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, 2009
 
  ̈
                  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.)
  19th
Floor, Didu Building, Pearl River Plaza
 No.
2 North Longkun Road
 Haikou, Hainan Province,
China 570125
 (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
15, 2010, there were 24,588,155 shares of the registrant’s common stock
outstanding.
 
 The
aggregate market value of the voting stock held by non-affiliates as of June 30,
2009 was $12,641,273.
 
 Documents Incorporated by
Reference: Portions of the registrant’s proxy statement for its 2010
annual meeting of shareholders, which the registrant expects to file with the
Securities and Exchange Commission ("SEC") within 120 days after December 31,
2009 are incorporated by reference into Part III of this annual
report.
  
  TABLE
OF CONTENTS
 PagePART
      IItem
      1.
                              Business
                              1Item 1A.
                              Risk
      Factors
                              12Item 1B.
                              Unresolved
      Staff Comments.
                              23Item
      2.
                              Properties
                              23Item
      3.
                              Legal
      Proceedings
                              23Item
      4.
                              Submission
      of Matters to a Vote of Security Holders
                              23PART
      IIItem
      5.
                              Market
      for Registrant’s Common Equity, Related Shareholder
Matters
                              24and
      Issuer Purchases of Equity SecuritiesItem
      6.
                              Selected
      Financial Data
                              25Item
      7.
                              Management’s
      Discussion and Analysis of Financial Condition and
                              26Results
      of OperationsItem 7A.
                              Quantitative
      and Qualitative Disclosures About Market Risk
                              32Item
      8.
                              Financial
      Statements and Supplementary Data
                              32Item
      9.
                              Changes
      in and Disagreements with Accountants on Accounting and
                              32Financial
      DisclosureItem 9A.
                              Controls
      and Procedures
                              33Item 9B.
                              Other
      Information
                              33PART
      IIIItem
      10.
                              Directors
      and Executive Officers of the Registrant
                              34Item
      11.
                              Executive
      Compensation
                              34Item
      12.
                              Security
      Ownership of Certain Beneficial Owners and Managementand
      Related Shareholder Matters
                              34Item
      13.
                              Certain
      Relationships and Related Transactions
                              34Item
      14.
                              Principal
      Accountant Fees and Services
                              34PART
      IVItem
      15.
                              Exhibits
      and Financial Statement Schedules
                              35SIGNATURESEXHIBITS
  
  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."  Shiner and its subsidiaries may be referred to herein
collectively as the "Shiner Group."
 
 Item
1.  Business.
 
 Overview
 
 We are a
Nevada corporation engaged in the packaging and anti-counterfeit plastic
filmbusiness in
the People's Republic of China ("China") through our operating subsidiaries. Our
principal executive offices are located at19th Floor, Didu Building, Pearl River
Plaza, No. 2 North Longkun Road, Haikou, Hainan Province, China 570125.Our telephone number is
+86-898-68581104. Our website is http://www.shinerinc.com.
 
 Our
primary business consists of the research and development, manufacture and
distribution of technology driven advanced packaging film
products.  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 China and each of our subsidiaries
was formed under the laws of China. We currently conduct our business through
Hainan Shiner Industrial Co., Ltd. (“Shiner Industrial”), which was incorporated
on May 21, 2003 and is headquartered in Haikou, Hainan Province, and Zhuhai
Huanuo Packaging Material Co., Ltd. (“Zhuhai”), which was incorporated on
December 25, 2006 and is headquartered in Zhuhai, Guangdong
Province.  In 2009, Shiner Industrial acquired all of the assets of
Hainan Shiny-day Color Printing Packaging Co., Ltd. (“Shiny-day”) and Hainan
Modern Hi-Tech Industrial Co., Ltd. (“Hainan Hi-Tech”) in an effort to improve
efficiencies, reduce expenses and take advantage of favorable tax
treatment.
  1
 
 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 year ended December 31,
2009, color printed packaging products made up approximately 7.9% of our
revenue, BOPP tobacco film made up 40% of our revenue, coated film accounted for
29.6% of our revenue and anti-counterfeit film sales equaled approximately 22.5%
of our revenue. Currently, our overall production capacity consists
of:
  ·
              five coated film lines with
      capacity of 15,000 tons per
year;
 ·
              one
      BOPP tobacco film production line with capacity of 3,500 tons per
      year;
 ·
              one
      BOPP film production line with capacity of 7,000 tons per
      year;
 ·
              three
      color printing lines; and
 ·
              four
      anti-counterfeit film lines with capacity of 2,500 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,
we are also focused on developing and exploiting our anti-counterfeit film
technology and coated film sales along with other more sophisticated film
products. As a result, we expect to generate more significant revenues and
greater profit margins from our anti-counterfeit film and coated 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.
 
 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 China.   As a result of a share exchange transaction, we
changed our name to Shiner International, Inc. on July 24, 2007.
 
 Our
Business Operations
 
 Shiner
Industrial
 
 Shiner
Industrial produces three main types of packaging film: common BOPP film for
package over-wraps,  shrink-wrap and anti-counterfeit
films.
  BOPP
refers to the manufacture of polypropylene 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
polypropylene and random co-polymer polypropylene.
 
 Anti-counterfeit
film is a specialty product derived from BOPP film. Because piracy is a major
concern both within China and internationally, 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 use proprietary technology to develop
specialized anti-counterfeit film products.
 
 Shiner
Industrial also has color printing capabilities.  It is able to
fulfill the printing needs of multiple manufacturers, including consumer goods
companies located in China.
  2
 
 Shiner
Industrial currently has one BOPP tobacco film production line with total
capacity of 3,500 tons per year, three anti-counterfeit film lines with an
annual capacity of 1,000 tons, three coated film lines with an annual capacity
of 6,000 tons and two 8-color printing lines.
 
 Zhuhai
 
 Zhuhai
produces BOPP film, coated film and anti-counterfeit film has color printing
capabilities.  It currently has one BOPP film production line with an
annual capacity of 7,000 tons, two coated film lines with an annual capacity of
9,000 tons, one anti-counterfeit film line with an annual capacity of 1,500 tons
and one 10-color printing line.
 
 We have
received a number of accolades for our products over the
years.  Shiner Industrial was nominated as the National
Standardization Creator for both coated and anti-counterfeit films by the
Industrial Standards Administration of China 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.  We received the 2004-2005 Annual Technology
Advancing Certificate by People’s Government of Haikou for our BOPP laser
holographic anti-counterfeit shrinkable film. Additionally, this product was
selected to be listed in the China Reputable Products Database by the China
Enterprises Union. We have further been honored as a National New Product by the
Ministry of Science and Technology of China and Ministry of Commerce of China
for our BOPP laser anti-counterfeit film.
 
 We were
awarded the World Chinese Entrepreneurs Creativity Medal for our
industry-leading flexible packaging materials and two of our research and
development projects were selected as “Key Sci-tech Projects of Hainan Province”
by the Department of Science and Technology of Hainan Province.  The
Ministry of Science and Technology of China has certified us as a
Nationally-Focused Advanced High Technology Enterprise under the State Torch
Program, which promotes the development and application of science- and
technology-focused businesses in China.
 
 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
China during the past several 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 Chinese government to improve safety, hygiene and
      sanitation in consumer products in order to reduce contamination and
      spoilage;
 ·
              growth
      in consumer incomes in China 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.
 
 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
Film, Tobacco and other BOPP Based Film
 
 The
packaging film industry in China 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.
  3
 
 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-counterfeit 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.
 
 Coated
Film, Tobacco and other BOPP Based Film
 
 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 China 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.
 
 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, PVDC or
thermoplastic polyvinyl 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 acrylic layer is applied, it works
as a protective armor and is well-suited for multiple types of 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 acrylic coated film in China.  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 is a box over-wrap film designed to meet the industry requirements
for packaging appearance, product freshness and clear optics.
  4
  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.
 
 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 China qualified to meet international standards.
We use film machines and film lines to manufacture the packaging and specialty
films.
 
 Shiner
International currently has four anti-counterfeit film machines, three coated
film lines, two 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 acrylic.
 
 Sales
and Marketing
 
 Since
2003, we have concentrated on forming an experienced, knowledgeable and
customer-oriented marketing team. Currently, we have 25 employees in our
marketing group, 17 of these have worked 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
      film;
 ·
              BOPP
      tobacco and anti-counterfeit film;
 ·
              Color
      printing; and
 ·
              International.
 
 Coated
Film
 
 We have
established relationships with consumer goods manufacturers who comprise the
majority of the coated film customers in China. Potential customer data is
frequently updated through market research we perform to identify customers and
sales calls to potential customers.
  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.
  Our
marketing personnel typically serve both our coated film products and color
printing customers in China in order to provide them with the convenience of
“full service” from a single vendor.
 
 BOPP
Tobacco Film
 
 We have
established a well-respected reputation in China's 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 Chinese government, 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.
  5
 
 Anti-counterfeit
Film
 
 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 China and has
the beneficial characteristics of other BOPP films, such as heat and temperature
resistance, shrink-wrap, flavor and aroma barrier.
 
 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
 
 Our
international marketing unit services both the coated and BOPP film
products.  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.
  In 2008
and 2009, we spent over $300,000 and $320,000, respectively, on international
marketing and promotion and we have budgeted $1 million for such expenses in
2010, which includes travel, industry advertising, and exhibition
fees.
 
 Competitive
Advantages
 
 We
believe 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 overseas, 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 China, 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.
  6
 
 ·
              Research - We have 15
      patents, seven patent applications pending and two trademarks issued by
      China.  Our research and development team includes over 21
      engineers, several of whom hold advanced degrees in related fields. In
      2006, we entered into a five-year research agreement with China’s Science
      & Technology University.  Under the terms of this agreement,
      six professors, all holding advanced degrees, work in conjunction with our
      R&D team.  Shiner owns the proprietary rights to all
      findings to dedicated research projects which are undertaken at our
      request. We pay the university estimated fees of $12,850 annually under
      this 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 50% of the raw materials for Shiner Industrial’s BOPP tobacco film
operation are imported from multi-national chemical companies such as Sumitomo
Chemical Co., Ltd.  In contrast, only about 8% of the raw materials
for our coated films are imported because the current base BOPP film can be
supplied through qualified domestic suppliers in China.  All of the
raw materials for our color printing operations are purchased domestically in
China. There are numerous suppliers for these raw materials. We generally select
a supplier based on the best combination of quality, price and service. There
are no raw materials used in our color printing production process that are
provided by any sole source supplier.
 
 Zhuhai's
BOPP film line produces sufficient basic BOPP film to satisfy our coated film
production needs.  In 2009, this saved 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 China, 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
China who are looking for one-stop service to fulfill their printing and
packaging needs by a single vendor.
 
 Coated Film
 
 We are
the leading producer of coated film in China, with approximately 30% market
share of China domestic coated film output in 2009. Our domestic competitors
exist only in the form of smaller rivals with an average capacity of several
hundred tons. Approximately 70% of our sales are made directly to customers,
with the remaining 30% being 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,
those that constitute less than 2% of our overall sales, are subject to
pre-payment on all orders. Our largest domestic customer, Huian Dali Packaging
Co., Ltd., a manufacturer of cakes and snack foods, accounted for approximately
16% of our coated film sales in China and 5% of our total sales in
2009.
  7
 
 Internationally,
during 2009, approximately 10 customers accounted for approximately 50% of our
total coated film sales with an average sale of $300,000 per customer.
Approximately 10% of our exported coated film is 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 our
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.  Our largest international customer, Impak Films Pty. Ltd.
("Impak"), an Australian packaging distributor, accounted for approximately 22%
of our coated film sales and 7% of our total sales in 2009.
 
 BOPP
Tobacco Film
 
 As
tobacco remains one of the state-controlled industries in China, all of our
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
Chinese government. We currently sell our BOPP tobacco film to 28 out of 32
provincial cigarette manufacturers and have verbal contracts to sell over 5,000
tons of film per year to the state owned cigarette company of
China.
  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 domestic
market is Hainan Yeshu Group, and our largest customer in the international
market is Vietnam Tobacco Imports and Exports Co. ("Vintaba"), the tobacco
production company of the Government of Vietnam. Our anti-counterfeit product
sales were approximately $7.8 million in 2009, of which Vintaba accounted for
approximately 41% and the Hainan Yeshu Group accounted for approximately 19% of
these 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 China 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, Dongguan Lidun Detergent
Industrial Co., Ltd. and Yeshu Group, accounted for 42% and 11%, respectively,
of color printing sales in 2009.
 
 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
2008 and 2009, we spent approximately $150,310 and $347,610, respectively, on
research and development projects with the majority expended on new product
trials and experimental manufacturing techniques, including fog prevention and
high heat shrinkable films. In 2010, we plan to spend approximately $2,000,000
in the area of new product trials. All research and development costs are funded
through our operating cash flow and are expensed as incurred.
  8
 
 In
addition to in-house research and development, we have sponsored several
projects with research institutions and universities in China 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.
  Intellectual
Property
 
 We hold
15 patents on both products and production equipment that have been issued by
the State Intellectual Property Office of China. We have additional products and
production equipment for which seven patent applications are currently pending
and we expect to receive approval of one patent during 2010 and the remaining in
2011.We also
have two trademarks issued by the State Intellectual Property Office of
China.
 
 Employees
  We have a
centralized labor management system for our operating subsidiaries. Labor and
employment affairs of each subsidiary are managed by our central human resources
department.
 
 Currently,
we have 535 full-time employees, of which 378 are employed by Shiner Industrial
and 157 are employed by Zhuhai.  Our employees work in the
functional units as indicated in the table below.
 
 Department
                    
                    Shiner Industrial
                    
                    
                    ZhuhaiManagement
                    
                    
                    9
                    
                    
                    
                    0All
      administration
                    
                    
                    11
                    
                    
                    
                    1Sales
                    
                    
                    21
                    
                    
                    
                    0Production
                    
                    
                    337
                    
                    
                    
                    156TOTAL
                    
                    
                    378
                    
                    
                    
                    157
 
 Government
and Environmental Regulation
 
 In
February 2009, China's top legislature enacted the new Food Safety Law ("FSL"),
effective as of June 1, 2009, providing a legal basis for the government to
regulate food quality and strengthen food safety control "from the production
line to the dining table." The FSL restructures and clarifies the coordination
of government agencies with responsibility over food safety, provides broader
enforcement powers and harsher penalties for violations, mandates national
harmonized standards for food products and additives, and more tightly regulates
food ingredients and additives. Vice Premier Li Keqiang heads up the
state-level food safety commission to oversee the entire food monitoring system,
whose lack of efficiency has long been blamed for repeated scandals. Offenders
could face maximum fines which would be ten times the value of sold products. If
businesses are found producing or selling a substandard foodstuff, consumers can
ask for financial compensation which is ten times the price of the product, in
addition to compensation for the harm the product causes the consumer. Chinese
food producers must record information on raw material procurement and food
processing procedures and keep detailed records for at least two years under the
new food safety regulations. The FSL also mandates a comprehensive risk
monitoring and assessment system to prevent food safety incidents from
escalating into crises. Detailed rules are laid out for the development of
national food safety standards, greater scrutiny of food additives, import and
export activity, and packaging and labeling. The new FSL mandates
additional rule-making to regulate every phase of the food production process, a
complete review and assessment of current food safety issues, national standards
for food quality and safety, and a unified national program for addressing food
safety emergencies.
  Under the
FSL, the Chinese government regulates food manufacturers (producers and
processors) and operators (distributors and caterers), as well as manufacturers
of (i) food additives, (ii) packaging materials, containers, detergents and
disinfectants used with food and (iii) tools and equipment used in production
and processing of food.
  9
  Shiner
has been appointed a “Standards Creator” in Coated Film by the Standardization
Administration of the PRC.  As such, Shiner has been working closely
with various government agencies to assist the regulatory authorities in
drafting new packaging guidelines that that will help ensure a safe food supply
as outlined in the FSL. It is our belief that large domestic Chinese food
manufacturers will utilize coated film packaging to meet the requirements
detailed in the FSL.
 
 Additionally,
our products are subject to regulation by agencies of the provincial government
of Haikou responsible for food packaging and hygiene and the regulatory schemes
of international governmental authorities governing the food safety, quality and
hygiene of our customers.  The safety, quality and hygiene
requirements of many of our customers, especially those located internationally,
exceed government requirements in China. Our PVDC and all coated films have
already met FDA requirements, as well as those required for food products sold
in the European Economic Community ("EEC").
 
 Business
registrations, our production processes, and certain products are certified on a
regular basis and must be in compliance with the laws, rules and regulations of
various governments and industry agencies. Our subsidiaries have been assessed
and certified as meeting the requirements of ISO 9001:2000 for designing and
manufacturing BOPP films, PVDC coated film, BOPP laser holographic
anti-counterfeit film for packaging by the SGS Group.
  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 2009,
we incurred expenses of approximately $10,000 to comply with governmental and
environmental regulations in China.
 
 Competition
 
 Coated
Film
 
 We are
the leading producer of coated films in China 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.
  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 China, 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 on the Shanghai
      Stock Exchange. It is the largest manufacturer of BOPP Tobacco film in
      China;
 ·
              Fo Shan Plastics Group Co.,
      Ltd., a Guangdong province company listed on 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.
  10
 
 As we
have attained certification as a government supplier, a certain level of annual
salesis guaranteed
to us from the government of China. 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-counterfeit film is unique, we do not face direct competition for this
product. 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.
  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 and 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 China.  As a result, competition
in China 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 China 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.
  11
  History
 
 From
incorporation to July 24, 2007, the business of our company, then known as
Cartan Holdings Inc., consisted of ownership of 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.
 
 On July
23, 2007, we entered into and completed a share exchange transaction with Sino
Palace Holdings Ltd., a British Virgin Islands corporation, pursuant to which we
acquired the Shiner Group in exchange for 16,500,000 shares of common
stock.
  Concurrently
with the closing of the transactions contemplated by the share exchange
agreement and as a condition thereof, we entered into an agreement with Zubeda
Mohamed-Lakhani, our former director and chief executive officer, pursuant to
which she returned 4,750,000 shares of our common stock for cancellation. Ms.
Mohamed-Lakhani was not compensated for the cancellation of her shares. Upon
completion of the foregoing transactions, we had 21,150,000 shares of common
stock issued and outstanding.  The shares of common stock issued to
the shareholders of Sino Palace were issued in reliance upon the exemption from
registration provided by Regulation S under the Securities Act of 1933, as
amended.
 
 Corporate
Outlook
 
 With the
mild recovery of the global market, and growing consumer confidence in the
Chinese domestic markets, we are guardedly optimistic that consumption will
continue to rebound. We are experiencing an increase of inquiries from food
manufacturers on how to comply with the FSL that went into effect in June 2009.
This renewed interest from manufacturers affects our entire breadth of products
and we are confident this will lead to an overall improvement in our business.
 We will complete construction of our new Hainan manufacturing facility in
June 2010 at a total cost of $12 million.  This facility, which is
currently being used for limited operations, will be fully operational in
October 2010.  Shiner believes it will be well positioned to be the
prime beneficiary of increased domestic consumption, a growing world economy,
and increased market penetration as the full import of the recently enacted FSL
is felt.
 
 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.
  12
 
 Our
anti-counterfeit technology may not satisfy the changing needs of our
customers.
 
 With any
anti-counterfeit 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.
  We
may not be able to keep pace with rapid technological changes in the
anti-counterfeit product industry.
 
 The
anti-counterfeit product authentication industry is a relatively new industry
and market, especially in China 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-counterfeit 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-counterfeit 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.
  13
 
 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 China to best penetrate China's 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 China'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 China'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.
  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.
 
 Fluctuating
energy prices impact our operating results.
 
 Energy
prices were stable throughout 2009, which has resulted in constant raw material
costs for our branded products. Petroleum is the prime ingredient in many
plastics that we use to make our products, including acrylic, PET and BOPP.
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 an increase in crude oil prices throughout the year.
 
 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
China 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.
  14
 
 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 China and abroad. We rely on patents, trademarks and licenses to
protect our intellectual property. We also have patent applications pending in
China, and have worked and continue to work closely with China's 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 China for the protection of intellectual property
rights is still at its early stage of development. Intellectual property
protection became a national effort in China in 1979 when China adopted its
first statute on the protection of trademarks. Since then, China 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. China 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 China
became a party to the World Trade Organization in 2001, China 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 China over the years to tighten up its regulation and
protection of intellectual property rights, private parties may not enjoy
intellectual property rights in China to the same extent as they would in many
Western countries, including the United States, and enforcement of such laws and
regulations in China have not achieved the levels reached in those countries.
Both the administrative agencies and the court system in China are 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-counterfeit film producers in China may increase the supply
of, and decrease the prices of, BOPP and anti-counterfeit 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-counterfeit film in China 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-counterfeit film or otherwise. Accordingly, we may experience increased
competition, and the entry of new BOPP and anti-counterfeit producers will also
lead to an increase in the industry supply of BOPP and anti-counterfeit film
resulting in more competitive pricing. 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, China 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.
  15
 
 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 41% of our anti-counterfeit film
sales in 2009 were to one customer, approximately 22% of our coated film sales
in China were to one customer and approximately 50% of our overall coated film
sales were to ten international customers. In 2009, approximately 29% of our
BOPP tobacco film sales were to one customer and approximately 53% of our color
printing sales were to two customers. Any decrease in the demand for our BOPP
tobacco film will significantly affect our financial performance. Although
demand for our BOPP tobacco film 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 plants would disrupt production of our products and adversely
affect our sales.
 
 Our films
are manufactured solely at our production facilities located in Haikou City and
Zhuhai City in China. While we have not experienced any calamities in the past
which disrupted production, any disruption in the 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
China, 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.
 
 Compliance with
the Sarbanes-Oxley Act of 2002 and related corporate governance and public
disclosure requirements have resulted in significant additional
expense.
 
 Changing
laws, regulations, and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002 and the associated SEC
regulations and Nasdaq rules, have resulted in significant additional expense as
well as a diversion of management time and attention from revenue-generating
activities to compliance activities. If our efforts to comply with new or
changed laws, regulations, and standards differ from the activities intended by
regulatory or governing bodies, we might be subject to lawsuits or sanctions or
investigation by regulatory authorities, such as the SEC or Nasdaq, and our
reputation may be harmed.
  16
 
 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.
 
 Failure
to adequately comply with hygiene and food safety standards set by the PRC may
disrupt our operations.
 
 In
accordance with the laws and regulations of the PRC, we are required to comply
with applicable hygiene and food safety standards, including the standards set
forth in the FSL and any rules and regulations promulgated by the central
Chinese government or local provincial governments
thereunder.  Failure to comply with these laws, rules and regulations,
could require us to temporarily or permanently suspend some or all of our
production operations, which could disrupt our operations and adversely affect
our revenues and profitability.
 
 PRC
food safety and hygiene laws may become more onerous, which may adversely affect
our operations and financial performance and lead to an increase in our costs
which we may be unable to pass on to our customers.
  As a
manufacturer of food-related products, we are subject to extensive governmental
regulation. For example, we are subject to the newly enacted FSL and the rules
and regulations promulgated thereunder. We cannot assure shareholders that in
the future the PRC food safety and hygiene laws will not become more onerous,
providing for stricter and more comprehensive monitoring and regulation of
food-related product manufacturers, which may lead to an increase in our costs
of complying with such regulations resulting in a material adverse effect on its
results of operations.
 
 Concerns
with the safety and quality of packaged food products could cause consumers to
avoid such products and our customers to stop producing packaged food
products.
 
 We could
be adversely affected if consumers lose confidence in the safety and quality of
packaged food products. Adverse publicity about these types of concerns, such as
the publicity concerning the use of the substance melamine in milk and infant
formula, may discourage consumers from buying packaged food products, which
would reduce or eliminate the need for our food packaging, causing production
disruptions. Any negative change in customer perceptions about the safety and
quality of packaged food products could adversely affect our business and
financial condition.
 
 17
 
 Increased
consumption tax on cigarettes may materially impact our tobacco film
sales
 
 On May 1,
2009, the central Chinese government raised the consumption tax on cigarettes in
an effort to curb smoking and to increase state revenues. The consumption tax
was raised by between 6% and 11% and is based on the sales price of the
cigarettes – the higher the sales price the higher the percentage of consumption
tax.  This tax hike, together with a new 5% tax on cigarette
wholesalers, which became effective on May 1, 2009, may negatively impact the
cigarette manufacturing business in China and, depending on the severity of the
impact thereon, may create a severe softening of our sales in the tobacco film
market.  Coupled with the decrease in our sales as a result of the
economic crisis, the new tobacco-related taxes may have a material adverse
effect on both our sales price and volume for the foreseeable
future.
 
 Deterioration of economic conditions
could negatively impact our business.
 
 Our
business may be adversely affected by changes in global economic conditions,
including inflation, interest rates, availability of capital markets, consumer
spending rates, energy availability and costs (including fuel surcharges) and
the effects of governmental initiatives to manage economic conditions. Any such
changes could adversely affect the demand for our products or the cost and
availability of our needed raw materials, thereby negatively affecting our
financial results.
 
 The
recent disruptions in credit and other financial markets and deterioration of
global economic conditions, could, among other things:
 
 ·
              make
      it more difficult or costly for us to obtain financing for our operations
      or investments or to finance debt in the
future;
 ·
              impair
      the financial condition of some of our customers or suppliers, thereby
      increasing bad debts or non-performance by suppliers;
  and
 ·
              negatively
      impact demand for our products, which could result in a reduction of
      sales, operating income and cash
flows.
 
 Risks
Related to Conducting Our Business in China
 
 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 China. Doing business
outside the United States, particularly in China, 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.
 
 China’s
economic policies could affect our business.
 
 Generally,
all of our assets are located in China and a substantial amount of our revenue
is derived from our operations in China. Accordingly, our results of operations
and prospects are subject, to a significant extent, to the economic, political
and legal developments in China.
 
 While
China’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. China'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 China, 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 China has been changing from a planned economy to a
more market-oriented economy. In recent years, China 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 China are still owned by our government. In addition, China
government continues to play a significant role in regulating industry
development by imposing industrial policies. It also exercises significant
control over China’s economic growth through the allocation of resources, the
control of payment of foreign currency-denominated obligations, the setting
of monetary policy and the provision of preferential treatment to particular
industries or companies.
  18
 
 We
may have difficulty establishing adequate management, legal and financial
controls in China.
 
 China
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 China. 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 China. 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 China, any loss which we suffer
may not be insured or may be insured to only a limited extent.
 
 The
insurance industry in China is still in an early state of development and
insurance companies located in China 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 China are subject to substantial revision, some of which
may adversely affect our profitability.
 
 China's
tax system is in a state of flux, and it is anticipated that China'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 China 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. Zhuhai had a 100% exemption
from federal taxes in China from January 1, 2008 through December 31, 2009, and
presently has a 50% exemption from federal tax during January 1, 2010 through
December 31, 2012. 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 China.
 
 Another
obstacle to foreign investment in China 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
China’s poorly developed and sometimes corrupt judicial systems.
 
 If
relations between the United States and China 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 China have had
significant disagreements over political and economic issues. Controversies may
arise in the future between these two countries. Any political or trade
controversies between the United States and China, whether or not directly
related to our business, could reduce the price of our common
stock.
  19
 
 The
government of China 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 China. Over the
past several years, the government of China has pursued economic reform policies
including the encouragement of private economic activity and greater economic
decentralization. The government of China 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 China create an uncertain environment for
business operations and they could have a negative effect on us.
 
 The legal
system in China 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, China 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 China 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 China, 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 China’s
Renminbi. The value of the Renminbi fluctuates and is subject to changes in
China’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 China into the country or when paying vendors for services
performed outside of China.
 
 We
may not be able to obtain regulatory approvals for our products.
 
 The
manufacture and sale of our products in China are regulated by China and the
local provincial governments. Although our licenses and regulatory filings are
current, the uncertain legal environment in China 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 China.
 
 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 China, it may be extremely difficult or impossible for
you to access those assets to enforce judgments rendered against us or our
directors or executive officers by United States courts. In addition, the
courts in China 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.
  20
 
 We
may face obstacles from the communist system in China.
 
 Foreign
companies conducting operations in China face significant political, economic
and legal risks. The Communist regime in China, 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.
 
 During
the six month period from August 15, 2007 through February 11, 2008, the high
and low bid prices of our common stock on the Over-The-Counter Bulletin Board
(“OTCBB”) were $8.74 per share and $2.00 per share, respectively.  Prior to
that date, our common stock was traded sporadically on the "pink
sheets."  Since our commencement of trading on the Nasdaq Stock Market
on February 12, 2008 through March 15, 2010, the high and low sales prices of
our common stock were $8.74 and $0.47. 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.
 
 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.
  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 currently approximately
49,191,795 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
  21




·
            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.




Our
directors and senior management 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 and senior management 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.


22


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





China 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 China 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
1B.  Unresolved Staff Comments.





None.





Item
2.  Properties.


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





Shiner
Industrial





We have
been granted the right to use three plots of land in Haikou City by the
Municipal Administration of China for state-owned land. With respect to two of
these plots, our rights run through January 2059 and, with respect to the third
plot, our rights run through October 2060. We own four buildings dedicated to
film production and office facilities, three anti-counterfeit film production
lines, one BOPP tobacco film line, two 8-color printing lines, three coated film
production lines and all production equipment and research facilities at this
site.





In 2009
we began construction of a new facility in the Hainan Shiziling Feidi Industrial
Park.  We have purchased one plot of land and will lease an adjacent,
currently undeveloped, plot from Hainan Xiandai Keji Group. During the fourth
quarter, we completed the first phase of our construction and relocated our
color printing operations to the new facility.  The color printing
lines were installed, debugged and placed into production. The construction of
the entire facility will be completed by June 30, 2010.





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, two coated film production lines, one
anti-counterfeit film production line and one 10-color printing line in
Zhuhai.





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, 2009.


23


PART
II





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




Market
Information





Through
February 11, 2008, our common stock was quoted on the OTCBB under the symbol
"SHNL.OB."  Our common stock is currently traded on the Nasdaq Global
Market under the symbol "BEST."  The following table sets forth, for
the periods indicated, the quarterly high and low selling prices for our common
stock as reported by Nasdaq.





For the Year Ended December 31,2009
                        
                        
                        2008High
                        
                        
                        Low
                        
                        
                        High
                        
                        
                        LowFirst
      Quarter
                        
                        $
                        1.39
                        
                        
                        $
                        0.47
                        
                        
                        $
                        8.74
                        
                        
                        $
                        3.00Second
      Quarter
                        
                        
                        1.0601
                        
                        
                        
                        0.5861
                        
                        
                        
                        4.06
                        
                        
                        
                        3.00Third
      Quarter
                        
                        
                        2.25
                        
                        
                        
                        0.85
                        
                        
                        
                        3.30
                        
                        
                        
                        1.53Fourth
      Quarter
                        
                        
                        1.98
                        
                        
                        
                        1.20
                        
                        
                        
                        2.10
                        
                        
                        
                        0.88





On March
15, 2010, the closing price of our common stock as reported on Nasdaq was
$1.31.





Holders





As of
March 15, 2010, there were 24,588,155 shares of our common stock
outstanding held by approximately 69 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.





Dividend
Policy





Except
for dividends paid to those persons who held shares of our common stock prior to
the consummation of the share exchange transaction described on page 11 of this
Annual Report on Form 10-K, we have not paid any cash dividends on our common
stock  and we have no intention of paying cash dividends in the
foreseeable future. Whether we will declare and pay dividends in the future will
be determined by our board of directors at their discretion, subject to certain
limitations imposed under Nevada corporate law. In addition, our ability to pay
dividends may be affected by the foreign exchange controls in China. The timing,
amount and form of dividends, if any, will depend on, among other things, our
results of operations, financial condition, cash requirements and other factors
deemed relevant by our board of directors.


24





Securities
Authorized for Issuance under Equity Compensation Plans





The
following table provides information as of December 31, 2009 about our
common stock that may be issued upon the exercise of options and rights granted
to employees or members of our Board of Directors:




Plan Category
                    
                    (a)
                      Number of
                      securities
                      to be issued
                      upon
                      exercise of
                      outstanding
                      options,
                      warrants
                      and rights
                    
                    (b)
                      Weighted-
                      average
                      exercise price
                      of
                      outstanding
                      options,
                      warrants
                      and rights
                    
                    (c)
                      Number of
                      securities
                      remaining
                      available
                      for future
                      issuance under
                      equity
                      compensation
                      plans (excluding
                      securities
                      reflected
                      in column (a))Equity
      compensation plans approved by security holders
                    
                    190,000
                    
                    $
                    1.38
                    
                    0Equity
      compensation plans not approved by security holders
                    
                    60,000
                    
                    $
                    7.00
                    
                    0Total
                    
                    250,000
                    
                    $
                    2.73
                    
                    0





(1)
            Includes
      options to purchase 90,000 shares of our common stock, at an exercise
      price of $7.00 per share, granted to our independent directors in
      2009 outside any plan.





Repurchases
of Equity Securities





This
table provides certain information with respect to our purchases of shares of
our common stock during the fourth quarter of 2009.




Issuer
Purchases of Equity Securities




Period
                        
                        Total Number of
                          Shares Purchased
                        
                        
                        Average
                          Price
                          Paid per
                          Share
                        
                        
                        Total Number of
                          Shares Purchased as
                          Part of Publicly
                          Announced Plan
                        
                        
                        Approximate
                          Dollar Value of
                          Shares that May
                          Yet Be Purchased
                          Under the Plan(1)October
      1, 2009 through December 31,2009
                        
                        
                        18,166
                        
                        
                        $
                        1.0656
                        
                        
                        
                        18,166
                        
                        
                        $
                        5,710,325




(1)
              On
      March 22, 2009, the Company instituted a stock buyback program of up
      to 4 million shares of its common stock over the next 12
      months.  As of December 31, 2009, the Company had repurchased
      61,845 shares which are deemed treasury stock.  Up to 3,938,155
      shares of our common stock may yet be repurchased under this
      program.




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





None.





Item
6.  Selected Financial Data.





Not
required.


25


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




Overview





We
develop, manufacture and distribute packaging film and color printed packaging
through our operating subsidiaries. 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 China and each
of our subsidiaries was formed under the laws of China.





We currently conduct our business
through our operating subsidiaries Shiner Industrial located in Haikou, Hainan
Province and Zhuhai located in Zhuhai, Guangdong Province.  We operate
in several markets within the packaging film segment: BOPP based film, coated
film, anti-counterfeit film and color printed packaging. For the year ended
December 31, 2009, color printed packaging products made up 7.9% of our revenue,
BOPP tobacco film made up 40.0% of our revenue, coated film accounted for 29.6%
of our revenue and anti-counterfeit film sales equaled 22.5% of our
revenue.





The following table sets forth the
markets and the percentage of packaging film revenue for each market for the
years ended December 31, 2009 and 2008, respectively:





Percent of Total RevenueFor the Year Ended
                    December 31,2009
                  
                  
                  2008BOPP
      based film
                  
                  
                  40.0
                  %
                  
                  
                  35.1
                  %Coated
      film
                  
                  
                  29.6
                  %
                  
                  
                  25.6
                  %Anti-counterfeiting
      film
                  
                  
                  22.5
                  %
                  
                  
                  20.3
                  %Color
      printed packaging
                  
                  
                  7.9
                  %
                  
                  
                  19.0
                  %





Our
current production capacity consists of:





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


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


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


·
            Three
      color printing lines; and


·
            Four
      anti-counterfeit film lines with total capacity of 2,500 tons a
      year.





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 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 possible acquisition of an anti-counterfeit
technology company.





Results of
Operations





Year EndedDecember 31, 2009Compared to the Year Ended December
31, 2008





YearsEnded
                                    December31,2009
                                  
                                  
                                  2008
                                  
                                  
                                  $Change
                                  
                                  
                                  %ChangeRevenues
                                  
                                  $
                                  34,516,827
                                  
                                  
                                  $
                                  51,594,842
                                  
                                  
                                  $
                                  (17,078,015
                                  )
                                  
                                  
                                  (33.1
                                  )
      %Cost
      of Goods Sold
                                  
                                  
                                  29,925,504
                                  
                                  
                                  
                                  42,026,145
                                  
                                  
                                  
                                  (12,100,641
                                  )
                                  
                                  
                                  (28.8
                                  )
      %Gross
      Profit
                                  
                                  
                                  4,591,323
                                  
                                  
                                  
                                  9,568,697
                                  
                                  
                                  
                                  (4,977,374
                                  )
                                  
                                  
                                  (52.0
                                  )
      %Selling,
      General and Administrative Expenses
                                  
                                  
                                  4,784,457
                                  
                                  
                                  
                                  4,424,688
                                  
                                  
                                  
                                  359,769
                                  
                                  
                                  
                                  8.1
                                  %Interest
      Expense
                                  
                                  
                                  165,135
                                  
                                  
                                  
                                  113,486
                                  
                                  
                                  
                                  51,649
                                  
                                  
                                  
                                  45.5
                                  %Income
      Tax Expense
                                  
                                  
                                  112,481
                                  
                                  
                                  
                                  546,723
                                  
                                  
                                  
                                  (434,242
                                  )
                                  
                                  
                                  (79.4
                                  )
      %Net
      Income
                                  
                                  
                                  (99,801
                                  )
                                  
                                  
                                  4,879,306
                                  
                                  
                                  
                                  (4,979,107
                                  )
                                  
                                  
                                  (102.0
                                  )
      %


26





Revenues





Revenues
for the year ended December 31, 2009 decreased 33.1%, or $17.1 million, to $34.5
million compared to $51.6 million in 2008.  BOPP tobacco revenue
decreased 24%, or $ 4.3 million, to $13.8 from $18.1million in 2008, coated film
revenue decreased 22%, or $ 3.0 million, to $10.2 from $13.2 million in 2008,
our anti-counterfeit revenue decreased 25.7%, or $ 2.7 million, to $7.8 from
$10.5 million in 2008. Our Color printing segment sales declined 73% or $7.1
million to $2.7million from $9.8 million in 2008.





The table
below shows a product breakdown of 2009 consolidated net sales (in millions)
based on product and percentage variances from 2008:





Product
                
                Net Sales
                  2009
                
                
                % Change
                  from 2008
                
                
                % Change in
                  Volume
                
                
                % Change in
                  PriceBOPP
      Tobacco Film
                
                
                13.8
                
                
                
                (24
                )
                
                
                (26
                )
                
                
                2Coated
      Film
                
                
                10.2
                
                
                
                (22
                )
                
                
                (6
                )
                
                
                (18
                )Anti-Counterfeit
                
                
                7.8
                
                
                
                (26
                )
                
                
                (3
                )
                
                
                (24
                )Color
      Printing
                
                
                2.7
                
                
                
                (73
                )
                
                
                (73
                )
                
                
                -





The
decrease in revenue is primarily caused by two factors; the loss of one large
customer in 2009 and secondly to the global economic crisis and the melamine
milk scare of 2008. The revenue attributed to this customer in fiscal year 2008
was 81.6% or $8.0 million of our color printing sales.





Approximately
70%, or $24.1 million, of our total sales in 2009 were made domestically to
Chinese companies.  In 2008, approximately 79.9%, or $40.6 million, of
our total sales were made domestically.  The table below shows a
product breakdown of 2009 domestic sales (in millions) based on product and
percentage variances from 2008:





Product
                
                Net Sales
                  2009
                
                
                % Change
                  from 2008
                
                
                % Change in
                  Volume
                
                
                % Change in
                  PriceBOPP
      Tobacco Film
                
                
                13.8
                
                
                
                (24
                )
                
                
                (25
                )
                
                
                2Coated
      Film
                
                
                5.7
                
                
                
                (35
                )
                
                
                (17
                )
                
                
                (22
                )Anti-Counterfeit
                
                
                2.0
                
                
                
                (49
                )
                
                
                (20
                )
                
                
                (31
                )Color
      Printing
                
                
                2.7
                
                
                
                (73
                )
                
                
                (73
                )
                
                
                -





Internationally,
we sell only two lines of products, our anti-counterfeit film and coated
film.  International sales for 2009 totaled $10.4 million, accounting
for 30% of our total revenues, a decrease of $0.6 million, or 5.4%, from $11.0
million for 2008.  This decrease was primarily due to an 11% decrease
in anti-counterfeit film sales. Revenue from coated film increased 3% to $4.6
million from $4.4 million. All international sales are indirect using a network
of distributers and converts. Two of the companies to six customers are
international companies and represent 16% of total sales. Vintaba represents 9%
of our overall revenue and 41% of our anti-counterfeit film
revenue.  Impak accounted for approximately 22% of our coated film
sales and 7% of our total sales in 2009. Impak distributes our products in
Australia, New Zealand, New Guinea and the US.





The table
below shows a product breakdown of 2009 international sales (in millions based
on product and percentage variances from 2008:





Product
                
                Net Sales
                  2009
                
                
                % Change
                  from 2008
                
                
                % Change in
                  Volume
                
                
                % Change in
                  PriceCoated
      Film
                
                
                4.6
                
                
                
                3
                
                
                
                20
                
                
                
                (14
                )Anti-Counterfeit
                
                
                5.8
                
                
                
                (11
                )
                
                
                4
                
                
                
                (15
                )




27





The
following table sets forth the percentage of our total revenue attributable to
our largest customers in 2008 and 2009.





2009
                      
                      
                      2008Hunan
      Zhongyan Industry
                      
                      
                      9
                      %
                      
                      
                      6
                      %Vietnam
      Tobacco Imports and Exports Co.
                      
                      
                      9
                      %
                      
                      
                      5
                      %Huiandali
      Packaging Co.
                      
                      
                      7
                      %
                      
                      
                      1
                      %Impak
      Films Pyt Ltd
                      
                      
                      7
                      %
                      
                      
                      3
                      %Guizhou
      Zhongyan Industry
                      
                      
                      6
                      %
                      
                      
                      5
                      %Dongguan
      Xufuji Foods Co., Ltd.
                      
                      
                      5
                      %
                      
                      
                      8
                      %Guangzhou
      LiBai Enterprise Group Co., Ltd.
                      
                      
                      —
                      
                      
                      
                      16
                      %





Cost
of Goods Sold





Cost of
goods sold decreased $12.1 million, or 29%, from $42.0 million in 2008
to $ 29.9 million in 2009. Cost of goods sold represented 86.7% and 81.5%
of our total revenue in 2009 and 2008, respectively.  The decrease in
cost of goods sold year to year was primarily caused by two factors; the loss of
one large customer (Guangzhou LiBai Enterprise Group ("LiBai")) in 2009 and the
overall decrease in revenue in 2009 as compared to 2008.





The
packaging industry requirements for the food industry mandates the use of
non-benzene based products. In an effort to be environmentally friendly and to
improve work conditions in our factory, Shiner proactively switched to
non-benzene based ink products in a corporate effort to be green. This change
also positively contributed to our compliance with the FSL, as our food
packaging operations are conducted in the same facility.  We had a
favorable response from all customers except LiBai. The environmentally friendly
ink is 40-50% more expensive than benzene based ink and LiBai would not accept
the price change after several attempts to persuade them. Thus, we terminated
the LiBai account. Lidun accepted the use of non-benzene ink and associated
price increase and remains a satisfied customer.  The loss of
Guangzhou LiBai Enterprise Group as a customer accounted for a 68% decrease
($8.2 million) in our cost of goods sold.





The
percentage increase in our cost of goods sold in 2009 was negatively influenced
by the following events:





·
            Our
      coated film operations experienced a 15% unit cost increase as a result of
      a 10% increase in raw material costs over 2008 and a 50% increase in
      overhead rates as a result of startup cost associated with our expansion
      of the Zhuhai facility in 2009;


·
            Our
      unit cost in BOPP tobacco film increased by 18% as a result of a 15%
      increase in raw material unit costs over 2008 and a 43% increase in
      overhead due to a decrease in factory utilization for
  2009;


·
            The
      unit cost of production of our anti-counterfeit film increased 13% as a
      direct result of a 15% increase in raw material prices;
  and


·
            Unit
      costs in our color printing business increased 6% as a direct result of
      increased overhead due to the decline in factory utilization rates caused
      by the loss of a significant
customer.





Gross
Profit





Our gross profit for the year ended
December 31, 2009 was about $4.6 million, representing a gross margin of 13.3%,
a decrease of 5.2% from the gross margin of 18.5% for the year ended December
31, 2008.  The decrease in gross margin was a direct consequence of a
reduction in the selling prices of our products, an increase in overhead rates
as a result of startup cost associated with our expansion of the Zhuhai
facility, and higher raw material prices.





Selling,
General and Administrative Expenses





Our selling, general and administrative
expenses increased by about 8.1%, or $0.4 million, to $4.8 million for the year
ended December 31, 2009 compared to $4.4 million for the year ended December 31,
2008. General and administrative expenses include rent, management and staff
salaries,  insurance, marketing, accounting and legal
expenses.  Approximately 4.5% of the increase, or $200,000, was due to
an increase in research and development. The remaining components of our
selling, general and administrative expense were not
significant.


28


Interest
Expense





Interest expense in the year ended
December 31, 2009 increased by 45.5% to $165,135 compared to $113,486 for the
same period in 2008. This increase was not significant.





Income
Tax Expense





For the year ended December 31, 2009 we
recorded a tax provision of $112,481 compared to $546,723 for the same period in
2008.  Our effective tax rates for the year ended December 31, 2009
and 2008 were 15% and 10.1%, respectively.





Net
Income





The decrease in our net income for the
year ended December 31, 2009 compared to 2008 was the result of lower sales, and
decreased margins on those sales resulting from increased raw material prices,
the application of higher overhead rates due to the decline in capacity
utilization, and startup cost associated with our expansion of the Zhuhai
facility.





Off-Balance
Sheet Arrangements





We had no off-balance sheet
arrangements during the year ended December 31, 2009 that have, or are
reasonably likely to have, a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to our interests.





Liquidity
and Capital Resources





Cash
Flows





At December 31, 2009, we had $3,059,796
in cash and cash equivalents on hand. Our principal demands for liquidity are
increasing capacity, purchasing raw materials, sales distribution and the
possible acquisition of new subsidiaries in our industry as opportunities
present themselves, as well as general corporate purposes. As of December 31,
2009, we had four short-term loans for a total of $3,227,400, with interest at
5.31%. The loans are due in June 2010 and are collateralized by time deposits or
by buildings and equipment.  As of December 31, 2009, we had working
capital of $11,479,310, a decrease of $4,607,251 from December 31, 2008. We
anticipate we will have adequate working capital to fund our operations and
growth in the foreseeable future.





During the year ended December 31,
2009, we purchased 61,845 shares of our common stock on the open market
(treasury shares) for $58,036.  We accounted for the purchase of these
treasury shares using the cost method.





Net cash flows provided by operating
activities for the year ended December 31, 2009 was $6,711,963 compared to
$2,473,319 for the year ended December 31, 2008. This change in cash flows from
operating activities was mainly due to an increase other payables during the
year ended December 31, 2009.  During the year ended December 31,
2009, other payables increased by $4,339,873 compared to a decrease in other
payables of $1,532,111 during the year ended December 31, 2008 for a change of
$5,871,984.  The increase in other payables is due to the credit
purchases for costs related our construction in progress.




We used $6,689,511 in investing
activities during the year ended December 31, 2009, primarily for the
acquisition of property and equipment and construction in progress of $1,525,917
and $5,069,602, respectively.





Cash used in financing activities
during the year ended December 31, 2009 was $777,659 due to the issuance of
notes payable offset by repayments of our short term loans and notes
payable.


29





Assets





As of December 31, 2009, our accounts
receivable decreased by $1,217,801 compared with the balance as of December 31,
2008. The decrease in accounts receivable during the year ended December 31,
2009, was due primarily to decreased sales.  We intend to continue our
efforts to maintain accounts receivable at reasonable levels in relation to our
sales. Inventory increased by $1,240,474 in the same period. Prepaid expenses
and other current assets decreased by $953,758 during the year ended December
31, 2009.





Liabilities





Our accounts payable decreased by
$1,130,262 during the year ended December 31, 2009 and unearned revenues
(payments received before all the relevant criteria for revenue recognition are
satisfied), other payables and accrued payroll increased by $72,981, $4,339,873
and $98,786, respectively, over the same period.





During the year ended December 31,
2009, we received $3,227,400 in short-term loans and repaid $3,883,795 in
short-term loans for a decrease of $656,395.





We intend to meet our liquidity
requirements, including capital expenditures related to the purchase of
equipment, purchase of raw materials, and the expansion of our business, through
cash flow provided by operations and funds raised through private placement
offerings of our securities.





We have entered into a formal agreement
with a vendor whereby we have agreed to purchase new equipment at the cost of
approximately $13,200,000.  We have already paid approximately $1.26
million toward the purchase of this equipment.  The equipment is
expected to be delivered early in the first quarter of 2011, installed in the
latter part of the first quarter of 2011 and operational in the second quarter
of 2011.





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





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





Critical
Accounting Policies





Accounts
Receivable





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.





Inventory





Inventory is valued at the lower of
cost (determined on a weighted average basis) or market. Management compares the
cost of inventory with this market value and allowance is made to write down
inventory to market value, if lower.





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
collectability is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.


30





Stock-Based
Compensation





The Company records stock-based
compensation in accordance with ASC Topic 718, “Compensation – Stock
Compensation.”  ASC 718 requires companies to measure compensation
cost for stock-based employee compensation at fair value at the grant date and
recognize the expense over the employee’s requisite service period. The Company
recognizes in the statement of operations the grant-date fair value of stock
options and other equity-based compensation issued to employees and
non-employees. There were 250,000 options outstanding as of December 31,
2009.





Income
Taxes





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





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





Basic and Diluted Earnings
Per Share





Earnings per share is calculated in
accordance with the ASC Topic 260, “Earnings Per Share.”  Basic
earnings per share is based upon the weighted average number of common shares
outstanding.  Diluted earnings per share is based on the assumption
that all dilutive convertible shares and stock warrants were converted or
exercised. Dilution is computed by applying the treasury stock method. Under
this method, warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the
period.  There were 250,000 options and 970,050 warrants outstanding
as of December 31, 2009.  All options and warrants were excluded from
the diluted loss per share calculation due to their anti-dilutive
effect.





Recent
Accounting Pronouncements





On July 1, 2009, we adopted
Accounting Standards Update (“ASU”) No. 2009-01, “Topic 105 - Generally Accepted
Accounting Principles - amendments based on Statement of Financial Accounting
Standards No. 168, “The FASB Accounting Standards CodificationTM and the
Hierarchy of Generally Accepted Accounting Principles” (“ASU No.
2009-01”).  ASU No. 2009-01 re-defines authoritative GAAP for
nongovernmental entities to be only comprised of the FASB Accounting Standards
CodificationTM (“Codification”) and, for SEC registrants, guidance issued by the
SEC.  The Codification is a reorganization and compilation of all
then-existing authoritative GAAP for nongovernmental entities, except for
guidance issued by the SEC.  The Codification is amended to effect
non-SEC changes to authoritative GAAP.  Adoption of ASU No. 2009-01
only changed the referencing convention of GAAP in Notes to the
Consolidated Financial Statements.





In October 2009, the FASB issued
ASU No. 2009-15, “Accounting for
Own-Share Lending Arrangements in Contemplation of Convertible Debt
Issuance.” This ASU
requires that at the date of issuance of the shares in a share-lending
arrangement entered into in contemplation of a convertible debt offering or
other financing, the shares issued shall be measured at fair value and be
recognized as an issuance cost, with an offset to additional paid-in capital.
Further, loaned shares are excluded from basic and diluted earnings per share
unless default of the share-lending arrangement occurs, at which time the loaned
shares would be included in the basic and diluted earnings-per-share
calculation.  This ASU is effective for fiscal years beginning on or
after December 15, 2009, and interim periods within those fiscal years for
arrangements outstanding as of the beginning of those fiscal years. We are
currently evaluating the impact of this ASU on our consolidated financial
statements.


31





On December 15, 2009, the FASB issued
ASU No. 2010-06 Fair Value Measurements and Disclosures Topic 820 “Improving
Disclosures about Fair Value Measurements”.  This ASU requires some
new disclosures and clarifies some existing disclosure requirements about fair
value measurement as set forth in Codification Subtopic 820-10. The FASB’s
objective is to improve these disclosures and, thus, increase the transparency
in financial reporting.  The adoption of this ASU will not have a
material impact on our consolidated financial statements.





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, 2009, 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 RMB 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, 2009
                    
                    F-2Consolidated
      Statements of Income and Other Comprehensive Income for the years
      ended
                      December
      31, 2009 and 2007
                    
                    F-3Consolidated
      Statement of Stockholders’ Equity for the years ended December 31, 2009
      and 2007
                    
                    F-4Combined
      Statements of Cash Flows for the years ended December 31, 2009 and
      2007
                    
                    F-5Notes
      to Combined Financial Statements
                    
                    F-6
      to F-19




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




None


32


Item
9A.  Controls and Procedures.





Disclosure
Controls and Procedures





Our
management, under the supervision and with the participation of our chief
executive officer and chief financial officer, has performed an evaluation of
the effectiveness of the design and operation ofour disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report, as required by Rule 13a-15(b) under the
Exchange Act. Disclosure controls and procedures are thosecontrols and procedures
designed to provide reasonable assurance that the information required to be
disclosed in our Exchange Act filings is (1) recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules, regulations and
related forms, and (2) accumulated and communicated to management, including our
chief executive officer and chief financial officer, as appropriate, to allow
timely decisions regarding required disclosure.  Based on that
evaluation, our chief executive officer and chief financial officer concluded
that our disclosure controls and procedures were effective as of the end of the
period covered by this Annual Report on Form 10-K.





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 defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act).  Internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles (“GAAP”).  Internal control over financial reporting
includes policies and procedures that:





1)
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of our
      assets;





2)
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with GAAP, and that our
      receipts and expenditures are being made only in accordance with
      authorizations of our management and/or our board of directors;
      and





3)
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on the interim or annual consolidated financial
      statements.





Under the
supervision and with the participation of our chief executive officer and chief
financial officer, management conducted an evaluation of the effectiveness of
Shiner’s internal control over financial reporting as of December 31, 2009,
using the criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“Treadway”).





Based on
this evaluation, our management concluded that our internal control over
financial reporting was effective and that there was no material weakness or
significant deficiency discovered as of December 31, 2009.





Inherent
Limitations Over Internal Controls





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect all errors or misstatements and all fraud. Therefore, even
those systems determined to be effective can provide only reasonable, not
absolute, assurance that the objectives of the policies and procedures are met.
Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may
deteriorate.





This
annual report does not include an attestation report of the company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the company's registered
public accounting firm pursuant to temporary rules of the SEC that permit the
company to provide only management's report in this annual report.




Changes
in Internal Control Over Financial Reporting





There
have not been any changes in our internal control over financial reporting (as
such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the fourth quarter of 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.




Item 9B.  Other
Information.




None.


33


PART
III





Item
10.  Directors, Executive Officers and Corporate
Governance.





The
information required by this Item is incorporated by reference to the
information contained in our Proxy Statement for our 2010 Annual Meeting of
Shareholders, which we will file with the SEC within 120 days after the end of
2009.





Item
11.  Executive Compensation.





The
information required by this Item is incorporated by reference to the
information contained in our Proxy Statement for our 2010 Annual Meeting of
Shareholders, which we will file with the SEC within 120 days after the end of
2009.





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





The
information required by this Item is incorporated by reference to the
information contained in our Proxy Statement for our 2010 Annual Meeting of
Shareholders, which we will file with the SEC within 120 days after the end of
2009.





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





The
information required by this Item is incorporated by reference to the
information contained in our Proxy Statement for our 2010 Annual Meeting of
Shareholders, which we will file with the SEC within 120 days after the end of
2009.





Item
14.  Principal Accounting Fees and Services.





The
information required by this Item is incorporated by reference to the
information contained in our Proxy Statement for our 2010 Annual Meeting of
Shareholders, which we will file with the SEC within 120 days after the end of
2009.


34


PART
IV





Item
15.  Exhibits, Financial Statement Schedules.




(a)(1)
Financial Statements




See Item 8, "Financial Statements and
Supplementary Data."




(a)(2)
Financial Statement Schedules




All financial statement schedules for
Shiner and its subsidiaries have been included in the consolidated financial
statements or the related notes or they are either inapplicable or not
required.




(a)(3)
Exhibits




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


35


SHINER
INTERNATIONAL, INC. AND SUBSIDIARIES


Consolidated
Financial Statements


For
the Years Ended December 31, 2009 and 2008





Contents





PageReport
      of Independent Registered Public Accounting Firm
                      
                      F-1Financial
      Statements:Consolidated
      Balance Sheets as of December 31, 2009 and 2008
                      
                      F-2Consolidated
      Statements of Operations and Other Comprehensive Income
    (Loss)for
      the years ended December 31, 2009 and 2008
                      
                      F-3Consolidated
      Statement of Stockholders' Equity for the years endedDecember
      31, 2009 and 2008
                      
                      F-4Consolidated
      Statements of Cash Flows for the years endedDecember
      31, 2009 and 2008
                      
                      F-5Notes
      to Consolidated Financial Statements
                      
                      F-6
      to
F-19





Report of Independent
Registered Public Accounting Firm




Board of
Directors and Stockholders of


Shiner
International, Inc.





We have
audited the accompanying consolidated balance sheets of Shiner International,
Inc. and subsidiaries as of December 31, 2009 and 2008, and the related
consolidated statements of operations and other comprehensive income (loss),
stockholders' equity, and cash flows for the years ended December 31, 2009 and
2008. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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. and subsidiaries as of December 31, 2009 and 2008, and the
consolidated results of their operations and their consolidated cash flows for
the years ended December 31, 2009 and 2008, in conformity with U.S. generally
accepted accounting principles.





Goldman
Parks Kurland Mohidin LLP


Encino,
California


March 3,
2010


F-1


Shiner
International, Inc. and Subsidiaries


Consolidated
Balance Sheet


as
of December 31, 2009 and 2008




December
      31,
                                          
                                          
                                          December
      31,2009
                                          
                                          
                                          2008ASSETSCURRENT
      ASSETS:Cash
      & cash equivalents
                                          
                                          $
                                          3,059,796
                                          
                                          
                                          $
                                          3,816,454Restricted
      cash
                                          
                                          
                                          733,455
                                          
                                          
                                          
                                          684,212Accounts
      receivable, net of allowance for doubtfulaccounts of $252,008 and
      $223,973
                                          
                                          
                                          6,405,741
                                          
                                          
                                          
                                          7,594,718Advances
      to suppliers
                                          
                                          
                                          3,192,211
                                          
                                          
                                          
                                          3,677,890Notes
      receivable
                                          
                                          
                                          88,311
                                          
                                          
                                          
                                          43,503Inventory,
      net
                                          
                                          
                                          8,320,624
                                          
                                          
                                          
                                          7,079,390Prepaid
      expenses & other current assets
                                          
                                          
                                          299,694
                                          
                                          
                                          
                                          1,283,650Total
      current assets
                                          
                                          
                                          22,099,832
                                          
                                          
                                          
                                          24,179,817Property
      and equipment, net
                                          
                                          
                                          12,163,693
                                          
                                          
                                          
                                          12,412,689Construction
      in progress
                                          
                                          
                                          6,582,805
                                          
                                          
                                          
                                          32,265Advance
      for purchase of equipment
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,531,590Intangible
      assets, net
                                          
                                          
                                          349,491
                                          
                                          
                                          
                                          356,447TOTAL
      ASSETS
                                          
                                          $
                                          41,195,821
                                          
                                          
                                          $
                                          38,512,808LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                                          
                                          $
                                          2,667,835
                                          
                                          
                                          $
                                          3,798,790Other
      payables
                                          
                                          
                                          4,487,587
                                          
                                          
                                          
                                          145,507Unearned
      revenue
                                          
                                          
                                          234,543
                                          
                                          
                                          
                                          161,516Accrued
      payroll
                                          
                                          
                                          138,826
                                          
                                          
                                          
                                          39,979Short
      term loan
                                          
                                          
                                          3,227,400
                                          
                                          
                                          
                                          3,884,197Dividend
      payable
                                          
                                          
                                          -
                                          
                                          
                                          
                                          63,267Total
      current liabilities
                                          
                                          
                                          10,756,191
                                          
                                          
                                          
                                          8,093,256Commitments
      and contingenciesSTOCKHOLDERS'
      EQUITY:Common
      stock, par value $0.001; 75,000,000 shares authorized,24,650,000
      shares issued and 24,588,155 shares outstanding at December 31,
      200924,650,000
      shares issued and 24,650,000 shares outstanding at December 31,
      2008
                                          
                                          
                                          24,650
                                          
                                          
                                          
                                          24,650Additonal
      paid-in capital
                                          
                                          
                                          11,389,756
                                          
                                          
                                          
                                          11,214,071Treasury
      stock (61,845 shares)
                                          
                                          
                                          (58,036
                                          )
                                          
                                          
                                          -Other
      comprehensive income
                                          
                                          
                                          2,980,077
                                          
                                          
                                          
                                          2,977,847Statutory
      reserve
                                          
                                          
                                          2,872,856
                                          
                                          
                                          
                                          2,854,686Retained
      earnings
                                          
                                          
                                          13,230,327
                                          
                                          
                                          
                                          13,348,298Total
      stockholders' equity
                                          
                                          
                                          30,439,630
                                          
                                          
                                          
                                          30,419,552TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                          
                                          $
                                          41,195,821
                                          
                                          
                                          $
                                          38,512,808




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




F-2


Shiner
International, Inc. and Subsidiaries


Consolidated
Statements of Operations and Comprehensive Income (Loss)


For
the Years Ended December 31, 2009 and 2008





2009
                    
                    
                    2008Net
      Revenue
                    
                    $
                    34,516,827
                    
                    
                    $
                    51,594,842Cost
      of Revenue
                    
                    
                    29,925,504
                    
                    
                    
                    42,026,145Gross
      profit
                    
                    
                    4,591,323
                    
                    
                    
                    9,568,697Operating
      expensesSelling
      expenses
                    
                    
                    1,822,239
                    
                    
                    
                    1,839,846General
      and administrative expenses
                    
                    
                    2,962,218
                    
                    
                    
                    2,584,842Total
      operating expenses
                    
                    
                    4,784,457
                    
                    
                    
                    4,424,688Income
      (loss) from operations
                    
                    
                    (193,134
                    )
                    
                    
                    5,144,009Non-operating
      income (expense):Other
      income (expense), net
                    
                    
                    (156,220
                    )
                    
                    
                    (43,336
                    )Subsidy
      income
                    
                    
                    443,893
                    
                    
                    
                    469,234Interest
      income
                    
                    
                    31,972
                    
                    
                    
                    26,504Interest
      expense
                    
                    
                    (165,135
                    )
                    
                    
                    (113,486
                    )Exchange
      gain (loss)
                    
                    
                    51,304
                    
                    
                    
                    (56,896
                    )Total
      non-operating income (expense)
                    
                    
                    205,814
                    
                    
                    
                    282,020Income
      before income tax
                    
                    
                    12,680
                    
                    
                    
                    5,426,029Income
      tax
                    
                    
                    112,481
                    
                    
                    
                    546,723Net
      income
                    
                    
                    (99,801
                    )
                    
                    
                    4,879,306Other
      comprehensive incomeForeign
      currency translation gain
                    
                    
                    2,230
                    
                    
                    
                    1,593,456Comprehensive
      Income (Loss)
                    
                    $
                    (97,571
                    )
                    
                    $
                    6,472,762Weighted
      average shares outstanding :Basic
                    
                    
                    24,622,204
                    
                    
                    
                    24,650,000Diluted
                    
                    
                    24,622,204
                    
                    
                    
                    24,650,000Earnings
      per share:Basic
                    
                    $
                    (0.00
                    )
                    
                    $
                    0.20Diluted
                    
                    $
                    (0.00
                    )
                    
                    $
                    0.20





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


F-3


Shiner
International, Inc. and Subsidiaries


Consolidated
Statement of Shareholders' Equity


For
the Years Ended December 31, 2009 and 2008





Additional
                      
                      
                      
                      
                      
                      Other
                      
                      
                      
                      
                      
                      
                      
                      
                      TotalCommon
      Stock
                      
                      
                      Paid
      in
                      
                      
                      Treasury
                      
                      
                      Comprehensive
                      
                      
                      Statutory
                      
                      
                      Retained
                      
                      
                      Stockholders'Shares
                      
                      
                      Amount
                      
                      
                      Capital
                      
                      
                      Stock
                      
                      
                      Income
                      
                      
                      Reserve
                      
                      
                      Earnings
                      
                      
                      EquityBalance,
      December 31, 2007
                      
                      
                      24,650,000
                      
                      
                      
                      24,650
                      
                      
                      
                      11,153,503
                      
                      
                      
                      -
                      
                      
                      
                      1,384,391
                      
                      
                      
                      2,374,069
                      
                      
                      
                      8,949,609
                      
                      
                      
                      23,886,222Stock
      compensation expense for options issued to directors
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      159,568
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      159,568Payment
      of stock offering costs
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (99,000
                      )
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (99,000
                      )Foreign
      currency translation gain
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      1,593,456
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      1,593,456Net
      income
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      4,879,306
                      
                      
                      
                      4,879,306Transfer
      to statutory reserve
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      480,617
                      
                      
                      
                      (480,617
                      )
                      
                      
                      -Balance,
      December 31, 2008
                      
                      
                      24,650,000
                      
                      
                      
                      24,650
                      
                      
                      
                      11,214,071
                      
                      
                      
                      -
                      
                      
                      
                      2,977,847
                      
                      
                      
                      2,854,686
                      
                      
                      
                      13,348,298
                      
                      
                      
                      30,419,552Stock
      compensation expense for options issued to directors
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      175,685
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      175,685Purchase
      of 61,845 treasury shares
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (58,036
                      )
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (58,036
                      )Foreign
      currency translation gain
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      2,230
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      2,230Net
      loss
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (99,801
                      )
                      
                      
                      (99,801
                      )Transfer
      to statutory reserve
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      18,170
                      
                      
                      
                      (18,170
                      )
                      
                      
                      -Balance,
      December 31, 2009
                      
                      
                      24,650,000
                      
                      
                      $
                      24,650
                      
                      
                      $
                      11,389,756
                      
                      
                      $
                      (58,036
                      )
                      
                      $
                      2,980,077
                      
                      
                      $
                      2,872,856
                      
                      
                      $
                      13,230,327
                      
                      
                      $
                      30,439,630




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, 2009 and 2008




2009
                    
                    
                    2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
                    
                    $
                    (99,801
                    )
                    
                    $
                    4,879,306Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
                    
                    
                    1,647,639
                    
                    
                    
                    1,301,403Amortization
                    
                    
                    6,952
                    
                    
                    
                    6,835Stock
      compensation expense for options issued to directors
                    
                    
                    175,685
                    
                    
                    
                    159,568Loss
      on disposal of assets
                    
                    
                    183,644
                    
                    
                    
                    -(Increase)
      / decrease in assets:Accounts
      receivable
                    
                    
                    1,217,801
                    
                    
                    
                    1,988,896Inventory
                    
                    
                    (1,240,474
                    )
                    
                    
                    (214,794
                    )Advances
      to suppliers
                    
                    
                    485,381
                    
                    
                    
                    (970,766
                    )Other
      assets
                    
                    
                    953,758
                    
                    
                    
                    (810,886
                    )Increase
      / (decrease) in current liabilities:Accounts
      payable
                    
                    
                    (1,130,262
                    )
                    
                    
                    (970,141
                    )Unearned
      revenue
                    
                    
                    72,981
                    
                    
                    
                    (388,138
                    )Other
      payables
                    
                    
                    4,339,873
                    
                    
                    
                    (1,532,111
                    )Accrued
      payroll
                    
                    
                    98,786
                    
                    
                    
                    (4,110
                    )Tax
      and welfare payable
                    
                    
                    -
                    
                    
                    
                    (971,743
                    )Net
      cash provided by operating activities
                    
                    
                    6,711,963
                    
                    
                    
                    2,473,319CASH
      FLOWS FROM INVESTING ACTIVITIESPayment
      on (issuance of) notes receivable
                    
                    
                    (44,780
                    )
                    
                    
                    (943
                    )Payments
      for property and equipment
                    
                    
                    (1,525,917
                    )
                    
                    
                    (5,678,801
                    )Payments
      for construction in progress
                    
                    
                    (5,069,602
                    )
                    
                    
                    (31,704
                    )Increase
      in restricted cash
                    
                    
                    (49,212
                    )
                    
                    
                    (672,319
                    )Net
      cash used in investing activities
                    
                    
                    (6,689,511
                    )
                    
                    
                    (6,383,767
                    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from short-term loans
                    
                    
                    3,227,400
                    
                    
                    
                    3,774,309Repayment
      of short-term loans
                    
                    
                    (3,883,795
                    )
                    
                    
                    (822,528
                    )Purchase
      of treasury stock
                    
                    
                    (58,036
                    )
                    
                    
                    -Payment
      of offering costs
                    
                    
                    -
                    
                    
                    
                    (99,000
                    )Dividend
      paid
                    
                    
                    (63,228
                    )
                    
                    
                    (6,297
                    )Net
      cash provided by (used in) financing activities
                    
                    
                    (777,659
                    )
                    
                    
                    2,846,484Effect
      of exchange rate changes on cash and cash equivalents
                    
                    
                    (1,451
                    )
                    
                    
                    272,984NET
      DECREASE IN CASH & CASH EQUIVALENTS
                    
                    
                    (756,658
                    )
                    
                    
                    (790,980
                    )CASH
      & CASH EQUIVALENTS, BEGINNING BALANCE
                    
                    
                    3,816,454
                    
                    
                    
                    4,607,434CASH
      & CASH EQUIVALENTS, ENDING BALANCE
                    
                    $
                    3,059,796
                    
                    
                    $
                    3,816,454SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Interest
      paid
                    
                    $
                    165,136
                    
                    
                    $
                    114,100Income
      taxes paid
                    
                    $
                    90,913
                    
                    
                    $
                    544,135Transfer
      from construction-in-process to property and equipment
                    
                    $
                    -
                    
                    
                    $
                    227,510





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


F-5


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





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  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 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.”  In 2009, Shiner Industrial acquired all of the assets of
Shiny-day and Modern in an effort to improve efficiencies, reduce expenses and
management overhead while taking advantage of favorable tax
treatment.





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 for the cancellation
of her shares. Upon completion of the foregoing transactions, the Company had
21,150,000 shares of common stock issued and outstanding.





The
exchange of shares with Shiner Group was accounted for as a reverse acquisition
under the purchase method of accounting since 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
was recorded as a recapitalization of Shiner Group, Shiner Group being treated
as the continuing entity. Shiner Group had common shareholders and common
management. The historical financial statements presented are the combined
financial statements of Shiner Group. The share exchange agreement was 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.





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





Basis of
Presentation





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





Foreign Currency
Translation





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


F-6


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





Note
2 - Summary of Significant Accounting Policies





Use of
Estimates





The
preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the 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.





Restricted
Cash





Restricted
cash consists of monies restricted by the Company’s lender related to its
outstanding debt obligations.





Accounts
Receivable





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





Advances to
Suppliers





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





Inventory





Inventory
is valued at the lower of cost (determined on a weighted average basis) or
market. Management compares the cost of inventory with this market value and
allowance is made to write down inventory to market value, if
lower.





Notes
Receivable





Notes
receivable consist of several notes that are due from third parties that bear no
interest. The notes are generally due within six months from the date of
issuance.





Property and
Equipment





Property
and equipment are stated at cost. Expenditures for maintenance and repairs are
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


F-7




Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





The
following are the details of the property and equipment:





December 31,
                  
                  
                  December 31,2009
                  
                  
                  2008Operating
      equipment
                  
                  $
                  12,267,407
                  
                  
                  $
                  12,139,325Vehicles
                  
                  
                  72,516
                  
                  
                  
                  99,013Office
      equipment
                  
                  
                  173,771
                  
                  
                  
                  262,107Buildings
                  
                  
                  1,240,931
                  
                  
                  
                  1,303,767Building
      and equipment improvements
                  
                  
                  1,021,547
                  
                  
                  
                  1,184,90714,776,172
                  
                  
                  
                  14,989,119Less
      accumulated depreciation
                  
                  
                  (2,612,479
                  )
                  
                  
                  (2,576,430
                  )$
                  12,163,693
                  
                  
                  $
                  12,412,689





Depreciation
expense was $1,647,639 and $1,301,403 for the years ended December 31, 2009 and
2008, respectively.





Construction-in-Process





Construction-in-process
mainly consists of amounts expended to build a new workshop. The project is
expected to be completed by June 30, 2010.  Once the projects are
completed, the cost accumulated in construction-in-process is transferred to
property and equipment.





Long-Lived
Assets





The
Company applies the provisions of ASC Topic 360, “Property, Plant, and
Equipment,” which governs financial accounting and reporting for the impairment
or disposal of long-lived assets. ASC 360 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets’ carrying amounts. In that event, a loss is
recognized based on the amount by which the carrying amount exceeds the fair
value of the long-lived assets. Loss on long-lived assets to be disposed of is
determined in a similar manner, except that fair values are reduced for the cost
of disposal. Based on its review, the Company believes that as of December 31,
2009 and 2008, there was no significant impairment 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





For
certain of the Company’s financial instruments, including cash and cash
equivalents, restricted cash, accounts receivable, accounts payable, accrued
liabilities and short-term debt, the carrying amounts approximate their fair
values due to their short maturities.





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


F-8


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





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





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





·
            Level
      3 inputs to the valuation methodology are unobservable and significant to
      the fair value measurement.





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





As of
December 31, 2009, the Company did not identify any assets and liabilities that
are required to be presented on the balance sheet at fair value.





Revenue
Recognition





The
Company’s revenue recognition policies 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 collectability is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue.





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, 2009 and 2008, were not significant.





Research and
Development





The
Company expenses its research and development costs as
incurred.  Research and development costs for the years ended December
31, 2009 and 2008 were $150,310 and $347,610, respectively.





Stock-Based
Compensation





The
Company records stock-based compensation in accordance with ASC Topic 718,
“Compensation – Stock Compensation.”  ASC 718 requires companies to
measure compensation cost for stock-based employee compensation at fair value at
the grant date and recognize the expense over the employee’s requisite service
period. The Company recognizes in the statement of operations the grant-date
fair value of stock options and other equity-based compensation issued to
employees and non-employees. There were 250,000 options outstanding as of
December 31, 2009.





Income
Taxes





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


F-9


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





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





Basic and Diluted Earnings
Per Share





Earnings
per share is calculated in accordance with the ASC Topic 260, “Earnings Per
Share.”  Basic earnings per share is based upon the weighted average
number of common shares outstanding.  Diluted earnings per share is
based on the assumption that all dilutive convertible shares and stock warrants
were converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period.  There were 250,000 options and 970,050 warrants
outstanding as of December 31, 2009.  All options and warrants were
excluded from the diluted loss per share calculation due to their anti-dilutive
effect.





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’s Chinese
subsidiaries is the RMB. Translation gains of $2,980,077 and $2,977,847 at
December 31, 2009 and December 31, 2008, respectively, are classified as an item
of other comprehensive income in the stockholders’ equity section of the
consolidated balance sheet.





Statement of Cash
Flows





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





Segment
Reporting





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





Recent Accounting
Pronouncements





On July
1, 2009, the Company adopted Accounting Standards Update (“ASU”) No.
2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments
based on Statement of Financial Accounting Standards No. 168 , “The FASB
Accounting Standards CodificationTM and the Hierarchy of Generally Accepted
Accounting Principles” (“ASU No. 2009-01”).  ASU No. 2009-01
re-defines authoritative GAAP for nongovernmental entities to be only comprised
of the FASB Accounting Standards CodificationTM (“Codification”) and, for SEC
registrants, guidance issued by the SEC.  The Codification is a
reorganization and compilation of all then-existing authoritative GAAP for
nongovernmental entities, except for guidance issued by the SEC.  The
Codification is amended to effect non-SEC changes to authoritative
GAAP.  Adoption of ASU No. 2009-01 only changed the referencing
convention of GAAP in Notes to the Consolidated Financial
Statements.


F-10


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





In
October 2009, the FASB issued ASU No. 2009-15, “Accounting for
Own-Share Lending Arrangements in Contemplation of Convertible Debt
Issuance.” This ASU
requires that at the date of issuance of the shares in a share-lending
arrangement entered into in contemplation of a convertible debt offering or
other financing, the shares issued shall be measured at fair value and be
recognized as an issuance cost, with an offset to additional paid-in capital.
Further, loaned shares are excluded from basic and diluted earnings per share
unless default of the share-lending arrangement occurs, at which time the loaned
shares would be included in the basic and diluted earnings-per-share
calculation.  This ASU is effective for fiscal years beginning on or
after December 15, 2009, and interim periods within those fiscal years for
arrangements outstanding as of the beginning of those fiscal years. The Company
is currently evaluating the impact of this ASU on its consolidated financial
statements.





On
December 15, 2009, the FASB issued ASU No. 2010-06 Fair Value Measurements and
Disclosures Topic 820 “Improving Disclosures about Fair Value
Measurements”.  This ASU requires some new disclosures and clarifies
some existing disclosure requirements about fair value measurement as set forth
in Codification Subtopic 820-10. The FASB’s objective is to improve these
disclosures and, thus, increase the transparency in financial
reporting.  The adoption of this ASU will not have a material impact
on the Company’s consolidated financial statements.





Note
3 - Inventory





Inventory
consisted of the following:





December31,2009
                  
                  
                  December31,2008Raw
      Material
                  
                  $
                  3,963,837
                  
                  
                  $
                  3,578,816Work
      in process
                  
                  
                  1,117,172
                  
                  
                  
                  1,039,346Finished
      goods
                  
                  
                  3,433,445
                  
                  
                  
                  2,461,2288,514,454
                  
                  
                  
                  7,079,390Less:
      Obsolescence Reserve
                  
                  
                  (193,830
                  )
                  
                  
                  -Net
      Inventory
                  
                  $
                  8,320,624
                  
                  
                  $
                  7,079,390





Note
4 - Intangible Assets





Intangible
assets were as follows:





December 31,
                  
                  
                  December 31,2009
                  
                  
                  2008Right
      to use land
                  
                  $
                  391,378
                  
                  
                  $
                  391,378Less:
      Accumulated amortization
                  
                  
                  (41,887
                  )
                  
                  
                  (34,931
                  )Intantible
      assets, net
                  
                  $
                  349,491
                  
                  
                  $
                  356,447





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


F-11


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





Note
5 - Short-term loans





Short-term
loans consisted of the following:





December 31,
                      
                      
                      December 31,2009
                      
                      
                      2008The
      term of the loan was from March 3, 2008 to March 3, 2009, with an interest
      rate at the standard rate times 1.1 8.09% at December 31, 2008. The loan
      was collateralized by a one-year time deposit.
                      
                      $
                      -
                      
                      
                      $
                      400,195The
      term of the loan was from April 24, 2008 to April 24, 2009, with an
      interest rate of 8.21% at December 31, 2008.  The loan was
      collateralized by a one-year time deposit.
                      
                      
                      -
                      
                      
                      
                      256,602The
      term of the loan wass from May 30, 2008 to May 30, 2009, with an interest
      rate of 7.512% at December 31, 2008.  The loan was
      collateralized by buildings land use rights and machines.
                      
                      
                      -
                      
                      
                      
                      1,467,000The
      term of the loan was from July 10, 2008 to May 30, 2009, with an interest
      rate of 7.512% at December 31, 2008.  The loan was
      collateralized by buildings, land use rights and machines.
                      
                      
                      -
                      
                      
                      
                      733,500The
      term of the loan was from August 15, 2008 to May 30, 2009, with an
      interest rate of 7.512% at December 31, 2008.  The loan was
      collateralized by buildings, land use rights and machines.
                      
                      
                      -
                      
                      
                      
                      440,100The
      term of the loan was from October 10, 2008 to May 30, 2009, with an
      interest rate of 7.512% at December 31, 2008.  The loan was
      collateralized by buildings, land use rights and machines.
                      
                      
                      -
                      
                      
                      
                      586,800The
      term of the loan is from June 30, 2009 to June 08, 2010, with an interest
      rate of 5.31% at December 31, 2009.  The loan is collateralized
      by buildings and equipment
                      
                      
                      1,467,000
                      
                      
                      
                      -The
      term of the loan is from July 14, 2009 to June 08, 2010, with an interest
      rate of 5.31% at December 31, 2009.  The loan is collateralized
      by buildings and equipment
                      
                      
                      733,500
                      
                      
                      
                      -The
      term of the loan is from November 03, 2009 to June 08, 2010, with an
      interest rate of 5.31% at December 31, 2009.  The loan is
      collateralized by buildings and equipment
                      
                      
                      440,100
                      
                      
                      
                      -The
      term of the loan is from September 16, 2009 to June 08, 2010, with an
      interest rate of 5.31% at December 31, 2009.  The loan is
      collateralized by buildings and equipment
                      
                      
                      586,800
                      
                      
                      
                      -$
                      3,227,400
                      
                      
                      $
                      3,884,197





Note
6 – Stockholders’ Equity





Treasury
Stock





During
the year ended December 31, 2009, the Company purchased 61,845 shares of its
common stock on the open market (treasury shares) for $58,036.  The
Company accounted for the purchase of these treasury shares using the cost
method.


F-12


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





Note
7 - Stock Options and Warrants





Stock
Options





Options
                                      Outstanding
                                    
                                    
                                    Weighted
                                      Average
                                      Exercise
                                      Price
                                    
                                    
                                    Aggregate
                                      Intrinsic
                                      ValueOutstanding
      at December 31, 2007
                                    
                                    
                                    90,000
                                    
                                    
                                    $
                                    7.00Granted
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Canceled
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Exercised
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Outstanding
      at December 31, 2008
                                    
                                    
                                    90,000
                                    
                                    
                                    
                                    7.00Granted
                                    
                                    
                                    190,000
                                    
                                    
                                    
                                    1.38Canceled
                                    
                                    
                                    (30,000
                                    )
                                    
                                    
                                    7.00Exercised
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Outstanding
      at December 31, 2009
                                    
                                    
                                    250,000
                                    
                                    
                                    $
                                    2.73
                                    
                                    $
                                    13,500Exercisable
      at December 31, 2009
                                    
                                    
                                    110,000
                                    
                                    
                                    $
                                    3.34
                                    
                                    $
                                    10,500





The
number and weighted average exercise prices of all options outstanding as of
December 31, 2009, are as follows:





Options OutstandingWeightedWeighted
                  
                  
                  AverageNumber
                  
                  
                  Average
                  
                  
                  RemainingRange of
                  
                  
                  Outstanding
                  
                  
                  Exercise
                  
                  
                  Contractual LifeExercise Price
                  
                  
                  December 31, 2009
                  
                  
                  Price
                  
                  
                  (Years)$
                  1.25
                  
                  
                  
                  90,000
                  
                  
                  $
                  1.25
                  
                  
                  
                  4.02$
                  1.50
                  
                  
                  
                  100,000
                  
                  
                  $
                  1.50
                  
                  
                  
                  3.13$
                  7.00
                  
                  
                  
                  60,000
                  
                  
                  $
                  7.00
                  
                  
                  
                  3.14250,000





The
number and weighted average exercise prices of all options exercisable as of
December 31, 2009, are as follows:





Options ExercisableWeightedWeighted
                  
                  
                  AverageNumber
                  
                  
                  Average
                  
                  
                  RemainingRange of
                  
                  
                  Outstanding
                  
                  
                  Exercise
                  
                  
                  Contractual LifeExercise Price
                  
                  
                  December 31, 2009
                  
                  
                  Price
                  
                  
                  (Years)$
                  1.25
                  
                  
                  
                  70,000
                  
                  
                  $
                  1.25
                  
                  
                  
                  4.02$
                  7.00
                  
                  
                  
                  40,000
                  
                  
                  $
                  7.00
                  
                  
                  
                  3.14110,000


F-13


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008








Expected
      life (years)
                  
                  
                  2.5Risk-free
      interest rate
                  
                  3
      to 5 yearsExpected
      volatility
                  
                  
                  103
                  %Expected
      dividend yield
                  
                  
                  0
                  %





The
weighted average grant-date fair value for the options granted during the year
ended December 31, 2009, was $0.63.  No options were granted
during 2009 where the exercise price was equal to or less than the stock
price at the date of the grant.  The compensation expense related to
the unvested options as of December 31, 2009, was $50,543, which will be
recognized through December 31, 2011.





Warrants





Following
is a summary of warrant activity:





Warrants
                        Outstanding
                      
                      
                      Weighted
                        Average
                        Exercise
                        Price
                        Price
                      
                      
                      Weighted
                        Average
                        Remaining
                        Contractual Life
                        (Years)Outstanding
      at December 31, 2007
                      
                      
                      -
                      
                      
                      
                      -Granted
                      
                      
                      970,050
                      
                      
                      $
                      6.00Canceled
                      
                      
                      -
                      
                      
                      
                      -Exercised
                      
                      
                      -
                      
                      
                      
                      -Outstanding
      at December 31, 2008
                      
                      
                      970,050
                      
                      
                      
                      6.00
                      
                      
                      
                      1.81Granted
                      
                      
                      -
                      
                      
                      
                      -Canceled
                      
                      
                      -
                      
                      
                      
                      -Exercised
                      
                      
                      -
                      
                      
                      
                      -Outstanding
      at December 31, 2009
                      
                      
                      970,050
                      
                      
                      $
                      6.00
                      
                      
                      
                      0.81





Note
8 - Income Taxes





Local PRC
Income Tax





Pursuant
to the tax laws of the PRC, general enterprises are subject to income tax at an
effective rate of 25%.





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





·
            Shiner
      Industrial - 50% exemption from federal tax from January 1, 2006 to
      December 31, 2008 and enjoys a tax rate of 15% from January 1, 2009 to
      December 31, 2011 since it is recognized as a high-tech
      enterprise.





·
            Zhuhai
      -exemption from federal tax from January 1, 2008 to December 31, 2009. In
      addition, it also enjoys a 50% federal tax reduction from January 1, 2010
      to December 31, 2012.





Shiner
Industrial acquired all of the assets of Shiny-day and Modern in 2009, partially
in response to the expiration of the tax holiday previously enjoyed by
them.


F-14


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





According
to the new PRC income tax law, for enterprises to which the 15% tax rate was
applicable previously, these rates shall apply from 2007 to 2012:





Year
                    
                    Tax rate
                    
                    
                    Income tax rate-
                      Shiner Industrial
                    
                    
                    Income tax rate-
                      Zhuhai2007
                    
                    
                    15
                    %
                    
                    
                    7.5
                    %
                    
                    Tax
      free2008
                    
                    
                    18
                    %
                    
                    
                    9
                    %
                    
                    Tax
      free2009
                    
                    
                    20
                    %
                    
                    
                    15
                    %
                    
                    
                    12.5
                    %2010
                    
                    
                    22
                    %
                    
                    
                    15
                    %
                    
                    
                    12.5
                    %2011
                    
                    
                    24
                    %
                    
                    
                    15
                    %
                    
                    
                    12.5
                    %2012
                    
                    
                    25
                    %
                    
                    
                    25
                    %
                    
                    
                    12.5
                    %





A
reconciliation of tax at United States federal statutory rate to provision for
income tax recorded in the financial statements for the years ended December 31,
2009 and 2008 is as follows:





2009
                  
                  
                  2008Tax
      provision (benefit) at U.S. statutory rate
                  
                  
                  34
                  %
                  
                  
                  34
                  %Foreign
      tax rate difference
                  
                  
                  (9
                  )%
                  
                  
                  (9
                  )%US
      and Chinese NOL for which no benefit is realized
                  
                  
                  872
                  %
                  
                  
                  1
                  %Effect
      of tax holiday
                  
                  
                  (10
                  )%
                  
                  
                  (16
                  )%887
                  %
                  
                  
                  10
                  %





The
effect of the change of tax status was accounted for in accordance with ASC
Topic 740-10-25), which states that the effect of a change in tax status is
computed as of the date of change and is included in the tax provision for
continuing operations. Management believes that the local tax authorities would
not have waived past taxes had it not been for the change in the Company’s
subsidiary’s tax status.





If the
Company had not been exempt from income taxes due to operating in a privileged
economic zone, for the year ended December 31, 2009, income would have been
unaffected but for the year ended December 31, 2008, income would have been
lower by approximately $1,300,000. The net effect on earnings per share had
income tax been applied would have had no effect on earnings per share for the
year ended December 31, 2009, but would have decreased earnings per share from
$0.20 to $0.15 for the year ended December 31, 2008.





Foreign
pretax earnings approximated $127,000 and $5,500,000 for the years ended
December 31, 2009 and 2008 respectively. Pretax earnings of a foreign subsidiary
are subject to U.S. taxation when effectively repatriated. The Company provides
income taxes on the undistributed earnings of non-U.S. subsidiaries except to
the extent that such earnings are indefinitely invested outside the United
States. At December 31, 2009, approximately $14,040,000 of accumulated
undistributed earnings of non-U.S. subsidiaries was indefinitely invested. At
the existing U.S. federal income tax rate, additional taxes of $1,264,000 would
have to be provided if such earnings were remitted currently.





Note
9 - Employee Welfare Plans





The total
expense for the employee common welfare was $77,053 and $52,047 for the years
ended December 31, 2009 and 2008, respectively.  The Company did not
record a welfare payable during the years ended December 31, 2009 and
2008.  The Chinese government abolished the 14% welfare plan policy at
the beginning of 2007.  The Company is not required to establish
welfare and common welfare reserves. The balance of welfare payable is remaining
amount due under the welfare plan provided for prior to 2007.





Note
10 - Statutory Common Welfare Fund





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





i.
            Making
      up cumulative prior years’ losses, if
any;


F-15


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





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 5-10% 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.





The
Company appropriated $18,170 and $480,617 as reserve for the Statutory surplus
reserve and Statutory common welfare fund for the years ended December 31, 2009
and 2008, respectively.





Note
11 - Current Vulnerability Due to Certain Concentrations





One
vendor provided 11% of the Company’s raw materials for the year ended December
31, 2009.  There were no vendors who accounted for more than 10% of
the Company’s raw materials for the year ended December 31, 2008.





There
were no customers who accounted for more than 10% of the Company’s sales for the
year ended December 31, 2009.  One customer accounted for 16.8% of the
Company’s sales for the year ended December 31, 2008.





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





Note
12 - Contingent Liabilities





At
December 31, 2009, the Company is contingently liable to banks for discounted
notes receivable and to vendors for endorsed notes receivable amounting to
$1,028,621.





The
Company has entered into a formal agreement with a vendor whereby the Company
has agreed to purchase new equipment at the cost of approximately
$13,200,000.  The Company has already paid approximately $1.26 million
toward the purchase of this equipment which is reflected in construction in
progress in the accompanying consolidated balance sheet.  The
equipment is expected to be delivered early in the first quarter of 2011,
installed in the latter part of the first quarter of 2011 and operational in the
second quarter of 2011.


F-16


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





Note
13 – Segment Information





The
Company’s business segments are in packaging film (which includes BOPP tobacco,
coated, and anti-counterfeit) and color printing.  The following
tables summarize the Company’s segment information for the years ended December
31, 2009 and 2008:




Years Ended December 31,2009
                
                
                2008Revenues
      from unrelated entitiesColor
      Printing
                
                $
                2,737,614
                
                
                $
                9,793,831Packaging
                
                
                31,779,213
                
                
                
                41,801,011$
                34,516,827
                
                
                $
                51,594,842Intersegment
      revenuesColor
      Printing
                
                $
                1,942,080
                
                
                $
                778,306Packaging
                
                
                22,254,899
                
                
                
                14,440,173$
                24,196,979
                
                
                $
                15,218,479Total
      RevenuesColor
      Printing
                
                $
                4,679,694
                
                
                $
                10,572,137Packaging
                
                
                54,034,112
                
                
                
                56,241,184Less
      Intersegment revenues
                
                
                (24,196,979
                )
                
                
                (15,218,479
                )$
                34,516,827
                
                
                $
                51,594,842Income
      (loss) from operationsColor
      Printing
                
                $
                (1,066,905
                )
                
                $
                (582,295
                )Packaging
                
                
                1,130,114
                
                
                
                6,328,025Holding
      Company
                
                
                (256,343
                )
                
                
                (601,721
                )$
                (193,134
                )
                
                $
                5,144,009Interest
      incomeColor
      Printing
                
                $
                772
                
                
                $
                3,140Packaging
                
                
                30,637
                
                
                
                20,316Holding
      Company
                
                
                563
                
                
                
                3,048$
                31,972
                
                
                $
                26,504Interest
      ExpenseColor
      Printing
                
                $
                -
                
                
                $
                -Packaging
                
                
                165,135
                
                
                
                113,486Holding
      Company
                
                
                -
                
                
                
                -$
                165,135
                
                
                $
                113,486Income
      tax expense (benefit)Color
      Printing
                
                $
                -
                
                
                $
                14,473Packaging
                
                
                112,481
                
                
                
                532,250Holding
      Company
                
                
                -
                
                
                
                -$
                112,481
                
                
                $
                546,723




F-17


Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008




Net
      Income (loss)Color
      Printing
            
            $
            (1,069,296
            )
            
            $
            (566,521
            )Packaging
            
            
            1,225,744
            
            
            
            6,044,500Holding
      Company
            
            
            (256,249
            )
            
            
            (598,673
            )$
            (99,801
            )
            
            $
            4,879,306Provision
      for depreciationColor
      Printing
            
            $
            345,355
            
            
            $
            167,086Packaging
            
            
            1,302,284
            
            
            
            1,134,317Holding
      Company
            
            
            -
            
            
            
            -$
            1,647,639
            
            
            $
            1,301,403





As of December 31,2009
                        
                        
                        2008Total
      AssetsColor
      Printing
                        
                        $
                        2,230,665
                        
                        
                        $
                        6,429,317Packaging
                        
                        
                        38,783,939
                        
                        
                        
                        30,317,410Holding
      Company
                        
                        
                        181,217
                        
                        
                        
                        1,766,081$
                        41,195,821
                        
                        
                        $
                        38,512,808





Note
14 - Geographical Sales





Geographical
distribution of sales is as follows:





Years Ended December 31,Geographical Areas
                    
                    2009
                    
                    
                    2008Chinese
      Main Land
                    
                    $
                    24,133,963
                    
                    
                    $
                    40,621,912Asia
      (outside Main Land China)
                    
                    
                    4,758,917
                    
                    
                    
                    4,473,167Africa
                    
                    
                    309,713
                    
                    
                    
                    538,699Australia
                    
                    
                    2,503,452
                    
                    
                    
                    1,732,265North
      America
                    
                    
                    1,009,251
                    
                    
                    
                    1,773,952Middle
      East
                    
                    
                    926,948
                    
                    
                    
                    1,168,591Europe
                    
                    
                    831,340
                    
                    
                    
                    1,286,256Other
                    
                    
                    43,243
                    
                    
                    
                    -$
                    34,516,827
                    
                    
                    $
                    51,594,842





Note
15 – Selected Quarterly Data (unaudited)





Quarterly Periods EndedMarch 31,
                  
                  
                  June 30,
                  
                  
                  September 30,
                  
                  
                  December 31,2009
                  
                  
                  2009
                  
                  
                  2009
                  
                  
                  2009Net
      revenue
                  
                  $
                  7,070,408
                  
                  
                  $
                  8,006,378
                  
                  
                  $
                  8,662,339
                  
                  
                  $
                  10,777,702Gross
      profit
                  
                  $
                  471,485
                  
                  
                  $
                  1,105,497
                  
                  
                  $
                  1,499,540
                  
                  
                  $
                  1,514,801Income
      (loss) from operations
                  
                  $
                  (330,284
                  )
                  
                  $
                  (208,107
                  )
                  
                  $
                  265,491
                  
                  
                  $
                  79,766Other
      income (expense)
                  
                  $
                  (26,612
                  )
                  
                  $
                  (24,129
                  )
                  
                  $
                  122,217
                  
                  
                  $
                  134,338Net
      income (loss)
                  
                  $
                  (275,013
                  )
                  
                  $
                  (276,416
                  )
                  
                  $
                  297,908
                  
                  
                  $
                  155,950Earnings
      per shares (basic)
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  0.01
                  
                  
                  $
                  0.01





F-18





Shiner
International, Inc. and Subsidiaries


Notes
to Consolidated Financial Statements


For
the Years Ended December 31, 2009 and 2008





Quarterly Periods EndedMarch 31,
                      
                      
                      June 30,
                      
                      
                      September 30,
                      
                      
                      December 31,2008
                      
                      
                      2008
                      
                      
                      2008
                      
                      
                      2008Net
      revenue
                      
                      $
                      11,277,937
                      
                      
                      $
                      14,160,149
                      
                      
                      $
                      15,159,122
                      
                      
                      $
                      10,997,634Gross
      profit
                      
                      $
                      2,538,147
                      
                      
                      $
                      2,820,355
                      
                      
                      $
                      2,846,978
                      
                      
                      $
                      1,363,217Income
      from operations
                      
                      $
                      1,704,842
                      
                      
                      $
                      1,828,240
                      
                      
                      $
                      1,653,729
                      
                      
                      $
                      (42,802
                      )Other
      income (expense)
                      
                      $
                      18,095
                      
                      
                      $
                      160,450
                      
                      
                      $
                      383,683
                      
                      
                      $
                      (280,208
                      )Net
      income (loss)
                      
                      $
                      1,563,883
                      
                      
                      $
                      1,826,265
                      
                      
                      $
                      1,863,497
                      
                      
                      $
                      (374,339
                      )Earnings
      per shares (basic)
                      
                      $
                      0.06
                      
                      
                      $
                      0.07
                      
                      
                      $
                      0.08
                      
                      
                      $
                      (0.01
                      )




F-19


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 25th day of March,
2010.





Shiner
      International, Inc.By:
      /s/ Qingtao XingName:
      Qingtao XingTitle:
      President and Chief Executive
Officer





Power of
Attorney





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 and Jeffrey T. Roney 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, 2009 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/ Qingtao Xing
              
              President
      and Chief Executive Officer
              
              March
      25, 2010Qingtao
      Xing/s/ Jeffrey T. Roney
              
              Chief
      Financial Officer
              
              March
      25, 2010Jeffrey
      T. Roney
              
              (Chief
      Accounting Officer)/s/ Yuet Ying
              
              Chairman
      of the Board of Directors
              
              March
      25, 2010Yuet
      Ying/s/ Marshall Cogan
              
              Director
              
              March
      25, 2010Marshall
      Cogan/s/ Jian Fu
              
              Director
              
              March
      25, 2010Jian
      Fu/s/ Brian G. Cunat
              
              Director
              
              March
      25, 2010Brian
      G.Cunat/s/ Arnold Staloff
              
              Director
              
              March
      25, 2010Arnold
      Staloff







INDEX
TO EXHIBITS




Exhibit
                
                Description of Exhibit2.1
                
                Share
      Exchange Agreement by and between Sino Palace Holdings Limited and Cartan
      Holdings Inc. dated as of July 23, 2007 (incorporated by reference to
      Exhibit 2.1 of Shiner's Current Report on Form 8-K (Commission File No.
      001-33960) filed with the SEC on July 27, 2007).2.2
                
                Return
      to Treasury Agreement between Cartan Holdings, Inc. and Zubeda
      Mohamed-Lakhani, dated as of July 23, 2007 (incorporated by reference to
      Exhibit 2.2 of Shiner's Current Report on Form 8-K (Commission File No.
      001-33960) filed with the SEC on July 27, 2007).3.1
                
                Amended
      and Restated Articles of Incorporation  (incorporated by
      reference to Exhibit 3.1 of Shiner's Current Report on Form 8-K
      (Commission File No. 001-33960) filed with the SEC on July 27,
      2007)3.2
                
                Amended
      and Restated Bylaws (incorporated by reference to Exhibit 3.2 of Shiner's
      Current Report on Form 8-K (Commission File No. 001-33960) filed with the
      SEC on July 27, 2007).4.1
                
                Specimen
      Stock Certificate (incorporated by reference to Exhibit 4.1 of Shiner's
      Current Report on Form 8-K (Commission File No. 001-33960) filed with the
      SEC on July 27, 2007)10.1
                
                Registration
      Rights Agreement, dated as of September 30, 2007, between Shiner and the
      investors signatory thereto (incorporated by reference to Exhibit 10.1 of
      Shiner's Registration Statement on Form SB-2 (Commission File No.
      333-148304), filed with the SEC on December 21, 2007)10.2
                
                Form
      of Common Stock Purchase Warrant (incorporated by reference to Exhibit
      10.2 of Shiner's Registration Statement on Form SB-2 (Commission File No.
      333-148304), filed with the SEC on December 21, 2007).10.3
                
                Form
      of Stock Option Agreement (incorporated by reference to Exhibit 10.3 of
      Shiner's Registration Statement on Form SB-2 (Commission File No.
      333-148304), filed with the SEC on December 21, 2007)10.4
                
                Employment
      Agreement, dated January 1, 2008, by and between Shiner and Jian Fu
      (incorporated by reference to Exhibit 10.4 of Shiner's Annual Report on
      Form 10-K (Commission File No. 001-33960) filed with the SEC on March 28,
      2008).10.5
                
                Employment
      Agreement, dated January 1, 2008, by and between Shiner and Xuezhu Xu
      (incorporated by reference to Exhibit 10.5 of Shiner's Annual Report on
      Form 10-K (Commission File No. 001-33960) filed with the SEC on March 28,
      2008).10.6
                
                Employment
      Agreement, dated January 1, 2008, by and between Shiner and Mingbiao Li
      (incorporated by reference to Exhibit 10.6 of Shiner's Annual Report on
      Form 10-K (Commission File No. 001-33960) filed with the SEC on March 28,
      2008).10.7
                
                Employment
      Agreement, dated February 11, 2010, by and between Shiner and Jeffrey T.
      Roney (incorporated by reference to Exhibit 10.7 of Shiner's Current
      Report on Form 8-K (Commission File No. 001-33960) filed with the SEC on
      February 26, 2009).10.8
                
                Employment
      Agreement, dated February 3, 2010, by and between Shiner and Qingtao
      Xing.21
                
                List
      of Subsidiaries.24
                
                Powers
      of Attorney (included in signature page)31.1
                
                Certification
      of our Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 under
      the Securities Exchange Act of 1934, as amended31.2
                
                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
      200232.2
              
              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