Overview

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

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

· Shiner Industrial located in Haikou, Hainan Province;

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

· Zhuhai located in Zhuhai, Guangdong Province; and

· Hainan Hi-Tech located in Haikou, Hainan Province.

We operate in several markets within the packaging film segment: BOPP based film, coated film, anti-counterfeit film and color printed packaging. For the year ended December 31, 2008, color printed packaging products made up 19.0% of our revenue, BOPP tobacco film made up 35.1% of our revenue, coated film accounted for 25.6% of our revenue and anti-counterfeit film sales equaled 20.3% of our revenue.

Our current production capacity consists of:

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

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

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

· Three color printing lines; and

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

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

Results of Operations

Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

                                                                           Year
                                                                          Ended
                                                   Year Ended            December
                                                December 31, 2008        31, 2007        $ Change        % Change
Revenues                                       $        51,594,842     $ 42,762,615     $ 8,832,227           20.7 %
Cost of Goods Sold                                      42,026,145       34,225,643       7,800,502           22.8 %
Gross Profits                                            9,568,697        8,536,972       1,031,725           12.1 %
Selling, General and Administrative Expenses             4,424,688        3,375,492       1,049,196           31.1 %
Interest Expense (net)                                     (86,982 )        (31,251 )        55,731          178.3 %
Other Income (Expense), net                                (43,336 )         72,713        (116,049 )       (159.6 ) %
Subsidy Income                                             469,234                          469,234              -
Income Tax Expense                                         546,723          409,294         137,429           33.6 %
Net Income                                               4,879,306        4,540,129         339,177            7.5 %

Revenues

Our revenues for the year ended December 31, 2008 increased by 20.7% or $8,832,227 compared to the same period last year. Higher revenues resulted from a 55% increase in tobacco BOPP sales and 195% increase in the sales of anti-counterfeit film. The increase in revenues was due to higher sales volumes and increases in the average unit prices. For BOPP products, $4,993,917 was due to an increase in sales volume and $1,435,994 was due to an increase in unit sale prices. Anti-counterfeit film sales grew by $7,517,812 due to higher sales volumes.

International sales for the year ended December 31, 2008 totaled $10,972,931 accounting for approximately 21.3%of total revenues in comparison to $9,161,159or 21.4% for the year ended December 31 of 2007. A 19.8% or $1,811,772 increase in international sales was primarily due to a 530.3% increase in the anti-counterfeit film sales.

Cost of Goods Sold

Our cost of goods sold during the year ended December 31, 2008 were 81.5% of revenues as compared to 80.0% of revenues during the year ended December 31, 2007 as a result of slightly higher costs of raw materials.

Gross Profit

Our gross profit during the year ended December 31, 2008 was $9,568,697, representing a gross margin of 18.5%, a decrease of 1.9% from a gross margin of 20.0% that we experienced during the year ended December 31, 2007. The decrease in gross margin is due to higher raw material costs.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses increased by 31.1% or $1,049,196 to $4,424,688 for the year ended December 31, 2008 compared to $3,375,492 for the year ended December 31, 2007. Selling expenses for the year ended December 31, 2008 increased by 38.1% to $1,839,846 in comparison to the same period in 2007 due to increased transportation costs. General and administrative expenses for the year ended December 31, 2008 increased by 26.5% to $2,584,842 in comparison to the same period in 2007. The increase in general and administrative expense is due in part to an increase in regulatory filings and professional fees.

Interest Expense

Our interest expense in the year ended December 31, 2008 increased 178.3% from the same period in 2007. This increase is mainly attributable to an increase in the average note payable balance.

Other Income (Expense)

The decrease in other income (expense) was due in large part to a decrease in waste materials that can be sold.

Subsidy Income

In 2008, we received a $469,234 subsidy from the Chinese government. We did not receive any subsidies in 2007.

Income Tax Expense

Our effective tax rate for the year ended December 31, 2008 was 10.1% as opposed to 8.3% for the year ended December 31, 2007. Since we operate in a privileged economic zone, we will continue to enjoy certain tax privileges as a result of a reduced rate.

Net Income

The increase in our net income for the year ended December 31, 2008 as compared to the same period for 2007 was the result of higher sales and higher subsidy income offset by a slightly lower gross margin percentage and higher operating expenses.

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

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

Revenues

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

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

Cost of Goods Sold

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

Gross Profit

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

Selling, General and Administrative Expenses

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

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

Interest Expense

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

Other Income (Expense)

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

Income Tax Expense

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

Net Income

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

Off-Balance Sheet Arrangements

There were no off-balance sheet arrangements during the year ended December 31, 2008 that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

Liquidity and Capital Resources

Cash Flows

At December 31, 2008, we had $4,500,666 in cash and cash equivalents on hand. Our principal demands for liquidity are increasing capacity, purchasing raw materials, sales distribution and the possible acquisition of new subsidiaries in our industry as opportunities present themselves, as well as general corporate purposes.

As of December 31, 2008, we had seven short-term loans outstanding for a total of $3,884,197, with interest rates between 7.5% and 8.2%. The loans are due between March 3, 2009 and May 30, 2009 and are collateralized by a one year time deposit or by buildings land use rights and machinery. As of December 31, 2008, we had working capital of $16,086,561, an increase of $1,407,614 from our working capital at December 31, 2007. We anticipate that we will have adequate working capital to fund our operations and growth in the foreseeable future.

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

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

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

Net cash flows provided by operating activities for the year ended December 31, 2008 was $2,473,319 compared to $2,938,196 for the year ended December 31, 2007. This change in cash flows from operating activities was mainly due to a change in current assets and liabilities..

We used $6,383,767 in investing activities during the year ended December 31, 2008 for the acquisition of property and equipment and payments on notes receivable.

Cash provided from financing activities in the year ended December 31, 2008 was $2,846,484, and included the proceeds from a short term loan of $3,774,309, offset by the payment of both a short-term payable of $822,528 and dividends of $6,297.

Assets

As of December 31, 2008, our accounts receivable decreased by $1,393,841 compared with the balance as of December 31, 2007. The decrease in accounts receivable on year ended December 31, 2008 was due primarily to increased sales offset by better collections. We intend to continue our efforts to maintain accounts receivable at reasonable levels in relation to our sales. Notes receivables increased by $3,748 in the same period. Advances to suppliers increased by $1,163,209 and inventory increased by $668,123 during year ended December 31, 2008.

Liabilities

Our accounts payable decreased by $746,839 during the year ended December 31, 2008 and other payables decreased by $1,250,726 for the same period. Unearned revenues (payments received before all the relevant criteria for revenue recognition are satisfied) decreased by $358,540 and tax and welfare payable decreased by $924,137 over the same period.

Short-term loans increased by $3,061,669 due to the receipt of proceeds from a new loans entered into during the year ended December 31, 2008.

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

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

Recent Accounting Pronouncements

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

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

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

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

In March 2008, FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133." SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. Based on current conditions, we do not expect the adoption of SFAS 161 to have a significant impact on our results of operations or financial position.

In May 2008, FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles." SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP in the United States. SFAS 162 will not have an impact on our financial statements.

In May 2008, FASB issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60." The scope of SFAS 163 is limited to financial guarantee insurance (and reinsurance) contracts, as described in this Statement, issued by enterprises included within the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial guarantee contracts issued by enterprises excluded from the scope of Statement 60 or to some insurance contracts that seem similar to financial guarantee insurance contracts issued by insurance enterprises (such as mortgage guaranty insurance or credit insurance on trade receivables). SFAS 163 also does not apply to financial guarantee insurance contracts that are derivative instruments included within the scope of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 163 will not have an impact on our financial statements.