors do not receive any additional compensation for their service
as directors.




39






Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.






Security
Ownership of Certain Beneficial Owners and Management




The
following table sets forth certain information, as of March 24, 2008, with
respect to the beneficial ownership of the outstanding common stock by (i) any
holder of more than five percent (5%); (ii) each of our executive officers and
directors; and (iii) our directors and executive officers as a group. Except as
otherwise indicated, each of the stockholders listed below has sole voting and
investment power over the shares beneficially owned.




Number
      of Shares
            
            Percent of
      SharesTitle
      of
            
            
            
            Beneficially
            
            BeneficiallyClass
            
            Name of Beneficial Owner1
            
            Owned
            
            Owned2Common
      Stock
            
            Jian
      Fu
            
            
            58,650
            3
            
            *Common
      Stock
            
            XueZhu
      Xu
            
            
            0
            
            
            *Common
      Stock
            
            MingBiao
      Li
            
            
            0
            
            
            *Common
      Stock
            
            Ying
      Yuet
            
            
            11,518,408
            
            
            46.73
            %Common
      Stock
            
            Brian
      Cunat
            
            
            0
            
            
            *Common
      Stock
            
            Joseph
      Rizzello4
            
            
            23,000
            
            
            *Common
      Stock
            
            Arnold
      Staloff5
            
            
            82,534
            
            
            *Common
      Stock
            
            All
      officers and directors (7 persons)
            
            
            11,682,592
            
            
            47.39
            %





*
            Less
      than 1 percent1
            Except
      as otherwise indicated, the address of each beneficial owner is c/o 9/F.
      Didu Bldg. No. 2. North Longkun Road, Haikou Hainan,
  China.2
            Beneficial
      ownership has been determined in accordance with Rule 13d-3 under the
      Securities and Exchange Act of 1934. Unless otherwise noted, we believe
      that all person named in the table have sole voting and investment power
      with respect to all shares of common stock beneficially owned by
      them.3.
            Includes
      51,000 shares held by Mr. Fu's spouse and warrants to purchase 7,650
      shares of common stock exercisable until October 25, 2010 at $6 per
      share.4.
            Includes
      warrants to purchase 3,000 shares of common stock exercisable until
      October 22, 2010 at $6 per share.5.
            Includes
      warrants to purchase 10,700 shares of common stock exercisable until
      October 22, 2010 at $6 per share.




40





Equity
Compensation Plan Information





Shiner has
no stock option plan. However, we have granted compensatory stock options to
certain non-management directors, as set forth in the table below.





Plan
      category
            
            Number
      of securities
              to
      be issued upon
              exercise
      of
              outstanding
      options,
              warrants
      and rights
            
            Weighted
      average
              exercise
      price of
              outstanding
      options,
              warrants
      and rights
            
            Number
      of securities
              remaining
      available for future issuance under equity compensation plans (excluding
      securities reflected in column (a)(a)
            
            (b)
            
            (c)Equity
      compensation plans approved by security holders
            
            
            0
            
            
            N/A
            
            
            0Equity
      compensation plans not approved by security holders
            
            
            90,000
            
            
            $7.00
            
            
            0Total
            
            
            90,000
            
            
            $7.00
            
            
            0




Item
13.  Certain Relationships and Related Transactions, and Director
Independence.


Certain
Relationships and Related Transactions





We are
not a party to any transactions required to be disclosed pursuant to Item 404 of
Regulation S-K, including any transaction between us and any officer, director
or affiliates of Shiner that has a value in excess of $120,000.





Director
Independence





Our board
has determined that Messrs. Cunat, Rizzello and Staloff are independent
directors within the meaning of applicable NASDAQ Stock Market and SEC rules.
Each of Messrs. Cunat, Rizzello and Staloff serve on our audit, compensation and
nominating committees.  No other directors serve on these
committees.  In considering director independence, the board studied
the shares of Shiner common stock beneficially owned by each of the directors as
set forth under “Security Ownership of Certain Beneficial Owners and
Management.”







Item
14.  Principal Accounting Fees and Services.


Manning
Elliott LLP had been our independent accountants, until we dismissed them on
July 24, 2007. On September 28, 2007, we appointed GPKM as our independent
registered certified public accounting firm.




41





The
following table sets forth fees billed to us by GPKM for professional services
rendered for 2007 and 2006:





2007
            
            2006Audit
      Fees
            $
            115,000
            
            $
            109,250Audit-Related
      Fees
            $
            0
            
            $
            0Tax
      Fees
            $
            0
            
            $
            0All
      Other Fees
            $
            0
            
            $
            0Total
            $
            115,000
            
            $
            109,250





Audit
Fees. This category includes the aggregate fees billed for professional
services rendered for the audits of our financial statements for fiscal years
2007 and 2006, respectively, for the reviews of the financial statements
included in our quarterly reports on Form 10-Q and for services that are
normally provided by GPKM in connection with statutory and regulatory filings or
engagements for the relevant fiscal year.





The audit committee has considered the compatibility of the
non-audit services performed by and fees paid in fiscal year 2007 and has
determined that such services and fees were compatible with the independence of
the accountants. During fiscal year 2007, GPKM did not utilize any personnel in
connection with the audit other than its full-time, permanent
employees.





Policy for
Approval of Audit and Non-audit Services. The audit committee has adopted
an approval policy regarding the approval of audit and non-audit services
provided by the independent accountants. The approval policy describes the
procedures and the conditions pursuant to which the Audit Committee may grant
general pre-approval for services proposed to be performed by our independent
accountants. All services provided by our independent accountants, both audit
and non-audit, must be pre-approved by the Audit Committee.





In
determining whether to approve a particular audit or permitted non-audit
service, the Audit Committee will consider, among other things, whether such
service is consistent with maintaining the independence of the independent
accountant. The audit committee will also consider whether the independent
accountant is best positioned to provide the most effective and efficient
service to our company and whether the service might be expected to enhance our
ability to manage or control risk or improve audit quality.






42


PART
IV





Item
15.  Exhibits.





(a)(1)(2)
Financial Statements and Financial Statement Schedule.




The financial
statements and schedule listed in the Index to Financial Statements are filed as
part of this Annual Report on Form 10-K.





(a)(3)
Exhibits.





The exhibits
required by this item are set forth on the Exhibit Index attached
hereto.





43




SHINER
INTERNATIONAL, INC.
 Consolidated
Financial Statements
 For
The Year Ended December 31, 2007 and 2006
  Contents
 
 
 PageReport
      of Independent Registered Public Accounting Firm
              F-1Financial
      Statements:Consolidated
      Balance Sheet as of December 31, 2007
              F-2Consolidated
      Statements of Income and Other Comprehensive Income
                for the years ended December 31,
      2007 and 2006
              F-3Consolidated
      Statement of Stockholders' Equity for the years ended
                December 31, 2007 and
      2006
              F-4Consolidated
      Statements of Cash Flows for the years ended
                December 31, 2007 and
      2006
              F-5Notes
      to Consolidated Financial Statements
              F-6
      to F-21
    
  Report
of Independent Registered Public Accounting Firm
   Board of
Directors and Stockholders of
 Shiner
International, Inc.
 
 We have
audited the accompanying consolidated balance sheet of Shiner International,
Inc. as of December 31, 2007, and the related consolidated statements of income
and other comprehensive income, stockholders' equity, and cash flows for the
years ended December 31, 2007 and 2006. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement.
..  The Company is not required to have, nor were we engaged to
perform, an audit of internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Shiner
International, Inc. as of December 31, 2007, and the consolidated results of
their operations and their consolidated cash flows for the years ended December
31, 2007 and 2006, in conformity with U.S. generally accepted accounting
principles.
 
 
 
 
 Goldman
Parks Kurland Mohidin LLP
 Encino,
California
 March 7,
2008
  F-1
  Shiner International, Inc. and Subsidiaries
 Consolidated
Balance Sheet
 As of
December 31, 2007
   December
      31,2007ASSETSCURRENT
      ASSETS:Cash
      & cash equivalents
                
                $
                4,607,434Accounts
      receivable, net of allowance for doubtful accounts $84,964
                
                
                8,988,559Advances
      to suppliers
                
                
                2,514,681Note
      receivable
                
                
                39,755Inventory
                
                
                6,411,267Prepaid
      expense & other current assets
                
                
                432,211Total
      current assets
                
                
                22,993,907Property
      and equipment, net
                
                
                5,242,178Advance
      for purchase of equipment
                
                
                3,409,721Long-term
      prepaid expense
                
                
                215,783Intangible
      assets
                
                
                339,593TOTAL
      ASSETS
                
                $
                32,201,182LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                
                $
                4,545,629Other
      payables
                
                
                1,396,233Unearned
      revenue
                
                
                520,056Accrued
      payroll
                
                
                41,267Short
      term loan
                
                
                822,528Advance
      from related party
                
                
                -Dividend
      payable
                
                
                65,110Tax
      and welfare payable
                
                
                924,137Total
      current liabilities
                
                
                8,314,960Commitments
      and contingencies
                
                
                -STOCKHOLDERS'
      EQUITY:Common
      stock, par value $0.001; 75,000,000 shares authorized,24,650,000
      shares issued and outstanding
                
                
                24,650Additonal
      paid-in capital
                
                
                11,153,503Other
      comprehensive income
                
                
                1,384,391Statutory
      reserve
                
                
                2,374,069Retained
      earnings
                
                
                8,949,609Total
      stockholders' equity
                
                
                23,886,222TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                32,201,182
  The
accompanying notes are an integral part of these consolidated financial
statements.
 
 F-2
  Shiner
International, Inc. and Subsidiaries
 Consolidated
Statements of Income and Comprehensive Income
 For the Years Ended December 31, 2007 and
2006
 
 Years
      Ended December 31,2007
              
              
              2006Net
      Revenue
              
              $
              42,762,615
              
              
              $
              33,951,965Cost
      of Revenue
              
              
              34,225,643
              
              
              
              27,328,787Gross
      profit
              
              
              8,536,972
              
              
              
              6,623,178Operating
      expensesSelling
      expenses
              
              
              1,331,904
              
              
              
              1,578,585General
      and administrative expenses
              
              
              2,043,588
              
              
              
              1,194,911Total
      operating expenses
              
              
              3,375,492
              
              
              
              2,773,496Income
      from operations
              
              
              5,161,480
              
              
              
              3,849,682Non-operating
      income (expense):Other
      income, net
              
              
              72,713
              
              
              
              278,545Interest
      income
              
              
              64,984
              
              
              
              1,443Interest
      expense
              
              
              (96,235
              )
              
              
              (330,530
              )Exchange
      Gain (Loss)
              
              
              (253,519
              )
              
              
              (23,301
              )Total non-operating income (expense)
              
              
              (212,057
              )
              
              
              (73,843
              )Income
      before income tax
              
              
              4,949,423
              
              
              
              3,775,839Income
      tax
              
              
              409,294
              
              
              
              214,504Net
      income
              
              
              4,540,129
              
              
              
              3,561,335Other
      comprehensive incomeForeign
      currency translation gain
              
              
              953,081
              
              
              
              282,693Comprehensive
      Income
              
              $
              5,493,210
              
              
              $
              3,844,028Weighted
      average shares outstanding :Basic
              
              
              19,222,329
              
              
              
              16,500,000Diluted
              
              
              19,229,798
              
              
              
              16,500,000Earnings
      per share:Basic
              
              $
              0.24
              
              
              $
              0.22Diluted
              
              $
              0.24
              
              
              $
              0.22
    The
accompanying notes are an integral part of these consolidated financial
statements.
 
 F-3
  Shiner
International, Inc. and Subsidiaries
 Consolidated
Statement of Stockholders' Equity
 (unaudited)
 
 
  Additional
                
                Other
                
                
                
                
                
                TotalCommonStock
                
                Paid
      in
                
                Comprehensive
                
                Statutory
                
                Retained
                
                Stockholders'Shares
                
                Amount
                
                Capital
                
                Income
                
                Reserve
                
                Earnings
                
                EquityBalance
      December 31, 2005
                
                
                
                16,500,000
                $
                16,500
                $
                1,288,825
                $
                148,617
                $
                1,158,504
                $
                4,634,733
                $
                7,247,179Change
      in foreign currency translation gain
                
                -
                
                -
                
                -
                
                282,693
                
                -
                
                -
                
                282,693Dividends
                
                
                
                
                -
                
                -
                
                -
                
                -
                
                -
                
                (1,917,943)
                
                (1,917,943)Net
      income
                
                
                
                
                -
                
                -
                
                -
                
                -
                
                -
                
                3,561,335
                
                3,561,335Transfer
      to statutory reserve
                
                
                -
                
                -
                
                -
                
                -
                
                717,435
                
                (717,435)
                
                -Balance
      December 31, 2006
                
                
                16,500,000
                
                16,500
                
                1,288,825
                
                431,310
                
                1,875,939
                
                5,560,690
                
                9,173,264Capital
      contribution
                
                
                
                -
                
                -
                
                204,446
                
                -
                
                -
                
                -
                
                204,446Recapitalization
      on reverse acquisiton
                
                
                4,650,000
                
                4,650
                
                (39,517)
                
                -
                
                -
                
                -
                
                (34,867)Dividends
      declared
                
                
                
                -
                
                -
                
                -
                
                -
                
                -
                
                (653,080)
                
                (653,080)Common
      Stock sold for cash
                
                
                3,500,000
                
                3,500
                
                9,680,689
                
                -
                
                -
                
                -
                
                9,684,189Stock
      compensation expense for options issued to directors
                
                -
                
                -
                
                19,060
                
                -
                
                -
                
                -
                
                19,060Change
      in foreign currency translation gain
                
                -
                
                -
                
                -
                
                953,081
                
                -
                
                -
                
                953,081Net
      income
                
                
                
                
                -
                
                -
                
                -
                
                -
                
                -
                
                4,540,129
                
                4,540,129Transfer
      to statutory reserve
                
                
                -
                
                -
                
                -
                
                -
                
                498,130
                
                (498,130)
                
                -Balance
      December 31, 2007
                24,650,000
                $
                24,650
                $
                11,153,503
                $
                1,384,391
                $
                2,374,069
                $
                8,949,609
                $
                23,886,222
      The
accompanying notes are an integral part of these consolidated financial
statements.
  F-4
  Shiner
International, Inc. and Subsidiaries
 Consolidated
Statements of Cash Flows
 For the Years
Ended December 31, 2007 and 2006
 
 Years
      Ended December 31,2007
                
                
                2006CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                
                $
                4,540,129
                
                
                $
                3,561,335Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
                
                
                656,170
                
                
                
                494,216Loss
      on disposal of property and equipment
                
                
                8,347
                
                
                
                17,991Amortization
                
                
                6,245
                
                
                
                5,948Stock
      compensation expense for options issued to directors
                
                
                19,060
                
                
                
                -(Increase)
      / decrease in assets:Accounts
      receivable
                
                
                (1,846,491
                )
                
                
                (1,064,201
                )Inventory
                
                
                (1,526,188
                )
                
                
                200,212Advances
      to suppliers
                
                
                (1,068,576
                )
                
                
                (234,056
                )Other
      assets
                
                
                120,099
                
                
                
                15,599Increase
      / (decrease) in current liabilities:Accounts
      payable
                
                
                57,102
                
                
                
                735,793Unearned
      revenue
                
                
                55,822
                
                
                
                111,142Other
      payables
                
                
                1,178,796
                
                
                
                (706,358
                )Accrued
      payroll
                
                
                (12,890
                )
                
                
                6,143Tax
      and welfare payable
                
                
                750,571
                
                
                
                31,206Net
      cash provided by (used in) operating activities
                
                
                2,938,196
                
                
                
                3,174,970CASH
      FLOWS FROM INVESTING ACTIVITIESPayments
      on (issuance of) notes receivable
                
                
                59,166
                
                
                
                394,772Acquisition
      of property and equipment
                
                
                (241,627
                )
                
                
                (1,100,933
                )Advance
      for payment of equipment
                
                
                (3,275,783
                )Cash
      acquired with acquisition of Cartan Holdings, Inc.
                
                
                3,610
                
                
                
                -Net
      cash used in investing activities
                
                
                (3,454,634
                )
                
                
                (706,161
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Short
      -term loan payable
                
                
                -
                
                
                
                752,580Repayment
      of advances
                
                
                (3,634,418
                )
                
                
                (3,094,115
                )Dividend
      payable
                
                
                (2,237,086
                )
                
                
                (303,703
                )Issuance
      of shares for cash
                
                
                10,500,000
                
                
                
                -Payments
      of offering costs
                
                
                (815,811
                )
                
                
                -Capital
      contribution
                
                
                204,446
                
                
                
                -Net
      cash provided by (used in) financing activities
                
                
                4,017,131
                
                
                
                (2,645,238
                )Effect
      of exchange rate changes on cash and cash equivalents
                
                
                168,473
                
                
                
                33,081NET
      INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
                
                
                3,669,166
                
                
                
                (143,348
                )CASH
      & CASH EQUIVALENTS, BEGINNING BALANCE
                
                
                938,268
                
                
                
                1,081,616CASH
      & CASH EQUIVALENTS, ENDING BALANCE
                
                $
                4,607,434
                
                
                $
                938,268SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Interest
      paid
                
                $
                90,878
                
                
                $
                54,635Income
      taxes paid
                
                $
                297,142
                
                
                $
                119,230Transfer
      from construction-in-process to property and equipment
                
                $
                4,586
                
                
                $
                1,187,706The
      accompanying notes are an integral part of these consolidated financial
      statements.




F-5




Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006









Note
1 - Organization and Basis of Presentation





Organization and Line of
Business





Shiner
International, Inc. formerly known as Cartan Holdings, Inc. (hereinafter
referred to as the “Company” or “Shiner”) was incorporated in the State of
Nevada on November 12, 2003.





On July
23, 2007, the Company entered into a share exchange agreement and plan of
reorganization with Sino Palace Holdings Limited., a corporation formed under
the laws of the British Virgin Islands (“Sino Palace”). Pursuant to the
agreement, the Company acquired from Sino Palace all of the issued and
outstanding capital stock of each of Hainan Shiner Industrial Co., Ltd. (“Shiner
Industrial”) and Hainan Shiny-day Color Printing Packaging Co., Ltd.
(“Shiny-day”) as well as all of the issued and outstanding capital stock of
their subsidiaries, Hainan Modern Hi-Tech Industrial Co., Ltd. (“Modern”) and
Zhuhai Modern Huanuo Packaging Material Co., Ltd. (“Zhuhai”) in exchange for the
issuance of an aggregate of 16,500,000 shares of the Company’s common stock to
the shareholders of Sino Palace. Shiner Industrial, Shiny-day, Modern and Zhuhai
are each Chinese corporations and are referred to collectively as the “Shiner
Group.”





Concurrently
with the closing of the transactions contemplated by the share exchange
agreement and as a condition thereof, the Company entered into an agreement with
Zubeda Mohamed-Lakhani, the Company’s sole director and chief executive officer,
pursuant to which she returned 4,750,000 shares of the Company’s common stock
for cancellation. Ms. Mohamed-Lakhani was not compensated in any way for the
cancellation of her shares of the Company’s common stock. Upon completion of the
foregoing transactions, the Company had an aggregate of 21,150,000 shares of
common stock issued and outstanding.





The
exchange of shares with the Shiner Group was accounted for as a reverse
acquisition under the purchase method of accounting since the Shiner Group
obtained control of the Company. On July 24, 2007, Cartan Holdings, Inc. changed
its name to Shiner International, Inc. Accordingly, the merger of the Shiner
Group into the Company were recorded as a recapitalization of the Shiner Group,
the Shiner Group being treated as the continuing entities. The Shiner Group had
common shareholders and common management. The historical financial statements
presented are the combined financial statements of the Shiner Group. The share
exchange agreement has been treated as a recapitalization and not as a business
combination; therefore, no pro forma information is disclosed. At the date of
this transaction, the net liabilities of the legal acquirer were
$34,867.





As a
result of the reverse merger transactions described above the historical
financial statements presented are those of the Shiner Group, the operating
entities.





The
Company is engaged in research, manufacture, sale, and distribution of packaging
film and color printing for the packaging industry.






F-6







Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006







Basis of
Presentation





The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America.  The Company’s functional currency is the Chinese Renminbi;
however the accompanying Consolidated financial statements have been translated
and presented in United States Dollars ($).





Foreign Currency
Translation





As of
December 31, 2007 and 2006, the accounts of the Company were maintained, and
their financial statements were expressed in the Chinese Yuan Renminbi (CNY).
Such financial statements were translated into U.S. Dollars (USD) in accordance
with Statement of Financial Accounts Standards ("SFAS") No. 52, "Foreign
Currency Translation," with the CNY as the functional currency. According to the
Statement, all assets and liabilities were translated at the exchange rate on
the balance sheet date, stockholder's equity are translated at the historical
rates and statement of operations items are translated at the weighted average
exchange rate for the year. The resulting translation adjustments are reported
under other comprehensive income in accordance with SFAS No. 130, "Reporting
Comprehensive Income.”  Gains and losses resulting from the
translations of foreign currency transactions and balances are reflected in the
income statement.





Note
2 – Summary of Significant Accounting Policies





Use of
Estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles 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 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. Allowance for doubtful debts amounted to $84,964 at
December 31, 2007.












F-7





Shiner
International, Inc.


Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006





Advances to
Suppliers





The
Company advances to certain vendors for purchase of its material. The advances
to suppliers are interest free and unsecured. The advances to suppliers amounted
to $2,514,681 at December 31, 2007.





Inventories





Inventories
are valued at the lower of cost (determined on a weighted average basis) or
market. The Management compares the cost of inventories with the market value
and allowance is made for writing down their inventories to market value, if
lower.





Notes
Receivable





Notes
receivable consist of several notes that are due from third
parties.  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
charged to earnings as incurred; additions, renewals and betterments 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 of:








Operating
      equipment
            10
      yearsVehicles
            8
      yearsOffice
      equipment
            5
      yearsBuildings
      and improvements
            20
      years





At
December 31, 2007, the following are the details of the property and
equipment:





Operating
      equipment
            
            $
            5,984,512Vehicles
            
            
            67,765Office
      equipment
            
            
            319,979Buildings
      and improvements
            
            
            1,084,7307,456,986Less
      accumulated depreciation
            
            
            (2,214,808
            )$
            5,242,178





Depreciation
expense was $656,170 and $494,216 for the years ended December 31, 2007 and
2006, respectively.




Advance for Purchase of
Equipment









F-8




Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006


Long-Lived
Assets





The
Company applies the provisions of Statement of Financial Accounting Standards
No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
144”), which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
the Results of Operations for a Disposal of a Segment of a Business.” The
Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with SFAS 144. SFAS 144 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 market value of the long-lived assets. Loss on long-lived assets to be
disposed of is determined in a similar manner, except that fair market values
are reduced for the cost of disposal. Based on its review, the Company believes
that, as of December 31, 2007 there were no significant impairments of its
long-lived assets.





Intangible
Assets





Intangible
assets consist of Rights to use land. The Company evaluates intangible assets
for impairment, at least on an annual basis and whenever events or changes in
circumstances indicate that 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





SFAS No.
107, Disclosures about fair value of financial instruments, requires that the
Company disclose estimated fair values of financial instruments. The carrying
amounts reported in the statements of financial position for current assets and
current liabilities qualifying as financial instruments are a reasonable
estimate of fair value.





Revenue
Recognition





The
Company’s revenue recognition policies are in compliance with SEC Staff
accounting bulletin (SAB) 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 collectibility is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue.







F-9
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006


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 years ended
December 31, 2007 and 2006 were not significant.





Stock-Based
Compensation





The
Company accounts for its stock-based compensation in accordance with SFAS No.
123R, “Share-Based Payment, an Amendment of FASB Statement No.
123.”  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 90,000 options
outstanding as of December 31, 2007.





Income
Taxes





The
Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.





The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, on January 1, 2007.  As a result of the
implementation of FIN 48, the company made a comprehensive review of its
portfolio of tax positions in accordance with recognition standards established
by FIN 48.  As a result of the implementation of Interpretation 48,
the Company recognized no material adjustments to liabilities or stockholders’
equity.  When tax returns are filed, it is highly certain that some
positions taken would be sustained upon examination by the taxing authorities,
while others are subject to uncertainty about the merits of the position taken
or the amount of the position that would be ultimately sustained.  The
benefit of a tax position is recognized in the financial statements in the
period during which, based on all available evidence, management believes it is
more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if
any.  Tax positions taken are not offset or aggregated with other
positions.  Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is
more than 50 percent likely of being realized upon settlement with the
applicable taxing authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above is reflected
as a liability for unrecognized tax benefits in the accompanying balance sheets
along with any associated interest and penalties that would be payable to the
taxing authorities upon examination.





Interest
associated with unrecognized tax benefits are classified as interest expense and
penalties are classified in selling, general and administrative expenses in the
statements of income. The adoption of FIN 48 did not have a material impact on
the Company’s financial statements.






F-10
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006


Earnings Per
Share





Earnings per share is calculated in accordance with the SFAS No.
128 (SFAS No. 128), “Earnings Per Share”. SFAS No. 128 superseded Accounting
Principles Board Opinion No.15 (APB 15). 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
options were converted or exercised. Dilution is computed by applying the
treasury stock method. Under this method, options and 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 90,000 options and 970,050
warrants outstanding as of December 31, 2007.  For the year ended
December 31, 2007, the Company’s average stock price was greater than some of
the exercise prices which resulted in additional common stock equivalents of
7,469.








The
following is a reconciliation of the number of shares (denominator) used in the
basic and diluted earnings per share computations:





2007
            
            
            2006Per
      Share
            
            
            
            
            
            Per
      ShareShares
            
            
            Amount
            
            
            Shares
            
            
            AmountBasic  earnings
      per share
            
            
            19,222,329
            
            
            $
            0.24
            
            
            
            16,500,000
            
            
            $
            0.22Effect
      of dilutive stock options and warrants
            
            
            7,469
            
            
            
            -
            
            
            
            -
            
            
            
            -Diluted
      earnings per share
            
            
            19,229,798
            
            
            $
            0.24
            
            
            
            16,500,000
            
            
            $
            0.22








Foreign Currency
Transactions and Comprehensive Income





Accounting
principles generally require that 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 is Chinese
Renminbi. The unit of Renminbi is in Yuan. Translation gains of $1,384,391 at
December 31, 2007, are classified as an item of other comprehensive income in
the stockholders’ equity section of the consolidated balance sheet. During the
years ended December 31, 2007 and 2006, other comprehensive income in the
consolidated statements of income and other comprehensive income included
translation gains of $953,081 and $282,693, respectively.


F-11
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006


Statement of Cash
Flows





In
accordance with SFAS No. 95, “Statement of Cash Flows,” cash flows from the
Company’s operations are calculated based upon the local currencies. As a
result, amounts related to assets and liabilities reported on the statement of
cash flows will not necessarily agree with changes in the corresponding balances
on the balance sheet.





Segment
Reporting





SFAS No.
131 (SFAS No. 131), “Disclosure About Segments of an Enterprise and Related
Information” requires use of the “management approach” model for segment
reporting. The management approach model is based on the manner in which a
company’s management organizes segments within the company for making operating
decisions and assessing performance. The Company has determined that it has two
reportable segments (See Note 13).





Recent
Pronouncements





In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the
overfunded or underfunded status of a defined benefit postretirement plan (other
than a multiemployer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business entity or
changes in unrestricted net assets of a not-for-profit organization. This
statement also requires an employer to measure the funded status of a plan as of
the date of its year-end statement of financial position, with limited
exceptions. The provisions of SFAS No. 158 are effective for employers with
publicly traded equity securities as of the end of the fiscal year ending after
December 15, 2006. The adoption of this statement had no effect on the Company‘s
reported financial position or results of operations.




In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements“. The
objective of SFAS No. 157 is to increase consistency and comparability in fair
value measurements and to expand disclosures about fair value measurements. SFAS
No. 157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS No. 157 applies under other accounting pronouncements
that require or permit fair value measurements and does not require any new fair
value measurements. The provisions of SFAS No. 157 are effective for fair value
measurements made in fiscal years beginning after November 15, 2007. The
adoption of this statement is not expected to have a material effect on the
Company‘s future reported financial position or results of
operations.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities“. This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. The Company is currently assessing the
impact of SFAS No. 159 on its financial position and results of
operations.


F-12
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006





In June
2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for use in Future
Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
nonrefundable advance payments for goods or services that used or rendered for
research and development activities should be expensed when the advance payment
is made or when the research and development activity has been
performed.  Management is currently evaluating the effect of this
pronouncement on financial statements.





In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations.” SFAS No. 141 (Revised 2007) changes how a reporting
enterprise accounts for the acquisition of a business. SFAS No. 141
(Revised 2007) requires an acquiring entity to recognize all the assets acquired
and liabilities assumed in a transaction at the acquisition-date fair value,
with limited exceptions, and applies to a wider range of transactions or events.
SFAS No. 141 (Revised 2007) is effective for fiscal years beginning on or
after December 15, 2008 and early adoption and retrospective application is
prohibited.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.





Note
3 - Inventory





The
inventory as of December 31, 2007 consisted of the following:-





Raw
      Material
            
            $
            3,569,017Work
      in process
            
            
            676,476Finished
      goods
            
            
            2,241,5076,487,000Less
      : Obsolescence Reserve
            
            
            (75,733
            )Net
      Inventory
            
            $
            6,411,267


F-13
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006







Note
4 – Intangible Assets





Intangible
assets at December 31, 2007 were as follows:





Rights
      to use land
            
            $
            365,735Less
      Accumulated amortization
            
            
            (26,142
            )$
            339,593





Per the
People's Republic of China's (“PRC”) governmental regulations, the Government
owns all land. The Company has recognized the amounts paid for the acquisition
of rights to use land as intangible asset and amortizing over the period the
Company has use of the land which range from 54 to 57 years.





Amortization
expense for the Company’s intangible assets for the years ended December 31,
2007 and 2006 amounted to $6,245 and $5,948, respectively.





Amortization
expense for the Company’s intangible assets over the next five fiscal years is
estimated to be: 2008-$6,245, 2009-$6,245, 2010-$6,245, 2011-$6,245 and 2012
-$6,245.





Note
5 – Short-term loan





Short-term
loan at December 31, 2007 consists of the following:




Short-term
      bank loan. The term of the loan is from August 15, 2007 to February 15,
      2008 with an interest rate of 7.227%.  The loan is
      collateralized by buildings land use rights and machines.  This
      loan was repaid in February 2008.
            $
            822,528





Note
6 – Stockholders’ Equity





On
October 22, 2007, the Company completed a final closing of a private placement
offering of units pursuant to which they sold an aggregate of 3,500,000 units at
an offering price of $3.00 per unit for aggregate gross proceeds of $10,500,000.
Each unit consisted of one share of our common stock, par value $.001 per share,
and a three year warrant to purchase 15% of one share of common stock at an
exercise price of $6.00 per share. Accordingly, the Company issued an aggregate
of 3,500,000 shares of common stock and warrants to purchase 525,000 shares of
our common stock to the 76 accredited investors who participated in this
offering. In addition, the Company compensated four finders that assisted in the
sale of securities in this private placement offering by (i) paying them cash
equal to 8% of the gross proceeds from the sales of units placed and (ii)
issuing them warrants to purchase that number of shares of our common stock
equal to 15% of the units placed as follows:


F-14
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006







Selected
      Finder
            
            Cash
            
            
            WarrantsMaxim
      Group LLC
            
            $
            178,400
            
            
            
            111,500Four
      Tong Investments Ltd.
            
            
            153,600
            
            
            
            96,000Global
      Hunter Securities, LLC
            
            
            300,880
            
            
            
            188,050Basic
      Investors, Inc.
            
            
            79,200
            
            
            
            49,500$
            712,080
            
            
            
            445,050





The
warrants granted to these finders have the same terms and conditions as the
warrants granted in the offering. The Company anticipates that the net proceeds
of this private placement offering will be used for market development, product
research, working capital, the potential acquisition of a BOPP Production Line
in Zhuhai, the potential acquisition of an anti-counterfeit technology company
and equipment purchases for coated film.





Note
7 – Stock Options and Warrants





Stock
Options





Following
is a summary of the stock option activity:





Options
      outstanding
            
            
            Weighted
      Average Exercise Price
            
            
            Weighted
      average remaining contractual life
            
            
            Aggregate
      Intrinsic ValueOutstanding,
      December 31, 2006
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            -Granted
            
            
            90,000
            
            
            $
            7.00Forfeited
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -Outstanding,
      December 31, 2007
            
            
            90,000
            
            
            $
            7.00
            
            
            
            4.89
            
            
            $
            -Exercisable,
      December 31, 2007
            
            
            -





The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option- pricing model are as follows:





Risk-free
      interest rate
            3.5%Expected
      life of the options
            4
      yearsExpected
      volatility
            122%Expected
      dividend yield
            0





Warrants





On
October 22, 2007, the Company completed a private placement offering whereby
they sold an aggregate of 3,500,000 shares of common stock and issued a three
year warrant to purchase 15% of one share of common stock at an exercise price
of $6.00 per share.  In addition, the Company issued to four finders
445,050 warrants with the same terms and conditions as those granted in the
private placement.


F-15
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006





The
following is a summary of the warrant activity:





Outstanding,
      December 31, 2006
            
            
            -Granted
            
            
            970,050Forfeited
            
            
            -Exercised
            
            
            -Outstanding,
      December 31, 2007
            
            
            970,050








Note
8 – Income Taxes





Local PRC
Income Tax





Pursuant
to the tax laws of China, general enterprises are subject to income tax at an
effective rate of 33% (30% federal and 3% provincial).  The Company
currently has a 15% tax rate because of its location in a privileged economic
zone. In addition, it also enjoys a 50% reduction (50% of 15%) for the dates
specified below.





A
reconciliation of tax at United States federal statutory rate to provision for
income tax recorded in the financial statements is as follows:





Years
      EndedDecember
      31,2007
            
            
            2006Tax
      provision at statutory rate
            
            
            34
            %
            
            
            34
            %Foreign
      tax rate difference
            
            
            (1
            %)
            
            
            (1
            %)Effect
      of tax holiday
            
            
            (25
            %)
            
            
            (27
            %)8
            %
            
            
            6
            %





The
Company operates in a privileged economic zone which entitles them to certain
tax benefits (tax holiday) as follows:





·
            Shiny-Day
      – Exempt from provincial tax and 100% exemption from federal tax from
      January 1, 2005 to December 31, 2006 and 50% exemption from federal tax
      from January 1, 2007 to December 31,
2009.





·
            Shiner
      – Exempt from provincial tax and 100% exemption from federal tax from
      January 1, 2004 to December 31, 2005 and 50% exemption from federal tax
      from January 1, 2006 to December 31,
2008.


F-16
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006





If the
Company had not been exempt from paying income taxes due to operating in a
privileged economic zone, net income for the year ended December 31, 2007 and
2006 would have been lower by approximately $1,230,000 and $1,031,000,
respectively.  The net effect on earnings per share had the income tax
been applied at the regular rates would decrease basic and diluted earnings per
share from $0.24 to $0.17 and $0.22 to $0.15 for the years ended December 31,
2007 and 2006, respectively.





Note
9 – Employee Welfare Plans





The
Company has established its own employee welfare plan in accordance with Chinese
law and regulations. The Company makes annual contributions of 14% of all
employees’ salaries to the employee welfare plan. The total expense for the
welfare plan was $19,906 and $106,912 for the years ended December 31, 2007 and
2006, respectively.  The Company has recorded welfare payable of $0 at
December 31, 2007.





Note
10 – Statutory Common Welfare Fund





As
stipulated by the Company Law of the People’s Republic of China (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 fund
      amounts to 50% of the Company’s registered
  capital;





iii.
            Allocations
      of 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.





Pursuant
to the new Corporate Law effective on January 1, 2006, there is now only one
"Statutory surplus reserve" requirement. The reserve is 10 percent of income
after tax, not to exceed 50 percent of registered capital.





Pursuant
to the "Circular of the Ministry of Finance (MOF) on the Issue of Corporate
Financial Management after the Corporate Law Enforced" (No.67 [2006]), effective
on April 1, 2006, issued by the MOF, the companies will transfer the balance of
SCWF as of December 31, 2005 to Statutory Surplus Reserve. Any deficit in the
SCWF will be charged in turn to Statutory Surplus Reserve, additional paid-in
capital and undistributed profit of previous years. If a deficit still remains,
it should be transferred to retained earnings and be reduced to zero by a
transfer from after tax profit of following years. At December 31, 2005 the
Company did not have a deficit in the SCWF.  The Company has
appropriated


F-17
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006










Note
11 – Current Vulnerability Due to Certain Concentrations





Three
vendors provided 9%, 9% and 8% of the Company’s raw materials for the year ended
December 31, 2007.  Two vendors provided 14% and 11% of the Company’s
raw materials for the year ended December 31, 2006.





One
customer accounted for 31% of the Company’s sales for the year ended December
31, 2007.  Two customers accounted for 37% and 11% of the Company’s
sales for the year ended December 31, 2006.





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, 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
December 31, 2007, the Company is contingently liable to banks for discounted
and endorsed notes receivable and to vendors for endorsed notes receivable
amounting to $2,200,951.


F-18
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006





Notes 13 –
Segment Information





The Company’s business segments are packaging film and color
printing. The following tables summarize segment information for the years ended
December 31, 2007 and 2006:





2007
            
            
            2006Revenues
      from unrelated entitiesColor
      Printing
            
            $
            14,282,551
            
            
            $
            14,553,667Packaging
            
            
            28,480,064
            
            
            
            19,398,29842,762,615
            
            
            
            33,951,965Intersegment
      revenuesColor
      Printing
            
            
            217,469
            
            
            
            2,845,322Packaging
            
            
            4,562,692
            
            
            
            -4,780,161
            
            
            
            2,845,322Total
      RevenuesColor
      Printing
            
            
            14,500,020
            
            
            
            17,398,989Packaging
            
            
            33,042,756
            
            
            
            19,398,298Less
      Intersegment revenues
            
            
            (4,780,161
            )
            
            
            (2,845,322
            )42,762,615
            
            
            
            33,951,965Income
      from operationsColor
      Printing
            
            
            949,473
            
            
            
            1,077,142Packaging
            
            
            4,364,810
            
            
            
            2,772,540Holding
      Company
            
            
            (152,803
            )
            
            
            -5,161,480
            
            
            
            3,849,682Interest
      incomeColor
      Printing
            
            
            1,178
            
            
            
            1,384Packaging
            
            
            9,605
            
            
            
            59Holding
      Company
            
            
            54,201
            
            
            
            -64,984
            
            
            
            1,443Interest
      ExpenseColor
      Printing
            
            
            3,184
            
            
            
            90,039Packaging
            
            
            93,046
            
            
            
            240,491Holding
      Company
            
            
            5
            
            
            
            -96,235
            
            
            
            330,530





F-19
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006
 2007
                
                
                2006Income
      tax expense (benefit)Color
      Printing
                
                
                73,163
                
                
                
                -Packaging
                
                
                336,131
                
                
                
                214,504Holding
      Company
                
                
                -
                
                
                
                -409,294
                
                
                
                214,504Net
      IncomeColor
      Printing
                
                
                852,030
                
                
                
                1,108,661Packaging
                
                
                3,786,706
                
                
                
                2,452,674Holding
      Company
                
                
                (98,607
                )
                
                
                -4,540,129
                
                
                
                3,561,335Provision
      for depreciationColor
      Printing
                
                
                162,834
                
                
                
                107,526Packaging
                
                
                493,336
                
                
                
                386,690Holding
      Company
                
                
                -
                
                
                
                -656,170
                
                
                
                494,216Total
      AssetsColor
      Printing
                
                
                8,962,727Packaging
                
                
                21,074,650Holding
      Company
                
                
                2,163,80532,201,182
  F-20
  Shiner
International, Inc.
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2007 and 2006
 
 Note
14 – Geographical Sales





Geographical distribution of sales is as
follows:





Years
      EndedDecember
      31,Geographical
      Areas
            
            2007
            
            
            2006Chinese
      Main Land
            
            $
            33,601,456
            
            
            $
            27,927,943Asia
            
            
            4,591,483
            
            
            
            4,106,900Africa
            
            
            811,886
            
            
            
            268,636Australia
            
            
            1,471,102
            
            
            
            134,792USA
            
            
            801,440
            
            
            
            675,866South
      America
            
            
            304,045
            
            
            
            52,379Europe
            
            
            1,181,203
            
            
            
            785,449$
            42,762,615
            
            
            $
            33,951,965








F-21


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 on the 27th day of March
2008.





Shiner
      International, Inc.By:
      /s/ Jian
      FuName:
      Jian FuTitle:
      Chief Executive Officer





In accordance with the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Each of the undersigned hereby appoints Qingtao Xing his true and lawful
attorney-in-fact and agent, for him and in his name and place, to sign the
name of the undersigned in the capacity or capacities indicated below to
the Annual Report of Shiner International, Inc. on Form 10-K for the year
ended December 31, 2007 and any and all amendments to such Form 10-K and to
file the same, with all exhibits thereto and other documents in connection
therewith, with all necessary or appropriate governmental or
other entities, including, but not limited to, the Securities and Exchange
Commission and the NASDAQ Stock Market LLC, granting to such
attorney-in-fact and agent full power and authority to perform each act
necessary to be done as fully to all intents and purposes as he might do in
person, hereby ratifying and confirming all that such attorney-in-fact and
agent may lawfully do or cause to be done by virtue hereof.








Signature
            
            Title
            
            Date/s/
      Jian Fu
            
            Chief
      Executive Officer and Vice Director
            
            March  27,
      2008Jian
      Fu/s/
      XueZhu Xu
            
            Chief
      Financial Officer and Chief Accounting Officer
            
            March  27,
      2008XueZhu
      Xu/s/
      Yuet Ying
            
            Chairman
      of the Board of Directors
            
            March  27,
      2008Yuet
      Ying/s/ Brian
      G. Cunat
            
            Director
            
            March  27,
      2008Brian
      G.Cunat/s/
      Joseph S. Rizzello
            
            Director
            
            March  27,
      2008Joseph
      S.Rizzello/s/
      Arnold Staloff
            
            Director
            
            March  27,
      2008Arnold
      Staloff





INDEX
TO EXHIBITS





Exhibit
            Description
      of Exhibit





2.1
            Share
      Exchange Agreement by and between Sino Palace Holdings Limited and Cartan
      Holdings Inc. dated as of July 23, 2007, is incorporated herein by
      reference to Exhibit 2.1 to Shiner's Form 8-K dated July 23,
      2007.





2.2
            Return
      to Treasury Agreement between Cartan Holdings, Inc. and Zubeda
      Mohamed-Lakhani, dated as of July 23, 2007, is incorporated herein by
      reference to Exhibit 2.2 to Shiner's Form 8-K dated July 23,
      2007.





3.1
            Amended
      and Restated Bylaws, is incorporated herein by reference to Exhibit 3.2 to
      Shiner's Form 8-K dated July 23,
2007.





3.2
            Amended
      and Restated Articles of Incorporation, is incorporated herein by
      reference to Exhibit 3.3 to Shiner's Form 8-K dated July 23,
      2007.





4.1
            Specimen
      Stock Certificate, is incorporated herein by reference to Exhibit 4.1 to
      Shiner's Form 8-K dated July 23,
2007.





10.1
            Registration
      Rights Agreement, dated as of September 30, 2007, between us and the
      investors signatory thereto, is incorporated herein by reference to
      Exhibit 10.1 to Shiner's Form SB-2 dated December 21,
  2007.





10.2
            Form
      of Common Stock Purchase Warrant, is incorporated herein by reference to
      Exhibit 10.2 to Shiner's Form SB-2 dated December 21,
  2007.





10.3
            Form
      of Stock Option Agreement, is incorporated herein by reference to Exhibit
      10.3 to Shiner's Form SB-2 dated December 21,
  2007.





10.4
            Employment
      Agreement, dated January 1, 2008, by and between Shiner and Jian
      Fu.*





10.5
            Employment
      Agreement, dated January 1, 2008, by and between Shiner and Xuezhu
      Xu.*





10.6
            Employment
      Agreement, dated January 1, 2008, by and between Shiner and Mingbiao
      Li.*





14
            Code
      of Conduct, is incorporated herein by reference to Exhibit 4.1 to the
      Corporation’s Form SB-2 dated December 21,
2007.





21
            List
      of Subsidiaries.*




23
              Consent
      of Goldman Parks Kurland Mohidin LLP, independent registered public
      accounting firm.*


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.





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.





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.





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.