Special Note Regarding Forward Looking Statements

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 April 12, 2012.

Because the factors discussed in this report could cause 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:

? "Shiner," "Company," "we," "us" or "our" are to Shiner International, Inc., a Nevada corporation, and its wholly-owned subsidiaries, Hainan Shiner Industrial Co., Ltd., or "Hainan Shiner," a PRC company, and Shimmer Sun Ltd., or "Shimmer Sun," a PRC company; it's 70% majority-owned subsidiary, Shanghai Juneng Functional Film Company, Ltd. or "Shanghai Juneng," a PRC company; Shiner Industrial's wholly-owned subsidiaries, Hainan Shiny-Day Color Printing Packaging Co., Ltd., or "Shiny-Day," a PRC company, Hainan Modern Hi-Tech Industrial Co., Ltd., or "Hainan Modern," a PRC company, and Zhuhai Modern Huanuo Packaging Material Co., Ltd., or "Zhuhai Modern", a PRC company; and Shimmer Sun's 65% majority-owned subsidiary company, Ningbo Neisuoer Latex Co., Ltd., or "Ningbo," a PRC company.

? "SEC" are to the United States Securities and Exchange Commission;

? "Securities Act" are to the Securities Act of 1933, as amended; and "Exchange Act" are to the Securities Exchange Act of 1934, as amended;

? "RMB" are to Renminbi, the legal currency of China; and "U.S. dollar," "USD," "US$" and "$" are to the legal currency of the United States;

? "China," "Chinese" and "PRC" are to the People's Republic of China; and

? "BVI" are to the British Virgin Islands.

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, Ningbo and Shanghai Juneng we manufacture and sell packaging and anti-counterfeit plastic film to manufacturers and producers in China. We also sell three of our products, 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 total 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 total capacity of 2,500 tons a year; and two water-based latex reaction kettles with a total capacity of 3,000 tons a year.

The table below shows the percentage of revenue by each of our business segments for the three months ended March 31, 2012 and 2011:

Percent of Revenue

                        2012          2011
 BOPP tobacco film         57.8 %       50.5 %
 Water-based latex          0.1 %        0.0 %
 Coated film               23.7 %       30.9 %
 Color printing             5.9 %        8.2 %
 Advanced film             12.5 %       10.4 %
                          100.0 %      100.0 %

We have 19 patents by the State Intellectual Property Office of China and have 10 patent applications relating to our products and manufacturing processes pending. Although our patents and processes provide us with a competitive advantage, we do not believe the loss of any single patent would have a material adverse effect on our business as a whole.

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 accessible via www.shinerinc.com.

Results of Operations



Comparison of the Three Months Ended March 31, 2012 and 2011



                                                                          $                %
                                       2012             2011            Change          Change
Revenues                           $ 17,370,024     $ 15,906,845     $  1,463,179             9.2 %
Cost of goods sold                   15,199,083       13,539,738        1,659,345            12.3 %
Gross profit                          2,170,941        2,367,107         (196,166 )          -8.3 %
Selling, general and
administrative expenses               2,301,008        1,161,715        1,139,293            98.1 %
Interest expense, net of
interest income                         279,840          136,678          143,162           104.7 %
Other income (expense), net            (101,183 )        194,611         (295,794 )         152.0 %
Exchange loss                            (5,873 )        (55,795 )         49,922           -89.5 %
Income tax expense                       78,943          210,836         (131,893 )         -62.6 %
Net loss attributed to
noncontrolling interest                  41,386            8,310           33,076           398.0 %
Net income (loss) attributed to
Shiner                             $   (554,520 )   $  1,005,004     $ (1,559,524 )         155.2 %

Revenues

Revenues for the three months ended March 31, 2012 increased 9.2%, or $1.5 million, to $ 17.4 million, compared to $15.9 million in 2011. Advanced film sales increased 67.1% to $2.2 million, up from $1.3 million in 2011. This increase was mainly a result of increased sales across all of our product lines. BOPP tobacco revenue increased 24.9%, or $2.0 million, to $10.0 million in the three months ended March 31, 2012, from $8.0 million in 2011. Coated film revenue decreased 16.3%, or $0.8 million, to $4.1 million in the three months ended March 31, 2012, from $4.9 million in 2011. Our anti-counterfeit revenue increased 67.1%, or $0.9 million, to $2.2million in the three months ended March 31, 2012, from $1.3 million in of 2011. Our color printing segment revenues decreased 37.8%, or $0.63 million, to $1.0 million in the three months ended March 31, 2012, from $1.7 million in 2011.

The increase in revenue was primarily caused by a 9.9%, or $1.3 million, increase in the volume of our domestic sales during the three months ended March 31, 2012. Our domestic sales accounted for 82.8%, or $14.4 million of our sales during the three months ended March 31, 2012, while only 82.0%, or $13.1 million, of our sales were made domestically in the same 2011 period. The Company provides coated film to its largest customer, who manufactures snack cakes, and our remaining top three customers are tobacco manufacturers who use our BOPP tobacco film.

Internationally, we sell three lines of products: advanced film (anti-counterfeit film), coated film, and color printing. International sales for the three months ended March 31 2012 were $3.0 million, or 17.2%, of our revenues in 2012 as compared to $2.8 million or 18.0% of revenue for the same 2011 period. The increase was not significant. All international sales are indirect using a network of distributors and converters.

Cost of Goods Sold

Cost of goods sold ("COGS") increased $1.7 million, or 12.3%, from $13.5 million for the three months ended March 31, 2011, to $15.2 million for the 2012 period. The COGS was 87.5% and 85.1% of our revenue in the three months ended March 31, 2012 and 2011, respectively.

The principal cost component of our COGS is raw materials which includes petroleum. The increase in COGS year to year was primarily caused by an increase in raw material costs due to petroleum price fluctuations, an increase in the cost of labor, and the amortization of the added depreciation of Phase I of the Hainan manufacturing facility into the COGS. We estimate that a $10 per barrel increase in the price of crude oil would cause our raw material costs to increase by approximately 6%. There was some increase in the cost of our raw materials as a result of an increase in crude oil prices throughout the period. There has not been a significant difference in the COGS percentages among our different product lines and therefore, any increase or decrease in our raw material costs would be expected to have a similar impact on the profitability of our various product lines.

In a corporate effort to be environmentally friendly and improve work conditions in our production facilities, we had previously switched to non-benzene based ink products, which was appreciated by our customers at the time. Food safety regulations subsequently mandated the use of non-benzene based products in the packaging of foods and our prior switch helped our food packaging operations, which are conducted in the same production facilities, to easily comply.

Gross Profit

Our gross profit for the three months ended March 31, 2012 was $2.2 million, a profit margin of 12.5%, a decrease of 2.4% from 14.9% for the same 2011 period. The decrease in profit margin was primarily a consequence of an increase during the 2012 period in overhead unit rates as a result of increased labor costs and depreciation of the new property.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses increased by 98.1%, or $1.1 million, to $2.3 million for the three months ended March 31, 2012, compared to $1.2 million in the same 2011 period. General and administrative expenses include rent, management and staff salaries, insurance, marketing, accounting, legal, and research and development expenses ("R&D"). Although we have strict standards to control our general and administrative expenses, during the 2012 period we increased our R&D expenditures, as compared to the 2011 period. The increase in selling, general and administrative expenses is mainly due to an increase of $0.5 million in R&D expenses and an increase of $0.2 million for marketing activities.

Interest Expense, net

Interest expense increased by 104.7%, or $143,162, to $279,840 in the three months ended March 31, 2012, compared to $136,678 in the same period of 2011, primarily due to additional short-term and long-term loans.

Other Income (Expense)

Other income decreased by $295,794, or 152.0%, to ($101,183) for the three months ended March 31, 2012, compared to income of $194,611 in the same period of 2011. During the three months ended March 31, 2012, we received $ 0.3 million in subsidy income from Chinese Governmental Agencies for developing technology and for R&D projects.

Income Tax Expense

For the three months ended March 31, 2012, we recorded a tax provision of $78,943, compared to $210,836 for the same period of 2011. Our effective tax rates for 2012 and 2011 were 28.9% and 19%, respectively. The increase 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.

Net Income (Loss)

We had a net loss of ($554,520) during the three months ended March 31, 2012, which was a $1.5 million, or 155.2%, decrease from a $1.0 million net income during the same 2011 period. The decrease in net income was mainly due to increased labor costs, depreciation of our new property, no other income from a former landlord (related to payments received for vacating a leased property early in 2011) , offset by an increase in subsidy income.

Liquidity and Capital Resources

At March 31, 2012, we had $2.0 million in cash and equivalents on hand, compared to $2.8 million at December 31, 2011, and we had working capital of $7.7 million at both March 31, 2012 and December 31, 2011. The decrease in working capital is primarily due to the use of current assets such as cash, other payables and short-term loans to purchase non-current assets. 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 the cash flows for the three months ended March 31, 2012 and 2011:

                                                              2012              2011
Net cash (used in) provided by operating activities       $   1,063,030     $  (5,385,679 )
Net cash used in investing activities                        (1,176,067 )     (10,000,363 )
Net cash provided by (used in) financing activities            (718,938 )       9,754,597
Effect of exchange rate changes on cash and equivalents          22,196            31,785
Net (decrease)/increase in cash and equivalents                (809,779 )      (5,599,660 )
Cash and cash equivalents at beginning of the period          2,831,808         8,622,035
Cash and cash equivalents at end of the period            $   2,022,029     $   3,022,375

Operating Activities

Net cash flows provided by operating activities for the three months ended March 31, 2012 was $1.1 million, as compared to (5,385,679) used in operating activities during the same 2011 period. Net cash flows was comprised primarily of net loss of $0.6 million, offset by depreciation and amortization of $0.7 million and an increase in working capital components of $0.9 million.

As of March 31, 2012, our accounts receivable increased by $0.07 million compared with December 31, 2011. We intend to continue our efforts to maintain accounts receivable at reasonable levels in relation to our sales. As of March 31, 2012, our inventory increased by $3.4 million compared with December 31, 2011 and our advances to suppliers decreased by $2.2 million.

Investing Activities

We used $1.2 million from our investing activities during the three months ended March 31, 2012, as compared to $10.0 million used in investing activities during the same 2011 period. We primarily invested in the acquisition of property and equipment. We are building a new tobacco film production line in a fully automated plant equipped with state-of-the-art production machinery.

Financing Activities

Net cash used in financing activities during the three months ended March 31, 2012 was $0.7 million, as compared to $9.7 million provided by financing activities during the same 2011 period. During the three months ended March 31, 2012, we repaid $8.6 million of short term loans and received proceeds of $6.8 million and $1.0 million for short-term and long-term loans, respectively.

Loan Commitments

Our current liabilities increased by $1.8 million during the three months ended March 31, 2012, principally due to the increase in accounts and other payables. As of March 31, 2012, the amount, maturity date and term of each of our bank loans were as follows: (All amounts in U.S. Dollars)

Lender                                 Interest rate   Maturity date        Balance
The Hainan Branch of Shenzhen              8.53%       Feb 18, 2013    $  1,583,000
Development Bank
The Hainan Branch of Shenzhen              8.20%       Jun 30, 2012       1,583,000
Development Bank
The Hainan Branch of Industrial and     3.27%-6.41%     Jun 5, 2012       3,100,954
Commercial Bank of China
The Hainan Branch of Nanyang                N/A        Jun 23, 2012       2,706,954
Commercial Bank (China)
The Hainan Branch of the Bank of           6.60%       Jan 24, 2018       2.532,800
China
The Hainan Branch of the Bank of           6.60%       Feb 10, 2018       2,849,400
China
The Hainan Branch of the Bank of           6.60%       Feb 16, 2018       2,295,350
China
The Hainan Branch of the Bank of           6.60%       Feb 17, 2018       1,250,570
China
The Hainan Branch of the Bank of           6.60%       Mar 25, 2018         427,410
China
The Hainan Branch of the Bank of           6.60%       Nov 30, 2018         158,300
China
The Hainan Branch of the Bank of           6.60%       Dec 23, 2018         506,560
China
The Hainan Branch of the Bank of           6.60%       Jan 18, 2018       1,060,610
China
Total                                                                    20,054,908

During the three months ended March 31, 2012, we paid approximately $8.6 million of our short-term loans and borrowed an additional $6.8 million in short-term loans. These loans are due between June 30, 2012 and February 2013. 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 facility.

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 70 million RMB, or approximately $11.1 million, secured revolving credit facility. Hainan Shiner may not make any draw downs under this facility after March 31, 2012. 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 approximately $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 on the loan.

The initial interest rate on each withdrawal from the facility will be the 5-year benchmark lending rate announced by the People's Bank of China on the date of such withdrawal, and is subject to adjustment every 12 months based upon this benchmark. Additional interest will be paid on any overdue loan under this credit facility of 50% of the current interest rate on the loan. As collateral under this facility, Hainan Shiner and certain of its affiliates, including the Company, provided guarantees and certain land, buildings and property.

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.

Obligations under Material Contracts



We have the following material payment obligations:



                                                           Payments due by Period
                                Less than          One to         Three to        More Than
                                 One Year       Three Years      Five Years       Five Years         Total
Short-term loan                $  8,973,908     $          -     $         -     $          -     $  8,973,908
Long-term loans                           -                -               -       11,081,000        11,081,00 0
Interest on loan obligations        927,034        1,462,692       1,462,692          548,510        4,400,928
Lease obligations                   428,928          689,500               -                -        1,118,428
Total                          $ 10,329,870     $  2,152,192     $ 1,462,692     $ 11,629,510     $ 25,574,264

Critical Accounting Policies

Accounts Receivable

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

Inventory

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

Revenue Recognition

The Company's revenue recognition policies are in compliance with SEC Staff Accounting Bulletin ("SAB") 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

Sales revenue consists of the invoiced value of goods, which is net of value-added tax ("VAT"). All of the Company's 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 at the grant date and recognize the expense over the employee's requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees. There were 120,000 options outstanding as of March 31, 2012.

Income Taxes

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

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

Basic and Diluted Earnings Per Share

Earnings per share ("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. There were 120,000 options and 521,664 warrants outstanding as of March 31, 2012. All options and warrants were excluded from the diluted loss per share calculation due to their anti-dilutive effect since the exercise prices are greater than the average stock price.

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-04 which was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This guidance is effective for us beginning on January 1, 2012. The adoption of ASU 2011-04 did not have a significant impact our consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in Accounting Standards Codification (ASC) 220, Comprehensive Income, and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive . . .