NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
Note
1 - Organization and Basis of Presentation
The
unaudited consolidated financial statements have been prepared by Shiner
International, Inc. (the “Company”) pursuant to the rules and regulations of the
Securities Exchange Commission (“SEC”). The information furnished herein
reflects all adjustments (consisting of normal recurring accruals and
adjustments) which are, in the opinion of management, necessary to fairly
present the operating results for the respective periods. Certain information
and footnote disclosures normally present in annual consolidated financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted pursuant to such rules and
regulations. These consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and footnotes
included in the Company’s Current Report on Form 8-K filed on July 27, 2007. The
results for the nine months ended September 30, 2007 are not necessarily
indicative of the results to be expected for the full year ending December
31,
2007.
Organization
and Line of Business
Shiner
International, Inc. formerly known as Cartan Holdings, Inc. (hereinafter
referred to as the “Company” or “Shiner”) was incorporated in the State of
Nevada on November 12, 2003.
On
July
23, 2007, the Company entered into a share exchange agreement and plan of
reorganization with Sino Palace Holdings Limited., a corporation formed under
the laws of the British Virgin Islands (“Sino Palace”). Pursuant to the
agreement, the Company acquired from Sino Palace all of the issued and
outstanding capital stock of each of Hainan Shiner Industrial Co., Ltd. (“Shiner
Industrial”) and Hainan Shiny-day Color Printing Packaging Co., Ltd.
(“Shiny-day”) as well as all of the issued and outstanding capital stock of
their subsidiaries, Hainan Modern Hi-Tech Industrial Co., Ltd. (“Modern”) and
Zhuhai Modern Huanuo Packaging Material Co., Ltd. (“Zhuhai”) in exchange for the
issuance of an aggregate of 16,500,000 shares of the Company’s common stock to
the shareholders of Sino Palace. Shiner Industrial, Shiny-day, Modern and Zhuhai
are each Chinese corporations and are referred to collectively as the “Shiner
Group.”
Concurrently
with the closing of the transactions contemplated by the share exchange
agreement and as a condition thereof, the Company entered into an agreement
with
Zubeda Mohamed-Lakhani, the Company’s sole director and chief executive officer,
pursuant to which she returned 4,750,000 shares of the Company’s common stock
for cancellation. Ms. Mohamed-Lakhani was not compensated in any way for the
cancellation of her shares of the Company’s common stock. Upon completion of the
foregoing transactions, the Company had an aggregate of 21,150,000 shares of
common stock issued and outstanding.
The
exchange of shares with the Shiner Group was accounted for as a reverse
acquisition under the purchase method of accounting since the Shiner Group
obtained control of the Company. On July 24, 2007, Cartan Holdings, Inc. changed
its name to Shiner International, Inc. Accordingly, the merger of the Shiner
Group into the Company were recorded as a recapitalization of the Shiner Group,
the Shiner Group being treated as the continuing entities. The Shiner Group
had
common shareholders and common management. The historical financial statements
presented are the combined financial statements of the Shiner Group. The share
exchange agreement has been treated as a recapitalization and not as a business
combination; therefore, no pro forma information is disclosed. At the date
of
this transaction, the net liabilities of the legal acquirer were
$34,867.
As
a
result of the reverse merger transactions described above the historical
financial statements presented are those of the Shiner Group, the operating
entities.
SHINER
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
The
Company is engaged in research, manufacture, sale, and distribution of packaging
film and color printing for the packaging industry.
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America.
The Company’s functional currency is the Chinese Renminbi; however the
accompanying consolidated financial statements have been translated and
presented in United States Dollars ($).
Foreign
Currency Translation
As
of
September 30, 2007, the accounts of the Company were maintained, and their
financial statements were expressed in the Chinese Yuan Renminbi (CNY). Such
financial statements were translated into U.S. Dollars (USD) in accordance
with
Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency
Translation,” with the CNY as the functional currency. According to the
Statement, all assets and liabilities were translated at the exchange rate
on
the balance sheet date, stockholder’s equity are translated at the historical
rates and statement of operations items are translated at the weighted average
exchange rate for the year. The resulting translation adjustments are reported
under other comprehensive income in accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 130, “Reporting Comprehensive Income.” Gains
and losses resulting from the translations of foreign currency transactions
and
balances are reflected in the income statement.
Note
2 - Summary of Significant Accounting Policies
Use
of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash
and Cash Equivalents
Cash
and
cash equivalents include cash in hand and cash in time deposits, certificates
of
deposit and all highly liquid debt instruments with original maturities of
three
months or less.
Accounts
Receivable
The
Company maintains reserves for potential credit losses on accounts receivable.
Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate
the
adequacy of these reserves. Reserves are recorded primarily on a specific
identification basis. Allowance for doubtful debts amounted to $67,888 at
September 30, 2007.
SHINER
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
Advances
to Suppliers
The
Company advances funds to certain vendors for purchase of its material. The
advances to suppliers are interest free and unsecured.
Inventories
Inventories
are valued at the lower of cost (determined on a weighted average basis) or
market. The Company compares the cost of inventories with the market value
and
allowance is made for writing down its inventories to market value, if lower.
Notes
Receivable
Notes
receivable consist of several notes that are due from third parties that accrue
no interest. The notes are generally due within six months from the date of
issuance.
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
years
|
|
|
Vehicles
|
|
|
8
years
|
|
|
Office
equipment
|
|
|
5
years
|
|
|
Buildings
and improvements
|
|
|
20
years
|
|
At
September 30, 2007, the following are the details of the property and equipment:
|
Operating
equipment
|
|
$
|
68,681
|
|
|
Vehicles
|
|
|
316,930
|
|
|
Office
equipment
|
|
|
1,284,654
|
|
|
Buildings
and improvements
|
|
|
7,484,383
|
|
|
Less
accumulated depreciation
|
|
|
(2,001,020
|
)
|
|
|
|
$
|
5,483,363
|
|
SHINER
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
Long-Lived
Assets
Effective
January 1, 2002, the Company adopted SFAS No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and
reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations
for a Disposal of a Segment of a Business.” The Company periodically evaluates
the carrying value of long-lived assets to be held and used in accordance with
SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than
the assets’ carrying amounts. In that event, a loss is recognized based on the
amount by which the carrying amount exceeds the fair market value of the
long-lived assets. Loss on long-lived assets to be disposed of is determined
in
a similar manner, except that fair market values are reduced for the cost of
disposal. Based on its review, the Company believes that, as of September 30,
2007 there were no significant impairments of its long-lived assets.
Intangible
Assets
Intangible
assets consist of rights to use land. The Company evaluates intangible assets
for impairment, at least on an annual basis and whenever events or changes
in
circumstances indicate that the carrying value may not be recoverable from
its
estimated future cash flows. Recoverability of intangible assets, other
long-lived assets and, goodwill is measured by comparing their net book value
to
the related projected undiscounted cash flows from these assets, considering
a
number of factors including past operating results, budgets, economic
projections, market trends and product development cycles. If the net book
value
of the asset exceeds the related undiscounted cash flows, the asset is
considered impaired, and a second test is performed to measure the amount of
impairment loss.
Fair
Value of Financial Instruments
SFAS
No.
107, “Disclosures about fair value of financial instruments,” requires that the
Company disclose estimated fair values of financial instruments. The carrying
amounts reported in the statements of financial position for current assets
and
current liabilities qualifying as financial instruments are a reasonable
estimate of fair value.
Revenue
Recognition
The
Company’s revenue recognition policies are in compliance with SEC Staff
Accounting Bulletin (SAB) 104. Sales revenue is recognized at the date of
shipment to customers when a formal arrangement exists, the price is fixed
or
determinable, the delivery is completed, no other significant obligations of
the
Company exist and collectibility is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue.
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 nine months
ended September 30, 2007 and 2006 were not significant.
Stock-Based
Compensation
The
Company accounts for its stock-based compensation in accordance with SFAS No.
123R, “Share-Based Payment, an Amendment of FASB Statement No. 123.” The Company
recognizes in the statement of operations the grant-date fair value of stock
options and other equity-based compensation issued to employees and
non-employees. No options have been granted.
SHINER
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
Income
Taxes
The
Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the
recognition of deferred tax assets and liabilities for the expected future
tax
consequences of events that have been included in the financial statements
or
tax returns. Under this method, deferred income taxes are recognized for the
tax
consequences in future years of differences between the tax bases of assets
and
liabilities and their financial reporting amounts at each period end based
on
enacted tax laws and statutory tax rates applicable to the periods in which
the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, on January 1, 2007. As a result of the
implementation of FIN 48, the Company made a comprehensive review of its
portfolio of tax positions in accordance with recognition standards established
by FIN 48. As a result of the implementation of Interpretation 48, the Company
recognized no material adjustments to liabilities or stockholders’ equity. When
tax returns are filed, it is highly certain that some positions taken would
be
sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the
position that would be ultimately sustained. The benefit of a tax position
is
recognized in the financial statements in the period during which, based on
all
available evidence, management believes it is more likely than not that the
position will be sustained upon examination, including the resolution of appeals
or litigation processes, if any. Tax positions taken are not offset or
aggregated with other positions. Tax positions that meet the
more-likely-than-not recognition threshold are measured as the largest amount
of
tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority. The portion of the benefits
associated with tax positions taken that exceeds the amount measured as
described above is reflected as a liability for unrecognized tax benefits in
the
accompanying balance sheets along with any associated interest and penalties
that would be payable to the taxing authorities upon examination.
Interest
associated with unrecognized tax benefits are classified as interest expense
and
penalties are classified in selling, general and administrative expenses in
the
statements of income. The adoption of FIN 48 did not have a material impact
on
the Company’s financial statements.
Basic
and Diluted Earnings Per Share
Earnings
per share is calculated in accordance with the SFAS No. 128 (SFAS No. 128),
“Earnings Per Share”. SFAS No. 128 superseded Accounting Principles Board
Opinion No.15 (APB 15). Net earnings per share for all periods presented has
been restated to reflect the adoption of SFAS No. 128. Basic earnings per share
is based upon the weighted average number of common shares outstanding. Diluted
earnings per share is based on the assumption that all dilutive convertible
shares and stock options were converted or exercised. Dilution is computed
by
applying the treasury stock method. Under this method, options and warrants
are
assumed to be exercised at the beginning of the period (or at the time of
issuance, if later), and as if funds obtained thereby were used to purchase
common stock at the average market price during the period. There were no
options, warrants or dilutive securities outstanding during the nine months
ended September 30, 2007 and 2006.
SHINER
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
Foreign
Currency Transactions and Comprehensive Income
Accounting
principles generally require that recognized revenue, expenses, gains and losses
be included in net income. Certain statements, however, require entities to
report specific changes in assets and liabilities, such as gain or loss on
foreign currency translation, as a separate component of the equity section
of
the balance sheet. Such items, along with net income, are components of
comprehensive income. The functional currency of the Company is Chinese
Renminbi. The unit of Renminbi is in Yuan. Translation gains of $873,215 at
September 30, 2007 are classified as an item of other comprehensive income
in
the stockholders’ equity section of the consolidated balance sheet. During the
nine months ended September 30, 2007 and 2006, other comprehensive income in
the
consolidated statements of income and other comprehensive income included
translation gains of $441,905 and $188,527, respectively.
Statement
of Cash Flows
In
accordance with SFAS No. 95, “Statement of Cash Flows,” cash flows from the
Company’s operations are calculated based upon the local currencies. As a
result, amounts related to assets and liabilities reported on the statement
of
cash flows will not necessarily agree with changes in the corresponding balances
on the balance sheet.
Segment
Reporting
Statement
of Financial Standards No. 131 (SFAS No. 131), “Disclosure About Segments of an
Enterprise and Related Information” requires use of the “management approach”
model for segment reporting. The management approach model is based on the
manner in which a company’s management organizes segments within the company for
making operating decisions and assessing performance. The Company has determined
that it has two reportable segments (See Note 11).
Recent
Pronouncements
Fair
Value Measurements
In
September 2006, the FASB issued SFAS No. 157,
“
Fair
Value Measurements,” which
establishes
a framework for measuring fair value, and expands disclosures about fair value
measurements required under the accounting pronouncements, but does not change
existing guidance as to whether or not an instrument is carried at fair value.
Additionally, it establishes a fair value hierarchy that prioritizes the
information used to develop those assumptions. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Earlier application is
encouraged, provided that the reporting entity has not yet issued financial
statements for fiscal year, including financial statements for an interim period
within the fiscal year. The Company is currently evaluating the impact, if
any,
that SFAS No. 157 will have on its consolidated financial
statements.
Fair
Value Option for Financial Assets and Financial Liabilities
In
February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
Assets and Financial Liabilities —Including an amendment of FASB Statement No.
115.” The statement permits entities to choose to measure many financial
instruments and certain other items at fair value. The objective is to improve
financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. The statement is effective as of the beginning of an entity’s first
fiscal year that begins after November 15, 2007. The Company is analyzing the
potential accounting treatment.
SHINER
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
Considering
the Effects of Prior Year Misstatements in Current Year Financial
Statements
In
September 2006, the SEC issued SAB No. 108, “Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements,” (“SAB 108”),which provides interpretive guidance on the
consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of a materiality assessment. The Company
adopted SAB 108 in the fourth quarter of 2006 with no impact on its consolidated
financial statements.
The
inventory as of September 30, 2007 consisted of the following:
|
Raw
Material
|
|
$
|
2,874,004
|
|
|
Work
in process
|
|
|
824,010
|
|
|
Finished
goods
|
|
|
3,073,461
|
|
|
|
|
|
6,771,475
|
|
|
Less
: Obsolescence Reserve
|
|
|
(73,729
|
)
|
|
Net
Inventory
|
|
$
|
6,697,746
|
|
Intangible
assets at September 30, 2007 were as follows:
|
Rights
to use land
|
|
$
|
356,058
|
|
|
Less
Accumulated amortization
|
|
|
(23,868
|
)
|
|
|
|
$
|
332,190
|
|
Per
the
People’s Republic of China’s governmental regulations, the Government owns all
land. The Company has recognized the amounts paid for the acquisition of rights
to use land as intangible asset and amortizing over the period the Company
has
use of the land which range from 54 to 57 years.
Short-term
loans at September 30, 2007 consist of the following:
|
Short-term
bank loan. The term of the loan is from December 15, 2006 to January
15,
2008 with an interest rate of 6.732%. The loan is collateralized
by
buildings land use rights and machines.
|
|
$
|
800,766
|
|
SHINER
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
Local
PRC
Income Tax
Pursuant
to the tax laws of China, general enterprises are subject to income tax at
an
effective rate of 33% (30% federal and 3% provincial).
A
reconciliation of tax at United States federal statutory rate to provision
for
income tax recorded in the financial statements is as follows:
|
|
|
For
the Nine Months
|
|
|
|
|
Ended
September 30,
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Tax
provision at statutory rate
|
|
|
34
|
%
|
|
34
|
%
|
|
Foreign
tax rate difference
|
|
|
(1
|
%)
|
|
(1
|
%)
|
|
Effect
of tax holiday
|
|
|
(25
|
%)
|
|
(28
|
%)
|
|
|
|
|
8
|
%
|
|
5
|
%
|
The
Company operates in a privileged economic zone which entitles them to certain
tax benefits (tax holiday) as follows:
Shiny-day
- Exempt from provincial tax and 100% exemption from federal tax from January
1,
2005 to December 31, 2006 and 50% exemption from federal tax from January 1,
2007 to December 31, 2009.
Shiner
International - Exempt from provincial tax and 100% exemption from federal
tax
from January 1, 2004 to December 31, 2005 and 50% exemption from federal tax
from January 1, 2006 to December 31, 2008.
The
estimated tax savings for the nine months ended September 30, 2007 amounted
to
approximately $747,250.The net effect on earnings per share had the income
tax
been applied would decrease basic and diluted earnings per share from $0.15
to
$0.11.
Note
7 - Employee Welfare Plans
The
Company has established its own employee welfare plan in accordance with Chinese
law and regulations. The Company makes annual contributions of 14% of all
employees’ salaries to the employee welfare plan. The total expense for the
welfare plan was $81,175 and $0 for the nine months ended September 30, 2006
and
2007, respectively.
SHINER
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
Note
8 - Statutory Common Welfare Fund
As
stipulated by the Company Law of the People’s Republic of China (PRC), net
income after taxation can only be distributed as dividends after appropriation
has been made for the following:
|
|
i.
|
Making
up cumulative prior years’ losses, if any;
|
|
|
ii.
|
Allocations
to the “Statutory surplus reserve” of at least 10% of income after tax, as
determined under PRC accounting rules and regulations, until the
fund
amounts to 50% of the Company’s registered capital;
|
|
|
iii.
|
Allocations
of 5-10% of income after tax, as determined under PRC accounting
rules and
regulations, to the Company’s “Statutory common welfare fund” (“SCWF”),
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 has appropriated $300,748 and $589,995 as reserve for the statutory
surplus reserve and welfare fund for the nine months ended September 30, 2007
and 2006, respectively.
Note
9 - Current Vulnerability Due to Certain Concentrations
One
vendor provided 11% of the Company’s raw materials for the nine months ended
September 30, 2007. There vendors provided 14%,12% and 10% of the Company’s raw
materials for the nine months ended September 30, 2006.
One
customer accounted for 33% of the Company’s sales for the nine months ended
September 30, 2007. One customer accounted for 38% and of the Company’s sales
for the nine months ended September 30, 2006.
The
Company’s operations are carried out in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by
the
political, economic and legal environments in the PRC, by the general state
of
the PRC’s economy. The Company’s business may be influenced by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods
of
taxation, among other things.
Note
10 - Contingent Liabilities
At
September 30, 2007, the Company is contingently liable to banks for discounted
and endorsed notes receivable and to vendors for endorsed notes receivable
amounting to $4,451,677 (RMB33,355,642).
SHINER
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
Note
11 - Segment Information
The
Company’s business segments are packaging film and color printing. The following
tables summarize segment information for the nine months ended September 30,
2007 and September 30, 2006:
The
following tables summarize segment information:
|
|
|
9/30/2007
|
|
9/30/2006
|
|
|
|
|
|
|
|
|
|
Revenues
from unrelated entities
|
|
|
|
|
Color
Printing
|
|
$
|
10,116,162
|
|
$
|
10,636,393
|
|
|
Packaging
|
|
|
17,514,045
|
|
|
13,509,668
|
|
|
|
|
|
27,630,207
|
|
|
24,146,061
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment
revenues
|
|
|
|
|
|
|
|
|
Color
Printing
|
|
|
5,959
|
|
|
2,036,506
|
|
|
Packaging
|
|
|
986,285
|
|
|
-
|
|
|
|
|
|
992,244
|
|
|
2,036,506
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenues
|
|
|
|
|
|
|
|
|
Color
Printing
|
|
|
10,122,121
|
|
|
12,672,899
|
|
|
Packaging
|
|
|
18,500,330
|
|
|
13,509,668
|
|
|
Less
Intersegment revenues
|
|
|
(992,244
|
)
|
|
(2,036,506
|
)
|
|
|
|
|
27,630,207
|
|
|
24,146,061
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
|
|
|
|
|
|
Color
Printing
|
|
|
505,096
|
|
|
976,227
|
|
|
Packaging
|
|
|
2,078,741
|
|
|
2,032,597
|
|
|
Holding
Company
|
|
|
24,073
|
|
|
-
|
|
|
|
|
|
2,607,910
|
|
|
3,008,824
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
|
|
|
|
|
|
Color
Printing
|
|
|
1,117
|
|
|
1,021
|
|
|
Packaging
|
|
|
11,844
|
|
|
3,154
|
|
|
Holding
Company
|
|
|
-
|
|
|
-
|
|
|
|
|
|
12,961
|
|
|
4,175
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
Color
Printing
|
|
|
3,158
|
|
|
3,829
|
|
|
Packaging
|
|
|
58,855
|
|
|
33,331
|
|
|
Holding
Company
|
|
|
-
|
|
|
-
|
|
|
|
|
|
62,013
|
|
|
37,160
|
|
SHINER
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
|
Income
tax expense (benefit)
|
|
|
|
|
|
|
Color
Printing
|
|
|
43,594
|
|
|
-
|
|
|
Packaging
|
|
|
202,385
|
|
|
157,058
|
|
|
Holding
Company
|
|
|
-
|
|
|
-
|
|
|
|
|
|
245,979
|
|
|
157,058
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
|
|
|
|
|
|
Color
Printing
|
|
|
537,652
|
|
|
996,323
|
|
|
Packaging
|
|
|
2,113,564
|
|
|
1,937,044
|
|
|
Holding
Company
|
|
|
24,068
|
|
|
-
|
|
|
|
|
|
2,675,284
|
|
|
2,933,367
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for depreciation
|
|
|
|
|
|
|
|
|
Color
Printing
|
|
|
114,137
|
|
|
106,610
|
|
|
Packaging
|
|
|
376,207
|
|
|
260,463
|
|
|
Holding
Company
|
|
|
-
|
|
|
-
|
|
|
|
|
|
490,344
|
|
|
367,073
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
|
|
|
|
|
|
Color
Printing
|
|
|
6,085,917
|
|
|
|
|
|
Packaging
|
|
|
16,667,755
|
|
|
|
|
|
Holding
Company
|
|
|
3,175
|
|
|
|
|
|
|
|
|
22,756,847
|
|
|
|
|
Geographical
distribution of sales is as follows:
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
Geographical
Areas
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Main
Land China
|
|
$
|
21,064,720
|
|
$
|
19,705,378
|
|
|
Asia
(Outside Main Land China)
|
|
|
3,448,411
|
|
|
2,762,190
|
|
|
Africa
|
|
|
437,107
|
|
|
217,320
|
|
|
Australia
|
|
|
911,124
|
|
|
49,382
|
|
|
United
States
|
|
|
670,348
|
|
|
819,789
|
|
|
South
America
|
|
|
301,535
|
|
|
-
|
|
|
Europe
|
|
|
796,962
|
|
|
592,002
|
|
|
|
|
$
|
27,630,207
|
|
$
|
24,146,061
|
|
SHINER
INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2007 AND 2006
(UNAUDITED)
On
October 22, 2007, the Company completed the closing of a private placement
offering of units pursuant to which it sold an aggregate of 3,500,000 units
at
an offering price of $3.00 per unit for aggregate gross proceeds of $10,500,000.
Each unit consisted of one share of the Company’s common stock and a three year
warrant to purchase 15% of one share of the Company’s common stock at an
exercise price of $6.00 per share. Accordingly, the Company issued an aggregate
of 3,500,000 shares of common stock and warrants to purchase 525,000 shares
of
the Company’s common stock to the 76 accredited investors who participated in
this offering. In addition, the Company compensated four finders that assisted
it in the sale of securities in this private placement offering by (i) paying
them cash equal to 8% of the gross proceeds from the sales of units placed
and
(ii) issuing them warrants to purchase that number of shares of our common
stock
equal to 15% of the units
placed
as follows:
|
Finder
|
|
Cash
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
Maxim
Group LLC
|
|
$
|
178,400
|
|
|
111,500
|
|
|
Four
Tong Investments Ltd.
|
|
$
|
153,600
|
|
|
96,000
|
|
|
Global
Hunter Securities, LLC
|
|
$
|
300,880
|
|
|
188,050
|
|
|
Basic
Investors, Inc.
|
|
$
|
79,200
|
|
|
49,500
|
|
The
warrants granted to these finders have the same terms and conditions as the
warrants granted in the offering. The Company anticipates that the net proceeds
of this private placement offering will be used for market development, product
research, working capital, the potential acquisition of a BOPP Production Line
in Zhuhai, the potential acquisition of an anti-counterfeit technology company
and equipment purchases for coated film.
CAUTIONARY
STATEMENT FOR FORWARD-LOOKING STATEMENTS
This
Quarterly Report on Form 10-QSB includes forward-looking statements within
the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our actual results,
levels of activity, performance or achievements to be materially different
from
any future results, levels of activity, performance or achievements expressed
or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “may,” “will,” “should,”
“could,” “would,” “expect,” “plan,” anticipate,” believe,” estimate,” continue,”
or the negative of such terms or other similar expressions. Factors that might
cause or contribute to such a discrepancy include, but are not limited to,
those
listed under the heading “Risk Factors” beginning on page 25 and those listed in
our other Securities and Exchange Commission filings. The following discussion
should be read in conjunction with our Financial Statements and related Notes
thereto included elsewhere in this report.
Item
2.
Management’s
Discussion and Analysis or Plan of Operations
The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes appearing elsewhere in this report and in
conjunction with the audited consolidated financial statements and footnotes
included in our Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 27, 2007. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties, and assumptions.
The actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including but not
limited to the risks discussed in this report.
Overview
We
develop, manufacture and distribute packaging film and color printed packaging
through our four operating subsidiaries, Shiner Industrial, Shiny-day, Zhuhai
and Modern. Our products include coated film, shrink film, common film,
anti-counterfeit laser holographic film and color printed packaging materials.
All of our operations are based in the People’s Republic of China and each of
our subsidiaries was formed under the laws of the People’s Republic of China.
We
currently conduct our business through the following four operating subsidiaries
in China:
|
·
|
Shiner
Industrial located in Haikou, Hainan province;
|
|
·
|
Shiny-day
also located in Haikou, Hainan Province;
|
|
·
|
Zhuhai
located in Zhuhai, Guangdong Province; and
|
|
·
|
Modern
located in the Shiziling Feidi Industrial Park of Haikou, Hainan
Province.
|
We
operate in several markets within the packaging film segment: Bi-axially
Oriented Polypropylene or BOPP based films, coated films, anti-counterfeit
films
and color printed packaging materials. For the nine months ended September
30,
2007, color printed packaging products made up approximately 40% of our
revenues, BOPP tobacco film made up approximately 21.5% of our revenues, coated
film accounted for approximately 35% of our revenues and anti-counterfeit film
sales equaled approximately 3.5% of our revenues.
Our
current production capacity consists of:
|
·
|
Three
coated film lines with total capacity of 6,000 tons a year;
|
|
·
|
One
BOPP tobacco film production line with total capacity of 3,500 tons
a
year;
|
|
·
|
One
BOPP film production line with capacity of 7,000 tons a year;
|
|
·
|
Three
color printing lines; and
|
|
·
|
Three
anti-counterfeit film lines.
|
We
are
targeting growth through three main channels: (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) the
development of next generation films, and (iv) acquisition of an anticounterfeit
technology company.
Critical
Accounting Policies
In
presenting our financial statements in conformity with accounting principles
generally accepted in the United States, we are required to make estimates
and
assumptions that affect the amounts reported therein. Several of the estimates
and assumptions we are required to make relate to matters that are inherently
uncertain as they pertain to future events. However, events that are outside
of
our control cannot be predicted and, as such, they cannot be contemplated in
evaluating such estimates and assumptions. If there is a significant unfavorable
change to current conditions, it will likely result in a material adverse impact
to our consolidated results of operations, financial position and in liquidity.
We believe that the estimates and assumptions we used when preparing our
financial statements were the most appropriate at that time. Presented below
are
those accounting policies that we believe require subjective and complex
judgments that could potentially affect reported results.
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America.
Our functional currency is the Chinese Renminbi, however the accompanying
consolidated financial statements have been translated and presented in United
States Dollars ($).
Use
of
Estimates
Our
discussion and analysis of our financial condition and results of operations
are
based upon our consolidated financial statements, which have been prepared
in
accordance with accounting principles generally accepted in the United States
of
America. The preparation of these consolidated financial statements requires
us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, including
those
related to impairment of long-lived assets, and allowance for doubtful accounts.
We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results
may
differ from these estimates under different assumptions or conditions; however,
we believe that our estimates, including those for the above-described items,
are reasonable.
Foreign
Currency Transactions
As
of
March 31, 2007, our accounts were maintained and our consolidated financial
statements were expressed in the Chinese Yuan Renminbi (CNY). Such consolidated
financial statements were translated into U.S. Dollars (USD) in accordance
with
Statement of Financial Accounting Standards (SFAS) No. 52, “Foreign Currency
Translation,” with the CNY as the functional currency. According to the
Statement, all assets and liabilities are translated at the exchange rate on
the
balance sheet date, stockholder’s equity are translated at the historical rates
and statement of operations items are translated at the weighted average
exchange rate for the year. The resulting translation adjustments are reported
under other comprehensive income in accordance with SFAS No. 130, “Reporting
Comprehensive Income.” Gains and losses resulting from the translation of
foreign currency transactions and balances are reflected in the income
statement.
Revenue
Recognition
Our
revenue recognition policies are in compliance with SEC Staff Accounting
Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to
customers when a formal arrangement exists, the price is fixed or determinable,
the delivery is completed, no other significant obligations exist and
collectibility is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.
Stock
Based Compensation
We
account for our stock-based compensation in accordance with SFAS No. 123R,
“Share-Based Payment, an Amendment of FASB Statement No. 123.” We recognize in
the statement of operations the grant-date fair value of stock options and
other
equity-based compensation issued to employees and non-employees. As of the
date
of this report, we have not granted any options to our employees or consultants.
Recent
Accounting Pronouncements
Fair
Value Measurements
In
September 2006, FASB issued SFAS No. 157, “Fair Value Measurements,” which
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements required under the accounting pronouncements, but does
not change existing guidance as to whether or not an instrument is carried
at
fair value. Additionally, it establishes a fair value hierarchy that prioritizes
the information used to develop those assumptions. SFAS No. 157 is effective
for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Earlier application is
encouraged, provided that the reporting entity has not yet issued financial
statements for fiscal year, including financial statements for an interim period
within the fiscal year. We are currently evaluating the impact, if any, that
SFAS No. 157 will have on our consolidated financial statements.
In
February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
Assets and Financial Liabilities—including an amendment of FASB Statement No.
115.” The statement permits entities to choose to measure many financial
instruments and certain other items at fair value. The objective is to improve
financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. The statement is effective as of the beginning of an entity’s first
fiscal year that begins after November 15, 2007. We are analyzing the potential
accounting treatment.
In
September 2006, the SEC SAB No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements,” (“SAB 108”),which provides interpretive guidance on the
consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of a materiality assessment. We adopted
SAB
108 in the fourth quarter of 2006 with no impact on our consolidated financial
statements.
Results
of Operations
Three
Months Ended September 30, 2007 Compared to three months ended September 30,
2006
|
|
|
Three Months
Ended
September 30,
2007
|
|
Three Months
Ended
September 30,
2006
|
|
$
Change
|
|
%
Change
|
|
|
Revenues
|
|
$
|
12,331,074
|
|
$
|
8,997,119
|
|
|
3,331,074
|
|
|
37.1
|
%
|
|
Cost
of Goods Sold
|
|
|
10,559,937
|
|
|
7,209,785
|
|
|
3,350,152
|
|
|
46.5
|
%
|
|
Gross
Profit
|
|
|
1,771,137
|
|
|
1,787,334
|
|
|
(16,197
|
)
|
|
(0.9
|
)%
|
|
Selling,
General and Administrative Expenses
|
|
|
623,439
|
|
|
649,322
|
|
|
(25,883
|
)
|
|
(4.0
|
)%
|
|
Interest
Expense (net)
|
|
|
17,787
|
|
|
8,660
|
|
|
9,127
|
|
|
105.4
|
%
|
|
Other
Income (Expense)
|
|
|
236,310
|
|
|
41,720
|
|
|
194,590
|
|
|
466.4
|
%
|
|
Income
Tax Expense
|
|
|
98,347
|
|
|
54,878
|
|
|
43,469
|
|
|
79.2
|
|
|
Net
Income
|
|
|
1,230,172
|
|
|
1,108,173
|
|
|
121,999
|
|
|
11.0
|
%
|
Revenues
The
increase in revenues during the three months ended September 30, 2007 compared
to the same period last year was due to a 32.5% increase in the sales of coated
film, a 23.4% increase in tobacco BOPP sales and a 26.3% increase in the sales
of anti-counterfeit film as well as higher sales to Libai, a major household
chemicals manufacturer in China. The increase in revenues was due to higher
sales volumes and increases in the average unit prices. For BOPP products,
we
derived a gain of $41,333 from an increase in average unit price across the
entire market compared to the same period last year, and $426,666 from an
increase in sales volume. Coated film sales grew by $96,000 due to higher unit
prices and $904,000 due to higher sales volumes.
International
sales for the three months ended September 30, 2007 totaled $2,330,453
accounting for approximately 18.9% of total revenues in comparison to $1,774,550
or 19.7% for the third quarter of 2006. A 31.3% or $555,903 increase in
international sales was primarily due to a 44.9%increase in the coated films
sales and 39% increase in the anti-counterfeit film sales.
Cost
of Goods Sold
Cost
of
goods sold during the
three
months ended September 30, 2007
were
85.6% of revenues as compared to 80.1% of revenues during the three months
ended
September 30, 2006. Higher costs were due to the increase in the prices of
raw
materials, such as polypropylene, a raw material that is derived directly from
crude oil and subject to the price increases that crude oil has experienced
throughout the world.
Gross
Profit
Our
gross
profit during the three months ended September 30, 2007 was $1,771,137,
representing a gross margin of 14.4%, a decrease of 5.5% from gross margin
of
19.9% that we experienced during the three months ended September 30, 2006.
The
decrease in gross margin was due to the increase in the costs of raw materials.
Selling,
General and Administrative Expenses
Our
selling, general and administrative expenses decreased by 4.0% or $25,883 to
$623,439 for the three months ended September 30, 2007 compared to $649,322
for
the three months ended September 30, 2006. General and administrative expenses
include rent, management and staff salaries, general insurance, marketing,
accounting and legal expenses. Selling expenses for the three months ended
September 30, 2007 decreased by 9.9% to $310,505 in comparison to the same
period in 2006 due to continued implementation of better cost controls and
management. General and administrative expenses for the three months ended
September 30, 2007 increased by $8,253 or 2.7% to $312,934 in comparison to
the
same period in 2006. The increase in general and administrative expense is
due
to the legal and audit expenses associated with being a publicly traded United
States reporting company that we did not incur during the same period last
year,
offset by continued implementation of better cost controls and
management
.
Interest
Expense
The
increase in interest expense during the three months ended September 30, 2007
was due to a new bank loan in the principal amount of RMB 6,000,000, or
approximately $800,766, that we received in December 2006.
Other
Income (Expense)
The
increase in Other Income was due to sale of leftover materials and unusable
film. The prices of these materials have increased because of an increase in
the
price of oil in the same period.
Income
Tax Expense
The
effective tax rate for the three months ended September 30, 2007 was equivalent
to 7.4% as opposed to 4.7% for the three months ended September 30, 2006. Since
we operate in a privileged economic zone, we will continue to enjoy certain
tax
privileges albeit at a reduced rate.
Net
Income
The
increase in our net income for the three months ended September 30, 2007 as
compared to the same period for 2006 resulted from higher sales for the period,
a 4% reduction in operating expenses and a $194,590 increase in other
income.
Results
of Operations for the Nine Months Ended September 30, 2007 Compared to Nine
Months Ended March 31, 2006
|
|
|
Nine
Months
Ended
September 30,
2007
|
|
Nine
Months
Ended
September 30,
2006
|
|
$
Change
|
|
%
Change
|
|
|
Revenues
|
|
$
|
27,630,207
|
|
$
|
24,146,061
|
|
|
3,484,146
|
|
|
14.4
|
%
|
|
Cost
of Goods Sold
|
|
|
22,996,228
|
|
|
19,171,705
|
|
|
3,824,523
|
|
|
20.0
|
%
|
|
Gross
Profit
|
|
|
4,633,979
|
|
|
4,974,356
|
|
|
(340,377
|
)
|
|
(6.8
|
)%
|
|
Selling,
General and Administrative Expenses
|
|
|
2,026,069
|
|
|
1,965,532
|
|
|
60,537
|
|
|
3.1
|
%
|
|
Interest
Expense (net)
|
|
|
49,052
|
|
|
32,985
|
|
|
16,067
|
|
|
48.7
|
%
|
|
Other
Income (Expense)
|
|
|
496,692
|
|
|
123,918
|
|
|
372,774
|
|
|
300.8
|
%
|
|
Income
Tax Expense
|
|
|
245,979
|
|
|
157,058
|
|
|
88,921
|
|
|
56.62
|
%
|
|
Net
Income
|
|
|
2,675,284
|
|
|
2,933,367
|
|
|
(258,083
|
)
|
|
(8.8
|
)%
|
Revenues
The
increase in revenues for the nine months ended September 30, 2007 compared
to
the same period last year was largely due to a 37.8% rise in coated film sales
and a 19% increase in tobacco BOPP sales. The increase in revenues was due
to
higher sales volumes and increases in the average unit prices. For BOPP
products, we derived a gain of $60,000 from an increase in average unit price,
and $1,148,000 from an increase in sales volume. Coated film sales grew by
$466,666 due to higher unit prices and $2,125,333 due to higher sales volumes.
These increases were offset by decreases in color sales printing during the
first and second quarter of 2007 due to lower sales to Libai, a major household
chemicals manufacturer in China.
Cost
of Goods Sold
Cost
of
goods sold during the nine months ended September 30, 2007 were 83.2% of
revenues as compared to 79.4% of revenues during the nine months ended September
30, 2006. Higher costs were due to the increase in the prices of raw materials,
such as polypropylene, a raw material that is derived directly from crude oil
and is subject to the price increases that crude oil has experienced throughout
the world.
Gross
Profit
Our
gross
profit for the nine months ended September 30, 2007 was $4,633,979, representing
a gross margin of 16.8%, a decrease of 3.8% from the gross margin of 20.6%
for
the nine months ended September 30, 2006. The decrease in gross margin is a
direct result of the increase in the costs of raw materials.
Selling,
General and Administrative Expenses (SG&A)
Our
selling, general and administrative expenses increased by 3.1% or $60,537 to
$2,026,069 for the nine months ended September 30, 2007 compared to $1,965,532
for the nine months ended September 30, 2006. General and administrative
expenses include rent, management and staff salaries, general insurance,
marketing, accounting and legal expenses. Selling expenses for the period
decreased by 27.6% to $835,176 in comparison to the same period last year due
to
a 34% decrease in freight costs. During this period, we continued to implement
better cost controls and management. During nine months ended September 30,
2007, we more effectively controlled travel and entertainment expenses. The
increase in general and administrative expense is mainly due to $133,333 of
expenses related to the opening of the new facility in Zhuhai and the raises
of
key employees’ salaries and social insurance. We anticipate that salary expense
will continue to increase as sales increase. Research and development expenses
will also increase as we work to bring new products to the market. We intend
to
control increases in other administrative expenses in order to partially offset
these increases.
Interest
Expense
The
increase in interest expense during the nine months ended September 30, 2007
was
the result of a new bank loan in the principal amount of RMB 6,000,000, or
approximately $800,766, that we received in December 2006.
Other
Income (Expense)
The
increase in Other Income was due to proceeds we received from the disposal
of
some obsolete raw materials and products in 2007.
Income
Tax Expense
The
effective tax rate for the nine months ended September 30, 2007 was equivalent
to 8.4% as opposed to 5.1% for the nine months ended September 30, 2006. Since
we operate in a privileged economic zone, we will continue to enjoy certain
tax
privileges albeit at a reduced rate.
Net
Income
The
decrease in net income during the nine months ended September 30, 2007 is
attributable to lower revenues from the color printing segment during the first
and second quarters of 2007, higher raw material prices, a 13.3% decrease in
the
operating income, higher exchange loss and an increase in the income tax
burden.
Off-Balance
Sheet Arrangements
There
were no off-balance sheet arrangements during the nine months ended September
30, 2007 that have, or are reasonably likely to have, a current or future affect
on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to our interests.
Liquidity
and Capital Resources
Cash
Flows
At
September 30, 2007, we had $929,884 cash and cash equivalents on hand. Our
principal demands for liquidity are to increase capacity, raw materials
purchase, sales distribution and the possible acquisition of new subsidiaries
in
our industry as opportunities present themselves, as well as general corporate
purposes. As of September 30, 2007, we had one short-term loan of $800,766,
with
an interest rate of 6.732%, originally due July 15, 2007 and collateralized
by
our buildings, land use rights and equipment. The loan was rolled over and
is
now due on January 15, 2008. As of September 30, 2007, we had working capital
of
$5,984,591, an increase of $2,697,776 on our working capital at December 31,
2006.
On
October 22, 2007, we completed the closing of a private placement offering
of
units pursuant to which we sold an aggregate of 3,500,000 units at an offering
price of $3.00 per unit for aggregate gross proceeds of $10,500,000. Each unit
consisted of one share of our common stock, par value $.001 per share, and
a
three year warrant to purchase 15% of one share of our common stock at an
exercise price of $6.00 per share. Accordingly, we issued an aggregate of
3,500,000 shares of our common stock and warrants to purchase 525,000 shares
of
our common stock to the 76 accredited investors who participated in this
offering. In addition, we compensated four finders that assisted us in the
sale
of securities in this private placement offering by (i) paying them cash equal
to 8% of the gross proceeds from the sales of units placed and (ii) issuing
them
warrants to purchase that number of shares of our common stock equal to 15%
of
the units placed. The warrants granted to these finders have the same terms
and
conditions as the warrants granted in the offering. We anticipate that the
net
proceeds of this private placement offering will be used in the following
manner:
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$3,500,000
for the purchase of the currently leased BOPP production line in
Zhuhai,
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$1,140,000
for the acquisition of the fourth coated film line,
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$400,000
for coated and anti-counterfeit films R&D, and
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$400,000
for marketing.
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The
remaining amount will be used for working capital and acquisition of an
anti-counterfeit partner with strong distribution channels.
We
intend
to meet our liquidity requirements for the next twelve months, including capital
expenditures related to the purchase of equipment, purchase of raw materials,
and the expansion of our business, through cash flow provided by operations
and
our existing cash and cash equivalents. We anticipate that we have adequate
working capital to fund our operations and growth for at least the next twelve
months.
Net
cash
provided by operating activities for the nine months ended September 30, 2007
was primarily due to our net income, depreciation of $490,344, a decrease in
advances to suppliers of $215,631, an increase in accounts payable of $616,955,
an increase in other payables of $2,556,195 and an increase in unearned revenue
of $744,938, offset by an increase in accounts receivables of $436,192 and
an
increase in inventory of $1,959,974.
Net
cash
used in investing activities during the nine months ended September 30, 2007
was
due to the acquisition of property and equipment for $201,730 offset by
collections of $18,186 on notes receivable.
Net
cash
used in financing activities during the nine months ended September 30, 2007
was
due to $3,604,422 used in the repayment of related parties’ (stockholder’s)
advances and $1,618,945 used in the payment of dividends offset by $223,526
in
capital contributions that we received from one of our shareholders.
Assets
As
of
September 30, 2007, our accounts receivable increased by $436,192 compared
with
the balance as of December 31, 2006. The increase in accounts receivable at
September 30, 2007 was due to increased sales compared to the same period in
2006. We intend to continue our efforts to maintain accounts receivable at
reasonable levels in relation to our sales. Other receivables fell by $68,553
in
the same period. Advances to suppliers decreased by $215,631 while inventory
increased by $1,959,974 during nine months ended September 30, 2007. Our
inventory increased during this period as we purchased more raw materials than
we normally require in anticipation of increases in the price of crude oil
in
the international market.
Liabilities
Our
accounts payable increased by $632,890 in the nine months ended September 30,
2007. Other payables increased by $2,556,195 as a result of short-term
borrowings from unrelated companies. Unearned revenues (payments received before
all the relevant criteria for revenue recognition are satisfied) grew by
$744,938 and tax and welfare payable increased by $156,140 over the same period.
The
majority of our revenues and expenses were denominated primarily in Renminbi
(“RMB”), the currency of the People’s Republic of China. There is no assurance
that exchange rates between the RMB and the U.S. Dollar will remain stable.
We
do not engage in currency hedging. Inflation has not had a material impact
on
our business.
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.
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 trading price of our common stock could decline
due
to any of these risks and you may lose all or part of your investment. In
assessing these risks, you should also refer to the other information
contained in this report, including our consolidated financial statements
and related notes.
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. Our failure to develop
new
products and introduce them successfully and in a timely manner could harm
our
ability to grow our business and could have a material adverse effect on our
business, results of operations and financial condition.
Our
anti-counterfeiting technology may not satisfy the changing needs of our
customers.
With
any
anti-counterfeiting/product authentication technology, including the technology
of our current and proposed products, there are risks that the technology may
not successfully address all of our customers’ needs. While we have already
established successful relationships with Chinese customers with regard to
our
products, our customers’ ultimate needs may change or vary, thus introducing
variables which may affect the ability of our proposed products to address
all
of our customers’ ultimate technology needs in an economically feasible manner.
We
may not be able to keep pace with rapid technological changes and competition
in
the anti-counterfeiting product industry.
The
anti-counterfeiting/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’s/market needs, applications, and technology. While
we believe that we have hired or engaged personnel and outside consultants,
who
have experience, and/or are recognized within the industry to be experts, in
the
anti-counterfeiting/product authentication industry, including with respect
to
technology, and 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. Further, the industry is highly competitive. Although we believe that
we
have developed strategic relationships in China to best penetrate the China
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.
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.
Rising
energy prices could adversely affect our operating results.
In
the
last few years, energy prices have risen dramatically, which has resulted in
increased raw materials costs for our branded products. Petroleum is the prime
ingredient in many plastics that we use to make our products. These include
AC,
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. Rising oil prices in the international market will continue
to
increase our operating costs, which would reduce our operating income and net
income if we are unable to offset these increased costs with price increases
for
our products.
Our
success depends on our management team and other key personnel, the loss of
any
of whom could disrupt our business operations.
Our
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 in respect of any of our officers or employees. Our future success
will also depend on the continued ability to attract, retain and motivate highly
qualified personnel in many fields of our operations. The rapid growth of the
economy in The People’s Republic of 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.
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 and abroad. We have patents and patent applications pending in
The
People’s Republic of China, and have worked and continue to work closely with
Chinese 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.
In
each of our product lines, we have a large amount of sales concentrated in
a
small number of customers
.
In
each
of our product lines, we have a large number of sales concentrated in a small
number of customers. For example, approximately 82% of our anti-counterfeiting
film sales in 2006 were to one customer. In 2006, approximately 40% of our
coated film sales in China were to one customer and approximately 20% of our
overall coated film sales were to ten international customers. In 2006,
approximately 12% of our BOPP Tobacco Film Sales were to one customer and
approximately 79% of our color printing sales were to one customer. During
the
nine months ended September 30, 2007, approximately 72% of our
anti-counterfeiting film sales were to one customer. Approximately 30% of
our coated film sales in China were to one customer and approximately
33% of our overall coated film sales were to ten international customers.
Approximately 10% of our BOPP Tobacco Film Sales were to one customer and
approximately 93% of our color printing sales were to one customer.
Accordingly, the loss of significant business from any of these customers could
have an adverse effect on our net revenues and operating income.
Risks
Related to Our Business being Conducted in The People’s Republic of 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 The People’s Republic of
China. Doing business outside the United States, particularly in The People’s
Republic of 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 and, therefore, unable to alter out business practice
in time to avoid the possibility of reduced revenues.
The
People’s Republic of China’s economic policies could affect our business.
Substantially
all of our assets are located in The People’s Republic of China and a
substantial amount of our revenue is derived from our operations in The People’s
Republic of China. Accordingly, our results of operations and prospects are
subject, to a significant extent, to the economic, political and legal
developments in The People’s Republic of China.
We
may have difficulty establishing adequate management, legal and financial
controls in The People’s Republic of China.
The
People’s Republic of 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 The People’s
Republic of 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 The People’s
Republic of 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 The People’s Republic of China,
any loss which we suffer may not be insured or may be insured to only a limited
extent.
The
insurance industry in The People’s Republic of China is still in an early state
of development and insurance companies located in The People’s Republic of 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.
The
Chinese tax system is in a state of flux, and it is anticipated that the
People’s Republic of 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.
As
a
substantial portion of our operations are located in a privileged economic
zone,
we are entitled to certain tax benefits. These tax benefits are presently
scheduled to expire over the next several years. For example, Shiny-day was
exempt from provincial tax and had a 100% exemption from federal taxes in China
from January 1, 2005 to December 31, 2006. It presently enjoys a 50% exemption
from federal tax from January 1, 2007 to December 31, 2009. Shiner Industrial
currently has a 50% exemption from federal tax from January 1, 2006 to December
31, 2008. When these exemptions expire, our income tax expenses will increase,
reducing our net income below what it would be if we continued to enjoy these
exemptions.
Another
obstacle to foreign investment in The People’s Republic of 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 The People’s Republic of China’s poorly developed
and sometimes corrupt judicial systems.
If
relations between the United States and The People’s Republic of 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 The People’s Republic
of 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 The People’s Republic of
China, whether or not directly related to our business, could reduce the price
of our common stock.
The
government of The People’s Republic of China could change our policies toward
private enterprise or even nationalize or expropriate private enterprises,
which
could result in the total loss of our and your investment.
Our
business is subject to significant political and economic uncertainties and
may
be affected by political, economic and social developments in The People’s
Republic of China. Over the past several years, the government of The People’s
Republic of China has pursued economic reform policies including the
encouragement of private economic activity and greater economic
decentralization. The government of The People’s Republic 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 cause a decline in the price of our common stock, should a market for
our
common stock ever develop. Nationalization or expropriation could even result
in
the total loss of your investment.
The
nature and application of many laws of The People’s Republic of China create an
uncertain environment for business operations and they could have a negative
effect on us.
The
legal
system in The People’s Republic of China is a civil law system. Unlike the
common law system, the civil law system is based on written statutes in which
decided legal cases have little value as precedents. In 1979, The People’s
Republic of 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 The People’s Republic of 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. In
addition, as these laws, regulations and legal requirements are relatively
recent, their interpretation and enforcement involve significant uncertainty.
As
we import goods into and export goods out of The People’s Republic 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 The
People’s Republic of China’s Renminbi. The value of the Renminbi fluctuates and
is subject to changes in The People’s Republic of 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 activates,
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 paying vendors for services performed outside of China.
The
manufacture and sale of our products in The People’s Republic of China are
regulated by The People’s Republic of China and the local provincial
governments. Although our licenses and regulatory filings are current, the
uncertain legal environment in The People’s Republic of 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 The People’s Republic of
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 The People’s Republic of 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 offices by United States
courts. In addition, the courts in The People’s Republic of 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.
Risks
Related to Our Securities
Our
common stock price is subject to significant volatility, which could result
in
substantial losses for investors.
Prices
for our shares are determined in the marketplace and may accordingly be
influenced by many factors, including, but not limited to:
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the
depth and liquidity of the market for the shares;
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quarter-to-quarter
variations in our operating results;
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announcements
about our performance as well as the announcements of our competitors
about the performance of their businesses;
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investors’
evaluations of our future prospects and the food industry generally;
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changes
in earnings estimates by, or failure to meet the expectations of,
securities analysts;
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our
dividend policy; and
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general
economic and market conditions.
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In
addition, the stock market often experiences significant price fluctuations
that
are unrelated to the operating performance of the specific companies whose
stock
is traded. These market fluctuations could adversely affect the trading price
of
our shares.
The
price
at which investors purchase shares of our common stock may not be indicative
of
the price that will prevail in the trading market. Investors may be unable
to
sell their shares of common stock at or above their purchase price, which may
result in substantial losses.
Shares
of our common stock lack a significant trading market.
Shares
of
our common stock are not eligible as yet for trading on any national securities
exchange. Our common stock is eligible for quotation in the over-the-counter
market on the Over-The-Counter Bulletin Board pursuant to Rule 15c2-11 of the
Securities Exchange Act of 1934. This market tends to be highly illiquid. There
can be no assurance that an active trading market in our common stock will
develop, or if such a market develops, that it will be sustained. In addition,
there is a greater chance for market volatility for securities that trade on
the
Over-The-Counter Bulletin Board as opposed to securities that trade on a
national exchange or quotation system. This volatility may be caused by a
variety of factors, including the lack of readily available quotations, the
absence of consistent administrative supervision of “bid” and “ask” quotations
and generally lower trading volume.
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 to be 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 approximately 49,380,000
authorized and unissued shares of our common stock which have not been reserved
and are available for future issuance. Although we have no commitments as of
the
date of this offering to issue our securities, we may issue a substantial number
of additional shares of our common stock, to complete a business combination
or
to raise capital. The issuance of additional shares of our common stock:
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may
significantly reduce the equity interest of investors in this offering;
and
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may
adversely affect prevailing market prices for our common stock.
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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 Securities and Exchange
Commission 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 transaction
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 Securities and Exchange Commission, which contains the
following:
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a
description of the nature and level of risk in the market for penny
stocks
in both public offerings and secondary trading;
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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;
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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;
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a
toll-free telephone number for inquiries on disciplinary actions;
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definitions
of significant terms in the disclosure document or in the conduct
of
trading in penny stocks; and
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Such
other information and is in such form (including language, type,
size and
format), as the Securities and Exchange Commission shall require
by rule
or regulation.
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Prior
to
effecting any transaction in penny stock, the broker-dealer also must provide
the customer with the following:
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the
bid and offer quotations for the penny stock;
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the
compensation of the broker-dealer and our salesperson in the transaction;
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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
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monthly
account statements showing the market value of each penny stock held
in
the customer’s account.
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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 and 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
management owns 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
principal executive officers and directors a large percentage of our outstanding
common stock. As a result, they are in a position to significantly influence
the
outcome of matters requiring a stockholder vote, including the election of
directors, the adoption of any amendment to our articles of incorporation or
bylaws, and the approval of significant corporate transactions. Their control
may delay or prevent a change of control on terms favorable to our other
stockholders and may adversely affect your voting and other stockholders rights.
Capital
outflow policies in The People’s Republic of China may hamper our ability to
declare and pay dividends to our shareholders.
The
People’s Republic of 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, should these regulations or the
interpretation of them by courts or regulatory agencies change, we may not
be
able to pay dividends to our shareholders outside of The People’s Republic of
China. In addition, under current Chinese 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.
Evaluation
of Disclosure Controls and Procedures
As
of
September 30, 2007, we carried out an evaluation of the effectiveness of the
design and operation of our “disclosure controls and procedures” (as defined in
the Exchange Act Rules 13a-15(e) and 15d-15(e)) under the supervision and with
the participation of our management, including our Chief Executive Officer
and
our Chief Financial Officer. Based upon that evaluation, we concluded that
our
disclosure controls and procedures are effective.
Disclosure
controls and procedures are controls and other procedures that are designed
to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is
accumulated and communicated to management to allow timely decisions regarding
required disclosure.
During
the quarter ended September 30, 2007, there were no changes in our internal
control over financial reporting that have materially affected our internal
control over financial reporting.
Part
II.
OTHER
INFORMATION
Item
1.
Legal
Proceedings
We
know
of no pending legal proceedings to which we are a party which are material
or
potentially material, either individually or in the aggregate. We are from
time
to time, during the normal course of our business operations, subject to various
litigation claims and legal disputes. We do not believe that the ultimate
disposition of any of these matters will have a material adverse effect on
our
consolidated financial position, results of operations or
liquidity.
Item
2.
Unregistered
Sales of Equity Securities and Use of Proceeds
In
July
2007, pursuant to the Share Exchange Agreement, we issued an aggregate of
16,500,000 shares of common stock to eight non-U.S. persons (as contemplated
by
Rule 902 under the Securities Act of 1933). These issuances were exempt from
registration requirements under Regulation S under the Securities Act of 1933,
as amended. The shares issued pursuant to Regulation S were issued in an
“offshore transaction” as defined in, and pursuant to, Rule 902 under the
Securities Act of 1933, on the basis that the purchaser was not offered the
shares in the United States and did not execute or deliver any agreement in
the
United States.
Item
3.
Defaults
Upon Senior Securities
None.
Item
4.
Submission
of Matters to a Vote of Security Holders
None.
Item
5.
Other
Information
None.
Item
6.
Exhibits
|
Exhibit
Number
|
|
Description
of Exhibit
|
|
|
|
|
|
2.1
|
|
Share
Exchange Agreement by and between Sino Palace Holdings Limited and
Cartan
Holdings Inc. dated as of July 23, 2007, is incorporated herein by
reference to Exhibit 2.1 to the Corporation’s Form 8-K dated July 23,
2007.
|
|
|
|
|
|
2.2
|
|
Return
to Treasury Agreement between Cartan Holdings, Inc. and Zubeda
Mohamed-Lakhani, dated as of July 23, 2007, is incorporated hereby
by
reference to Exhibit 2.2 to the Corporation’s Form 8-K dated July 23,
2007.
|
|
|
|
|
|
3.1
|
|
Amended
and Restated Bylaws, is incorporated herein by reference to Exhibit
3.2 to
the Corporation’s Form 8-K dated July 23, 2007.
|
|
|
|
|
|
3.2
|
|
Amended
and Restated Articles of Incorporation, is incorporated herein by
reference to Exhibit 3.3 to the Corporation’s Form 8-K dated July 23,
2007.
|
|
|
|
|
|
4.1
|
|
Specimen
Stock Certificate, is incorporated herein by reference to Exhibit
4.1 to
the Corporation’s Form 8-K dated July 23, 2007.
|
|
|
|
|
|
31.1
|
|
Certification
of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14
and
Rule 15d-14(a), promulgated under the Securities Exchange Act of
1934, as
amended.
|
|
|
|
|
|
31.2
|
|
Certification
of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14
and
Rule 15d 14(a), promulgated under the Securities Exchange Act of
1934, as
amended.
|
|
|
|
|
|
32.1
|
|
Certification
of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
32.2
|
|
Certification
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
|
|
Shiner
International, Inc.
|
|
|
|
|
November
14, 2007
|
By:
|
/s/ Fu
Jian
|
|
|
Fu
Jian
Chief
Executive Officer (Principal
Executive Officer)
|
|
|
|
|
|
November
14, 2007
|
By:
|
/s/ Xuezhu
Xu
|
|
|
Xuezhu
Xu
Chief
Financial Officer
(Principal
Financial and
Accounting
Officer)
|