Shiner International, Inc.

In March 2016, the FASB issued an ASU amending the accounting for stock-based compensation and requiring excess tax benefits and deficiencies to be recognized as a component of income tax expense rather than equity. This guidance also requires excess tax benefits to be presented as an operating activity on the statement of cash flows and allows an entity to make an accounting policy election to either estimate expected forfeitures or to account for them as they occur. The ASU is effective for reporting periods beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact of the ASU; however, we expect the ASU will have a material impact on the Company’s consolidated financial statements.

During the three months ended March 31, 2016, the Company repaid approximately $6.1 million of this credit facility and during the year ended December 31, 2015, the Company repaid approximately $6.4 million of this credit facility. At March 31, 2016 and December 31, 2015, the outstanding balance under this credit facility was approximately $6.2 million and $12.3 million, respectively.

Revenues for the three months ended March 31, 2016 decreased $1.5 million (or 10.9 %), to $12.3 million, compared to $13.8 million in 2015. The decrease was primarily attributable to decreased revenues generated from our coated film, color printing, and water-based latex segments. During the three months ended March 31, 2016, revenue from sales of our coated film decreased $1.5 million (or 37.1%) to $2.6 million, down from $4.1 million, revenue from color printing decreased $0.3 million (or 25.8%) to $0.8 million, down from $1.1 million, and revenue from water-based latex decreased $0.06 million (or 45.0%) to $.07 million, down from $0.13 million; offset by an increase in revenue from advanced film of $0.3 million (or 35.1%) to $1.3 million, up from $1.0 million and revenue from BOPP tobacco film was up just slightly. During the first quarter of 2016, our domestic (China Mainland) sales decreased as a percentage of total sales from 87.1% in 2015 to 85.5% in 2016. The decrease in revenue from our coated film, color printing, and water-based latex segments for the three months ended March 31, 2016, compared to the same period in 2015, was largely due to the Company’s limited acceptance of customer orders for these product lines that have become only marginally profitable.

For the three months ended March 31, 2016, interest income decreased by $0.3 million (or 41.1 %) to $0.4 million, compared to $0.7 million in 2015. The decrease in interest income is primarily due to a pay down of other receivables during 2016 in connection with temporary loans to unrelated third parties. During 2014, we borrowed RMB120 million, or approximately $19.5 million, at a 7.35% interest under a line of credit agreement and then lent these and other funds to unrelated third parties at interest rates ranging from 12% to 16%. A large portion of these loans were repaid during the latter half of the 2015 and the first quarter of 2016.

Our total assets as of March 31, 2016 were $83.3 million, a decrease of $8.2 million, compared to $91.5 million as of December 31, 2015. The decrease was primarily due to the decrease of other receivables, current, of $1.85 million, other non-current receivables of $6.4 million and inventory of $2.1 million, offset by an increase in cash of $1.1 million. The decrease in other receivables (both current and long-term) is due to the repayment of amounts loaned to third parties. (See Note 3 to the financial statements). We have historically advanced minimal funds to customers and other unrelated third parties that are non-interest bearing and payable upon demand. However, in 2014 we decided to temporarily expand our advances to unrelated third parties. The decrease inventory is due to less inventory on hand needed to meet our expected demand. The increase in cash is due to the timing of collections of receivables and payment of payables.

Our total liabilities decreased by $7.9 million as of March 31, 2016, compared to December 31, 2015, principally due to a decrease in long-term loans of $6.1 million and short-term loans of $4.1 million; and an increase in accounts payable of $2.1 million.