UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2013
[_] Transition report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______ to _______.
001-33960
(Commission file number)
SHINER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Nevada | 98-0507398 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
19/F, Didu Building, Pearl River Plaza,
No. 2
North Longkun Road
Haikou, Hainan Province
China 570125
(Address of principal executive offices)
011-86-898-68581104 (Issuers telephone number)
N/A
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)
Yes [X] No [_]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [_] | Accelerated filer [_] |
Non-accelerated filer [_] | Smaller reporting company [X] |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [_] No [X]
The number of shares outstanding of each of the issuers classes of common stock, as of August 9, 2013 is as follows:
Class of Securities | Shares Outstanding |
Common Stock, $0.001 par value | 27,541,491 |
EXPLANATORY NOTE
This amendment to the Quarterly Report on Form 10-Q (the “Amendment”) amends the amended Quarterly Report on Form 10-Q of Shiner International, Inc. (the “Company”) for the quarter ended June 30, 2013 (the “Original Filing”), that was originally filed with the U.S. Securities and Exchange Commission on August 15, 2013. The Amendment is being filed to submit Exhibit 101 (XBRL interactive data).
Except as described above, the Amendment does not modify or update the disclosures presented in, or exhibits to, the Original Filing in any way. Those sections of the Original Filing that are unaffected by the Amendment are not included herein. The Amendment continues to speak as of the date of the Original Filing. Furthermore, the Amendment does not reflect events occurring after the filing of the Original Filing. Accordingly, the Amendment should be read in conjunction with the Original Filing, as well as the Company’s other filings made with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act subsequent to the filing of the Original Filing.
Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | 1 |
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 19 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26 |
Item 4. | Controls and Procedures | 26 |
PART II OTHER INFORMATION | ||
Item 1. | Legal Proceedings | 26 |
Item 1A. | Risk Factors | 27 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 27 |
Item 3. | Defaults Upon Senior Securities | 27 |
Item 4. | Mine Safety Disclosures | 27 |
Item 5. | Other Information | 27 |
Item 6. | Exhibits | 27 |
PART I. |
FINANCIAL INFORMATION |
ITEM 1. FINANCIAL STATEMENTS. |
SHINER INTERNATIONAL, INC. |
CONSOLIDATED FINANCIAL STATEMENTS |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012 |
Page(s) | |
Financial Statements | |
Consolidated Balance Sheets | 2 |
Consolidated Statements of Operations and Other Comprehensive Income (Loss) | 3 |
Consolidated Statements of Cash Flows | 4 |
Notes to Consolidated Financial Statements | 5 - 18 |
SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, | December 31, | |||||
2013 | 2012 | |||||
(Unaudited) | ||||||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and equivalents | $ | 5,381,045 | $ | 4,233,183 | ||
Restricted cash | 2,509,330 | 925,039 | ||||
Accounts
receivable, net of allowance for doubtful accounts of
$997,763 and $850,123 at June 30, 2013 and December 31, 2012 |
10,088,042 | 7,807,846 | ||||
Advances to suppliers | 13,513,886 | 15,141,398 | ||||
Notes receivable | 58,653 | 542,802 | ||||
Inventory, net | 14,339,365 | 10,110,732 | ||||
Prepaid expenses and other current assets | 1,740,120 | 711,537 | ||||
Total current assets | 47,630,441 | 39,472,537 | ||||
Property and equipment, net | 30,349,348 | 30,689,391 | ||||
Construction in progress | 5,346,403 | 5,840,483 | ||||
Advance for purchase of equipment | 311,940 | 426,536 | ||||
Intangible assets, net | 1,080,556 | 1,069,988 | ||||
TOTAL ASSETS | $ | 84,718,688 | $ | 77,498,935 | ||
LIABILITIES AND EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Accounts payable | $ | 8,567,798 | $ | 6,808,524 | ||
Other payables | 8,457,086 | 8,213,146 | ||||
Unearned revenue | 1,032,067 | 1,622,318 | ||||
Accrued payroll | 150,704 | 147,722 | ||||
Short-term loans | 19,488,630 | 16,404,115 | ||||
Total current liabilities | 37,696,285 | 33,195,825 | ||||
Long-term loans | 11,326,000 | 11,095,000 | ||||
Total liabilities | 49,022,285 | 44,290,825 | ||||
Commitments and contingencies | ||||||
EQUITY: | ||||||
Shiner stockholders' equity: | ||||||
Common
stock, par value $0.001; 75,000,000 shares
authorized, 27,603,336 shares issued and 27,541,491 shares outstanding |
27,603 | 27,603 | ||||
Additional paid-in capital | 14,336,456 | 14,336,456 | ||||
Treasury stock (61,845 shares) | (58,036 | ) | (58,036 | ) | ||
Other comprehensive income | 6,452,437 | 5,745,728 | ||||
Statutory reserve | 3,414,514 | 3,414,514 | ||||
Retained earnings | 11,296,405 | 9,526,528 | ||||
Total Shiner stockholders' equity | 35,469,379 | 32,992,793 | ||||
Noncontrolling interest | 227,024 | 215,317 | ||||
Total equity | 35,696,403 | 33,208,110 | ||||
TOTAL LIABILITIES AND EQUITY | $ | 84,718,688 | $ | 77,498,935 |
The accompanying notes are an integral part of these consolidated financial statements.
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SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
(LOSS)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Net revenue | $ | 17,950,297 | $ | 16,401,485 | $ | 31,793,826 | $ | 33,771,509 | ||||
Cost of goods sold | 16,127,248 | 15,913,476 | 29,057,338 | 31,112,559 | ||||||||
Gross profit | 1,823,049 | 488,009 | 2,736,488 | 2,658,950 | ||||||||
Operating expenses: | ||||||||||||
Selling | 769,904 | 577,500 | 1,435,329 | 1,232,031 | ||||||||
General and administrative | 1,497,585 | 1,386,968 | 2,928,678 | 3,033,445 | ||||||||
Total operating expenses | 2,267,489 | 1,964,468 | 4,364,007 | 4,265,476 | ||||||||
Loss from operations | (444, 440 | ) | (1,476,459 | ) | (1,627,519 | ) | (1,606,526 | ) | ||||
Non-operating income (expense): | ||||||||||||
Other income (expense), net | 3,572,108 | 294,712 | 4,579,548 | 193,529 | ||||||||
Interest income | 14,411 | 9,565 | 75,761 | 18,394 | ||||||||
Interest expense | (512,850 | ) | (323,196 | ) | (887,006 | ) | (611,865 | ) | ||||
Exchange loss | (41,011 | ) | (3,775 | ) | (79,071 | ) | (9,648 | ) | ||||
Total non-operating income (expense) | 3,032,658 | (22,694 | ) | 3,689,232 | (409,590 | ) | ||||||
Income (loss) before income tax | 2,588,218 | (1,499,153 | ) | 2,061,713 | (2,016,116 | ) | ||||||
Income tax expense (benefit) | 284,684 | (63,222 | ) | 284,684 | 15,721 | |||||||
Net income (loss) | 2,303,534 | (1,435,931 | ) | 1,777,029 | (2,031,837 | ) | ||||||
Net income (loss) attributed to noncontrolling | ||||||||||||
interest | 7,137 | (21,641 | ) | 7,152 | (63,027 | ) | ||||||
Net income (loss) attributed to Shiner | $ | 2,296,397 | $ | (1,414,290 | ) | $ | 1,769,877 | $ | (1,968,810 | ) | ||
Comprehensive income (loss): | ||||||||||||
Net income (loss) | $ | 2,303,534 | $ | (1,435,931 | ) | $ | 1,777,029 | $ | (2,031,837 | ) | ||
Foreign currency translation gain | 517,918 | 28,762 | 706,709 | 307,086 | ||||||||
Comprehensive income (loss) | $ | 2,821,452 | $ | (1,407,169 | ) | $ | 2,483,738 | $ | (1,724,751 | ) | ||
Weighted average shares outstanding: | ||||||||||||
Basic | 27,541,491 | 27,541,491 | 27,541,491 | 27,541,491 | ||||||||
Diluted | 27,541,491 | 27,541,491 | 27,541,491 | 27,541,491 | ||||||||
Income (loss) per share attributed to Shiner common | ||||||||||||
stockholders: | ||||||||||||
Basic | $ | 0.08 | $ | (0.05 | ) | $ | 0.06 | $ | (0.07 | ) | ||
Diluted | $ | 0.08 | $ | (0.05 | ) | $ | 0.06 | $ | (0.07 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
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SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30, 2013 AND 2012
(Unaudited)
2013 | 2012 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income (loss) | $ | 1,777,029 | $ | (2,031,837 | ) | |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||
Depreciation | 1,627,172 | 1,654,126 | ||||
Amortization | 11,594 | 118,214 | ||||
Stock compensation expense | - | 2,032 | ||||
Change in working capital components: | ||||||
Accounts receivable | (2,096,694 | ) | 280,177 | |||
Inventory | (3,978,392 | ) | (2,276,621 | ) | ||
Advances to suppliers | 1,923,549 | (2,010,504 | ) | |||
Prepaid expenses and other current assets | (1,019,674 | ) | 475,505 | |||
Accounts payable | 1,602,247 | (1,942,069 | ) | |||
Unearned revenue | (617,857 | ) | 439,576 | |||
Other payables | 76,624 | (219,453 | ) | |||
Accrued payroll | (92 | ) | (41,167 | ) | ||
Net cash used in operating activities | (694,494 | ) | (5,552,021 | ) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Cash from the sale of assets | 122,255 | - | ||||
Issuance of notes receivable | (54,690 | ) | (23,764 | ) | ||
Proceeds from notes receivable | 545,241 | 7,925 | ||||
Payments for property and equipment | (48,258 | ) | (1,675,316 | ) | ||
Increase in restricted cash | (1,549,556 | ) | (156,619 | ) | ||
Net cash used in investing activities | (985,008 | ) | (1,847,774 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Repayment of short-term loans | (16,580,059 | ) | (11,655,944 | ) | ||
Proceeds from short-term loans | 19,295,912 | 18,572,677 | ||||
Proceeds from long-term loans | - | 1,061,206 | ||||
Net cash provided by financing activities | 2,715,853 | 7,977,939 | ||||
Effect of exchange rate changes on cash and equivalents | 111,511 | 25,348 | ||||
NET INCREASE IN CASH AND EQUIVALENTS | 1,147,862 | 603,492 | ||||
CASH AND EQUIVALENTS, BEGINNING BALANCE | 4,233,183 | 2,831,808 | ||||
CASH AND EQUIVALENTS, ENDING BALANCE | $ | 5,381,045 | $ | 3,435,300 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||
Interest paid | $ | 757,239 | $ | 546,020 | ||
Income taxes paid | $ | - | $ | 7,608 |
The accompanying notes are an integral part of these
consolidated financial statements.
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SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
Note 1 - Organization and Basis of Presentation
The unaudited consolidated financial statements were prepared by Shiner International, Inc., a Nevada corporation (the Company or Shiner), pursuant to the rules and regulations of the Securities Exchange Commission (SEC). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) were omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Companys Annual Report on Form 10-K filed with the SEC on March 29, 2013. The results for the three and six months ended June 30, 2013, are not necessarily indicative of the results to be expected for the year ending December 31, 2013.
Organization and Line of Business
Shiner International, Inc. (the Company or Shiner) was incorporated in the State of Nevada on November 12, 2003. The Company, through its subsidiaries manufactures Biaxially Oriented Polypropylene (BOPP) tobacco film, coated films, color printing products, advanced film, and water based coatings selling to customers throughout the Peoples Republic of China (China or PRC), Asia, Australia, Europe, the Middle East and North America. Our products are sold to companies in the following industries: food, tobacco, chemical, agribusiness, medical, pharmaceutical, personal care, electronics, automotive, construction, graphics, music and video publishing and other consumer goods.
Except as otherwise indicated by the context, all references in this report to Shiner, Company, we, us or our are to Shiner International, Inc. and its direct and indirect subsidiaries: (i) Hainan Shiner Industrial Co., Ltd., or Hainan Shiner, (ii) Hainan Shiny-Day Color Printing Packaging Co., Ltd., or Shiny-Day, (iii) Hainan Modern Hi-Tech Industrial Co., Ltd., or Hainan Modern, (iv) Zhuhai Modern Huanuo Packaging Material Co., Ltd., or Zhuhai Modern, (v) Shimmer Sun Ltd., or Shimmer Sun, (vi) Hainan Jingyue New Material Co., Ltd., or Jingyue, (vii) Hainan Shunhao New Material Co., Ltd., or Shunhao, (viii) Hainan Yongxin Environmental Co., Ltd., or Yongxin, and (ix) Ningbo Neisuoer Latex Co., Ltd., or Ningbo.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Shiner and its subsidiaries as follows:
Place | Percentage | ||
Subsidiary | Incorporated | Owned | Parent |
Shiner International, Inc. | Nevada, USA | None | |
Hainan Shiner | China | 100% | Shiner International, Inc. |
Shiny-Day | China | 100% | Shiner International, Inc. |
Hainan Modern | China | 100% | Shiny-Day |
Zhuhai Modern | China | 100% | Shiny-Day |
Shimmer Sun | China | 100% | Shiner International, Inc. |
Jingyue | China | 100% | Shimmer Sun |
Shunhao | China | 100% | Jingyue |
Yongxin | China | 100% | Shunhao |
Ningbo | China | 65% | Yongxin |
The accompanying consolidated financial statements were prepared in conformity with the accounting principles generally accepted in the United States of America (US GAAP). The Companys functional currency is the Chinese Yuan Renminbi (RMB); however, the accompanying consolidated financial statements were translated and presented in United States Dollars ($ or USD).
Noncontrolling Interest
On May 2, 2011, Shiner acquired 100% of the stock of Shimmer Sun Ltd. (Shimmer Sun) for $3.2 million. The Company paid $1.3 million in cash and the remaining $1.9 million was paid by September 30, 2011. The acquisition gave Shiner a 65% controlling
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SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
interest in Shimmer Suns subsidiary, Ningbo. The transaction was accounted for under the acquisition method of accounting, with the purchase price allocated based on the fair value (FV) of the individual assets acquired and liabilities assumed.
The Company follows Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 810, Consolidation, which governs the accounting for and reporting of non-controlling interests (NCIs) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs be treated as a separate component of equity, not as a liability, that increases and decreases in the parents ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also required changes to certain presentation and disclosure requirements.
The net income (loss) attributed to the NCI is separately designated in the accompanying statements of operations and other comprehensive income (loss). Losses attributable to the NCI in a subsidiary may exceed the NCIs interests in the subsidiarys equity. The excess attributable to the NCI is attributed to those interests. The NCI shall continue to attribute its share of losses even if that attribution results in a deficit NCI balance.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Shiner International, Inc. and its subsidiaries. All significant intercompany transactions and balances were eliminated in consolidation.
Foreign Currency Translation
The accounts of the Companys Chinese subsidiaries are maintained in RMB and the accounts of the US parent company are maintained in USD. The accounts of the Chinese subsidiaries are translated into USD in accordance with ASC Topic 830, Foreign Currency Matters, with the RMB as the functional currency. According to Topic 830, all assets and liabilities are translated at the exchange rate on the balance sheet date, stockholders equity is translated at historical rates and statement of operations items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, Comprehensive Income. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the statement of operations and other comprehensive income (loss).
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Equivalents
Cash and equivalents include cash on 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 Companys 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
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SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
To ensure a steady supply of raw materials, the Company is required from time to time to make cash advances when placing its purchase orders. Management determined no reserve was necessary for advances to suppliers. The advances to suppliers are interest free and unsecured.
Notes Receivable
Notes receivable consist of bank notes received from customers as payment of their accounts receivable. The notes are guaranteed by a bank and bear no interest. The notes are generally due within three months from the date of issuance.
Inventory, net
Inventory is valued at the lower of the inventorys cost (weighted average basis) or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower.
Property and Equipment, net
Property and equipment are stated at cost. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals and improvements are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:
Operating equipment | 10 years |
Vehicles | 8 years |
Office equipment | 5 years |
Buildings and improvements | 20 years |
The following are the details regarding the Companys property and equipment at June 30, 2013 and December 31, 2012:
June 30, | December 31, | |||||
2013 | 2012 | |||||
(audited) | ||||||
Operating equipment | $ | 26,478,484 | $ | 25,868,886 | ||
Vehicles | 710,210 | 695,724 | ||||
Office equipment | 240,916 | 231,234 | ||||
Buildings | 12,630,628 | 12,183,492 | ||||
40,060,238 | 38,979,336 | |||||
Less: accumulated depreciation | (9,710,890 | ) | (8,289,945 | ) | ||
$ | 30,349,348 | $ | 30,689,391 |
Construction in Progress and Government Grants
Construction in progress mainly consists of amounts expended to build a manufacturing workshop in Hainan, including a product line for a BOPP tobacco line. The costs incurred and capitalized as construction in progress at June 30, 2013 and December 31, 2012 (audited) were $5.3 million and $5.8 million, respectively, which include the facility and equipment. Once the project is completed, it will be transferred from Construction in progress to Property and equipment. The total cost of the new Hainan manufacturing workshop and the BOPP tobacco line is expected to be $25.1 million. The first phase of the project was completed during 2010. In October 2009, the Company received a government grant for this project of RMB29.1 million (or $4.3 million based on the exchange rate at December 31, 2009) from the Hainan Province Finance Bureau (HPFB). The Company is required to provide detailed expenses of the construction project to the HPFB. At the end of the project, the government will determine if the funds were used in accordance with the grant. At June 30, 2013 and December 31, 2012 (audited), respectively, RMB25.2 million ($4.1 million based on the exchange rate at June 30, 2013) and RMB26.675 million (or $4.2 million based on the exchange rate at December 31, 2012) was recorded in Other payables on the accompanying consolidated financial statements (Note 6). The amount of the government grant is being amortized into other income over the useful life of the asset on the same basis used to depreciate the asset. For the three and six months ended June 30, 2013, the Company amortized $116,546 and $232,364, respectively, into Other income.
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SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
In December 2011, the Company received a government grant of RMB14.0 million (or $2.2 million based on the exchange rate as of December 31, 2011) from the Haikou Finance Bureau (HFB) for the adjustment and expansion of our operations and related capital expenditures for construction and equipment purchases. The Company is required to provide detailed expenses of the construction project to HFB. At the end of the project, the government will determine if the funds were used in accordance with the grant. At June 30, 2013 and December 31, 2012 (audited), respectively, RMB12.1 million ($2.0 million based on the exchange rate at June 30, 2013) and RMB12.8 million (or $2.0 million based on the exchange rate at December 31, 2012) was recorded in Other payables on the accompanying consolidated financial statements (Note 6). The amount of the government grant is being amortized into Other income over the useful life of the asset on the same basis used to depreciate the asset. For the three and six months ended June 30, 2013, the Company amortized $56,070 and $111,790, respectively, into Other income.
In January 2012, the Company received a government grant of RMB1.8 million (or $0.3 million based on the exchange rate as of June 30, 2013) from the HFB for the adjustment and expansion of our operation and related capital expenditures for construction and equipment purchase. The Company is required to provide detailed expenses of the construction project to the HFB. At the end of the project, the government will determine if the funds were used in accordance with the grant. At June 30, 2013 and December 31, 2012 (audited), the entire grant was recorded in Other payables on the accompanying consolidated financial statements (Note 6). If the government determines the funds were used for their intended purpose, the amount of the government grant is then amortized into Other income over the useful life of the asset on the same basis being used to depreciate the asset. The Company has not begun amortizing the grant into Other income.
Long-Lived Assets
The Company applies ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the FV of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that FVs are reduced to recognize the cost of disposal. Based on its review, the Company believes that as of June 30, 2013 and December 31, 2012 (audited), respectively, there was no significant impairment of its long-lived assets.
Intangible Assets
Intangible assets consist of rights to use three plots of land in Haikou City granted by the Municipal Administration of China for state-owned land. For two of these plots, the Companys rights run through January 2059 and, for the third, through October 2060. The Company evaluates intangible assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible and other long-lived assets 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.
Goodwill
Goodwill is the excess of purchase price over the underlying net assets of businesses acquired. Under accounting requirements, goodwill is not amortized but is subject to annual impairment tests, and more frequently if circumstances dictate. The impairment testing is based on the FV of the reporting units, which is estimated based on a discounted cash flow valuation model and the projected future cash flows of the underlying businesses.
Fair Value of Financial Instruments
For certain of the Companys financial instruments, including cash and equivalents, restricted cash, accounts receivable, advances to suppliers, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their FVs due to their short maturities. In addition, the Company has long-term debt with financial institutions. The carrying amounts of the line of credit and other long-term liabilities approximate their FVs based on current rates of interest for instruments with similar characteristics.
ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the FV of financial instruments held by the Company. ASC Topic 825, Financial Instruments, defines FV, and establishes a three-level valuation hierarchy for disclosures of FV measurement that enhances disclosure requirements for FV 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 FVs 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:
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SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
The Company analyzes all financial instruments with features of both liabilities and equity under ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Topic 815, Derivatives and Hedging.
As of June 30, 2013 and December 31, 2012 (audited), respectively, the Company did not identify any assets and liabilities required to be presented on the balance sheet at FV.
Revenue Recognition
The Companys revenue recognition policies comply with ASC Topic 605, Revenue Recognition. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.
Sales revenue consists of the invoiced value of goods, which is net of value-added tax (VAT). All of the Companys products sold in the PRC are subject to Chinese VAT of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing their end product. The Company recorded VAT payable and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the receivables.
Sales and purchases are recorded net of VAT collected and paid. VAT taxes are not affected by the income tax holiday.
Sales returns and allowances was $0 for the three and six months ended June 30, 2013 and 2012. The Company does not provide unconditional right of return, price protection or any other concessions to its dealers or other customers.
Other Income
The Company recognizes other income in the period it has earned the revenue and collectability is reasonably assured. Other income in 2013 and 2012 consists primarily of subsidy income received from Chinese Government Agencies for developing technology and research and development. The Company must manage the funds according to government requirements. The Company recognizes the revenue over the contract period.
Advertising Costs
The Company expenses the cost of advertising as incurred. Advertising costs for 2013 and 2012 were not significant.
Research and Development
The Company expenses its research and development (R&D) costs as incurred. R&D costs included in general and administrative expenses for the three and six months ended June 30, 2013 were $921,262 and $1,575,906, respectively and $649,976 and $1,336,942 for the three and six months ended June 30, 2012, respectively.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC Topic 718, Compensation Stock Compensation. ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at FV at the grant date and recognize the expense over the employees requisite service period. The Company recognizes in the statement of operations the grant-date FV of stock options and other equity-based compensation issued to employees and non-employees. There were 90,000 options outstanding as of June 30, 2013.
- 9 -
SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is more than 50% likely of being realized on examination. For tax positions not meeting the more likely than not test, no tax benefit is recorded.
Basic and Diluted Earnings (Loss) Per Share
Earnings (loss) per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (EPS) is based on the weighted average number of common shares outstanding. Diluted EPS 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 90,000 options and 0 warrants outstanding as of June 30, 2013 with weighted-average exercise prices of $0.95 and $0, respectively. All options and warrants were excluded from the diluted loss per share for 2013 due to the dilutive effect. The following is a reconciliation of the number of shares (denominator) used in the basic and diluted EPS computations for the three and six months ended June 30, 2013 and 2012:
Three Months Ended June 30, | ||||||||||||
2013 | 2012 | |||||||||||
Per Share | Per Share | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Basic earnings (loss) per share | 27,541,491 | $ | 0.08 | 27,541,491 | $ | (0.05 | ) | |||||
Effect of dilutive stock options and warrants | - | - | - | - | ||||||||
Diluted earnings per share | 27,541,491 | $ | 0.08 | 27,541,491 | $ | (0.05 | ) |
Six Months Ended June 30, | ||||||||||||
2013 | 2012 | |||||||||||
Per Share | Per Share | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Basic earnings (loss) per share | 27,541,491 | $ | 0.06 | 27,541,491 | $ | (0.07 | ) | |||||
Effect of dilutive stock options and warrants | - | - | - | - | ||||||||
Diluted earnings per share | 27,541,491 | $ | 0.06 | 27,541,491 | $ | (0.07 | ) |
Foreign Currency Transactions and Comprehensive Income
US GAAP requires recognized revenue, expenses, gains and losses to 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 Companys Chinese subsidiaries is the RMB. Translation gains of $6,452,437 and $5,745,728 at June 30, 2013 and December 31, 2012 (audited), respectively, are classified as an item of other comprehensive income in the stockholders equity section of the consolidated balance sheets.
Statement of Cash Flows
In accordance with ASC Topic 230, Statement of Cash Flows, cash flows from the Companys operations are calculated based on 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
- 10 -
SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
ASC Topic 280, Segment Reporting, requires use of the management approach model for segment reporting. The management approach model is based on the way a companys management organizes segments within the company for making operating decisions and assessing performance. The Company determined it has five reportable segments. See Note 14.
Dividends
The Company's Chinese subsidiaries have restrictions on the payment of dividends to the Company. China has currency and capital transfer regulations that may require the Company's Chinese subsidiaries to comply with complex regulations for the movement of capital. These regulations include a public notice issued in October 2005 by the State Administration of Foreign Exchange (SAFE) requiring PRC residents, including both legal and natural persons, to register with the competent local SAFE branch before establishing or controlling any company outside of China. Although the Company believes its Chinese subsidiaries are in compliance with these regulations, should these regulations or the interpretation of them by courts or regulatory agencies change, the Company may not be able to pay dividends outside of China.
Note 3 Advances to Suppliers
Advances to suppliers represent prepayment to vendors for the purchases of inventory.
Note 4 Inventory, net
Inventory at June 30, 2013 and December 31, 2012 consisted of the following:
June 30, | December 31, | |||||
2013 | 2012 | |||||
(audited) | ||||||
Raw Material | $ | 4,322,783 | $ | 4,264,823 | ||
Work in process | 1,663,592 | 1,647,956 | ||||
Finished goods | 9,131,781 | 4,960,861 | ||||
15,118,156 | 10,873,640 | |||||
Less: obsolescence reserve | (778,791 | ) | (762,908 | ) | ||
Inventory, net | $ | 14,339,365 | $ | 10,110,732 |
Note 5 Prepaid Expenses and Other Current Assets
Prepaid expense and other current assets at June 30, 2013 and December 31, 2012 consisted of the following:
June 30, | December 31, | |||||
2013 | 2012 | |||||
(audited) | ||||||
Other receivables | $ | 1,683,128 | $ | 651,971 | ||
Prepaid expenses | 56,992 | 59,566 | ||||
$ | 1,740,120 | $ | 711,537 |
Note 6 - Intangible Assets, net
Intangible assets at June 30, 2013 and December 31, 2012 consisted of rights to use land as follows:
June 30, | December 31, | |||||
2013 | 2012 | |||||
(audited) | ||||||
Right to use land | $ | 1,186,431 | $ | 1,162,234 | ||
Less: accumulated amortization | (105,875 | ) | (92,246 | ) | ||
Intangible assets, net | $ | 1,080,556 | $ | 1,069,988 |
- 11 -
SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
Pursuant to the regulations, the PRC government owns all land. The Company has recognized the amounts paid for the acquisition of rights to use the land as an intangible asset and amortizes such rights over the period the Company has use of the land, which range from 54 to 57 years.
Note 7 Other Payables
Other payables at June 30, 2013 and December 31, 2012 consisted of the following:
June 30, | December 31, | |||||
2013 | 2012 | |||||
(audited) | ||||||
Special purpose fund for Shi Zi Ling workshop | $ | 4,080,596 | $ | 4,227,988 | ||
Special purpose fund for structure and equipment | 2,229,717 | 2,317,006 | ||||
Special purpose fund for expansion and equipment | 288,813 | 282,922 | ||||
Taxes payable | 892,556 | 652,751 | ||||
Miscellaneous payables | 965,404 | 732,479 | ||||
$ | 8,457,086 | $ | 8,213,146 |
The $4,080,596, $2,229,717 and $288,813 payables at June 30, 2013 are liabilities recorded pursuant to the funds received as part of government grants. See Construction in Progress and Government Grants in Note 2.
Note 8 - Debt
Short-term loans at June 30, 2013 and December 31, 2012 consisted of the following:
June 30, | December 31, | |||||
2013 | 2012 | |||||
(audited) | ||||||
From March 16, 2012 to February 18, 2013, with interest of 8.53% at December 31, 2012. The loan was collateralized by equipment. | $ | - | $ | 1,585,000 | ||
From June 19, 2012 to June 19, 2013, with interest of 8.20% at December 31, 2012. The loan was collateralized by equipment. | - | 2,377,500 | ||||
From June 8, 2012 to June 7, 2013, with interest of 7.26% at December 31, 2012. The loan was collateralized by equipment. | - | 4,279,500 | ||||
Various bank acceptance bills that were payable on various dates through June 10, 2013. | - | 3,758,527 | ||||
From December 21, 2012 to June 21, 2013, with interest of 6.16% at December 31, 2012. The loan was collateralized by a building and equipment. | - | 792,500 | ||||
From September 10, 2012 to March 10, 2013, with interest of 6.16% at December 31, 2012. The loan was collateralized by a building and equipment. | - | 697,400 | ||||
From September 10, 2012 to March 10, 2013, with interest of 6.16% at December 31, 2012. The loan was collateralized by a building and equipment. | - | 792,500 | ||||
From November 27, 2012 to May 27, 2103, with various interest rates averaging 6.70%. The loan was collateralized by a letter of credit. | - | 2,121,188 | ||||
From April 23, 2013 to October 23, 2013, with interest of 6.16% at June 30, 2013. The loan is collateralized by a building and equipment. | 2,427,000 | - | ||||
From May 31, 2013 to May 31, 2014, with interest of 6.6% at June 30, 2013. The loan is collateralized by a building and equipment. | 6,472,000 | - | ||||
From June 28, 2013 to September 27, 2014, with interest of 2.276% at June 30, 2013. The loan is collateralized by a building and equipment. | 285,038 | - | ||||
From May 30, 2013 to August 29, 2014, with interest of 2.273% at June 30, 2013. The loan is collateralized by a building and equipment. | 242,248 | - | ||||
From April 25, 2013 to July 25, 2014, with interest of 1.376% at June 30, 2013. The loan is collateralized by a building and equipment. | 283,540 | - | ||||
From March 28, 2013 to September 19, 2013, with interest of 6.16% at June 30, 2013. The loan is collateralized by a building and equipment. | 2,224,847 | - | ||||
From June 1, 2013 to November 19, 2014, with interest of 6.16% at June 30, 2013. The loan is collateralized by a building and equipment. | 1,621,802 | - | ||||
From May 13, 2013 to November 11, 2014, with interest of 6.3% at June 30, 2013. The loan is collateralized by a building and equipment. | 1,618,000 | - | ||||
Various bank acceptance bills that are payable on various dates through December 27, 2013. | 4,314,155 | - | ||||
$ | 19,488,630 | $ | 16,404,115 |
- 12 -
SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
Long-term loans at June 30, 2013 and December 31, 2012 consisted of the following:
June 30, | December 31, | |||||
2013 | 2012 | |||||
(audited) | ||||||
From January 24, 2011 to January 24, 2018, with interest of 6.60%. The loan is collateralized by buildings and land use rights. | $ | 2,588,800 | $ | 2,536,000 | ||
From February 10, 2011 to February 10, 2018, with interest of 6.60%. The loan is collateralized by buildings and land use rights. | 2,912,400 | 2,853,000 | ||||
From February 16, 2011 to February 16, 2018, with interest of 6.60%. The loan is collateralized by buildings and land use rights. | 2,346,100 | 2,298,250 | ||||
From February 17, 2011 to February 17, 2018, with interest of 6.60%. The loan is collateralized by buildings and land use rights. | 1,278,220 | 1,252,150 | ||||
From March 25, 2011 to March 25, 2018, with interest of 6.60%. The loan is collateralized by buildings and land use rights. | 436,860 | 427,950 | ||||
From November 30, 2011 to November 30, 2018, with interest of 6.60%. The loan is collateralized by buildings and land use rights. | 161,800 | 158,500 | ||||
From December 23, 2011 to December 23, 2018, with interest of 6.60%. The loan is collateralized by buildings and land use rights. | 517,760 | 507,200 | ||||
From March 19, 2012 to January 18, 2018, with interest of 6.60%. The loan is collateralized by buildings and land use rights. | 1,084,060 | 1,061,950 | ||||
$ | 11,326,000 | $ | 11,095,000 |
- 13 -
SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
Aggregate future maturities of long-term loans at June 30, 2013 are as follows:
Year ending December 31, | |||
2013 | $ | - | |
2014 | - | ||
2015 | - | ||
2016 | - | ||
Thereafter | 11,326,000 | ||
$ | 11,326,000 |
The weighted average interest rate on long-term loans is 6.60% ..
On August 2, 2010, Hainan Shiner entered into a credit facility with the Hainan Branch of the Bank of China. It is a secured revolving credit facility of RMB70 million (or $11.1 million based on the exchange rate on December 31, 2010) for seven years. Under the credit facility, Hainan Shiner may only use the loan proceeds to improve the technology of its BOPP film and to purchase certain equipment necessary for this improvement. Proceeds under the facility not used for these purposes would be subject to a misappropriation penalty interest rate that is 100% of the current interest rate on the loan.
The initial interest rate on each withdrawal from the facility will be the 5-year benchmark lending rate announced by the Peoples Bank of China on the date of such withdrawal, and is subject to adjustment every 12 months based upon the benchmark. Additional interest will be paid on an overdue loan under this credit facility at 50% of the current interest rate on the loan. Hainan Shiner and certain of its affiliates, including the Company, have provided guarantees and certain land, buildings, and property as collateral under this facility.
The credit facility includes covenants that prohibit Hainan Shiner from making distributions to the Company, its sole shareholder, if (a) its after-tax net income for the fiscal year is zero or negative, (b) its after-tax net income is insufficient to make up its accumulated loss, (c) its income before tax is not utilized in paying off the capital, interest and expense of the lender, or (d) its income before tax is insufficient to pay the capital, interest and expense of the lender.
As of June 30, 2013, the Company drew down the entire RMB70 million credit facility.
Note 9 - Stock Options and Warrants
Stock Options
The following is a summary of the Companys stock option activity for the six months ended June 30, 2013:
Weighted | |||||||||
Average | Aggregate | ||||||||
Options | Exercise Price | Intrinsic | |||||||
Outstanding | Price | Value | |||||||
Outstanding at December 31, 2012 | 90,000 | $ | 0.95 | $ | - | ||||
Granted | - | ||||||||
Canceled | - | ||||||||
Exercised | - | ||||||||
Outstanding at June 30, 2013 | 90,000 | $ | 0.95 | $ | - | ||||
Exercisable at June 30, 2013 | 90,000 | $ | 0.95 | $ | - |
- 14 -
SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
The number and weighted average exercise prices of all options outstanding as of June 30, 2013, are as follows:
Options Outstanding | |||||||||||
Weighted | |||||||||||
Weighted | Average | ||||||||||
Number | Average | Remaining | |||||||||
Range of | Outstanding | Exercise | Contractual Life | ||||||||
Exercise Price | June 30, 2013 | Price | (Years) | ||||||||
$ | 0.80 | 60,000 | $ | 0.80 | 3.44 | ||||||
$ | 1.25 | 30,000 | $ | 1.25 | 0.93 | ||||||
90,000 |
The number and weighted average exercise prices of all options exercisable as of June 30, 2013, are as follows:
Options Exercisable | |||||||||||
Weighted | |||||||||||
Weighted | Average | ||||||||||
Number | Average | Remaining | |||||||||
Range of | Outstanding | Exercise | Contractual Life | ||||||||
Exercise Price | June 30, 2013 | Price | (Years) | ||||||||
$ | 0.80 | 60,000 | $ | 0.80 | 3.44 | ||||||
$ | 1.25 | 30,000 | $ | 1.25 | 0.93 | ||||||
90,000 |
Warrants
The following is a summary of the Companys warrant activity for the three and six months ended June 30, 2013:
Weighted | |||||||||
Weighted | Average | ||||||||
Average | Remaining | ||||||||
Warrants | Exercise Price | Contractual Life | |||||||
Outstanding | Price | (Years) | |||||||
Outstanding at December 31, 2012 | 521,664 | $ | 1.70 | 0.24 | |||||
Granted | - | ||||||||
Canceled | - | ||||||||
Exercised | (521,664 | ) | $ | 1.70 | - | ||||
Outstanding at June 30, 2013 | - | $ | - | - | |||||
Exercisable at June 30, 2013 | - | $ | - | - |
Note 10 - Employee Welfare Plans
The expense for employee common welfare was $15,117 and $36,323 for the three and six months ended June 30, 2013, respectively and $40,302 and $42,805 for the three and six months ended June 30, 2012, respectively.
Note 11 - 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; |
- 15 -
SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
ii. |
Allocations to the statutory surplus reserve of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the reserve reaches 50% of the Companys registered capital; | |
iii. |
Allocations of 5% to 10% of income after tax, as determined under PRC accounting rules and regulations, to the Companys statutory common welfare fund, which is established for the purpose of providing employee facilities and other collective benefits to the Companys employees; and | |
iv. |
Allocations to the discretionary surplus reserve, if approved in the stockholders general meeting. |
The Company appropriated $0 and $0 as reserve for the statutory surplus reserve and statutory common welfare fund for the three and six months ended June 30, 2013 and 2012, respectively.
Note 12 - Current Vulnerability Due to Certain Concentrations
There were no customers that exceeded 10% of the Companys sales for the six months ended June 30, 2013 or 2012. One vendor provided 16% of the Companys raw materials for the six months ended June 30, 2013, as compared to one vendor that provided 17% of the Companys raw material purchases for the six months ended June 30, 2012. At June 30, 2013 and December 31, 2012, the Company owed these vendors $1,460,650 and $1,143,862, respectively.
The Companys operations are carried out in the PRC. Accordingly, the Companys 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 PRCs economy. The Companys 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 13 Commitments and Contingencies
At June 30, 2013, the Company was contingently liable to banks for discounted notes receivable and to vendors for endorsed notes receivable of $827,466 (RMB5,114,131).
Note 14 Segment Information
The Company has five segments: BOPP tobacco films, water-based latex, coated film, color printed packaging, and advanced film. The water-based latex is one of the raw materials used in coated film to make the packaging more environmental friendly and the barrier property better. Approximately 60% of the water-base latex products manufactured by Ningbo are sold to Hainan Shiner, Shiny-Day and Zhuhai Modern.
The following tables summarize the Companys segment information for the three and six months ended June 30, 2013 and 2012:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Revenues from unrelated entities | ||||||||||||
Tobacco film | $ | 10,121,060 | $ | 10,596,958 | $ | 17,509,118 | $ | 20,634,999 | ||||
Water-based latex | 200,231 | 278,999 | 399,415 | 292,810 | ||||||||
Coated film | 4,684,105 | 3,774,754 | 8,202,994 | 7,892,170 | ||||||||
Color printing | 1,211,045 | 385,673 | 2,162,528 | 1,416,479 | ||||||||
Advanced film | 1,733,856 | 1,365,101 | 3,519,771 | 3,535,051 | ||||||||
$ | 17,950,297 | $ | 16,401,485 | $ | 31,793,826 | $ | 33,771,509 | |||||
Intersegment revenues | ||||||||||||
Tobacco film | $ | 2,321,553 | $ | 4,516,389 | $ | 3,334,740 | $ | 9,767,474 | ||||
Water-based latex | 263 | (119 | ) | 42,720 | 168,948 | |||||||
Coated film | 1,019,630 | 1,581,823 | 1,502,205 | 3,735,720 | ||||||||
Color printing | 281,384 | 131,249 | 411,869 | 670,483 | ||||||||
Advanced film | 356,143 | 538,158 | 601,061 | 1,673,299 | ||||||||
$ | 3,978,973 | $ | 6,767,500 | $ | 5,892,595 | $ | 16,015,924 |
- 16 -
SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
Total revenues | ||||||||||||
Tobacco film | $ | 12,442,613 | $ | 15,113,347 | $ | 20,843,858 | $ | 30,402,473 | ||||
Water-based latex | 200,494 | 278,880 | 442,135 | 461,758 | ||||||||
Coated film | 5,703,735 | 5,356,577 | 9,705,199 | 11,627,890 | ||||||||
Color printing | 1,492,429 | 516,922 | 2,574,397 | 2,086,962 | ||||||||
Advanced film | 2,089,999 | 1,903,259 | 4,120,832 | 5,208,350 | ||||||||
Less Intersegment revenues | (3,978,973 | ) | (6,767,500 | ) | (5,892,595 | ) | (16,015,924 | ) | ||||
$ | 17,950,297 | $ | 16,401,485 | $ | 31,793,826 | $ | 33,771,509 | |||||
Income (loss) from operations | ||||||||||||
Tobacco film | $ | (373,976 | ) | $ | (1,253,324 | ) | $ | (1,043,068 | ) | $ | (753,110 | ) |
Water-based latex | 56,713 | 59,830 | 109,220 | 60,513 | ||||||||
Coated film | 87,154 | (169,752 | ) | (259,043 | ) | (554,756 | ) | |||||
Color printing | (29,130 | ) | (146,548 | ) | (106,995 | ) | (269,932 | ) | ||||
Advanced film | (160,195 | ) | (7,624 | ) | (267,821 | ) | (65,042 | ) | ||||
Holding Company | (25,006 | ) | 40,959 | (59,812 | ) | (24,199 | ) | |||||
$ | (444,440 | ) | $ | (1,476,459 | ) | $ | (1,627,519 | ) | $ | (1,606,526 | ) | |
Interest income | ||||||||||||
Tobacco film | $ | 8,982 | $ | 6,137 | $ | 41,722 | $ | 11,239 | ||||
Water-based latex | 69 | 152 | 952 | 159 | ||||||||
Coated film | 3,952 | 2,206 | 19,547 | 4,299 | ||||||||
Color printing | 936 | 248 | 5,153 | 772 | ||||||||
Advanced film | 472 | 822 | 8,387 | 1,925 | ||||||||
Holding Company | - | - | - | - | ||||||||
$ | 14,411 | $ | 9,565 | $ | 75,761 | $ | 18,394 | |||||
Interest expense | ||||||||||||
Tobacco film | $ | 309,454 | $ | 212,604 | $ | 535,143 | $ | 368,844 | ||||
Water-based latex | 3,218 | 3,622 | 5,566 | 3,837 | ||||||||
Coated film | 122,746 | 71,034 | 212,267 | 146,304 | ||||||||
Color printing | 24,835 | 10,245 | 42,948 | 29,601 | ||||||||
Advanced film | 51,960 | 25,021 | 89,856 | 61,933 | ||||||||
Holding Company | 637 | 670 | 1,226 | 1,346 | ||||||||
$ | 512,850 | $ | 323,196 | $ | 887,006 | $ | 611,865 | |||||
Income tax expense (benefit) | ||||||||||||
Tobacco film | $ | 158,886 | $ | (64,768 | ) | $ | 158,886 | $ | 9,274 | |||
Water-based latex | - | - | - | - | ||||||||
Coated film | 89,848 | (448 | ) | 89,848 | 4,453 | |||||||
Color printing | - | - | - | - | ||||||||
Advanced film | 35,950 | 1,994 | 35,950 | 1,994 | ||||||||
Holding Company | - | - | - | - | ||||||||
$ | 284,684 | $ | (63,222 | ) | $ | 284,684 | $ | 15,721 | ||||
Net income (loss) | ||||||||||||
Tobacco film | $ | 1,102,448 | $ | (1,219,285 | ) | $ | 750,228 | $ | (974,336 | ) | ||
Water-based latex | 53,562 | 56,361 | 104,605 | 56,836 | ||||||||
Coated film | 1,008,392 | (160,873 | ) | 893,102 | (631,283 | ) | ||||||
Color printing | (53,029 | ) | (156,545 | ) | (144, 790 | ) | (298,761 | ) | ||||
Advanced film | 210,667 | 25,763 | 227,770 | (95,721 | ) | |||||||
Holding Company | (25,643 | ) | 40,289 | (61,038 | ) | (25,545 | ) |
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SHINER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
(Unaudited)
$ | 2,296,397 | $ | (1,414,290 | ) | $ | 1,769,877 | $ | (1,968,810 | ) | |||
Provision for depreciation | ||||||||||||
Tobacco film | $ | 472,691 | $ | 631,228 | $ | 977,146 | $ | 992,620 | ||||
Water-based latex | 9,623 | 10,716 | 19,943 | 21,446 | ||||||||
Coated film | 187,495 | 219,625 | 387,590 | 393,727 | ||||||||
Color printing | 37,936 | 34,892 | 78,421 | 79,662 | ||||||||
Advanced film | 79,369 | 81,292 | 164,072 | 166,671 | ||||||||
Holding Company | - | - | - | - | ||||||||
$ | 787,114 | $ | 977,753 | $ | 1,627,172 | $ | 1,654,126 |
As of | As of | |||||||||||
June 30, | December 31, | |||||||||||
2013 | 2012 | |||||||||||
Total assets | (audited) | |||||||||||
Tobacco film | $ | 44,175,606 | $ | 34,457,224 | ||||||||
Water-based latex | 657,568 | 961,826 | ||||||||||
Coated film | 17,522,471 | 16,599,954 | ||||||||||
Color printing | 3,545,306 | 4,268,660 | ||||||||||
Advanced film | 7,417,519 | 8,140,512 | ||||||||||
Holding Company | 11,400,218 | 13,070,759 | ||||||||||
$ | 84,718,688 | $ | 77,498,935 |
Note 15 - Geographical Sales
The geographical distribution of Shiners revenue for the three and six months ended June 30, 2013 and 2012 is as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
Geographical Areas | 2013 | 2012 | 2013 | 2012 | ||||||||
Chinese Main Land | $ | 15,039,914 | $ | 13,569,643 | $ | 25,724,940 | $ | 27,947,584 | ||||
Asia (outside Mainland China) | 1,457,552 | 1,282,973 | 2,976,198 | 2,455,536 | ||||||||
Australia | 813,377 | 997,009 | 1,856,941 | 1,920,232 | ||||||||
North America | 482,795 | 374,903 | 794,045 | 632,842 | ||||||||
Middle East | 51,494 | 99,183 | 159,154 | 419,020 | ||||||||
Europe | 73,382 | 77,774 | 184,173 | 338,108 | ||||||||
Africa | - | - | - | 33,841 | ||||||||
South America | 31,783 | - | 98,375 | 24,346 | ||||||||
$ | 17,950,297 | $ | 16,401,485 | $ | 31,793,826 | $ | 33,771,509 |
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
In addition to historical information, this report contains 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 use words such as believe, expect, anticipate, project, target, plan, optimistic, intend, aim, will or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; and any statements regarding future economic conditions or performance, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. Potential risks and uncertainties include, among other things, the factors discussed in Item 1A, Risk Factors included in the Company annual report on Form 10-K filed on March 29, 2013.
Because the factors discussed in this report could cause our actual results or outcomes to differ materially from those expressed in any forward-looking statement made by us or on our behalf, you should not place undue reliance on any such forward-looking statement. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by law. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.
Use of Terms
Except as otherwise indicated by the context, all references in this report to:
Overview
We were incorporated in Nevada in November 2003, but since July 2007, have been headquartered in Hainan, China. Through our operating subsidiaries, Hainan Shiner, Shiny-Day, Hainan Modern, Zhuhai Modern, Shimmer Sun, and Ningbo we manufacture and sell packaging and anti-counterfeit plastic film to manufacturers and producers in China. We sell anti-counterfeit film, coated film, and color printing, in international markets through a network of distributors and converters.
Our primary business consists of the manufacture and distribution of technology driven advanced packaging film products in five business segments: bi-axially oriented polypropylene, or BOPP, film for wrapping tobacco; water-based latex; coated film; color printed packaging; and advanced film. Our products are sold to customers in the food, tobacco, chemical, medical and pharmaceutical, personal care, electronics, automotive, construction, graphics, music and video publishing industries. Our current production capacity consists of: five coated film lines with a capacity of 15,000 tons a year; two BOPP tobacco film production lines with a capacity of 13,500 tons a year; one BOPP film production line with a capacity of 7,000 tons a year; three color printing lines; four anti-counterfeit film lines with a capacity of 2,500 tons a year; and two water-based latex reaction kettles with a capacity of 3,000 tons a year.
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The table below shows the percentage of revenue by each of our business segments for the three and six months ended June 30, 2013, and 2012:
Percent of Revenue | Percent of Revenue | |||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
BOPP tobacco film | 56.4% | 64.6% | 55.0% | 61.1% | ||||||||
Water-based latex | 1.1% | 1.7% | 1.3% | 0.9% | ||||||||
Coated film | 26.1% | 23.0% | 25.8% | 23.4% | ||||||||
Color printing | 6.7% | 2.4% | 6.8% | 4.2% | ||||||||
Advanced film | 9.7% | 8.3% | 11.1% | 10.4% | ||||||||
100.0% | 100.0% | 100.0% | 100.0% |
We have 27 patents issued by the State Intellectual Property Office of China and have 75 patent applications relating to our products and manufacturing processes pending. Although our patents and processes provide us a competitive advantage, we do not believe the loss of any single patent would have a material adverse effect on our business.
Our principal executive offices are located at 19th Floor, Didu Building, Pearl River Plaza, No. 2 North Longkun Road, Haikou, Hainan Province, China 570125. Our telephone number is +86-898-68581104 and our website is www.shinerinc.com.
Principal Factors Affecting Our Financial Performance
We believe that the following factors will continue to affect our financial performance:
Global Economic Fragility The ongoing turmoil in the global economy may have an impact on our business and our financial condition, and we may face challenges if economic conditions do not improve. These economic conditions impact levels of consumer spending, which have deteriorated and may remain depressed for the foreseeable future. If demand for our products fluctuates as a result of these economic conditions or otherwise, our revenue and gross margin could be harmed.
Fuel Prices Significant fluctuations in fuel prices could have both a positive and negative effect on our business and operations. Significant fluctuations in world fuel prices could significantly increase the price of shipping or transporting our products which we may not be able to pass on to our customers.
Results of Operations
The following summary of our results of operations should be read in conjunction with our financial statements and the notes thereto for the three-month periods ended June 30, 2013 and 2012 included herein. The following tables set forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of sales revenue and key components of our revenue for the periods indicated in dollars and percentages.
Comparison of Three Months Ended June 30, 2013 and 2012
The following table summarizes the results of our operations during the three-month periods ended June 30, 2013 and 2012 and provides information regarding the dollar and percentage increase or (decrease) in such periods:
Three Months Ended June 30, | $ | % | ||||||||||
2013 | 2012 | Change | Change | |||||||||
Revenues | $ | 17,950,297 | $ | 16,401,485 | $ | 1,548,812 | 9.4% | |||||
Cost of goods sold | 16,127,248 | 15,913,476 | 213,772 | 1.3% | ||||||||
Gross profit | 1,823,049 | 488,009 | 1,335,040 | 273.6% | ||||||||
Selling, general and administrative expenses | 2,267,489 | 1,964,468 | 303,021 | 15.4% | ||||||||
Interest expense, net of interest income | 498,439 | 313,631 | 184,808 | 58.9% | ||||||||
Other income, net | 3,572,108 | 294,712 | 3,277,396 | 1,112.1% | ||||||||
Exchange (loss) | (41,011 | ) | (3,775 | ) | (37,236 | ) | 986.4% | |||||
Income tax expense (benefit) | 284,684 | (63,222 | ) | 347,906 | 550.3% | |||||||
Net income (loss) attributed to noncontrolling interest | 7,137 | (21,641 | ) | 28,778 | 133.0% | |||||||
Net income attributed to Shiner | $ | 2,296,397 | $ | (1,414,290 | ) | $ | 3,710,687 | 262.4% |
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Revenues
Revenues for the three months ended June 30, 2013 increased $1.5 million (or 9.4%), to $17.9 million, compared to $16.4 million in the 2012 period. The increase was primarily attributable to increased revenues generated from the sale of coated film, color printing and advanced film, which, was partially offset by a decrease in revenues generated from the sale of BOPP tobacco and water-based latex. In the second quarter of 2013, revenue from advanced film increased $0.37 million (or 27.0%) to $1.7 million, up from $1.4 million; revenue from coated film increased $0.9 million (or 24.1%) to $4.7 million, from $3.8 million, revenue from color printing increased $0.8 million (or 214.0%) to $1.2 million, from $0.4 million; revenue from BOPP tobacco decreased $0.5 million (or 4.5%) to $10.1 million, down from $10.6 million and revenue from water-based latex decreased $78,768 (or 28.2%) to $0.2 million, from $0.3 million, as compared to the 2012 period. In the second quarter of 2013, our domestic sales (in mainland China) increased as a percentage of total sales, from 82.7% in the second quarter of 2012, to 83.8% in the second quarter of 2013.
Cost of Goods Sold
For the three months ended June 30, 2013, cost of goods sold (COGS) increased $0.2 million (or 1.3%), from $15.9 million in the 2012 period, to $16.1 million. COGS for the second quarters of 2013 and 2012 were 89.8% and 97.0% of our revenues, respectively. The decrease in COGS as a percentage of revenues was primarily caused by improved utilization of equipment and higher material utilization.
Gross Profit
Our gross profit for the three months ended June 30, 2013 was $1.8 million, with a profit margin of 10.2%, a 7.2% increase from 3.0% in the second quarter of 2012. The increase in profit margin was primarily a consequence of increased sales revenue resulting from an increase in unit price and the improved utilization of equipment and material that lowered our cost of goods sold.
Selling, General and Administrative (SG&A) Expenses
For the three months ended June 30, 2013, our SG&A expenses increased by $0.3 million (or 15.4%) to $2.3 million, compared to $2.0 million in the 2012 period. SG&A expenses include rent, management and staff salaries, insurance, marketing, accounting, legal, and research and development (R&D) expenses. The increase in SG&A expenses was mainly due to an increase of $0.3 million R&D expenses.
Interest Expense, net
For the three months ended June 30, 2013, interest expense, net increased by $184,808 (or 58.9%) to $498,439 compared to $313,631 in the 2012 period, primarily due to additional short-term and long-term loans.
Other Income, net
For the three months ended June 30, 2013, there was other income of $3.6 million, representing an increase of $3.3 million (or 1,112.1%), compared to $294,712 for the same period in 2012. In the second quarter of 2013 and 2012, we recognized approximately $0.3 million in subsidy income from PRC governmental agencies for developing technology and R&D projects. In addition, in the second quarter of 2013, we also recognized approximately $3.2 million as a gain from the sale of a patent.
Income Tax Expense (benefit)
For the three months ended June 30, 2013, we recorded a tax provision of $284,684, compared to a tax benefit of $63,222 in the 2012 period. Our effective tax rates for the second quarters of 2013 and 2012 were 11.0% and 4.2%, respectively. The change in the effective tax rate is due to losses incurred by certain subsidiaries where the loss was not able to offset income generated by other subsidiaries.
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Net Income (Loss)
For the three months ended June 30, 2013, we generated net income of $2.3 million, representing an increase of $3.7 million (or 262.4%) from a net loss of $1.4 million during the 2012 period. The change in net income (loss) was principally due to an increase in revenue and increases in our gross margins, as explained above.
Comparison of Six Months Ended June 30, 2013 and 2012
The following table summarizes the results of our operations during the three-month periods ended June 30, 2013 and 2012 and provides information regarding the dollar and percentage increase or (decrease) in such periods:
Six Months Ended June 30, | $ | % | ||||||||||
2013 | 2012 | Change | Change | |||||||||
Revenues | $ | 31,793,826 | $ | 33,771,509 | $ | (1, 977,683 | ) | -5.9% | ||||
Cost of goods sold | 29,057,338 | 31,112,559 | (2,055,221 | ) | -6.6% | |||||||
Gross profit | 2,736,488 | 2,658,950 | 77,538 | 2.9% | ||||||||
Selling, general and administrative expenses | 4,364,007 | 4,265,476 | 98,531 | 2.3% | ||||||||
Interest expense, net of interest income | 811,245 | 593,471 | 217,774 | 36.7% | ||||||||
Other income, net | 4,579,548 | 193,529 | 4,386,019 | 2,266.3% | ||||||||
Exchange (loss) | (79,071 | ) | (9,648 | ) | (69,423 | ) | 719.6% | |||||
Income tax expense | 284,684 | 15,721 | 268,963 | 1710.9% | ||||||||
Net income (loss) attributed to noncontrolling interest | 7,152 | (63,027 | ) | 70,179 | 111.3% | |||||||
Net income (loss) attributed to Shiner | $ | 1,769,877 | $ | (1,968,810 | ) | $ | 3,738,687 | 189.9% |
Revenues
Revenues for the six months ended June 30, 2013 decreased $2.0 million (or 5.9%), to $31.8 million, compared to $33.8 million in the 2012 period. The decrease was primarily attributable to decreased revenues generated from the sale of BOPP tobacco and advanced film which was partially offset by an increase in coated film, color printing, and water-based latex. In the six months ended June 30, 2013 revenue from BOPP tobacco decreased $3.1 million (or 15.1%) to $17.5 million, down from $20.6 million; revenue from advanced film decreased $15,280 (or 0.4%) to $3.5 million; revenue from water-based latex increased $0.1 million (or 36.4%) to $0.4 million from $0.3 million; revenue from coated film increased $0.3 million (or 3.9%) to $8.2 million, from $7.9 million, and revenue from color printing increased $0.7 million (or 52.7%) to $2.2 million, from $1.4 million. In the six months ended June 30, 2013 the percentage of revenue from domestic and international sales did not change significantly from the percentages in 2012. In the six months ended June 30 of 2013 and 2012, sales generated domestically accounted for 80.9% and 82.8%, respectively.
Cost of Goods Sold
For the six months ended June 30, 2013, COGS decreased $2.1 million (or 6.6%), from $31.1 million in the 2012 period, to $29.1 million. COGS for the six months ended June 30, 2013 and 2012 was 91.4% and 92.1% of our revenues, respectively. The decrease in COGS as a percentage of revenues was not significant.
Gross Profit
Our gross profit for the six months ended June 30, 2013 was $2.7 million, with a profit margin of 8.6%, a .07% increase from 7.9% for the six months ended June 30, 2012. The increase in profit margin was primarily a consequence of increased sales revenue resulting from an increase in unit price and the improved utilization of equipment and material that lowered our cost of goods sold.
Selling, General and Administrative (SG&A) Expenses
For the six months ended June 30, 2013, our SG&A expenses increased by $98,531 (or 2.3%) to $4.4 million, compared to $4.3 million in the 2012 period. SG&A expenses include rent, management and staff salaries, insurance, marketing, accounting, legal, and research and development (R&D) expenses. The increase in SG&A expenses was not significant.
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Interest Expense, net
For the six months ended June 30, 2013, interest expense, net increased by $217,774 (or 36.7%) to $811,245 compared to $593,471 in the 2012 period, primarily due to additional short-term and long-term loans.
Other Income, net
For the six months ended June 30, 2013, other income increased by $4.4 million (or 2,266.3%) to $4.6 million, compared to $0.2 in the 2012 period. For the six months ended June 30, 2013 we recognized $1.1 million in subsidy income from PRC governmental agencies for developing technology and R&D projects compared to $0.2 million in the 2012 period and recognized approximately $3.2 million as a gain from the sale of a patent in 2013.
Income Tax Expense
For the six months ended June 30, 2013, we recorded a tax provision of $284,684, compared to $15,721 in the 2012 period. Our effective tax rates for the six months ended June 30 2013 and 2012 were 13.8% and (.08)%, respectively. The change in the effective tax rate is due to losses incurred by certain subsidiaries where the loss was not able to offset income generated by other subsidiaries. This resulted in us providing a provision for income taxes in the six months ended June 30, 2012 even though we incurred an overall net loss.
Net Income (Loss)
For the six months ended June 30, 2013, we incurred a net income of $1.8 million, representing an increase of $3.7 million or 189.9% from a net loss of $2.0 million during the 2012 period. The change in net income (loss) was principally due to an increase in revenue and increases in our gross margins, as explained above.
Liquidity and Capital Resources
At June 30, 2013, we had $5.4 million in cash and equivalents on hand, compared to $4.2 million at December 31, 2012. We had working capital of $9.9 million at June 30, 2013, compared to $6.3 million at December 31, 2012. The increase in working capital is attributed to the net income generated during the first half of 2013. Our principal demands for liquidity are: increasing capacity, purchasing raw materials, sales distribution and the possible acquisition of new subsidiaries in our industry, as well as other general corporate purposes.
Below is a tabular summary of our cash flows for the six months ended June 30, 2013, and 2012:
Six Months Ended June 30, | ||||||
2013 | 2012 | |||||
Net cash used in operating activities | $ | (694,494 | ) | $ | (5,552,021 | ) |
Net cash used in investing activities | (985,008 | ) | (1,847,774 | ) | ||
Net cash provided by financing activities | 2,715,853 | 7,977,939 | ||||
Effect of exchange rate changes on cash and equivalents | 111,511 | 25,348 | ||||
Net increase in cash and equivalents | 1,147,862 | 603,492 | ||||
Cash and equivalents at beginning of period | 4,233,183 | 2,831,808 | ||||
Cash and equivalents at end of period | $ | 5,381,045 | $ | 3,435,300 |
Operating Activities
Net cash flows used in operating activities during the six months ended June 30, 2013 was $0.7 million, a decrease of $4.9, compared to $5.6 million in the 2012 period. The decrease in cash used in operating activities during the six months ended June 30, 2013 was primarily attributable to our generating net income during the six months ended June 30, 2013 compared to a net loss during the same period in 2012.
Investing Activities
Net cash flows used in investing activities during the six months ended June 30, 2013 was $1.0 million, a decrease of $0.9 million, compared to $1.9 million in the 2012 period. During 2012, we used $1.6 million for the acquisition of property and equipment, compared to $48,258 in 2013. The property and equipment were purchased for the construction of a new BOPP film production line and a fully automated plant equipped with state-of-the-art production machinery. In the 2013 period there was cash provided from the repayment of notes receivable of $0.5 million, offset by an increase in restricted cash of $1.5 million.
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Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2013 was $2.7 million, a decrease of $5.3 million compared to the 2012 period. During the 2013 period, we decreased our net cash provided by financing activities by repaying $16.6 million of short-term loans, an increase of $4.9 million from $11.7 million in the 2012 period, and increased our proceeds from our loans from $18.6 million during the 2012 period to $19.3 in 2013.
Assets
Our total assets as of June 30, 2013 were $84.7 million, an increase of $7.2 million, compared to $77.5 million as of December 31, 2012. The increase was primarily due to the increase of cash of $1.1 million, restricted cash of $1.6 million, accounts receivable of $2.3 million and inventory of $4.2 million, offset by a decrease in advances to suppliers of $1.6 million. We intend to continue our efforts to maintain accounts receivable at reasonable levels in relation to our sales.
Liabilities
Our current liabilities increased by $4.5 million as of June 30, 2013, compared to December 31, 2012, principally due to an increase in accounts payable of $1.8 million and short-term loans of $3.1 million.
Loan Commitments
On August 2, 2010, Hainan Shiner, our wholly owned subsidiary, entered into a credit facility with the Hainan Branch of the Bank of China. The credit facility is comprised of a seven-year RMB70 million, or $11.1 million, secured revolving credit facility. On each of January 24, February 10, February 16, February 17, March 25, November 30, December 23, 2011 and March 19, 2012, Hainan Shiner made withdrawals on the credit facility of $2.5 million, $2.6 million, $2.2 million, $1.2 million, $0.4 million, $0.2 million, $0.5 million and $1.1 million, respectively. Hainan Shiner may only use the loan proceeds to improve the technology of its BOPP film and to purchase certain equipment necessary for these improvements. Proceeds under the facility not used for these purposes may be subject to a misappropriation penalty interest rate of 100% of the current interest rate (6.6% at June 30, 2013) on the loan.
The initial interest rate on each withdrawal from the facility is the 5-year benchmark lending rate announced by the Peoples Bank of China on the date of such withdrawal, and is subject to adjustment every 12 months based upon this benchmark. Additional interest is paid on any overdue loan under this credit facility of 50% of the current interest rate on the loan. Hainan Shiner and certain of its affiliates, including the Company, provided guarantees and certain land use rights, buildings, and property as collateral under this facility.
The credit facility includes financial covenants that prohibit Hainan Shiner from making distributions to its sole shareholder if (a) its after-tax net income for the fiscal year is zero or negative, (b) its after-tax net income is insufficient to make up its accumulated loss for the last several fiscal years, (c) its income before tax is not utilized in paying off the capital, interest and expense of the lender, or (d) the income before tax is insufficient to pay the capital, interest and expense of the lender.
During the six months ended June 30, 2013, we paid $16.6 million of our short-term loans and borrowed an additional $19.3 million in short-term loans. The current outstanding short-term loans are due through June 2014. We intend to meet our liquidity requirements, including capital expenditures related to the purchase of equipment, purchase of raw materials, and the expansion of our business, through cash flow provided by operations, and our current credit facilities.
Obligations Under Material Contracts
We have no material payment obligations other than the loan commitments disclosed above.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require managements difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from managements current judgments.
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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, Net
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 Companys revenue recognition policies comply with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 605, Revenue Recognition. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.
Sales revenue consists of the invoiced value of goods, which is net of value-added tax (VAT). All of the Companys products are sold in the PRC and are subject to Chinese VAT of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing their end product. The Company recorded VAT payable and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the receivables.
Sales and purchases are recorded net of VAT collected and paid. VAT taxes are not affected by the income tax holiday.
Stock-Based Compensation
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 (FV) at the grant date and recognize the expense over the employees requisite service period. The Company recognizes in the statement of operations the grant-date FV of stock options and other equity-based compensation issued to employees and non-employees.
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 Companys consolidated financial statements.
Basic and Diluted Earnings Per Share
Earnings per share (EPS) is calculated in accordance with the ASC Topic 260, Earnings Per Share. Basic EPS is based upon the weighted average number of common shares outstanding. Diluted EPS 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.
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Recent Accounting Pronouncements
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. This ASU requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. In January 2013, this guidance was amended by ASU 2013-01, Clarifying the Scope of Disclosure about Offsetting Assets and Liabilities, which limits the scope of ASU No. 2011-11 to certain derivatives, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions. This guidance is effective for annual and interim reporting periods beginning on or after January 1, 2013. The adoption of this standard did not have a material impact on our consolidated results of operations, financial condition, or liquidity.
Seasonality of Our Sales
The first quarter of the calendar year is typically the slowest season of the year for us due to the Chinese New Year holiday. During this period, accounts receivable collection tends to be very slow and we also need to purchase raw materials to prepare for upcoming busier seasons.
Inflation
Inflation does not materially affect our business or the results of our operations.
Off-Balance Sheet Arrangements
As of June 30, 2013, we did not have any off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer, Mr. Qingtao Xing and our Interim Chief Financial Officer, Xuezhu Xu, of the effectiveness of the design and operation of our disclosure controls and procedures, as of June 30, 2013. Based upon, and as of the date of this evaluation, Mr. Xing and Mr. Xu, determined that, as of June 30, 2013, and as of the date of this report, our disclosure controls and procedures were effective.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal controls over financial reporting during the six months ended June 30 of fiscal 2013 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. 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 our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.
- 26 -
ITEM 1A. RISK FACTORS.
There are no material changes from the risk factors previously disclosed in Item 1A Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2012.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
We have no information to disclose that was required to be in a report on Form 8-K during the period covered by this report, but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.
ITEM 6. EXHIBITS
Exhibit |
Description of Exhibit |
| |
31.1 | |
| |
31.2 | |
| |
32.1 | |
| |
32.2 | |
| |
101* |
Interactive data files pursuant to Rule 405 of Regulation S-T |
* |
Filed with this Form 10-Q for Shiner International, Inc. Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections. |
- 27 -
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SHINER INTERNATIONAL, INC. | |
August 15, 2013 | By: /s/ Qingtao Xing |
Name: Qingtao Xing | |
Title: President and Chief Executive Officer | |
(Principal Executive Officer) | |
August 15, 2013 | By: /s/ Xuezhu Xu |
Name: Xuezhu Xu | |
Title: Interim Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
Exhibit 31.1
CERTIFICATIONS
I, Qingtao Xing, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q/A of Shiner International, Inc.; | ||
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; | ||
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and | ||
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): | ||
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 16, 2013
/s/ Qingtao
Xing
Qingtao Xing
Chief Executive Officer
(Principal
Executive Officer)
Exhibit 31.2
CERTIFICATIONS
I, Xuezhu Xu, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q/A of Shiner International, Inc.; | ||
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; | ||
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and | ||
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): | ||
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 16, 2013
/s/Xuezhu Xu | |
Xuezhu Xu | |
Interim Chief Financial Officer | |
(Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT
OF 2002
The undersigned, Qingtao Xing, the Chief Executive Officer of SHINER INTERNATIONAL, INC. (the Company), DOES HEREBY CERTIFY that:
1. The Companys Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2013 (the Report), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
IN WITNESS WHEREOF, each of the undersigned has executed this statement this 16th day of August, 2013.
/s/ Qingtao Xing | |
Qingtao Xing | |
Chief Executive Officer | |
(Principal Executive Officer) |
A signed original of this written statement required by Section 906 has been provided to Shiner International, Inc. and will be retained by Shiner International, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 32.2
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT
OF 2002
The undersigned, Xuezhu Xu, the Interim Chief Financial Officer of SHINER INTERNATIONAL, INC. (the Company), DOES HEREBY CERTIFY that:
1. The Companys Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2013 (the Report), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
IN WITNESS WHEREOF, each of the undersigned has executed this statement this 16th day of August, 2013.
/s/ Xuezhu Xu | |
Xuezhu Xu | |
Interim Chief Financial Officer | |
(Principal Financial Officer and | |
Principal Accounting Officer) |
A signed original of this written statement required by Section 906 has been provided to Shiner International, Inc. and will be retained by Shiner International, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Current Vulnerability Due to Certain Concentrations
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Current Vulnerability Due to Certain Concentrations [Text Block] | Note 12 - Current Vulnerability Due to Certain Concentrations There were no customers that exceeded 10% of the Company’s sales for the six months ended June 30, 2013 or 2012. One vendor provided 16% of the Company’s raw materials for the six months ended June 30, 2013, as compared to one vendor that provided 17% of the Company’s raw material purchases for the six months ended June 30, 2012. At June 30, 2013 and December 31, 2012, the Company owed these vendors $1,460,650 and $1,143,862, respectively. 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. |
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Net revenue | $ 17,950,297 | $ 16,401,485 | $ 31,793,826 | $ 33,771,509 |
Cost of goods sold | 16,127,248 | 15,913,476 | 29,057,338 | 31,112,559 |
Gross profit | 1,823,049 | 488,009 | 2,736,488 | 2,658,950 |
Operating expenses: | ||||
Selling | 769,904 | 577,500 | 1,435,329 | 1,232,031 |
General and administrative | 1,497,585 | 1,386,968 | 2,928,678 | 3,033,445 |
Total operating expenses | 2,267,489 | 1,964,468 | 4,364,007 | 4,265,476 |
Income (loss) from operations | (444,440) | (1,476,459) | (1,627,519) | (1,606,526) |
Non-operating income (expense): | ||||
Other income (expense), net | 3,572,108 | 294,712 | 4,579,548 | 193,529 |
Interest income | 14,411 | 9,565 | 75,761 | 18,394 |
Interest expense | (512,850) | (323,196) | (887,006) | (611,865) |
Exchange loss | (41,011) | (3,775) | (79,071) | (9,648) |
Total non-operating income (expense) | 3,032,658 | (22,694) | 3,689,232 | (409,590) |
Income (loss) before income tax | 2,588,218 | (1,499,153) | 2,061,713 | (2,016,116) |
Income tax expense (benefit) | 284,684 | (63,222) | 284,684 | 15,721 |
Net income (loss) | 2,303,534 | (1,435,931) | 1,777,029 | (2,031,837) |
Net income (loss) attributed to noncontrolling interest | 7,137 | (21,641) | 7,152 | (63,027) |
Net income (loss) attributed to Shiner | 2,296,397 | (1,414,290) | 1,769,877 | (1,968,810) |
Comprehensive income (loss): | ||||
Net income (loss) | 2,303,534 | (1,435,931) | 1,777,029 | (2,031,837) |
Foreign currency translation gain | 517,918 | 28,762 | 706,709 | 307,086 |
Comprehensive income (loss) | $ 2,821,452 | $ (1,407,169) | $ 2,483,738 | $ (1,724,751) |
Weighted average shares outstanding: | ||||
Basic | 27,541,491 | 27,541,491 | 27,541,491 | 27,541,491 |
Diluted | 27,541,491 | 27,541,491 | 27,541,491 | 27,541,491 |
Income (loss) per share attributed to Shiner common stockholders: | ||||
Basic | $ 0.08 | $ (0.05) | $ 0.06 | $ (0.07) |
Diluted | $ 0.08 | $ (0.05) | $ 0.06 | $ (0.07) |
Prepaid Expense and Other Current Assets
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Prepaid Expense and Other Current Assets [Text Block] | Note 5 – Prepaid Expenses and Other Current Assets
Prepaid expense and other current assets at June 30, 2013 and December 31, 2012 consisted of the following:
|
Inventory (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Inventory [Table Text Block] |
|
Commitments and Contingencies
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Commitments and Contingencies [Text Block] | Note 13 – Commitments and Contingencies At June 30, 2013, the Company was contingently liable to banks for discounted notes receivable and to vendors for endorsed notes receivable of $827,466 (RMB5,114,131). |
Intangible Assets (Details) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Intangible Assets Intangible Assets 1 | $ 1,186,431 |
Intangible Assets Intangible Assets 2 | 1,162,234 |
Intangible Assets Intangible Assets 3 | (105,875) |
Intangible Assets Intangible Assets 4 | (92,246) |
Intangible Assets Intangible Assets 5 | 1,080,556 |
Intangible Assets Intangible Assets 6 | $ 1,069,988 |
Statutory Common Welfare Fund (Narrative) (Details) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Statutory Common Welfare Fund 1 | 10.00% |
Statutory Common Welfare Fund 2 | 50.00% |
Statutory Common Welfare Fund 3 | 5.00% |
Statutory Common Welfare Fund 4 | 10.00% |
Statutory Common Welfare Fund 5 | $ 0 |
Statutory Common Welfare Fund 6 | $ 0 |
Other Payables (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Other Payables [Table Text Block] |
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Intangible Assets (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Intangible Assets [Table Text Block] |
|
Inventory (Details) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Inventory Inventory 1 | $ 4,322,783 |
Inventory Inventory 2 | 4,264,823 |
Inventory Inventory 3 | 1,663,592 |
Inventory Inventory 4 | 1,647,956 |
Inventory Inventory 5 | 9,131,781 |
Inventory Inventory 6 | 4,960,861 |
Inventory Inventory 7 | 15,118,156 |
Inventory Inventory 8 | 10,873,640 |
Inventory Inventory 9 | (778,791) |
Inventory Inventory 10 | (762,908) |
Inventory Inventory 11 | 14,339,365 |
Inventory Inventory 12 | $ 10,110,732 |
Intangible Assets (Narrative) (Details)
|
6 Months Ended |
---|---|
Jun. 30, 2013
Y
|
|
Intangible Assets 1 | 54 |
Intangible Assets 2 | 57 |
Commitments and Contingencies (Narrative) (Details)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2013
USD ($)
|
Jun. 30, 2013
CNY
|
|
Commitments And Contingencies 1 | $ 827,466 | |
Commitments And Contingencies 2 | 5,114,131 |
Other Payables (Details) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Other Payables Other Payables 1 | $ 4,080,596 |
Other Payables Other Payables 2 | 4,227,988 |
Other Payables Other Payables 3 | 2,229,717 |
Other Payables Other Payables 4 | 2,317,006 |
Other Payables Other Payables 5 | 288,813 |
Other Payables Other Payables 6 | 282,922 |
Other Payables Other Payables 7 | 892,556 |
Other Payables Other Payables 8 | 652,751 |
Other Payables Other Payables 9 | 965,404 |
Other Payables Other Payables 10 | 732,479 |
Other Payables Other Payables 11 | 8,457,086 |
Other Payables Other Payables 12 | $ 8,213,146 |
Geographical Sales (Tables)
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Jun. 30, 2013
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Geographical Distribution of Shiner's Revenue [Table Text Block] |
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Depreciation of Property and Equipment Is Using Straight-Line Method for Substantially all Assets with Estimated Lives (Details)
|
6 Months Ended |
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Jun. 30, 2013
Y
|
|
Summary Of Significant Accounting Policies Depreciation Of Property And Equipment Is Using Straight-line Method For Substantially All Assets With Estimated Lives 1 | 10 |
Summary Of Significant Accounting Policies Depreciation Of Property And Equipment Is Using Straight-line Method For Substantially All Assets With Estimated Lives 2 | 8 |
Summary Of Significant Accounting Policies Depreciation Of Property And Equipment Is Using Straight-line Method For Substantially All Assets With Estimated Lives 3 | 5 |
Summary Of Significant Accounting Policies Depreciation Of Property And Equipment Is Using Straight-line Method For Substantially All Assets With Estimated Lives 4 | 20 |
Prepaid Expense and Other Current Assets (Tables)
|
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Jun. 30, 2013
|
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Schedule of Prepaid Expenses and Other Current Assets [Table Text Block] |
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Organization and Basis of Presentation
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Organization and Basis of Presentation [Text Block] | Note 1 - Organization and Basis of Presentation The unaudited consolidated financial statements were prepared by Shiner International, Inc., a Nevada corporation (the “Company” or “Shiner”), pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) were omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2013. The results for the three and six months ended June 30, 2013, are not necessarily indicative of the results to be expected for the year ending December 31, 2013. Organization and Line of Business Shiner International, Inc. (the “Company” or “Shiner”) was incorporated in the State of Nevada on November 12, 2003. The Company, through its subsidiaries manufactures Biaxially Oriented Polypropylene (“BOPP”) tobacco film, coated films, color printing products, advanced film, and water based coatings selling to customers throughout the People’s Republic of China (“China” or “PRC”), Asia, Australia, Europe, the Middle East and North America. Our products are sold to companies in the following industries: food, tobacco, chemical, agribusiness, medical, pharmaceutical, personal care, electronics, automotive, construction, graphics, music and video publishing and other consumer goods. Except as otherwise indicated by the context, all references in this report to “Shiner,” “Company,” “we,” “us” or “our” are to Shiner International, Inc. and its direct and indirect subsidiaries: (i) Hainan Shiner Industrial Co., Ltd., or “Hainan Shiner,” (ii) Hainan Shiny-Day Color Printing Packaging Co., Ltd., or “Shiny-Day,” (iii) Hainan Modern Hi-Tech Industrial Co., Ltd., or “Hainan Modern,” (iv) Zhuhai Modern Huanuo Packaging Material Co., Ltd., or “Zhuhai Modern,” (v) Shimmer Sun Ltd., or “Shimmer Sun,” (vi) Hainan Jingyue New Material Co., Ltd., or “Jingyue,” (vii) Hainan Shunhao New Material Co., Ltd., or “Shunhao,” (viii) Hainan Yongxin Environmental Co., Ltd., or “Yongxin,” and (ix) Ningbo Neisuoer Latex Co., Ltd., or “Ningbo”. Basis of Presentation The accompanying consolidated financial statements include the accounts of Shiner and its subsidiaries as follows:
The accompanying consolidated financial statements were prepared in conformity with the 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”). Noncontrolling Interest On May 2, 2011, Shiner acquired 100% of the stock of Shimmer Sun Ltd. (“Shimmer Sun”) for $3.2 million. The Company paid $1.3 million in cash and the remaining $1.9 million was paid by September 30, 2011. The acquisition gave Shiner a 65% controlling interest in Shimmer Sun’s subsidiary, Ningbo. The transaction was accounted for under the acquisition method of accounting, with the purchase price allocated based on the fair value (“FV”) of the individual assets acquired and liabilities assumed. The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation,” which governs the accounting for and reporting of non-controlling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also required changes to certain presentation and disclosure requirements. The net income (loss) attributed to the NCI is separately designated in the accompanying statements of operations and other comprehensive income (loss). Losses attributable to the NCI in a subsidiary may exceed the NCI’s interests in the subsidiary’s equity. The excess attributable to the NCI is attributed to those interests. The NCI shall continue to attribute its share of losses even if that attribution results in a deficit NCI balance. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Shiner International, Inc. and its subsidiaries. All significant intercompany transactions and balances were eliminated in consolidation. Foreign Currency Translation The accounts of the Company’s Chinese subsidiaries are maintained in RMB and the accounts of the US parent company are maintained in USD. The accounts of the Chinese subsidiaries are translated into USD in accordance with ASC Topic 830, “Foreign Currency Matters,” with the RMB as the functional currency. According to Topic 830, all assets and liabilities are translated at the exchange rate on the balance sheet date, stockholders’ equity is translated at historical rates and statement of operations items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the statement of operations and other comprehensive income (loss). |
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Advances to Suppliers [Text Block] | Note 3 – Advances to Suppliers Advances to suppliers represent prepayment to vendors for the purchases of inventory. |
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Intangible Assets [Text Block] | Note 6 - Intangible Assets, net
Intangible assets at June 30, 2013 and December 31, 2012 consisted of rights to use land as follows:
Pursuant to the regulations, the PRC government owns all land. The Company has recognized the amounts paid for the acquisition of rights to use the land as an intangible asset and amortizes such rights over the period the Company has use of the land, which range from 54 to 57 years. |
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Inventory [Text Block] | Note 4 – Inventory, net Inventory at June 30, 2013 and December 31, 2012 consisted of the following:
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Segment Information (Narrative) (Details)
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Segment Information 1 | 60.00% |
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Schedule of Maturities of Long-term Debt [Table Text Block] |
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Organization and Basis of Presentation (Narrative) (Details) (USD $)
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Jun. 30, 2013
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Organization And Basis Of Presentation 1 | 100.00% |
Organization And Basis Of Presentation 2 | $ 3 |
Organization And Basis Of Presentation 3 | 1 |
Organization And Basis Of Presentation 4 | $ 2 |
Organization And Basis Of Presentation 5 | 65.00% |
Employee Welfare Plans (Narrative) (Details) (USD $)
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Employee Welfare Plans 1 | $ 15,117 |
Employee Welfare Plans 2 | 36,323 |
Employee Welfare Plans 3 | 40,302 |
Employee Welfare Plans 4 | $ 42,805 |