**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**








**FORM 10-K/A**


**Amendment
      No. 3**








x
            **Annual
                report pursuant to Section 13 or 15(d) of the Securities
                Exchange Act of 1934.**





**For
      the fiscal year ended December 31, 2007**





o
            **Transition
                report pursuant to Section 13 or 15(d) of the Securities
                Exchange Act of 1934.**




**Commission
      file number 0-52549**




**RINO
      International Corporation**


(Exact
      name of registrant as specified in its charter)




**Nevada**
            
            **41-1508112**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer Identification No.)




**11
      Youquan Road, Zhanqian Street, Jinzhou District**


**Dalian,
      China 116100**


(Address
      of principal executive offices)




**00186
      411 8766 1222**


(Registrant’s
      telephone number)




Securities
      registered pursuant to Section 12(b) of the Act:




**None**




Securities
      registered pursuant to Section 12(g) of the Act:




**Common
      stock, par value $.0001 per share**




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.    Yes o No x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the
      Act.    Yes o No x




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 o









Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein and will not be contained, to the best
      of
      registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10K or any amendment to
      this
      Form 10-K. x




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
      definition of “accelerated filer, large accelerated filer and smaller reporting
      company” in Rule 12b-2 of the Exchange Act (Check one):




Large Accelerated Filer o Accelerated
      Filer o


Non-Accelerated Filer x Smaller Reporting Company o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act)    Yes o No x




The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the Registrant (assuming for these purposes, but without
      conceding, that all executive officers and directors are “affiliates” of the
      Registrant) as of March 20, 2008 (based on the closing sale price of the
      Registrant’s common stock, as reported on the Yahoo Finance on the
      Over-the-Counter Bulletin Board was $56,802,856. There were 25,000,000 shares
      of
      common stock outstanding on March 20, 2008.




DOCUMENTS
      INCORPORATED BY REFERENCE




None










**Explanatory
      Note**





This
      Annual Report on Form 10-K/A, Amendment No. 3 (“Amendment No. 3”) is being filed
      by the registrant solely to amend Part I, Item 1A (Risk Factors) contained
      in
      the Annual Report on Form 10-K/A, Amendment No. 1, which was filed with the
      Securities and Exchange Commission on April 1, 2008 (“Amendment No. **** 1”)
      and
      Part II, Item 6 (Selected Financial Data), Item 7 (Management’s Discussion and
      Analysis of Financial Condition and Results of Operations) and Item 8 (Financial
      Statements and Supplementary Data) and Part IV, Item 15 (Exhibits and Financial
      Statement Schedules) of the Annual Report on Form 10-K/A, Amendment No. 2,
      which
      was filed with the Securities and Exchange Commission on June 11, 2008
      (“Amendment No. **** 2”).





Subsequent
      to the publication of the financial statements of the registrant for the fiscal
      years ended December 31, 2007 and 2006, management of the registrant determined
      that there were material errors in the presentation of current assets,
      concentration of risks related to the registrant’s largest customers and cash
      flows related to the payment of deposits for the acquisition of property and
      equipment in the registrant’s financial statements. As a result the registrant
      restated the financial statements in Amendment No.2. Subsequent to the filing
      of
      Amendment No. 2, management of the Company determined that there were also
      errors in the restated financial statements filed with Amendment No. 2 causing
      redeemable stock to be presented as permanent equity. The restatement had no
      effect on the income statement, including net income and earnings per share.
      This Amendment No. 3 is being filed to restate the financial statements and
      footnotes thereto and the report of the independent public accountants in
      Amendment No. 2, to correct certain disclosures in the Management’s Discussion
      and Analysis of Financial Condition and Results of Operations in Amendment
      No.
      2, including disclosure concerning the registrant’s revenue recognition
      policies, to correct the Selected Financial Data section as a result of the
      restatement of the financial statements and to file as exhibits and include
      in
      the list of exhibits new certifications of the principal executive officer
      and
      principal financial officer of the Company. All of the Items which have been
      amended are being restated in their entirety.





Except
      as
      described in the above, no other provisions of the Annual Report on Form 10-K
      or
      Amendment No. 1 or Amendment No.2 are being amended.





**Part
      I**





Item
      1A.
      Risk Factors.





***An
      investment in our common stock involves a high degree of risk. You should
      carefully consider the risks described below and the other information contained
      in this prospectus before deciding to invest in our common
      stock.***





If
      any of
      the following risks, or any other risks not described below because they are
      currently unknown to us or we currently deem such risks as immaterial but they
      later become material, actually occurs, it is likely that our business,
      financial condition, and operating results could be seriously harmed. As a
      result, the trading price of our common stock could decline and you could lose
      part or all of your investment.





**Risks
      Related to our Business**





***Our
      limited operating history may not serve as an adequate basis to judge our future
      prospects and results of operations.***  ****




RINO
      began its operations in 2003. Our limited operating history in the environmental
      protection industry may not provide a meaningful basis on which to evaluate
      our
      business. Although RINO’s revenues have grown rapidly since its inception, we
      cannot assure you that we will maintain our profitability or that we will not
      incur net losses in the future. We expect that our operating expenses will
      increase as we expand. Any significant failure to realize anticipated revenue
      growth could result in significant operating losses. We will continue to
      encounter risks and difficulties frequently experienced by companies at a
      similar stage of development, including our potential failure to:




1




·
            maintain
                our cutting edge proprietary
                technology;




·
            expand
                our product offerings and maintain the high quality of our
                products;




·
            manage
                our expanding operations, including the integration of any future
                acquisitions;




·
            obtain
                sufficient working capital to support our expansion and to fill customers’
                orders in time;




·
            maintain
                adequate control of our expenses;




·
            implement
                our product development, marketing, sales, and acquisition strategies
                and
                adapt and modify them as needed;




·
            anticipate
                and adapt to changing conditions in the iron and steel
                industry markets in which we operate as well as the impact of any
                changes in government regulation, mergers and acquisitions involving
                our
                competitors, technological developments and other significant competitive
                and market dynamics.




2





If
      we are
      not successful in addressing any or all of these risks, our business may be
      materially and adversely affected.





***We
      may encounter substantial competition in our business and our failure to compete
      effectively may adversely affect our ability to generate
      revenue.***





We
      believe that existing and new competitors will continue to improve the design
      and performance of their products and to introduce new products with competitive
      price and performance characteristics. We expect that we will be required to
      continue to invest in product development and productivity improvements to
      compete effectively in our markets. Our competitors could develop a more
      efficient product or undertake more aggressive and costly marketing campaigns
      than ours, which may adversely affect our marketing strategies and could have
      a
      material adverse effect on our business, results of operations and financial
      condition.




Our
      major
      competitors may be better able than we to successfully endure downturns in
      our
      industrial sector. In periods of reduced demand for our products, we can either
      choose to maintain market share by reducing our selling prices to meet
      competition or maintain selling prices, which would likely sacrifice market
      share. Sales and overall profitability would be reduced in either case. In
      addition, we cannot assure you that additional competitors will not enter our
      existing markets, or that we will be able to compete successfully against
      existing or new competition.





***Our
      inability to fund our capital expenditure requirements may adversely affect
      our
      growth and profitability.***





Our
      continued growth is dependent upon our ability to raise capital from outside
      sources. Our ability to obtain financing will depend upon a number of factors,
      including:




·
            our
                financial condition and results of
                operations,




·
            the
                condition of the PRC economy and the environmental protection product
                industry in the PRC, and




·
            conditions
                in relevant financial markets




If
      we are
      unable to obtain financing, as needed, on a timely basis and on acceptable
      terms, our financial position, competitive position, growth and profitability
      may be adversely affected.




***We
      may not be able to effectively control and manage our
      growth***





Our
      sales
      revenues (excluding government grants) have increased from $10,307,630 **** for the
      fiscal year ended December 31, 2006 to $63,387,308 for the fiscal year ended
      December 31, 2007. Our net sales increased by $9,255,104 million to $19,045,425
      or 94.5% for the three months ended March 31, 2008, as compared to the three
      months ended March 31, 2007. If our business and markets continue to grow and
      develop, it will be necessary for us to finance and manage expansion in an
      orderly fashion. In addition, we may face challenges in managing expanding
      product offerings and in integrating acquired businesses with our own. These
      eventualities will increase demands on our existing management, workforce and
      facilities. Failure to satisfy these kinds of increased demands could interrupt
      or adversely affect our operations and cause production backlogs, longer product
      development time frames and administrative inefficiencies.





***If
      we are unable to successfully complete and integrate strategic acquisitions
      in a
      timely manner, our growth strategy may be adversely
      impacted.***





3





An
      important element of our growth strategy is expected to be the pursuit of
      acquisitions of other businesses that increase our existing market share and
      expand our production capacity. However, integrating businesses involves a
      number of special risks, including the possibility that management may be
      distracted from regular business concerns by the need to integrate operations,
      unforeseen difficulties in integrating operations and systems, problems relating
      to assimilating and retaining the employees of the acquired business, accounting
      issues that arise in connection with the acquisition, challenges in retaining
      customers, and potential adverse short-term effects on operating results. In
      addition, we may incur debt to finance future acquisitions, and we may issue
      securities in connection with future acquisitions that may dilute the holdings
      of our current or future stockholders. If we are unable to successfully complete
      and integrate strategic acquisitions in a timely manner, our growth strategy
      may
      be adversely impacted.





***We
      depend on a concentration of customers.***





Our
      revenue is dependent, in large part, on significant orders from a limited number
      of customers. Sales to our five largest customers accounted for approximately
      88% of our net sales during the twelve months ended December 2007, sales to
      our
      four largest customers accounted for approximately 97% of our net sales for
      the
      twelve months ended December 31, 2006 and sales to our five largest customers
      accounted for 95% of our net sales for the twelve months ended December 31,
      2005. During the three months ended March 31, 2008 and 2007, five major
      customers accounted for approximately 64.5% and 94.4% of our net sales
      respectively. We believe that revenue derived from current and future large
      customers will continue to represent a significant portion of our total revenue.
      Our inability to continue to secure and maintain a sufficient number of large
      customers would have a material adverse effect on our business, operating
      results and financial condition. Moreover, our success will depend in part
      upon
      our ability to obtain orders from new customers, as well as the financial
      condition and success of our customers and general economic
      conditions.





***Any
      significant fluctuation in price of our raw materials may have a material
      adverse effect on the manufacturing cost of our
      products.***





The
      prices of steel, electronic components and power systems, valves, machine tools,
      paints and welding rods, our principal raw materials, are subject to market
      conditions and generally we do not, and do not expect to, have long-term
      contracts with our suppliers for those items. While these raw materials are
      generally available and we have not experienced any raw material shortage in
      the
      past, we cannot assure you that the necessary materials will continue to be
      available to us at prices currently in effect or acceptable to us. The prices
      for these raw materials have varied significantly and may vary significantly
      in
      the future. Numerous factors, most of which are beyond our control, influence
      prices of our raw material. These factors include general economic conditions,
      industry capacity utilization, vendor backlogs and transportation delays and
      other uncertainties.





We
      may
      not be able to adjust our product prices, especially in the short-term, to
      recover cost increases in these raw materials. Our future profitability may
      be
      adversely affected to the extent we are unable to pass on higher raw material
      costs to our customers.





***We
      may engage in future acquisitions that could dilute the ownership interests
      of
      our stockholders, cause us to incur debt and assume contingent
      liabilities.***




As
      part
      of our business strategy, we review acquisition and strategic investment
      prospects that we believe would complement our current product offerings,
      augment our market coverage or enhance our technological capabilities, or
      otherwise offer growth opportunities. From time to time we review investments
      in
      new businesses and we expect to make investments in, and to acquire, businesses,
      products, or technologies in the future. In the event of any future
      acquisitions, we could:




·
            issue
                equity securities which would dilute current stockholders’ percentage
                ownership;





4





·
            incur
                substantial debt;





·
            Assume
                contingent liabilities; or





·
            Expend
                significant cash.




These
      actions could have a material adverse effect on our operating results or the
      price of our common stock. Moreover, even if we do obtain benefits in the form
      of increased sales and earnings, there may be a lag between the time when the
      expenses associated with an acquisition are incurred and the time when we
      recognize such benefits. Acquisitions and investment activities also entail
      numerous risks, including:





·
            difficulties
                in the assimilation of acquired operations, technologies and/or
                products;





·
            unanticipated
                costs associated with the acquisition or investment
                transaction;





·
            the
                diversion of management’s attention from other business
                concerns;





·
            adverse
                effects on existing business relationships with suppliers and
                customers;





·
            risks
                associated with entering markets in which we have no or limited prior
                experience;





·
            the
                potential loss of key employees of acquired organizations;
                and





·
            substantial
                charges for the amortization of certain purchased intangible assets,
                deferred stock compensation or similar
                items.




We
      cannot
      ensure that we will be able to successfully integrate any businesses, products,
      technologies, or personnel that we might acquire in the future, and our failure
      to do so could have a material adverse effect on our business, operating results
      and financial condition.





***We
      may not be able to prevent others from unauthorized use of our patents, which
      could harm our business and competitive position.***




Our
      success depends, in part, on our ability to protect our proprietary
      technologies. We own three patents in the PRC covering our waste water treatment
      technology. We also have two international invention patents pending and have
      applied for an additional international invention patent for our anti-oxidation
      technology under the International Patent Cooperation Treaty. The process of
      seeking patent protection can be lengthy and expensive and we cannot assure
      you
      that our patent applications will result in patents being issued, or that our
      existing or future issued patents will be sufficient to provide us with
      meaningful protection or commercial advantages.




We
      also
      cannot assure you that our current or potential competitors do not have, and
      will not obtain, patents that will prevent, limit or interfere with our ability
      to make, use or sell our products in either the PRC or other
      countries.




The
      implementation and enforcement of PRC intellectual property laws historically
      has not been vigorous or consistent, primarily because of ambiguities in the
      PRC
      laws and a relative lack of developed enforcement mechanisms. Accordingly,
      intellectual property rights and confidentiality protections in the PRC are
      not
      as effective as in the United States and other countries. Policing the
      unauthorized use of proprietary technology is difficult and expensive, and
      we
      might need to resort to litigation to enforce or defend patents issued to us
      or
      to determine the enforceability, scope and validity of our proprietary rights
      or
      those of others. Such litigation will require significant expenditures of cash
      and management efforts and could harm our business, financial condition and
      results of operations. An adverse determination in any such litigation will
      impair our intellectual property rights and may harm our business, competitive
      position, business prospects and reputation.





5





***We
      may need additional capital to fund our future operations and, if it is not
      available when needed, we may need to reduce our planned development and
      marketing efforts, which may reduce our sales revenues*****.**




We
      believe that our existing working capital and cash available from operations
      will enable us to meet our working capital requirements for at least the next
      12
      months. However, if cash from future operations is insufficient, or if cash
      is
      used for acquisitions or other currently unanticipated uses, we may need
      additional capital. The development and marketing of new products and the
      expansion of distribution channels and associated support personnel requires
      a
      significant commitment of resources. In addition, if the markets for our
      products develop more slowly than anticipated, or if we fail to establish
      significant market share and achieve sufficient net revenues, we may continue
      to
      consume significant amounts of capital. As a result, we could be required to
      raise additional capital. To the extent that we raise additional capital through
      the sale of equity or convertible debt securities, the issuance of such
      securities could result in dilution of the shares held by existing stockholders.
      If additional funds are raised through the issuance of debt securities, such
      securities may provide the holders certain rights, preferences, and privileges
      senior to those of common stockholders, and the terms of such debt could impose
      restrictions on our operations. We cannot assure you that additional capital,
      if
      required, will be available on acceptable terms, or at all. If we are unable
      to
      obtain sufficient amounts of additional capital, we may be required to reduce
      the scope of our planned product development and marketing efforts, which could
      harm our business, financial condition and operating results.




***We
      may have difficulty establishing adequate management, legal and financial
      controls in the PRC.***





The
      PRC
      historically has not adopted a western style of management and financial
      reporting concepts and practices, as well as in modern banking, computer and
      other control systems. We may have difficulty in hiring and retaining a
      sufficient number of qualified employees to work in the PRC. As a result of
      these factors, we may experience difficulty in establishing management, legal
      and financial controls, collecting financial data and preparing financial
      statements, books of account and corporate records and instituting business
      practices that meet Western standards.




***Our
      recognition of revenue could prove inaccurate.***





We
      use
      percentage completion to recognize revenue. The inherent difficulty of measuring
      completed output in our projects prior to full completion requires us to
      estimate percentage completion by measuring actual inputs in a given period
      relative to total estimated inputs required for a project. An incorrect estimate
      of total inputs required for a project, or an inaccurate accounting of actual
      inputs in any given period could cause us to misstate revenues by a material
      amount. If revenues were overestimated or underestimated, net income would
      also
      be over- or underestimated, as would accounts receivable.





***Our
      accounts receivable have historically been high.***





We
      record
      our revenue based on percentage completion, but are paid according to contract
      terms which only indirectly use percentage completion, causing leads and lags
      between our recording of revenue and our customers’ repayment of receivables.
      Moreover, we sell to large steel manufacturers which require time to fulfill
      internal control procedures before effecting payment. Finally, performance
      retainages of 10% of contract value are recorded at project commissioning and
      remain in our accounts receivable until one year after project commissioning.
      These factors all combine to raise our receivables as days sales outstanding.
      While to date we have only recorded *de
      minimis* bad
      debt, we cannot guarantee that all our accounts receivable will be collected
      or
      that they will be collected in a timely manner.




6




***We
      may not have adequate internal accounting controls. While we have certain
      internal procedures in our budgeting, forecasting and in the management and
      allocation of funds, our internal controls may not be
      adequate.***





We
      are
      constantly striving to improve our internal accounting controls. We hope to
      develop an adequate internal accounting control to budget, forecast, manage
      and
      allocate our funds and account for them. There is no guarantee that such
      improvements will be adequate or successful or that such improvements will
      be
      carried out on a timely basis. If we do not have adequate internal accounting
      controls, we may not be able to appropriately budget, forecast and manage our
      funds, we may also be unable to prepare accurate accounts on a timely basis
      to
      meet our continuing financial reporting obligations and we may not be able
      to
      satisfy our obligations under US securities laws.




***Our
      internal controls over financial reporting may not be effective, and our
      independent auditors may not be able to certify as to their effectiveness,
      which
      could have a significant and adverse effect on our
      business.***  **





Rules
      adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002
      require annual assessment of our internal control over financial reporting,
      and
      attestation of this assessment by our company's independent registered public
      accountants. The SEC extended the compliance dates for “non-accelerated filers,”
as defined by the SEC. Accordingly, we believe that the annual assessment of
      our
      internal controls requirement will first apply to our annual report for the
      2007
      fiscal year and the attestation requirement of management's assessment by our
      independent registered public accountants will first apply to our annual report
      for the 2008 fiscal year. The standards that must be met for management to
      assess the internal control over financial reporting as effective are new and
      complex, and require significant documentation, testing and possible remediation
      to meet the detailed standards. Based on our management’s assessment of our
      internal control over financial reporting, our management has concluded that
      our
      internal control was effective as of December 31, 2007 to provide reasonable
      assurance regarding the reliability of financial reporting and the preparation
      of financial statements for external reporting purposes in accordance with
      GAAP.
      However, our internal control over financial reporting system has yet to be
      evaluated by an external auditor for the purposes of providing an attestation
      report required by Section 404 of the Sarbanes-Oxley Act of 2002. If, in the
      future, management identifies one or more material weaknesses, and/or our
      external auditors are unable to attest that our management’s report is fairly
      stated or to express an opinion on the effectiveness of our internal controls,
      this could result in a loss of investor confidence in our financial reports,
      have an adverse effect on our stock price and/or subject us to sanctions or
      investigation by regulatory authorities.





***Potential
      environmental liability could have a material adverse effect on our operations
      and financial condition.***





To
      the
      knowledge of our management team, neither the production nor the sale of our
      products constitutes activities, or generates materials that create any
      environmental hazards or requires our business operations to comply with PRC
      environmental laws. Although it has not been alleged by PRC government officials
      that we have violated any current environmental regulations, we cannot assure
      you that the PRC government will not amend the current PRC environmental
      protection laws and regulations. Our business and operating results may be
      materially and adversely affected if we were to be held liable for violating
      existing environmental regulations or if we were to increase expenditures to
      comply with environmental regulations affecting our operations.




***We
      rely on our Chairman and CEO, the founders of RINO for the management of our
      business.***





We
      depend, to a large extent, on the abilities and participation of our current
      management team, but have a particular reliance upon Mr. Zou Dejun our CEO,
      and
      Ms. Qiu Jianping, our Chairman of the Board. The loss of the services of Mr.
      Zou
      or Ms. Qiu, for any reason, may have a material adverse effect on our business
      and prospects. We cannot assure you that the services of Mr. Zou and Ms. Qiu
      will continue to be available to us, or that we will be able to find a suitable
      replacement for either of them. We carry key man life insurance of $5.0 million
      apiece for Mr, Zou and Ms. Qiu but do not carry key man life insurance for
      any
      other key personnel.




7




***We
      may not be able to hire and retain qualified personnel to support our growth
      and
      if we are unable to retain or hire such personnel in the future, our ability
      to
      improve our products and implement our business objectives could be adversely
      affected.***




If
      one or
      more of our senior executives or other key personnel are unable or unwilling
      to
      continue in their present positions, we may not be able to replace them easily
      or at all, and our business may be disrupted and our financial condition and
      results of operations may be materially and adversely affected. Competition
      for
      senior management and senior technology personnel is intense, the pool of
      qualified candidates is very limited, and we may not be able to retain the
      services of our senior executives or senior technology personnel, or attract
      and
      retain high-quality senior executives or senior technology personnel in the
      future. Such failure could materially and adversely affect our future growth
      and
      financial condition.




***We
      do not presently maintain product liability insurance, and our property and
      equipment insurance does not cover the full value of our property and equipment,
      which leaves us with exposure in the event of loss or damage to our properties
      or claims filed against us.***





We
      currently do not carry any product liability or other similar insurance. Unlike
      in the U.S. and other countries, product liability claims and lawsuits are
      relatively rare in the PRC. However, we cannot assure you that we would not
      face
      liability in the event of the failure of any of our products. We cannot assure
      you that, especially as China’s domestic consumer economy and industrial economy
      continues to expand, product liability exposures and litigation will not become
      more commonplace in the PRC, or that we will not face product liability exposure
      or actual liability as we expand our sales into international markets, like
      the
      United States, where product liability claims are more prevalent.




Except
      for property and automobile insurance, we do not have other insurance such
      as
      business liability or disruption insurance coverage for our operations in the
      PRC.





***Rapid
      technological changes in our industry could render our products non-competitive
      or obsolete and consequently affect our ability to generate
      revenues.***





The
      environmental protection and remediation industry is subject to rapid
      technological change. Our future success will depend on our ability to respond
      to rapidly changing technologies and improve the quality of our products. Our
      failure to adapt to these changes could harm our business. Our future plans
      to
      market our products require them to be innovative. If we are slow to develop
      new
      products and technologies that are attractive to and useful solutions for the
      PRC iron and steel industry, we may not be successful in capturing an
      increasingly significant share of this market.




**Risks
      Related to Doing Business in the PRC.**





***We
      face the risk that changes in the policies of the PRC government could have
      a
      significant impact upon the business we may be able to conduct in the PRC and
      the profitability of such business.***





The
      PRC’s
      economy is in a transition from a planned economy to a market oriented economy
      subject to five-year and annual plans adopted by the government that set
      national economic development goals. Policies of the PRC government can have
      significant effects on economic conditions in China. The PRC government has
      confirmed that economic development will follow the model of a market economy,
      such as the United States. Under this direction, we believe that the PRC will
      continue to strengthen its economic and trading relationships with foreign
      countries and business development in the PRC will follow market forces. While
      we believe that this trend will continue, we cannot assure you that this will
      be
      the case. Our interests may be adversely affected by changes in policies by
      the
      PRC government, including:




8




·
            changes
                in laws, regulations or their
                interpretation





·
            confiscatory
                taxation





·
            restrictions
                on currency conversion, imports or sources of
                supplies





·
            expropriation
                or nationalization of private
                enterprises.




Although
      the PRC government has been pursuing economic reform policies for more than
      two
      decades, we cannot assure you that the government will continue to pursue such
      policies or that such policies may not be significantly altered, especially
      in
      the event of a change in leadership, social or political disruption, or other
      circumstances affecting the PRC's political, economic and social
      life.





9





***The
      PRC laws and regulations governing our current business operations are sometimes
      vague and uncertain. Any changes in such PRC laws and regulations may harm
      our
      business.***





There
      are
      substantial uncertainties regarding the interpretation and application of PRC
      laws and regulations, including but not limited to the laws and regulations
      governing our business, and the enforcement and performance of our arrangements
      with customers in the event of the imposition of statutory liens, death,
      bankruptcy and criminal proceedings. We and any future subsidiaries are
      considered foreign persons or foreign funded enterprises under PRC laws, and
      as
      a result, we are required to comply with PRC laws and regulations. These laws
      and regulations are sometimes vague and may be subject to future changes, and
      their official interpretation and enforcement may involve substantial
      uncertainty. The effectiveness of newly enacted laws, regulations or amendments
      may be delayed, resulting in detrimental reliance by foreign investors. New
      laws
      and regulations that affect existing and proposed future businesses may also
      be
      applied retroactively. We cannot predict what effect the interpretation of
      existing or new PRC laws or regulations may have on our businesses.





***The
      restructuring of RINO may affect RINO’s existing customer relationships and
      result in additional transactional costs that may adversely impact our
      profitability.***





We
      are
      conducting our business out of Dalian Innomind after we completed the asset
      purchases and leases as contemplated in the Restructuring Agreements. The
      restructuring of RINO’s business through assets transfers and leases to Dalian
      Innomind may affect RINO’s existing customer relationships. To the extent the
      existing customers do not want to assign their purchase orders to a newly formed
      entity (i.e., Dalian Innomind) the Restructuring Agreements provide a mechanism
      to allow RINO to continue its operations under Dalian Innomind’s control.
      However, we cannot assure you that the customers will continue their business
      relationships with us or RINO after this complicated restructuring. Any loss
      of
      RINO’s existing customers will have an adverse impact on our revenues and net
      profits.




***Our
      Restructuring Agreements with RINO and its shareholders may not be as effective
      in providing control over these entities as direct ownership and potential
      conflicts of interest may occur in the performance and enforcement of the
      Restructuring Agreements in the future.***





We
      operate our business through Dalian Innomind, our indirect wholly-owned
      subsidiary in the PRC, and rely on the Restructuring Agreements with RINO and
      its shareholders to control the operations of RINO. While we own and/or lease
      some of RINO’s key manufacturing assets through Dalian Innomind, and to the
      extent that any aspect of RINO’s business needs to be conducted through RINO in
      the future, the Restructuring Agreements provide Dalian Innomind with the legal
      right and power to control RINO and any of its remaining assets and operations,
      the Restructuring Agreements may not be as effective in providing control over
      RINO as direct ownership as we depend on the shareholders of RINO to perform
      their obligations under the Restructuring Agreements and the effective
      enforcement of these agreements when necessary.





Consequently,
      if RINO or any of its shareholders fails to perform its or his respective
      obligations under the Restructuring Agreements, we may have to incur substantial
      costs and resources to enforce those agreements, and rely on legal remedies
      under PRC law, including seeking specific performance or injunctive relief,
      and
      claiming damages, which may not be effective. For example, if the shareholders
      of RINO refuse to transfer their equity interest in RINO to us or our designee
      if we exercise the equity purchase option under the Restructuring Agreements,
      then we will have to pursue available remedies under PRC law for them to fulfill
      their contractual obligations.




The
      terms
      of the Restructuring Agreements were negotiated between RINO and the investors
      in the private placement that we completed on October 5, 2007 on behalf of
      the
      Company at an arms-length, the approval of which by the Company was a condition
      precedent to closing of the private placement. However, there may be potential
      conflicts of interest in the performance and enforcement of the Restructuring
      Agreements because our CEO and director, Mr. Zou, who, together with his wife,
      Ms. Qiu Jianping, our Chairman of the Board, are the sole beneficiaries of
      The
      Innomind Trust which holds 71.60% of all of our outstanding common stock and
      together they also hold 100% of RINO’s equity interest. As such, we can not
      assure you that Mr. Zou, in his capacity as our CEO and director, will act
      in
      the best interest of the Company when a conflict between us and RINO arises
      because of his ownership interest in RINO. For example, if RINO violates the
      Restructuring Agreement because of its failure to pay any management fee to
      Dalian Innomind, the fact that Mr. Zou has a 90% ownership interest in RINO
      may
      affect his decision as to whether and/or how vigorously the Company will seek
      to
      enforce its rights under the Restructuring Agreements.





10




The
      Restructuring Agreements are governed by PRC law and provide for the resolution
      of disputes through arbitration in the PRC. Accordingly, these agreements would
      be interpreted in accordance with PRC law and any disputes would be resolved
      in
      accordance with PRC legal procedures. The legal environment in the PRC is not
      as
      developed as in other jurisdictions, such as the United States. As a result,
      uncertainties in the PRC legal system could limit our ability to enforce the
      Restructuring Agreements. If we are unable to enforce the Restructuring
      Agreements, we may not be able to exert effective control over our operating
      entities, and our ability to conduct our business may be negatively
      affected.





***A
      slowdown or other adverse developments in the PRC economy may harm our customers
      and the demand for our services and our products.***





All
      of
      our operations are conducted in the PRC and all of our revenues are generated
      from sales in the PRC. Although the PRC economy has grown significantly in
      recent years, we cannot assure you that this growth will continue. Pollution
      control for China’s iron and steel sector is a relatively immature and growing
      sector, but we do not know how sensitive we might be to a slowdown in economic
      growth or other adverse changes in the PRC economy which might affect demand
      for
      iron and steel pollution control equipment. A slowdown in overall economic
      growth, an economic downturn, a recession or other adverse economic developments
      in the PRC could significantly reduce the demand for our products and harm
      our
      business.




***Inflation
      in the PRC could negatively affect our profitability and
      growth*** .





While
      the
      PRC economy has experienced rapid growth, such growth has been uneven among
      various sectors of the economy and in different geographical areas of the
      country. Rapid economic growth could lead to growth in the money supply and
      rising inflation. If prices for our products rise at a rate that is insufficient
      to compensate for the rise in the costs of supplies, it may harm our
      profitability.





In
      order
      to control inflation in the past, the PRC government has imposed controls on
      bank credit, limits on loans for fixed assets and restrictions on state bank
      lending. Such an austere policy can lead to a slowing of economic growth. In
      October 2004, the People's Bank of China, the PRC's central bank, raised
      interest rates for the first time in nearly a decade and indicated in a
      statement that the measure was prompted by inflationary concerns in the Chinese
      economy. Repeated rises in interest rates by the central bank would likely
      slow
      economic activity in China which could, in turn, materially increase our costs
      and also reduce demand for our products.




***Dalian
      Innomind and RINO are subject to restrictions on paying dividends and making
      other payments to us. We might be unable to pay dividends to
      you.***





We
      are a
      holding company incorporated in the State of Nevada and do not have any assets
      or conduct any business operations other than our investments in our
      subsidiaries and affiliates, Innomind, Dalian Innomind and RINO. As a result
      of
      our holding company structure, we rely entirely on dividend payments from Dalian
      Innomind, our subsidiary in China. PRC regulations currently permit payment
      of
      dividends only out of accumulated profits, as determined in accordance with
      PRC
      accounting standards and regulations. Our subsidiary and affiliated entity
      in
      the PRC also are required to set aside a portion of their after-tax profits
      according to PRC accounting standards and regulations to fund certain reserve
      funds. The PRC government also imposes controls on the conversion of RMB into
      foreign currencies and the remittance of currencies out of the PRC. We may
      experience difficulties in completing the administrative procedures necessary
      to
      obtain and remit foreign currency. Furthermore, if Dalian Innomind or RINO
      incurs debt on its own in the future, the instruments governing the debt may
      restrict its ability to pay dividends or make other payments. If we or Innomind
      are unable to receive all of the revenues from RINO’s operations, we may be
      unable to pay dividends on our common stock.





11




***Governmental
      control of currency conversion may affect the value of your
      investment.***





The
      PRC
      government imposes controls on the convertibility of Renminbi into foreign
      currencies and, in certain cases, the remittance of currency out of the PRC.
      We
      receive substantially all of our revenues in Renminbi, which is currently not
      a
      freely convertible currency. Shortages in the availability of foreign currency
      may restrict our ability to remit sufficient foreign currency to pay dividends,
      or otherwise satisfy foreign currency dominated obligations. Under existing
      PRC
      foreign exchange regulations, payments of current account items, including
      profit distributions, interest payments and expenditures from the transaction,
      can be made in foreign currencies without prior approval from the PRC State
      Administration of Foreign Exchange by complying with certain procedural
      requirements. However, approval from appropriate governmental authorities is
      required where Renminbi is to be converted into foreign currency and remitted
      out of China to pay capital expenses such as the repayment of bank loans
      denominated in foreign currencies.





The
      PRC
      government may also in the future restrict access to foreign currencies for
      current account transactions. If the foreign exchange control system prevents
      us
      from obtaining sufficient foreign currency to satisfy our currency demands,
      we
      may not be able to pay certain of our expenses as they come due.




***The
      fluctuation of the Renminbi may harm your investment.***





The
      value
      of the RMB against the U.S. dollar and other currencies may fluctuate and is
      affected by, among other things, changes in the PRC's political and economic
      conditions. As we rely entirely on revenues earned in the PRC, any significant
      revaluation of the RMB may materially and adversely affect our cash flows,
      revenues and financial condition. For example, to the extent that we need to
      convert U.S. dollars we receive from an offering of our securities into RMB
      for
      our operations, appreciation of the RMB against the U.S. dollar would diminish
      the value of the proceeds of the offering and this could harm our business,
      financial condition and results of operations. Conversely, if we decide to
      convert our RMB into U.S. dollars for the purpose of making payments for
      dividends on our common shares or for other business purposes and the U.S.
      dollar appreciates against the RMB, the U.S. dollar equivalent of the RMB we
      convert would be reduced. In addition, the depreciation of significant U.S.
      dollar denominated assets could result in a charge to our income statement
      and a
      reduction in the value of these assets.




On
      July
      21, 2005, the PRC government changed its decade-old policy of pegging the value
      of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to
      fluctuate within a narrow and managed band against a basket of certain foreign
      currencies. This change in policy has resulted in significant appreciation
      of
      the RMB against the U.S. dollar. There remains significant international
      pressure on the PRC government to adopt an even more flexible currency policy,
      which could result in a further and more significant appreciation of the RMB
      against the U.S. dollar.




***If
      the PRC were to eliminate the “grandfathered” preferential tax benefits
      currently enjoyed by Dalian Innomind, we would have to pay more taxes in the
      PRC, which could have a material and adverse effect on our financial condition
      and results of operations.***




Recent
      changes in the PRC’s tax laws have, effective January 1, 2008, made wholly
      foreign-owned enterprises (“WFOEs”) subject to standard enterprise income tax
      rates, which as of January 1, 2008, will be 25%. Prior to these changes, WFOEs
      enjoyed tax preferences consisting of multi-year exemptions followed by a period
      of reduced rate taxation and ending with the application of standard tax
      rates.





12




Because
      Dalian Innomind was incorporated before the effective date of these recent
      tax
      law changes, it has been “grandfathered” into the pre-change scheme. As a
      consequence, as a WFOE, Dalian Innomind is entitled to: (i) a two-year exemption
      from enterprise income taxation beginning in its first year of operations;
      (ii)
      a 12% enterprise income tax rate for the next three years; and (iii) application
      of the standard enterprise income tax rate (which will be 25% as of January
      1,
      2008) thereafter.





If
      the
      PRC were to eliminate these “grandfathered” tax preferences, Dalian Innomind
      would immediately be subject to the standard statutory tax rate. The loss of
      these preferential tax treatments and the resulting acceleration of the
      application of standard PRC tax rates to our Business, could have a material
      and
      adverse effect on our financial condition and results of
      operations.





***The
      Restructuring Agreements we have entered into among our subsidiaries and
      affiliated entities or persons may be subject to scrutiny by the PRC tax
      authorities and a finding that we owe additional taxes or are ineligible for
      our
      tax exemption, or both, could substantially increase our taxes owed, and reduce
      our net income and the value of your investment.***  ****





Dalian
      Innomind has purchased assets from RINO, our affiliated company, at their book
      value and leased the remaining assets from RINO at nominal amount. Under PRC
      law, arrangements and transactions among related parties may be subject to
      audit
      or challenge by the PRC tax authorities. If any of the transactions we have
      entered into between Dalian Innomind and RINO are found not to be on an
      arm’s-length basis, or to result in an unreasonable reduction in tax under PRC
      law, the PRC tax authorities have the authority to disallow our tax savings,
      adjust the profits and losses of Dalian Innomind and RINO, and assess late
      payment interest and penalties. A finding by the PRC tax authorities that we
      are
      ineligible for the tax savings achieved in the past, or that RINO or Dalian
      Innomind are ineligible for preferential tax benefits, would substantially
      increase our taxes owed and reduce our net income and the value of your
      investment.




***PRC
      regulations relating to the establishment of offshore special purpose companies
      by PRC residents, if applied to us, may subject the PRC resident shareholders
      of
      us or our parent company to personal liability and limit our ability to acquire
      PRC companies or to inject capital into our PRC subsidiary, limit our PRC
      subsidiary's ability to distribute profits to us or otherwise materially
      adversely affect us.***





In
      October 2005, the PRC State Administration of Foreign Exchange (“SAFE”) issued a
      public notice, the Notice on Relevant Issues in the Foreign Exchange Control
      over Financing and Return Investment Through Special Purpose Companies by
      Residents Inside China (the “SAFE Notice”), which requires PRC residents,
      including both legal persons and natural persons, to register with the competent
      local SAFE branch before establishing or controlling any company outside of
      China, referred to as an “offshore special purpose company,” for the purpose of
      overseas equity financing involving onshore assets or equity interests held
      by
      them. In addition, any PRC resident that is the shareholder of an offshore
      special purpose company is required to amend its SAFE registration with the
      local SAFE branch with respect to that offshore special purpose company in
      connection with any increase or decrease of capital, transfer of shares, merger,
      division, equity investment or creation of any security interest over any assets
      located in China. Moreover, if the offshore special purpose company was
      established and owned the onshore assets or equity interests before the
      implementation date of the SAFE notice, a retroactive SAFE registration is
      required to have been completed before March 31, 2006. If any PRC shareholder
      of
      any offshore special purpose company fails to make the required SAFE
      registration and amendment, the PRC subsidiaries of that offshore special
      purpose company may be prohibited from distributing their profits and the
      proceeds from any reduction in capital, share transfer or liquidation to the
      offshore special purpose company. Moreover, failure to comply with the SAFE
      registration and amendment requirements described above could result in
      liability under PRC laws for evasion of applicable foreign exchange
      restrictions. After the SAFE notice, an implementation rules on the SAFE notice
      was issued on May 29, 2007 which provides for implementation guidance and
      supplements the procedures as provided in the SAFE notice. For an offshore
      special purpose company which was established and owned the onshore assets
      or
      equity interests before the implementation date of the SAFE notice, a
      retroactive SAFE registration requirement is repeated.





13





Due
      to
      lack of official interpretation, some of the terms and provisions of the SAFE
      Notice and its implementation rules remain unclear, and the implementation
      of
      the SAFE Notice by central SAFE and local SAFE branches has been inconsistent
      since its adoption. Based on the advice of our PRC counsel, Global Law Offices,
      located in Beijing, and after consultation with relevant SAFE officials, we
      believe that the PRC resident shareholders of RINO International Corporation,
      were required to complete their respective SAFE registrations pursuant to the
      SAFE Notice.




Moreover,
      because of uncertainty over how the SAFE Notice will be interpreted and
      implemented, and how or whether the SAFE Notice and implementation rules will
      apply to us, we cannot predict how SAFE will affect our business operations
      or
      future strategies. For example, our present and prospective PRC subsidiaries’
ability to conduct foreign exchange activities, such as the remittance of
      dividends and foreign currency-denominated borrowings, may be subject to
      compliance with the SAFE Notice by our or our parent company’s PRC resident
      shareholders. In addition, such PRC residents may not always be able to complete
      registration procedures required by the SAFE Notice. We also have little control
      over either our present or prospective direct or indirect shareholders or the
      outcome of such registration procedures. A failure by our or RINO’s PRC resident
      shareholders or future PRC resident shareholders to comply with the SAFE Notice,
      if SAFE requires it, could subject us to fines or legal sanctions, restrict
      our
      overseas or cross-border investment activities, limit our subsidiary’s ability
      to make distributions or pay dividends or affect our ownership structure, which
      could adversely affect our business and prospects.




***Any
      recurrence of severe acute respiratory syndrome, or SARS, or another widespread
      public health problem, could adversely affect our
      operations.***





A
      renewed
      outbreak of SARS or another widespread public health problem in the PRC, where
      all of our revenue is derived, could have an adverse effect on our operations.
      Our operations may be impacted by a number of health-related factors, including
      quarantines or closures of some of our offices that would adversely disrupt
      our
      operations.




Any
      of
      the foregoing events or other unforeseen consequences of public health problems
      could adversely affect our operations.




***Because
      our principal assets are located outside of the United States and some of our
      directors and all our officers reside outside of the United States, it may
      be
      difficult for you to use the United States Federal securities laws to enforce
      your rights against us and our officers and some directors in the United States
      or to enforce judgments of United States courts against us or them in the
      PRC.***





All
      of
      our present officers and some of our directors reside outside of the United
      States. In addition, our operating subsidiary, Dalian Innomind, and controlled
      affiliate, RINO, are located in the PRC and substantially all of their assets
      are located outside of the United States. It may therefore be difficult for
      investors in the United States to enforce their legal rights based on the civil
      liability provisions of the United States Federal securities laws against us
      in
      the courts of either the United States or the PRC and, even if civil judgments
      are obtained in courts of the United States, to enforce such judgments in PRC
      courts. Further, it is unclear if extradition treaties now in effect between
      the
      United States and the PRC would permit effective enforcement against us or
      our
      officers and directors of criminal penalties, under the United States Federal
      securities laws or otherwise.




***The
      PRC’s legal and judicial system may not adequately protect our business and
      operations and the rights of foreign investors***





The
      PRC
      legal and judicial system may negatively impact foreign investors. In 1982,
      the
      National People's Congress amended the Constitution of China to authorize
      foreign investment and guarantee the "lawful rights and interests" of foreign
      investors in the PRC. However, the PRC's system of laws is not yet
      comprehensive. The legal and judicial systems in the PRC are still rudimentary,
      and enforcement of existing laws is inconsistent. Many judges in the PRC lack
      the depth of legal training and experience that would be expected of a judge
      in
      a more developed country. Because the PRC judiciary is relatively inexperienced
      in enforcing the laws that do exist, anticipation of judicial decision-making
      is
      more uncertain than would be expected in a more developed country. It may be
      impossible to obtain swift and equitable enforcement of laws that do exist,
      or
      to obtain enforcement of the judgment of one court by a court of another
      jurisdiction. The PRC's legal system is based on the civil law regime, that
      is,
      it is based on written statutes; a decision by one judge does not set a legal
      precedent that is required to be followed by judges in other cases. In addition,
      the interpretation of Chinese laws may be varied to reflect domestic political
      changes.





14





The
      promulgation of new laws, changes to existing laws and the pre-emption of local
      regulations by national laws may adversely affect foreign investors. However,
      the trend of legislation over the last 20 years has significantly enhanced
      the
      protection of foreign investment and allowed for more control by foreign parties
      of their investments in Chinese enterprises. There can be no assurance that
      a
      change in leadership, social or political disruption, or unforeseen
      circumstances affecting the PRC's political, economic or social life, will
      not
      affect the PRC government's ability to continue to support and pursue these
      reforms. Such a shift could have a material adverse effect on our business
      and
      prospects.




The
      practical effect of the PRC legal system on our business operations in the
      PRC
      can be viewed from two separate but intertwined considerations. First, as a
      matter of substantive law, the Foreign Invested Enterprise laws provide
      significant protection from government interference. In addition, these laws
      guarantee the full enjoyment of the benefits of corporate Articles and contracts
      to Foreign Invested Enterprise participants. These laws, however, do impose
      standards concerning corporate formation and governance, which are qualitatively
      different from the general corporation laws of the United States. Similarly,
      the
      PRC accounting laws mandate accounting practices, which are not consistent
      with
      U.S. generally accepted accounting principles. PRC’s accounting laws require
      that an annual "statutory audit" be performed in accordance with PRC accounting
      standards and that the books of account of Foreign Invested Enterprises are
      maintained in accordance with Chinese accounting laws. Article 14 of the
      People's Republic of China Wholly Foreign-Owned Enterprise Law requires a wholly
      foreign-owned enterprise to submit certain periodic fiscal reports and
      statements to designated financial and tax authorities, at the risk of business
      license revocation. While the enforcement of substantive rights may appear
      less
      clear than United States procedures, the Foreign Invested Enterprises and Wholly
      Foreign-Owned Enterprises are Chinese registered companies, which enjoy the
      same
      status as other Chinese registered companies in business-to-business dispute
      resolution. Any award rendered by an arbitration tribunal is enforceable in
      accordance with the United Nations Convention on the Recognition and Enforcement
      of Foreign Arbitral Awards (1958). Therefore, as a practical matter, although
      no
      assurances can be given, the Chinese legal infrastructure, while different
      in
      operation from its United States counterpart, should not present any significant
      impediment to the operation of Foreign Invested Enterprises.




***We
      may face obstacles from the communist system in the
      PRC.***





Foreign
      companies conducting operations in PRC face significant political, economic
      and
      legal risks. The Communist regime in the PRC, which includes a cumbersome
      bureaucracy, may hinder Western investment.




***We
      may have difficulty establishing adequate management, legal and financial
      controls in the PRC.***





The
      PRC
      historically has not adopted a Western style of management and financial
      reporting concepts and practices, as in modern banking, computer and other
      control systems. We may have difficulty in hiring and retaining a sufficient
      number of qualified employees to work in the PRC. As a result of these factors,
      we may experience difficulty in establishing management, legal and financial
      controls, collecting financial data and preparing financial statements, books
      of
      account and corporate records and instituting business practices that meet
      Western standards. Therefore, we may, in turn, experience difficulties in
      implementing and maintaining adequate internal controls as will be required
      under Section 404 of the Sarbanes Oxley Act of 2002.





15





***The
      relative lack of public company experience of our management team may put us
      at
      a competitive disadvantage.***  **





Our **** management team lacks public company experience, which could impair our ability
      to comply with legal and regulatory requirements such as those imposed by
      Sarbanes-Oxley Act of 2002. The individuals who now constitute our senior
      management have never had responsibility for managing a publicly traded company.
      Such responsibilities include complying with federal securities laws and making
      required disclosures on a timely basis. Our senior management may not be able
      to
      implement programs and policies in an effective and timely manner that
      adequately responds to such increased legal, regulatory compliance and reporting
      requirements. Our failure to comply with all applicable requirements could
      lead
      to the imposition of fines and penalties and distract our management from
      attending to the growth of our business.





**Risks
      Related to Our Common Stock.**





***Our
      officers, directors and affiliates control us through their positions and stock
      ownership and their interests may differ from other
      stockholders.***





Our
      officers and directors beneficially own approximately 71.6% of our Common Stock.
      As a result, they are able to control the outcome of stockholder votes on
      various matters, including the election of directors and extraordinary corporate
      transactions, including business combinations. The interests of our directors
      and officers may differ from other stockholders. Furthermore, the current ratios
      of ownership of our common stock reduce the public float and liquidity of our
      common stock which can, in turn, affect the market price of our common
      stock.





***We
      are not likely to pay cash dividends in the foreseeable
      future.***





We
      currently intend to retain any future earnings for use in the operation and
      expansion of our business. We do not expect to pay any cash dividends in the
      foreseeable future but will review this policy as circumstances dictate. Should
      we decide in the future to do so, as a holding company, our ability to pay
      dividends and meet other obligations depends upon the receipt of dividends
      or
      other payments from our operating subsidiary. In addition, our operating
      subsidiary, Dalian Innomind, from time to time, may be subject to restrictions
      on its ability to make distributions to us, including as a result of
      restrictions on the conversion of local currency into U.S. dollars or other
      hard
      currency and other regulatory restrictions.




***The
      5,464,357 shares issued in the October 5, 2007 private placement may be
      redeemable under the Securities Purchase Agreement***





The
      Securities Purchase Agreement contained a transferable provision such that
      if
      any governmental agency in the PRC takes action that adversely affects the
      Restructuring Agreements or the Share Exchange Agreement and the company doesn’t
      mitigate the adverse effect to the investors’ reasonable satisfaction within 60
      days of the PRC action, then the company is required to pay liquidated damages
      in an amount equal to the initial investment without interest and the
      shareholder must return the shares acquired under the agreement. Consequently,
      the total amount of the gross proceeds has been excluded from permanent equity
      and recorded as redeemable common stock in accordance with Rule 5-02.28 of
      Regulation S-X and Section 211 of the Codification of Financial Reporting
      Policies. Although there is no fixed redemption requirement in any of the next
      five years, the entire amount of $24,480,319 could become redeemable in any
      of
      the next five years.





***Our
      common stock is thinly traded, so you may be unable to sell at or near ask
      prices or at all if you need to sell your shares to raise money or otherwise
      desire to liquidate your shares.***  **




16




Prior
      to
      the October 5, 2007, Share Exchange our shares were not publicly traded. Through
      the Share Exchange we have essentially become public without the typical initial
      public offering procedures which usually include a large selling group of
      broker-dealers who may provide market support after going public. Thus, we
      have
      undertaken efforts to develop market recognition for our stock. Our common
      stock
      was added to the OTC Bulletin Board (the “OTC-BB”) daily list on July 3, 2007.
      As a result, there is limited market activity in our stock and we are too small
      to attract the interest of many brokerage firms and analysts. We cannot give
      you
      any assurance that a broader or more active public trading market for our common
      stock will develop or be sustained. Currently our common stock is quoted in
      the
      OTC Bulletin Board market and the trading volume we will develop may be limited
      by the fact that many major institutional investment funds, including mutual
      funds, as well as individual investors follow a policy of not investing in
      Bulletin Board stocks and certain major brokerage firms restrict their brokers
      from recommending Bulletin Board stocks because they are considered speculative,
      volatile and thinly traded. The OTC Bulletin Board market is an inter-dealer
      market much less regulated than the major exchanges and our common stock is
      subject to abuses and volatilities and shorting. Thus there is currently no
      broadly followed and established trading market for our common stock. An
      established trading market may never develop or be maintained. Active trading
      markets generally result in lower price volatility and more efficient execution
      of buy and sell orders. Absence of an active trading market reduces the
      liquidity of the shares traded there.





17




The
      trading volume of our common stock has been and may continue to be limited
      and
      sporadic. As a result of such trading activity, the quoted price for our common
      stock on the OTC Bulletin Board may not necessarily be a reliable indicator
      of
      its fair market value. Further, if we cease to be quoted, holders would find
      it
      more difficult to dispose of, or to obtain accurate quotations as to the market
      value of our common stock and as a result, the market value of our common stock
      likely would decline.




***Our
      common stock is currently subject to the "penny stock" rules which require
      delivery of a schedule explaining the penny stock market and the associated
      risks before any sale.***




Our
      common stock is currently subject to regulations prescribed by the SEC relating
      to “penny stocks.” The SEC has adopted regulations that generally define a penny
      stock to be any equity security that has a market price (as defined in such
      regulations) of less than $5.00 per share, subject to certain exceptions. On
      July 18, 2008, the last sale price of our common stock was $8.250 per share
      according to Yahoo Finance. These regulations impose additional sales practice
      requirements on broker-dealers who sell such securities to persons other than
      established customers and accredited investors (generally institutions with
      assets in excess of $5,000,000 and individuals with a net worth in excess of
      $1,000,000 or annual income exceeding $200,000 (individually) or $300,000
      (jointly with their spouse)). For transactions covered by these rules, the
      broker-dealer must make a special suitability determination for the purchase
      of
      these securities and have received the purchaser's prior written consent to
      the
      transaction. Additionally, for any transaction, other than exempt transactions,
      involving a penny stock, the rules require the delivery, prior to the
      transaction, of a risk disclosure document mandated by the SEC relating to
      the
      penny stock market. The broker-dealer also must disclose the commissions payable
      to both the broker-dealer and the registered representative, current quotations
      for the securities and, if the broker-dealer is the sole market-maker, the
      broker-dealer must disclose this fact and the broker-dealer's presumed control
      over the market. Finally, monthly statements must be sent disclosing recent
      price information for the penny stock held in the account and information on
      the
      limited market in penny stocks. Consequently, the "penny stock" rules may
      restrict the ability of broker-dealers to sell the common stock and may affect
      the ability of investors to sell their common stock in the secondary
      market.




***Our
      common stock is illiquid and subject to price volatility unrelated to our
      operations.***





The
      market price of our common stock could fluctuate substantially due to a variety
      of factors, including market perception of our ability to achieve our planned
      growth, quarterly operating results of other companies in the same industry,
      trading volume in our common stock, changes in general conditions in the economy
      and the financial markets or other developments affecting our competitors or
      us.
      In addition, the stock market is subject to extreme price and volume
      fluctuations. This volatility has had a significant effect on the market price
      of securities issued by many companies for reasons unrelated to their operating
      performance and could have the same effect on our common stock.




***A
      large number of shares will be eligible for future sale and may depress our
      stock price.***




This
      is
      an offering of 5,580,428 shares of our common stock by the selling stockholders,
      all of which (assuming the effectiveness of the registration statement of which
      this prospectus is a part) are freely tradable. Sales of substantial amounts
      of
      common stock, or a perception that such sales could occur, and the existence
      of
      warrants to purchase shares of common stock at prices that may be below the
      then
      current market price of the common stock, could adversely affect the market
      price of our common stock and could impair our ability to raise capital through
      the sale of our equity securities.





***We
      are authorized to issue "blank check" preferred stock, which, if issued without
      stockholders approval, may adversely affect the rights of holders of our common
      stock.***





18





We
      are
      authorized to issue 50,000,000 shares of preferred stock, none of which have
      been issued. Our Board of Directors is authorized under our Articles of
      Incorporation to provide for the issuance of shares of preferred stock by
      resolution, and by filing a certificate of designations under Nevada law, to
      fix
      the designation, powers, preferences and rights of the shares of each such
      series of preferred stock and the qualifications, limitations or restrictions
      thereof without any further vote or action by the stockholders. Any shares
      of
      preferred stock so issued are likely to have priority over our common stock
      with
      respect to dividend or liquidation rights. In the event of issuance, the
      preferred stock could be utilized, under certain circumstances, as a method
      of
      discouraging, delaying or preventing a change in control, which could have
      the
      effect of discouraging bids for the Company and thereby prevent stockholders
      from receiving the maximum value for their shares. We have no present intention
      to issue any shares of our preferred stock in order to discourage or delay
      a
      change of control or for any other reason. However, there can be no assurance
      that preferred stock will not be issued at some time in the future.





***We
      are responsible for the indemnification of our officers and
      directors*** *.*





Our
      Bylaws provide for the indemnification of our directors, officers, employees,
      and agents, under certain circumstances, against costs and expenses incurred
      by
      them in any litigation to which they become a party arising from their
      association with or activities on our behalf. Consequently, we may be required
      to expend substantial funds to satisfy these indemnity obligations.





**Part
      II**





Item
      6.
      Selected Financial Data.





The
      following selected consolidated financial data for December 31, 2007 and 2006
      and income statement data for the years ended December 31, 2007, 2006 and 2005
      are derived from our consolidated financial statements included elsewhere in
      this registration statement . Balance
      sheet data for December 2005, 2004 and 2003 and income statement data for the
      years ended December 31, 2004 and 2003 have been compiled from the financial
      records of the company, without audit, and are presented in accordance with
      US
      GAAP. The information set forth below should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations” and our Consolidated Financial Statements and their related notes
      included elsewhere in this registration statement. The historical results
      presented are not necessarily indicative of future results.




19





**Year Ended December 31,****2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003****($
                in millions)****Statement
                of Operations:**Net
                Sales (net of Government grants)
            
            $
            63.4
            
            
            10.3
            
            
            3.6
            
            
            2.9
            
            
            0.0Gross
                Profit
            
            
            30.7
            
            
            5.4
            
            
            0.8
            
            
            0.2
            
            
            0.0Selling,
                general & administrative expenses
            
            
            14.7
            
            
            0.7
            
            
            0.3
            
            
            0.4
            
            
            0.0Income
                from Operations
            
            
            15.8
            
            
            4.6
            
            
            0.5
            
            
            (0.2
            )
            
            0.0Interest
                expense, net
            
            
            0.5
            
            
            0.3
            
            
            0.0
            
            
            0.004
            
            
            0.0Income
                from Operations before Taxes
            
            
            15.2
            
            
            4.3
            
            
            0.4
            
            
            (0.2
            )
            
            0.0Income
                Tax Expense
            
            
            5.0
            
            
            1.2
            
            
            0.0
            
            
            0.002
            
            
            0.0Net
                income (loss)
            
            $
            10.2
            
            
            3.2
            
            
            0.3
            
            
            (0.2
            )
            
            0.0Basic
                earnings per common share
            
            $
            0.52
            
            
            0.18
            
            
            0.2
            
            
            (0.1
            )
            
            0.0Fully
                diluted earnings per common share
            
            $
            0.52
            
            
            0.18
            
            
            0.2
            
            
            (0.1
            )
            
            0.0Basic
                EPS denominator
            
            
            19,611,510
            
            
            17,899,643
            
            
            17,899,643
            
            
            17,899,643
            
            
            17,899,643Fully
                diluted EPS denominator
            
            
            19,694,481
            
            
            17,899,643
            
            
            17,899,643
            
            
            17,899,643
            
            
            17,899,643**Other
                Financial Data**:Cash
                flow provided by (used in) operating activities
            
            $
            (5.0
            )
            
            4.0
            
            
            (0.1
            )
            
            1.9
            
            
            (0.1
            )Cash
                flow used in investing activities
            
            
            (4.7
            )
            
            (5.0
            )
            
            (4.3
            )
            
            1.9
            
            
            0.8Cash
                flow provided by (used in) financing activities
            
            
            13.0
            
            
            4.5
            
            
            3.8
            
            
            0.0
            
            
            0.8**Consolidated
                Balance Sheet Data**:Cash
                and cash equivalents
            
            $
            7.4
            
            
            3.6
            
            
            0.1
            
            
            0.
            
            
            0.01Accounts
                receivable, net
            
            
            21.0
            
            
            5.6
            
            
            0.5
            
            
            2.
            
            
            0.4Total
                Assets
            
            
            62.2
            
            
            21.6
            
            
            11.8
            
            
            7.
            
            
            1.4Accounts
                Payable
            
            
            2.5
            
            
            3.9
            
            
            1.2
            
            
            1.
            
            
            0.5Notes
                Payable
            
            
            0
            
            
            4.2
            
            
            3.7
            
            
            0.0
            
            
            0Notes
                Payable - long term
            
            $
            0
            
            
            3.5
            
            
            0.0
            
            
            0.0
            
            
            0Total
                Common Stock and Other Stockholders’ Equity
            
            
            23.7
            
            
            7.3
            
            
            3.2
            
            
            0.7
            
            
            0.8





20





The
      selected financial data presented above is substantially the operating results
      for Dalian RINO. For the years ended December 31 2006, 2005, 2004, and 2003,
      all
      operations were undertaken by Dalian RINO. Beginning October 5, 2007, Dalian
      RINO began to pay all its after tax net income to Dalian Innomind as a
      management fee under the terms of the Entrusted Management Agreement. From
      October 5, 2007, the two companies’ operations are consolidated as a
      contractually controlled affiliate under EITF 97-2. RINO International
      Corporation and Innomind Group Limited exist as holding companies and have
      only *de
      minimis* income.





Item
      7. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.





**Overview**




The
      Company is engaged in designing, developing, manufacturing, and installing
      environmental protection and energy saving equipment for the Chinese iron and
      steel industry. Most of our customers are large, state-owned iron and steel
      companies. Our business operations are conducted throughout China.




China’s
      iron and steel companies have experienced robust growth during the last twenty
      years, following the expansion of China’s economy and industrial base,
      generally. Along with this growth, the iron and steel industry has produced
      large amounts of waterborne and airborne industrial waste and pollution, and
      as
      a consequence it faces increasingly stringent governmental mandates to reduce
      or
      eliminate sulphur dixoide emissions and untreated wastewater discharges. Failure
      to meet mandated emission and discharge standards can result in financial
      penalties.




Demand
      for our core product, the Lamella Wastewater System, increased 26.7% to $6.97
      million in 2007 and we expect demand to continue in 2008. Our Desulphurization
      System which we introduced in late 2006, is based on proprietary technology
      we
      jointly developed with the Research Institute of the Chinese Academy of
      Sciences, and can reduce flue gas sulphur dioxide levels by over 90%. We expect
      to see strong demand from the industry for the solutions that our
      Desulphurization System offers for airborne sulphur dioxide emissions. Starting
      in January 2007, we launched another new product, our Anti-Oxidation System,
      that materially reduces scrap loss in the production of hot rolled steel plate
      production caused by oxidation. Anti-oxidation is a long-sought solution in
      the
      Iron and Steel industry. We believe our Anti-Oxidation System, including paint
      and spraying equipment, is the only online system that prevents or reduces
      oxidation without needing to first cool down the steel slab. We anticipate
      that
      our Anti-Oxidation System will be an important driver of revenue
      growth.





In
      addition to the foregoing, we provide machining services to third parties,
      utilizing our heavy machine tools’ idle time to generate contract manufacturing
      revenue. In the first quarter of 2007, we also earned a significant amount
      of
      revenue from providing technical support to a business partner for the
      fulfillment of its desulphurization contract. The technical support business
      maintained our revenue growth while we continue to experience production
      capacity constraints. This business declined throughout the final 2 quarters
      of
      2007 as we built up adequate production capacity which allowed us to refocus
      on
      our manufacturing business. We did not generate any revenue from technical
      support business in the three months ended March 31, 2008.




We
      also
      receive grants from local government with amounts varying from year to year
      as
      rewards for our continued investment in new technologies. While being selected
      for these grants signals important government support for our technology
      development efforts, we believe the amounts of these grants are immaterial
      to
      our business. In the twelve months ended December 31, 2007, we received
      government grants of $228,430, or 0.4% of our total equipment and services
      sales
      revenue for the period. In the twelve months ended December 31, 2006, we
      received government grants of $448,515, or 4.4% of our total sales revenue
      for
      the period. In the twelve months ended December 31, 2005, we received government
      grants of $52,418, or 1.4% of our total equipment and services sales revenues
      for the period. In the three months ended March 31, 2008 and 2007, we received
      no government grants for our technology development efforts. For the three
      months ended March 31, 2008, we were awarded a government incentive prize in
      the
      amount of $73,377 by the local PRC government for Dalian RINO’s significant tax
      contribution as a tax-payer which we recorded as our other income.




21




All
      our
      products are custom-built pursuant to our customers’ specific requirements. We
      enter into fixed price engineering and installation agreements with our
      customers that are performed in engineering, manufacturing, construction and
      installation phases. Equipment and components are engineered and manufactured
      primarily at our headquarter facilities before being installed at our customers’
sites. Generally, we fulfill our contracts in twelve months.




Our
      project-based revenue is affected directly by our customers’ capital budgets and
      need to build new plants. Since most of our customers are
      state-owned-enterprises, their budgeting decisions are influenced by the central
      government’s environmental protection and pollution control policies, which
      presently are favorable to our business and products. We expect such policy
      emphasis to continue for the foreseeable future.




The
      cost
      of revenue for our products includes direct materials, direct labor, and
      manufacturing overhead, with a significant portion allocable to materials costs,
      which are subject to fluctuation.




**Recent
      Developments**




***Share
      Exchange, Restructuring Agreements and Private Placement
      Financing***





In
      a
      share exchange transaction that closed on October 5, 2007 (the “Share
      Exchange”), the Company acquired Innomind, and through that acquisition also
      acquired Innomind’s wholly-owned subsidiary, Dalian Innomind, as well as the
      business and some of the assets (including the key manufacturing equipment)
      of
      Dalian Innomind’s PRC affiliate, RINO. In the Share Exchange the Company issued
      17,899,643 shares of our common stock (the “Control Shares”) to Zhang Ze,
      Innomind’s sole shareholder, in exchange for 10 shares of capital stock of
      Innomind, which represented all of the issued and outstanding shares of
      Innomind, which were owned by Zhang Ze. Zhang Ze immediately transferred his
      Control Shares into a Trust, the beneficiaries of which were Zou Dejun and
      Qiu
      Jianping. Prior to the Share Exchange: (i) on July 16, 2007, the Company
      consummated a 1-for-200,000 reverse split of our common stock, with fractional
      shares rounded up to the nearest whole number; and (ii) on August 31, 2007,
      the
      Company’s Board of Directors authorized 100-for-1 forward split of the issued
      and outstanding shares of our common stock.





22





The
      acquisition of Innomind and Dalian Innomind on October 5, 2007 by RINO
      International Corporation effected a change in control and was accounted for
      as
      a “reverse acquisition” whereby Innomind is the accounting acquirer for
      financial statement purposes. Accordingly, for all periods and filings
      subsequent to the October 5, 2007 “reverse acquisition” transaction, the
      historical financial statements of the Company reflect the consolidated
      financial statements of Innomind since its inception and the operations of
      RINO
      International subsequent to October 5, 2007.




In
      connection with the Share Exchange, through a series of agreements between
      Dalian Innomind and RINO that we refer to as the “Restructuring Agreements,”
which were signed on October 3, 2007, and closed on October 5, 2007, Dalian
      Innomind agreed to: (i) purchase and lease from RINO some of RINO’s assets and
      properties, including, among other things, the purchase of certain of RINO’s key
      manufacturing equipment for $298,173 (or RMB 2,250,343), patent and trade mark
      for $1,325 (or RMB 10,000) and the lease of RINO’s manufacturing plants and land
      at an annual rent of approximately $82,778 (or RMB 610,000); and (ii) fully
      conduct and manage RINO’s business (the “Business”) in exchange for RINO’s
      payment to Dalian Innomind of a management fee equal to the Business’s monthly
      net profits. To the extent that any aspect of the Business needs to
      be conducted directly through RINO in the future, the Restructuring
      Agreements provide Dalian Innomind with the legal right and power to control
      RINO and any of its remaining assets and operations. For more information about
      the Restructuring Agreements, please see “Business — Acquisition of Innomind and
      the Business of RINO, — Restructuring Agreements to Acquire RINO’s Operating
      Business” at pages 62-64 of this prospectus.





The
      Restructuring Agreements were utilized instead of a direct acquisition of RINO's
      assets, because of the lack of clarity in the implementation of current PRC
      laws
      regarding the use of a non-PRC entity’s equity as consideration to acquire a PRC
      entity’s equity or assets. This makes it highly uncertain, if not impossible,
      for a non-PRC entity (such as the Company or Innomind) to use its equity to
      acquire a PRC entity (such as RINO). While PRC law does allow for the purchase
      of equity interests in, or assets of a PRC entity by a non-PRC entity for cash,
      the purchase price must be based on the appraised value of the equity or assets.
      Because the Company did not have sufficient cash to pay the estimated full
      value
      of all of the assets of RINO, the Company, through Dalian Innomind, purchased
      the maximum amount of assets possible with the net proceeds of the private
      placement described below, and leased from RINO the remainder of the assets
      used
      in RINO’s business.





As
      of the
      date of this Prospectus, Dalian Innomind has already assumed full operating
      control of the Business. No other regulatory requirements remain to be
      completed.




The
      funds
      used to consummate the Company’s acquisition of Innomind and the Restructuring
      Agreements were provided from the proceeds of a private placement of the
      Company’s common stock to 24 accredited investors that closed on October 5,
      2007, simultaneously with the Innomind acquisition and the implementation of
      the
      Restructuring Agreements. The private placement resulted in gross proceeds
      of
      $24,480,319 (or $21,251,000 in net proceeds) or from the sale of 5,464,357
      shares of our common stock. Pursuant to the Securities Purchase Agreement
      between the investors and the Company, the net proceeds of the Private Placement
      will otherwise principally be used by the Company and by Dalian Innomind to
      expand manufacturing and production capacity and facilities, and to provide
      working capital for the Business.




***Change
      in Independent Accountants***




On
      October 5, 2007, we engaged Jimmy C.H. Cheung & Co., CPAs as our independent
      accountants to perform our 2007 full year financial audit. On April 29, 2008,
      our board of directors approved our termination of Jimmy C.H. Cheung & Co.,
      CPAs as our independent accountants and our engagement of Moore Stephens Wurth
      Frazer and Torbet, LLP as our independent accountants.





23





***Name
      Change and Trading Symbol Change***





Effective
      May 9, 2008, we changed our name from Jade Mountain Corporation to “RINO
      International Corporation.” The board approved the changed name and deemed it a
      better reflection of the direction and business of the Company.





The
      name
      change is completed in connection with a merger pursuant to Section 92A.180
      of the Nevada Revised Statutes, according to which, the merger is in the form
      that the Company’s wholly-owned subsidiary, China RINO, Inc., a corporation
      incorporated under the laws of the State of Nevada on March 21, 2008, merged
      into the Company itself, having the Company as the surviving corporation.
      Therefore, no shareholder approval for the merger and the related name change
      from either the parent or the subsidiary company is required. The change to
      the
      Company’s name is reflected in the Articles of Merger attached herein, filed on
      April 28, 2008 with the State of Nevada. We filed a Current Report on Form
      8-K
      with the Securities and Exchange Commission to report our name change on May
      9,
      2008.





In
      connection with our name change, NASDAQ assigned a new symbol to our common
      stock effective May 13, 2008. As a result, our common stock is now quoted on
      the
      National Association of Securities Dealers Over-the-Counter Bulletin Board
      under
      the symbol “RINO”.





***Recent
      Accounting Pronouncements***





In
      June
      2007, the 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” (“FSP EITF 07-3”), which addresses whether
      nonrefundable advance payments for goods or services that 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. The
      Company adopted FSP EITF 07-3 and expensed the research and development as
      incurred.





In
      December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
      Consolidated Financial Statements - an amendment of Accounting Research Bulletin
      No. 51” (“SFAS 160”), which establishes accounting and reporting standards for
      ownership interests ** in
      subsidiaries held by parties other than the parent, the amount of consolidated
      net income attributable to the parent and to the noncontrolling interest,
      changes in a parent’s ownership interest and the valuation of retained
      non-controlling equity investments when a subsidiary is deconsolidated. The
      Statement also establishes reporting requirements that provide sufficient
      disclosures that clearly ** identify
      and distinguish between the interests of the parent and the interests of the
      non-controlling owners. SFAS 160 is effective for ** fiscal
      years beginning after December 15, 2008. The Company believes that the
      application of SFAS 160 will ** not have
      an impact on its consolidated financial statements.





In
      December 2007, the FASB issued SFAS 141R, “Business Combinations,” which applies
      to all transactions or other events in which an entity obtains control of one
      or
      more businesses, including those sometimes referred to as “true mergers” or
“mergers of equals” and combinations achieved without the transfer of
      consideration. This statement replaces FASB Statement No. 141 and applies to
      all
      business entities, including mutual entities that previously used the
      pooling-of-interests method of accounting for some business combinations. The
      adoption of SFAS No. 141R will have an impact on the Company’s accounting for
      business combination, but the effect is dependent upon acquisition at that
      time.





24





**Critical
      Accounting Policies and Estimates**




The
      following discussion and analysis is based upon the Company’s consolidated
      financial statements, which have been prepared in conformity with accounting
      principles generally accepted in the United States of America. The Company’s
      significant accounting policies are more fully described in the Notes to the
      Consolidated Financial Statements. However, certain accounting policies and
      estimates are particularly important to the understanding of the Company’s
      financial position and results of operations and require the application of
      significant judgment by the Company’s management or can be materially affected
      by changes from period to period in economic factors or conditions that are
      outside of the control of management. As a result they are subject to an
      inherent degree of uncertainty. In applying these policies, the Company’s
      management uses their judgment to determine the appropriate assumptions to
      be
      used in the determination of certain estimates. Those estimates are based on
      the
      Company’s historical operations, its future business plans and projected
      financial results, the terms of existing contracts, the Company’s observance of
      trends in the industry, information provided by customers and information
      available from other outside sources, as appropriate. The following discusses
      the Company’s significant accounting policies and estimates.




**Principles
      of Consolidation**





The
      accompanying consolidated financial statements of the Company reflects the
      activities of RINO International and its wholly owned subsidiaries Innomind,
      Dalian Innomind and its contractually controlled affiliate, RINO. All
      significant inter-company transactions and balances have been eliminated in
      consolidation.




**Consolidation
      of Contractually Controlled Affiliate**





On
      October 5, 2007 Dalian Innomind entered into Restructuring Agreements with
      RINO
      and its shareholders in which Dalian Innomind took over the management of the
      business activities of RINO. The Restructuring Agreements consist of the
      following agreements:





(a)
            RINO
                sold some of its manufacturing equipment and tangible assets to Dalian
                Innomind for RMB 2,250,343;(b)
            RINO
                transferred all of its three, presently owned patents, and three
                presently
                pending patent applications, to Dalian Innomind for an aggregate
                transfer
                fee of RMB 10,000;(c)
            RINO
                will lease to Dalian Innomind substantially all of its manufacturing
                plant
                and land at an annual rent of RMB 612,000;(d)
            With
                respect to its presently owned patents, RINO will contemporaneously
                enter
                into a separate transfer agreement (the “Patent Transfer Contract”) with
                Dalian Innomind to accomplish their actual transfer to Dalian
                Innomind;(e)
            With
                respect to its presently pending patent applications, and in order
                to
                accomplish the actual transfer of, each such applied-for patent,
                RINO will
                enter into additional patent transfer contracts within ten days after
                the
                issuance of the patents; and(f)
            RINO
                has granted to Dalian Innomind the royalty-free, perpetual right
                to use
                the “RINO” trademark and logo.




The
      Company determined it has a controlling financial interest in RINO and
      consolidates the results of RINO based on the criteria under Emerging Issues
      Task Force, or EITF, Issue No. 97-2, Physician Practice Management Entities
      and
      Certain Other Entities with Contractual Management Agreements. All intercompany
      accounts have been eliminated in consolidation.




**Revenue
      Recognition**





***Equipment
      Sales Contracts***





The
      Company enters into long-term fixed price contracts with customers to
      manufacture and install industrial equipment. Revenue on long-term fixed price
      contracts is recognized under the percentage-of-completion method in accordance
      with the American Institute of Certified Public Accountants Statement of
      Position 81-1 “Accounting for Performance of Construction-Type and Certain
      Production-Type Contracts”. Our contracts are generally for single, seamless
      solutions, a fact that would make estimation of percentage completion by
      measuring outputs of little value to financial statement users. Accordingly,
      we
      estimate percentage completion based on inputs rather than on outputs, as
      discussed in SOP 81-1 paragraph 47. Under the percentage-of-completion
      cost-to-cost method outlined in SOP 81-1 paragraph 44, management estimates
      the
      percentage-of-completion based upon costs incurred as a percentage of the total
      estimated costs to the contract. When total cost estimates exceed projected
      revenues, the Company accrues for the estimated losses immediately. The use
      of
      the percentage of completion method requires significant judgment relative
      to
      estimating total contract revenues and costs, including assumptions relative
      to
      the length of time to complete the project, the nature and complexity of the
      work to be performed, and anticipated changes in estimated costs. Estimates
      of
      total contract revenues and costs are continuously monitored during the term
      of
      the contract, and recorded revenues and costs are subject to revision as the
      contract progresses. When revisions in estimated contract revenues and costs
      are
      determined, such adjustments are recorded in the period in which they are first
      identified.




25




Our
      equipment sales contracts are fixed-price contracts generally for turnkey
      projects which include design, manufacture of equipment, and installation of
      equipment, which can require extensive fabrication and construction work in
      the
      client’s steel mill. Accordingly, desulphurization projects require in general 6
      to 7 months from inception to final installation and commissioning, while our
      anti-oxidation systems require about 3 to 4 months from inception to
      installation. Wastewater treatment equipment can require from 5 to 8 months
      from
      contract signing, depending in large part on the specific customer’s ability to
      accept delivery.





Our
      equipment sales contracts specify detailed performance criteria. Depending
      on
      the customer, contracts may also contain penalties for delays and definitions
      of
      breach of contract. All equipment sales contracts specify payment terms. In
      general, the first 30% is due from the customer within 30 days of contract
      signing. On average, when the project is 60% complete an additional 30% payment
      is due. When installation and testing are complete the other 30% payment is
      due,
      and the remaining 10% is held by the customer for up to a year following
      completion of the project to ensure quality of installation. To date the Company
      has not incurred significant costs toward a project after its completion and
      has
      had no difficulty collecting the full contract amounts when due.




Because
      our contracts are generally for single, seamless solutions, we estimate
      percentage completion based on inputs rather than on outputs, as discussed
      in
      SOP 81-1 paragraph 47. We use a cost to cost method of estimating percentage
      completion for any given reporting period. Specifically, we use the raw
      materials applied to a project as a percentage of total estimated raw materials
      for the project to estimate percentage completion.  “Applied” in this
      context means raw materials that are actually fabricated into components for
      a
      specific project and not held in inventory, for example “applied” would mean
      steel on which we have begun fabrication operations, or welding supplies or
      coatings that have been used or painted on components. We believe this accords
      with the intent of SOP 81-1 paragraph 49, which precludes using the mere
      purchase of raw materials to drive percentage completion estimates.





Significant
      production costs such as raw materials and labor are generally incurred pro
      rata
      over the time required to complete each project, beginning with machining of
      equipment parts in our production facilities in Dalian to fabrication and
      assembly of housings, towers, and other items constructed on site in our
      clients’ steel mills. While our production costs also include labor,
      depreciation, and other manufacturing costs, we believe that using the
      application of raw materials to work in progress to drive our percentage
      completion estimates offers the most concrete factual basis for estimation
      of
      percentage completion as this prevents the allocation of overheads and utilities
      from directly affecting our recognition of revenues. We believe our use of
      raw
      materials is in accord with the material quantities mentioned in SOP 81-1
      paragraph 48.





While
      our
      estimated percentage completion is driven by our application of raw materials,
      our contract terms provide the observation and inspection recommended by SOP
      81-1 paragraph 51. The customer assigns a project manager to monitor the
      progress and quality of each installation. The project manager signs his
      approval at the end of each month during the installation, and then upon final
      testing and acceptance. The second 30% progress payment is triggered by a
      percentage completion milestone, in many cases when 60% of a project is
      completed, while the final 30% progress payment becomes due at commissioning.
      Thus the project manager knows that each approval of percentage completion
      of a
      project brings the project closer to a progress payment milestone. We believe
      this acts as a natural check to prevent excessive estimates of percentage
      completion. As our estimates of percentage completion are signed off at the
      end
      of each month by clients before we make progress billings, we believe this
      practice increases the objectivity of our estimates of percentage completion.





26




***Services
      Contracts***





In
      addition to our specialty equipment sales, we use our heavy machining equipment
      to perform machining services for third parties. These engagements - numbering
      several hundred per year - are essentially piecework and are completed in
      usually less than one month. Accordingly, these heavy machinery contracts do
      not
      fall within the scope of SOP 81-1. Each machining engagement is governed by
      a
      separate contract, indicating existence of an arrangement, we recognize revenues
      as services are performed, which is usually concurrent with delivery to the
      client, our contract prices are set by contract, collectibility is assured
      - we
      have little or no bad debt. Accordingly, these revenues can be recognized under
      SAB Topic 13. Machining services contracts generally set out
      the machining work to be performed, including machining tolerances,
      number of pieces to be worked, payment terms, timing of delivery, and price
      per unit of work.  The contract price is generally paid upon acceptance by
      the customers of the completed work after testing by the customers according
      to
      the contract specifications. Dalian RINO is generally responsible for
      shipping.  Dalian RINO generally accepts responsibility to replace
      defective products, paying triple the packaging and related costs as a
      penalty to the customer.  Escalating penalties of 1-5% apply for
      missed delivery deadlines; unilateral cancellation of the contract by
      Dalian RINO generally results in a penalty of 10% of contract value.  In
      case of disputes, parties can accept arbitration or proceed directly
      to court action.




The
      Company also provided technical professional services to its customers based
      on
      a fixed-price time contract. The Company recognized services-based revenue
      from
      all of its contracts when the services have been performed, the customers have
      approved the completion of the services and invoices have been issued and
      collectibility is reasonably assured. Technical services contracts specify
      the
      final user, the nature of the project and the type of technology service to
      be
      provided.  Contracts are valid for one year from signing; payments are
      generally front-loaded, with 70% due within one month of signing, 20% due at
      completion of construction, and 10% due at commissioning. In the event of
      insurmountable technical obstacles caused by the recipient of the technical
      services, the recipient need not be refunded monies already paid and the
      contract is canceled.  In the event of insurmountable technical obstacles
      caused by the provider of the technical services, the provider must repay 50%
      of
      monies received and the contract is canceled.





**Costs
      and estimated earnings in excess of billings**





The
      current costs and estimated earning in excess of billings represent revenues
      recognized in excess of amounts billed pursuant to the percentage-of-completion
      method used to recognize revenue.





**Inventories**





Raw
      materials are stated at the lower of cost or market value, cost being calculated
      on the weighted average basis.




The
      Company provides inventory allowances based on excess and obsolete inventories
      determined principally by customer demand.




**Property
      and equipment**





Property
      and equipment are stated at cost, less accumulated depreciation. Expenditures
      for additions, major renewals and betterments are capitalized and expenditures
      for maintenance and repairs are charged to expense as incurred.





Depreciation
      is provided on a straight-line basis, less estimated residual value over the
      assets’ estimated useful lives. The estimated useful lives are as
      follows:





Buildings
            30
                YearsPlant
                and machinery
            15
                YearsMotor
                vehicles
            10
                YearsFurniture,
                fixtures and equipment
            5
                Years




Land
      use
      rights are stated at cost, less accumulated amortization and are amortized
      over
      the term of the relevant rights of 50 years from the date of
      acquisition.





27





The
      Company’s principal office and its manufacturing facilities are located in the
      Jinzhou Industry Cooperation Zone of Dalian, PRC. In 2003 RINO acquired from
      the
      government the right to use 287,117 square feet of land in the Jinzhou Industry
      Cooperation Zone for a 50 year period that expires in 2053 (the “Land Use
      Rights”). Instead of periodic rent, RINO paid a one-time fee of $580,203 for the
      Land Use Rights.





Of
      the
      area leased by us, our factory occupies 91,570 square feet, and office space,
      warehouse facilities and living quarters comprise 90,148 square
      feet.





**Accounting
      Treatment of the Private Placement**





The
      cash
      held in escrow pursuant to the Securities Purchase Agreement will be accounted
      for as other current assets and will not be shown as cash or cash equivalents
      on
      the our balance sheet until such funds have been released from escrow pursuant
      to the terms of the Securities Purchase Agreement. The shares held in escrow
      as
      Make Good Escrow Shares constitute a share-based award contingent on performance
      conditions subject to the accounting guidance of SFAS 123(R). The grant-date
      fair value of the award will be recognized as compensation expense over the
      periods in which the performance conditions are met. If the performance
      conditions are not met for any period, a portion of the Make Good Escrow Shares
      will be released to the Investors and no expense will be recorded by the Company
      for those shares. During the time such Make Good Escrow Shares are held in
      escrow, they will be accounted for as contingently issuable shares in
      determining the EPS denominators in accordance with SFAS 128. For the year
      ended
      December 31, 2007, compensation expense related to the Make Good Escrow Shares
      was $7,499,520.





Liquidated
      damages potentially payable by the Company under the Registration Rights
      Agreement will be accounted for in accordance with FSP EITF 00-19-2. Estimated
      damages at the time of closing will be recorded as a liability and deducted
      from
      additional paid-in capital as costs of issuance. Estimated damages determined
      later pursuant to the criteria for SFAS 5 will be recorded as a liability and
      deducted from operating income.





The
      Securities Purchase Agreement has a transferable provision in which the Company
      may be required to pay to the investors, as liquidated damages, an amount equal
      to the entire amount that the investors invested in the private placement,
      without interest, and in such case the investors must return all the shares
      acquired if any governmental agency in the PRC challenges or otherwise takes
      any
      action that adversely affects the transactions contemplated by the Restructuring
      Agreements or the Share Exchange Agreement, and the Company cannot undo or
      otherwise address its materially adverse effect to the investors’ reasonable
      satisfaction within 60 days of the PRC government action. Consequently, the
      total amount of the gross proceeds has been excluded from permanent equity
      and
      recorded as redeemable common stock in accordance with Rule 5-02.28 of
      Regulation S-X and Section 211 of the Codification of Financial Reporting
      Policies. Although there is no fixed redemption requirement in any of the next
      five years, the entire amount of $24,480,319 could become redeemable in any
      of
      the next five years. These shares are included as outstanding common stock
      for
      purposes of earnings per share. However, according to the legal opinion issued
      by the Company’s PRC counsel, the Restructuring Agreements and the
      organizational structure resulted thereunder are legal and enforceable under
      current PRC law and that changes to current law would need to be enacted in
      order for the PRC government or any of its entities to challenge the structure
      of the Company. Therefore, the Company believes that the chances of the
      restructuring structure being successfully challenged are remote.




The
      warrants issued to Douglas Capital, our placement agent, qualify as permanent
      equity under EITF 00-19, the value of which warrants has created offsetting
      debit and credit entries to additional paid-in capital.




**Results
      of Operations**




28





***Fiscal
      Years Ended December 31, 2007 And December 31, 2006***  **





**Results
      of Operations**





***Net
      Sales***





Net
      sales, excluding government grants, increased by $53.1 million to $63,287,308
      or
      515% for the twelve months ended December 31, 2007, as compared to the twelve
      months ended December 31, 2006. The increase in 2007 was due to continued growth
      in demand across our entire product lines. In 2007, we also added in our product
      and service offerings anti-oxidation equipment and coatings. We note that we
      have discontinued technical support services in order to employ our
      professionals in our core business of environmental protection equipment. The
      breakdown of the revenue growth, excluding government grants, is as
      follows:





**For the twelve months ended December 31****Net Sales (in thousands)**
            
            **2007**
            
            **% to**
              **Total**
              **Net**
              **Sales**
            
            **2006**
            
            **% to**
              **Total**
              **Net**
              **Sales**
            
            **Increase**Wastewater treatment
                contracts
            
            $
            6,968
            
            
            10.99
            %
            $
            5,499
            
            
            53.34
            %
            
            26.71
            %Flue
                gas desulphurization (including related royalties, and ancillary
                equipment)
            
            
            33,140
            
            
            52.32
            %Anti-oxidation
                equipment and coatings
            
            
            1,966
            
            
            3.10
            %Machining
                services
            
            
            11,859
            
            
            18.70
            %
            
            3,136
            
            
            30.42
            %
            
            278.16
            %Technical
                support services
            
            
            9,452
            
            
            14.90
            %
            
            1,673
            
            
            16.23
            %
            
            464.97
            %Total
                Net Sales
            
            $
            63,385
            
            
            100
            %
            $
            10,308
            
            
            100
            %
            
            515.30
            %





***Wastewater
      treatment equipment.*** Our line
      of wastewater treatment continued to enjoy strong demand in the face of
      increasingly strict environmental enforcement. We executed two contracts for
      wastewater equipment to existing customers in the first half of 2007, and signed
      an additional two contracts in December, 2007.





***Flue
      Gas Desulphurization equipment.*** While
      most of China’s coal-burning electric plants have installed desulphurization
      equipment, the clean-up of China’s iron sintering remains in its early phase.
      Accordingly, our flue gas desulphurization equipment enjoyed strong growth
      in
      2007 as tightening environmental policies required increased reductions in
      emissions of sulphur dioxide. In 2007, we executed ten contracts for
      desulphurization equipment, two to repeat desulphurization customers. Five
      of
      these ten contracts used a third-party equipment maker, a practice we have
      discontinued as our production capacity expanded. In December 2007, we signed
      a
      contract for an additional set of desulphurization equipment to a third repeat
      desulphurization customer. Increased activity in desulphurization of sintering
      operations has attracted competitors, including some international
      providers.




29





***Anti-Oxidation
      Equipment.*** Our anti-oxidation equipment has achieved considerable technical success,
      outperforming our projected reductions in oxidation loss during heat processing
      of hot-rolled steel, one of China’s major steel categories. We installed two
      sets of anti-oxidation equipment in 2007 for two separate customers and have
      signed an additional contract in 2008. After commissioning the first two
      installations, we have successfully raised the sales price of the equipment
      itself to approximately $1.3 million from $0.53 million. While we believe the
      prospects for anti-oxidation equipment and coatings is bright, we anticipate
      that in 2008 we will achieve greater revenue growth from sales of
      desulphurization equipment.





M ***achining
      Service Contracts***  ***.*** In
      the past few years, the demand for large machinery processing in
      power-generating, mining, ship building, paper and steel manufacturing
      industries in China has been increasing rapidly. Therefore, we immediately
      seized this great opportunity and continually purchased processing equipment
      for
      special purposes so that we are able to not only satisfy our internal processing
      needs but also provide the processing services of our heavy-duty machines,
      oversize, premium and rare equipment outside of our company. The parts this
      equipment processes and produces can be applied to a wide range of industries
      with high precision needs. Therefore, we have established business relationships
      with Haerbin Electric Motor Factory, Haerbin Steam Turbine Factory, Dalian
      Heavy
      Duty & Hoisting Group, China 1st Heavy Duty Machinery Factory, etc., all of
      which are large-scale equipment manufacturing enterprises. We are also one
      of
      the few companies capable of processing large-scale hydraulic turbine parts
      for
      hydroelectric plants. Due to our reputation, capacity and quality of services
      and technicians in this line, our processing contracts increased dramatically,
      from $3.1 M in 2006 to $11.9 M in 2007, an increase of 278%.




***Technical
      Support Services*** .  
In the first half of 2007, in order to protect the environment from pollution,
      the PRC government called for all iron and steel manufacturers or related
      industries to control SO2 emissions, otherwise, they have to close down their
      factories. Thus, there are immediate urgent needs for installing the
      desulphurization equipment which can control the flue gas. Due to our production
      capacity and excessive workload, we decided to subcontract part of our
      desulphurization procedure and only provide the technical support to the
      equipment installation. This was an unusual and unexpected market demand
      resulting from governmental behavior and policy. There was no such policy
      enforcement prior to 2007. Therefore, the revenue from technical support
      services is zero in 2006, while almost $9.5 M, 14.9% of the total net sales
      in
      2007.




***Cost
      of Sales***





Our
      cost
      of sales increased approximately $27.6 million, or 516%, to approximately $32.9
      million for the year ended December 31, 2007, from approximately $5.3 million
      for the same period in 2006. This increase was due to the substantial increase
      of our sales volume, especially the revenue from contracts (desulphurization,
      wastewater treatment and anti-oxidation products). The most significant
      component of cost of sales is raw material, which primarily includes steel
      plate, shapes and tubing. Such raw material cost increased approximately 569%
      from $3.4 million in 2006 to $22.8 million in 2007 as the sales increased almost
      530% from $10 million to $63 million. We do not currently have long term
      contracts with our suppliers of raw material, and are consequently subject
      to
      potential short and long-term price fluctuations. However, our raw materials
      are
      generally available and can be acquired from a number of vendors which allows
      us
      to seek the most competitive prices. We are not dependent on any single vendor
      for any of our raw materials. The less significant components of our cost of
      sales are manufacturing costs and overhead and direct labor. In addition to
      seeking competitive prices, many of our equipment sales contracts also contain
      clauses which allow us to pass through certain price increases when they exceed
      certain hurdles.




30




***Operating
      Expense.***




Operating
      expenses for the twelve months ended December 31, 2007 increased to $14.9
      million from $0.8 million for the same period ended December 31, 2006. The
      large
      increase was substantially attributable to a 2,033% increase in selling, general
      and administrative expenses to 14.7 million for the twelve months ended December
      31, 2007 from $0.7 million for the twelve months ended December 31, 2006. The
      increase in our selling, general and administrative expenses was primarily
      due
      to certain extra expenses that we incurred and/or recorded in connection with
      our private placement, share exchange and restructuring transactions that we
      closed in October 2007. In particular, in 2007, we recorded the $7,499,520
      stock
      compensation expense, which constituted 50.3% of our total operating expense,
      as
      a result of the require release of 1,674,000 make good escrow shares from the
      make good escrow account to our CEO and our Chairman of the Board pursuant
      to
      the Securities Purchase Agreement.. Such shares were valued at $4.48 per share
      which was the grant date fair value in accordance with SFAS 123R. Additionally,
      we incurred approximately $3.9 million selling, general and administrative
      expenses in commissions, outside professional services and travel in connection
      with the private placement, share exchange and restructuring transactions,
      which
      constituted 20.8% of our total operating expenses for the twelve months ended
      December 31, 2007.




***Other
      Income and Expense*** .




Other
      income and expense include primarily interest income and interest expense.
      Our
      other income and expense increased to $575,779 for the twelve months ended
      December 31, 2007 from $317,282 for the corresponding period in 2006,
      representing an increase of 81.5%.




Interest
      income was immaterial due to the fact we have maintained a low cash balance
      for
      most of our operations. Interest expense increased to $0.53 million for the
      twelve months ended December 31, 2007 from $0.30 million for the period ended
      December 31, 2006, due to an increased amount of the bank debt financing we
      undertook during 2007. All bank debt that we had outstanding prior to December
      31, 2007 was repaid by December 31, 2007, however we incurred a short-term
      bank
      loan amounted to $7,140,000 from one commercial bank in China in January, 2008
      with annual interest at 7.47%, which will mature in February 2009 and is secured
      by certain buildings, equipment and land use rights. These funds were borrowed
      to ensure adequate working capital to fund rapid growth in orders in the first
      half of 2008.




**Liquidity
      and Capital Resources**




We
      have
      historically funded our working capital needs from operations, advance payments
      from customers, bank borrowings, and capital from shareholders. Our working
      capital requirements are influenced by the level of our operations, the
      numerical and dollar volume of our project contracts, the progress of our
      contract execution, and the timing of accounts receivable
      collections.




As
      of
      December 31, 2007, 2006 and 2005, the Company had firm purchase commitments
      for
      capital projects in progress of $750,844, $702,494 and $829,794, respectively.
      As compared to that in fiscal year 2006, our firm purchase commitments for
      capital projects in fiscal year 2007 represented an increase of $48,350 as
      a
      result of our expansion in production capacity.




***Cash
      and Cash Equivalents***





Cash
      and
      cash equivalents totaled $7.39 million as of December 31, 2007, as compared
      to
      $3.60 million as of December 31, 2006, representing an increase of 105%. The
      increase was attributable to proceeds from our private placement stock issuance
      and increases in income taxes and value added taxes payable, partially offset
      by
      higher accounts receivable, higher contracts in progress, increased deposits
      with suppliers and repayment of bank loans.





31







The
      following tables present our net cash flows for the twelve months ended December
      31, 2007 and for the same period ended December 31, 2006.


For the twelve month
              ended December 312007
            
            2006(In
                thousands)Cash
                (used in) provided by operating activities
            
            $
            (4,971
            )
            
            4,026Cash
                used in investing activities
            
            
            (4,676
            )
            $
            (5,022
            )Cash
                provided by financing activities
            
            $
            13,017
            
            $
            4,469




***Cash
      flow from operating activities*** .




Net
      cash
      used by operating activities was $4.97 million for the twelve months ended
      December 31, 2007 as compared to net cash of $4.02 million generated in the
      same
      period ended December 31, 2006. The negative cash flow from operating activities
      was chiefly attributable to an increased inventories and receivables as we
      expanded our equipment sales; our credit policies and contract terms remained
      unchanged, see Accounts Receivables, below.




***Accounts
      Receivables***





During
      the twelve months ended December 31, 2007, our accounts receivable rose to
      $21.0
      million from $5.6 million at year-end 2006. Our accounts receivable at December
      31, 2007 constituted approximately 33.8% of our total assets at that date.
      The
      level of our receivables reflects the combined effect of our growing revenues
      and our sales to a small number of large clients, which means that repayment
      or
      delay in repayment on even a single account can have a disproportionate effect
      on total receivables in any given period. Our growth in receivables is due
      almost entirely to rising sales. Of the $21.0 million outstanding as of December
      31, 2007, approximately $8.9 million, or 42% has been collected as of March
      31,
      2008.





We
      design
      our credit policy based on our analysis of the financial conditions and
      creditworthiness of our customers. We sell almost exclusively to significant
      participants in China’s steel sector. Although they are all state-owned, many of
      these companies are listed either in China or on international stock markets,
      giving us direct access to audited financial data on our major customers. In
      addition, many of these firms enjoy policy support and/or access to bank loans.
      Accordingly, to date we have been able to extend trade receivables to our
      customers with no material adverse results. In addition to assessing our
      customers’ creditworthiness, for our waster-water treatment, desulphurization
      and anti-oxidation contracts, we also normally receive approximately 30% of
      contract value within 30 days of contract signing, giving us increased assurance
      that customers will pay. Additional receipts of 30% of contract value when
      a
      project is 60% completed and another 30% of contract value payment at
      commissioning, further reduce our repayment risk.





Accounts
      receivable as days sales outstanding increased to 119 days as of December 31,
      2007, versus days sales outstanding of 188 days as of December 31, 2006. We
      estimate that our accounts receivable balance as of June 30, 2008 contained
      no
      material retainages.





Our
      accounts receivable are owed to us by major participants in China’s steel
      sector, these firms receive government policy support and have access to funding
      from China’s banks and in some cases from equity capital markets. Over the
      course of our Company’s operations only *de
      minimis* receivables have been written off. Moreover, our receivables relate largely
      to
      sales of environmental protection equipment, a priority item as China’s
      authorities are now requiring steelmakers to retrofit environmental protection
      solutions. However, regardless of our past experience, we cannot guarantee
      that
      current receivables will be fully collected.




32




***Contracts
      in progress***




Contracts
      in progress represent work in progress. During the twelve months ended December
      31, 2007, our contracts in progress rose to $2.8 million from $0 at year-end
      2006, as we continued to perform on major equipment contracts.





***Deposits
      with Suppliers***





Deposits
      with suppliers are required to ensure timely delivery of raw materials and
      equipment needed to execute existing production contracts as well as to expand
      the business. Our deposits with suppliers rose to $12.1 million at year-end
      2007, an increase of $11.8 million, as our production and sales rose during
      the
      same period. Of the $12.1 million outstanding as of December 31, 2007,
      approximately $7.3 million, or 60% as been used as of March 31,
      2008.




***Other
      Current Assets***




During
      the twelve months ended December 31, 2007, our other current assets and prepaid
      expenses rose to $1.17 million from $0.17 million at year-end 2006. The increase
      was caused by our advances to employees and prepaid future operating
      costs.




33





***Cash
      used in investing activities*** .





For
      the
      twelve months ended December 31, 2007, net cash used in investing activities
      decreased by $0.34 million to $4.68 million as compared to $5.02 million for
      the
      same period ended December 31, 2006. This decrease was primarily resulted from
      the purchase of property, plant and equipment.





***Cash
      provided by financing activities*** .





Our
      operations historically have been financed by capital contributions and loans
      from RINO’s founder and by bank loans. For the twelve months ended December 31,
      2007, net cash provided by financing activities increased by $8.5 million to
      $13.02 million as compared to $4.47 million for the same period ended December
      31, 2006. This was principally the result of the private placement in October
      2007, partially offset by reductions in capital contributions from RINO’s
      founders and a net decrease in bank loans in 2007.


**Contractual
      Obligations**





As
      of
      December 31, 2007, we did not have any long-term debt, capital lease, operating
      lease or other long-term liabilities reflected on our balance sheet under GAAP
      except the following:





As
      of
      December 31, 2007, the Company had firm purchase commitments for capital
      projects in progress of $750,844.




**Payments
                due by period****Contractual
                Obligations**
            
            Total
            
            Less than
              1 year
            
            1 - 3 years
            
            3 - 5 years
            
            More than
              5 yearsPurchase Obligations
            
            $
            750,844
            
            $
            750,844
            
            
            0
            
            
            0
            
            
            0Total
            
            $
            750,844
            
            $
            750,844
            
            
            0
            
            
            0
            
            
            0





**Off-Balance
      Sheet Arrangements**





The
      Company does not have any off-balance sheet arrangements.





**Fiscal
      Years Ended December 31, 2006 And December 31, 2005.**





***Results
      of Operations, Liquidity and Capital Resources***





**Results
      of Operations**





******  ***Revenues*** .





Revenues,
      excluding government grants, increased by $6.7 million or 187% for the twelve
      months ended December 31, 2006, as compared to the twelve months ended December
      31, 2005. The revenue increase in 2006 was due to the growing demand for our
      wastewater treatment product, contract machining services, and technical support
      services. The breakdown of the revenue growth, excluding government grants,
      is
      as follows:





34




For the twelve months ended
              December 31(In
                thousands)
            
            2006
            
            2005
            
            IncreaseWastewater
                treatment contracts
            
            $
            5,499
            
            $
            3,585
            
            $
            1,914Machining
                service contracts
            
            
            3,136
            
            
            -
            
            
            3,136Technical
                support services
            
            
            1,673
            
            
            -
            
            
            1,673$
            10,308
            
            $
            3,585
            
            $
            6,723




***Cost
      of Revenue*** . The
      cost of revenue for the twelve months ended December 31, 2006 increased by
      $2.5
      million to $5.3 million from $2.8 million for the twelve months ended December
      31, 2005, largely due to increased sales. As a percentage of revenue excluding
      government grants, the cost of revenue decreased to 50% for the twelve months
      ended December 31, 2006 from 76% for the same period of 2005, primarily because
      our acquisition of heavy machine tools in 2006 allowed us to process product
      parts and components in-house, resulting in machine processing
      savings.




***Operating
      Expenses*** .
      Operating expenses for the twelve months ended December 31, 2006 increased
      to
      $0.8 million from $0.4 million for the same period ended December 31, 2005
      as a
      result of higher levels of operations during the year of 2006. As a percentage
      of revenue, the operating expenses decreased by 3% to 7% for the twelve months
      ended December 31, 2006 from 10% for the same period in 2005.




***Other
      Income and Expenses*** . Other
      income and expenses include primarily interest income and interest expense.
      Interest income was immaterial due to the fact we have maintained a low cash
      balance for most of our operations. Interest expense increased to $0.3 million
      for the twelve months ended December 31, 2006 from $0.09 million for the period
      ended December 31, 2005, due to an increased amount of the bank debt financing
      we undertook during 2006.





**Liquidity
      and Capital Resources**





We
      have
      historically funded our working capital needs from operations, advance payments
      from customers, bank borrowings, and capital from shareholders. Our working
      capital requirements are influenced by the level of our operations, the
      numerical and dollar volume of our project contracts, the progress of our
      contract execution, and the timing of accounts receivable
      collections.




Cash
      and
      cash equivalents totaled $3.6 million as of December 31, 2006, as compared
      to
      $0.07 million as of December 31, 2005.





The
      following table presents our net cash flows for the twelve months ended December
      31, 2006 and for the same period ended December 31, 2005.





For the twelve months ended
              December 31(In thousands)
            
            2006
            
            2005Cash
                (used in) provided by operating activities
            
            $
            4,026
            
            $
            (147
            )Cash
                (used in) provided by investing activities
            
            $
            (5,022
            )
            $
            (4,299
            )Cash
                (used in) provided by financing activities
            
            $
            4,469
            
            $
            3,808





35





***Cash
      flow from operating activities*** .  
Net cash provided by operating activities was $4.03 million for the twelve
      months ended December 31, 2006 as compared to $0.15 million used in the same
      period ended December 31, 2005. The positive cash flow from operating activities
      was chiefly attributable to the increase in net income of $2.9 million to $3.2
      million for the twelve months ended December 31, 2006 from $0.27 million for
      the
      same period in 2005, the $5.01 million we collected from our accounts receivable
      for the twelve months ended in December 31, 2006 and the $3.7 million reduction
      in accounts payable due to decrease in inventory and increases in
      production and project installations.





***Cash
      used in investing activities***. For
      the twelve months ended December 31, 2006, net cash used in investing activities
      increased by $0.72 million to $5.02 million as compared to $4.30 million for
      the
      same period ended December 31, 2005. This increase primarily resulted from
      the
      $0.5 million that we spent on deposits on fixed assets and the $0.3 million
      used
      in our purchase of intangible assets.




***Cash
      provided by financing activities*** Our
      operations historically have been financed by capital contributions and loans
      from RINO’s founder and by bank loans. For the twelve months ended December 31,
      2006, net cash provided by financing activities increased by $0.66 million
      to
      $4.47 million as compared to $3.81 million for the same period ended December
      31, 2005. This was principally the result of capital contributions from RINO’s
      founders and a net increase in bank loans in 2006.





Item
      8.
      Financial Statements and Supplementary Data.





The
      Company's consolidated financial statements, together with the independent
      registered public accounting firm report thereon appear at pages starting
      from F-1of this Form 10-K/A.




Supplementary
      Data





The
      following selected consolidated financial data are derived from the accounts
      of
      the Company without audit as required by Item 302 of Regulation
      S-K.





2007 Quarter EndedMarch 31
            
            June 30
            
            September 30
            
            December 31Net sales
            
            $
            9,765,096
            
            $
            18,902,092
            
            $
            17,648,671
            
            $
            17,299,879Gross
                profit
            
            $
            4,886,509
            
            $
            10,311,315
            
            $
            7,370,192
            
            $
            8,126,778Net
                income
            
            $
            2,280,213
            
            $
            5,057,334
            
            $
            4,262,802
            
            $
            (1,381,544
            )Basic
                earnings per share
            
            $
            0.13
            
            $
            0.28
            
            $
            0.24
            
            $
            (0.06
            )Fully
                diluted earnings per share
            
            $
            0.13
            
            $
            0.28
            
            $
            0.24
            
            $
            (0.06
            )Basic
                EPS denominator
            
            
            17,899,643
            
            
            17,899,643
            
            
            17,899,643
            
            
            24,614,111Fully
                diluted EPS denominator
            
            
            17,899,643
            
            
            17,899,643
            
            
            17,899,643
            
            
            24,738,283







2006 Quarter EndedMarch 31
            
            June 30
            
            September 30
            
            December 31Net
                sales
            
            $
            1,631,999
            
            $
            2,525,466
            
            $
            2,626,125
            
            $
            3,972,555Gross
                profit
            
            $
            665,378
            
            $
            1,423,283
            
            $
            1,044,659
            
            $
            2,277,881Net
                income
            
            $
            319,876
            
            $
            931,977
            
            $
            488,219
            
            $
            1,412,798Basic
                earnings per share
            
            $
            0.02
            
            $
            0.05
            
            $
            0.03
            
            $
            0.08Fully
                diluted earnings per share
            
            $
            0.02
            
            $
            0.05
            
            $
            0.03
            
            $
            0.08Basic
                EPS denominator
            
            
            17,899,643
            
            
            17,899,643
            
            
            17,899,643
            
            
            17,899,643Fully
                diluted EPS denominator
            
            
            17,899,643
            
            
            17,899,643
            
            
            17,899,643
            
            
            17,899,643







The
      selected financial data presented above is substantially the operating results
      for Dalian Rino. Until October 5, 2007, all operations were undertaken by Dalian
      Rino. From that date forward, the results of Dalian Rino are consolidated with
      those of Dalian Innomind Group Limited and Jade Mountain Corporation pursuant
      to
      the Restructuring Agreements whereby Dalian Rino became a contractually
      controlled affiliate under EITF 97-2. Consequently, the quarterly financial
      data
      is not the same as that previously reported by RINO International Corporation
      on
      on Forms 10-QSB.




36


**INDEX
      TO FINANCIAL STATEMENTS**





Audited
                and Consolidated Financial Statements of Jade Mountain Corporation
                for the
                Years ended December 31, 2007, 2006 and 2005i.
            Report
                of Independent Registered Certified Public Accounting Firm
            F-1ii.
            Consolidated
                Balance Sheets as of December 31, 2007 and 2006
            F-2iii.
            Consolidated
                Statements of Operations and Comprehensive Income for the Years ended
                December 31, 2007, 2006 and 2005
            F-
                3iv.
            Consolidated
                Statements of Changes in Stockholders' Equity for the Years ended
                December
                31, 2007, 2006 and 2005
            F-4v.
            Consolidated
                Statements of Cash Flows for the Years Ended December 31, 2007, 2006
                and
                2005
            F-5vi.
            Notes
                to the Consolidated Financial Statements
            F-6




37


**Jimmy
                  C.H. Cheung & Co**
              Registered
                  with the Public Company*Certified
                  Public Accountants*
              Accounting Oversight
                  Board*(A
                  member of Kreston International)*
 
 REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
        the
        Board of Directors of:
 Jade
        Mountain Corporation
 
 We
        have
        audited the accompanying restated consolidated balance sheets of Jade Mountain
        Corporation and subsidiaries, as of December 31, 2007 and 2006 and the related
        consolidated statements of operations and comprehensive income, stockholders’
equity and restated cash flows for each of the three years in the period
        ended
        December 31, 2007. These financial statements are the responsibility of the
        Company’s management. Our responsibility is to express an opinion on these
        financial statements based on our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits of the financial
        statements provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the restated financial position of Jade Mountain
        Corporation, as of December 31, 2007 and 2006, and the results of its operations
        and its restated cash flows for each of the three years in the period ended
        December 31, 2007, 2006 and 2005, in conformity with accounting principles
        generally accepted in the United States of America.
 
 As
        discussed in Note 21, the Company restated its consolidated financial statements
        for the years ended December 31, 2007, 2006 and 2005.
  
 **JIMMY
        C.H. CHEUNG & CO**
 Certified
        Public Accountants
 
 Hong
        Kong
 Date:
        January 23, 2008, except for Notes 4 and 19, as
        to which the date is June 6, 2008 and Notes 15 and 21, as to
        which the date is July 21, 2008.
  1607
                  Dominion Centre, 43 Queen’s Road East, Wanchai, Hong KongTel:
                  (852) 25295500 Fax: (852) 28651067Email:
                  jimmycheung@jimmycheungco.comWebsite:
                  http://www.jimmycheungco.com
  F-1
 
 **JADE
        MOUNTAIN CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEETS**
 
 December 31,2007
              
              2006Restated
              
              Restated**ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              7,390,631
              
              $
              3,604,350Restricted
                  cash
              
              
              1,000,000
              
              
              -Accounts
                  receivable, net of allowances
              
              
              21,043,006
              
              
              5,622,219Contracts
                  in progress
              
              
              2,818,122
              
              
              -Inventories,
                  net
              
              
              178,480
              
              
              111,321Deposits
                  with suppliers
              
              
              12,092,202
              
              
              266,638Other
                  current assets and prepaid expenses
              
              
              1,174,464
              
              
              171,772Total
                  Current Assets
              
              
              45,696,905
              
              
              9,776,300**PROPERTY
                  AND EQUIPMENT, NET**
              
              
              11,000,581
              
              
              10,460,727**OTHER
                  ASSETS**Prepaid
                  expenses (non-current)
              
              
              95,706
              
              
              -Deposits
                  on property and equipment
              
              
              3,751,343
              
              
              534,608Intangible
                  assets, net
              
              
              639,176
              
              
              268,628Land
                  use rights, net
              
              
              979,414
              
              
              528,084**TOTAL
                  ASSETS**
              
              $
              62,163,125
              
              
              21,568,347**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              2,534,858
              
              $
              3,858,078Liquidated
                  damages payable
              
              
              1,000,000
              
              
              -Other
                  payables and accrued liabilities
              
              
              802,245
              
              
              885,674Notes
                  payable
              
              
              -
              
              
              4,221,298Due
                  to a stockholder
              
              
              106,963
              
              
              451,921Business
                  tax and other taxes payable
              
              
              581,444
              
              
              195,438Income
                  tax payable
              
              
              5,970,794
              
              
              540,531Value
                  added tax payable
              
              
              2,989,365
              
              
              12,500Total
                  Current Liabilities
              
              
              13,985,669
              
              
              10,165,440**LONG-TERM
                  LIABILITIES**Notes
                  payable - long term
              
              
              -
              
              
              3,453,790Deferred
                  tax liabilities
              
              
              -
              
              
              655,705**TOTAL
                  LIABILITIES**
              
              
              13,985,669
              
              
              14,274,935**REDEEMABLE
                  COMMON STOCK**Common
                  stock ($0.0001 par value, 5,464,357 shares issued with conditions
                  for
                  redemption outside the control of the company)
              
              
              24,480,319
              
              
              -**COMMON
                  STOCK AND OTHER STOCKHOLDERS' EQUITY**Preferred
                  stock ($0.0001 par value, 50,000,000 shares authorized, none issued
                  and
                  outstanding as of December 31, 2007 and 2006)
              
              
              -
              
              
              -Common
                  stock ($0.0001 par value, 10,000,000,000 shares authorized, 2007:
                  25,000,000 shares issued and outstanding including 5,464,357 redeemable
                  shares, 2006: 17,899,643 shares issued and outstanding)
              
              
              2,500
              
              
              1,790Additional
                  paid-in capital
              
              
              8,221,663
              
              
              3,827,447Retained
                  earningsUnappropriated
              
              
              11,376,163
              
              
              2,940,341Appropriated
              
              
              2,109,539
              
              
              326,556Accumulated
                  other comprehensive gain
              
              
              1,987,272
              
              
              197,278Total
                  Common Stock and Other Stockholders' Equity
              
              
              23,697,137
              
              
              7,293,412**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              $
              62,163,125
              
              $
              21,568,347
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements
 
 F-2
 
 **JADE
        MOUNTAIN CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        OPERATIONS AND COMPREHENSIVE INCOME**
 
 For the Year Ended December 31,2007
              
              2006
              
              2005**NET
                  SALES**Contracts
              
              $
              42,073,308
              
              $
              5,499,370
              
              $
              3,585,299Services
              
              
              21,313,500
              
              
              4,808,260
              
              
              -Government
                  grant
              
              
              228,430
              
              
              448,515
              
              
              52,41863,615,738
              
              
              10,756,145
              
              
              3,637,717**COST
                  OF SALES**Cost
                  of contracts
              
              
              (24,170,825
              )
              
              (3,104,611
              )
              
              (2,626,882
              )Cost
                  of services
              
              
              (8,178,852
              )
              
              (1,960,453
              )
              
              -Depreciation
              
              
              (571,267
              )
              
              (279,880
              )
              
              (146,944
              )(32,920,944
              )
              
              (5,344,944
              )
              
              (2,773,826
              )**GROSS
                  PROFIT**
              
              
              30,694,794
              
              
              5,411,201
              
              
              863,891**OPERATING
                  EXPENSES**Selling,
                  general and administrative expenses
              
              
              14,733,445
              
              
              690,877
              
              
              278,048Depreciation
              
              
              87,670
              
              
              87,750
              
              
              87,766Amortization
                  of intangible assets
              
              
              42,667
              
              
              -
              
              
              -Amortization
                  of land use rights
              
              
              11,654
              
              
              11,122
              
              
              10,821Total
                  Operating Expenses
              
              
              14,875,436
              
              
              789,749
              
              
              376,635**INCOME
                  FROM OPERATIONS**
              
              
              15,819,358
              
              
              4,621,452
              
              
              487,256**OTHER
                  INCOME (EXPENSES)**Other
                  income
              
              
              12,926
              
              
              19,639
              
              
              622Interest
                  income
              
              
              32,065
              
              
              855
              
              
              8,315Imputed
                  interest
              
              
              (33,019
              )
              
              (26,482
              )
              
              (22,744
              )Interest
                  expenses
              
              
              (531,334
              )
              
              (297,303
              )
              
              (85,457
              )Other
                  expenses
              
              
              (56,417
              )
              
              (13,991
              )
              
              (31,603
              )Total
                  Other Expenses
              
              
              (575,779
              )
              
              (317,282
              )
              
              (130,867
              )**INCOME
                  FROM OPERATIONS BEFORE TAXES**
              
              
              15,243,579
              
              
              4,304,170
              
              
              356,389**INCOME
                  TAX EXPENSE**
              
              
              (5,024,774
              )
              
              (1,151,300
              )
              
              (85,390
              )**NET
                  INCOME**
              
              
              10,218,805
              
              
              3,152,870
              
              
              270,999**OTHER
                  COMPREHENSIVE INCOME**Foreign
                  currency translation gain
              
              
              1,789,994
              
              
              174,303
              
              
              22,975**COMPREHENSIVE
                  INCOME**
              
              $
              12,008,799
              
              $
              3,327,173
              
              $
              293,974Net
                  income per share-basic
              
              $
              0.52
              
              $
              0.18
              
              $
              0.02Weighted
                  average number of shares -basic
              
              
              19,611,510
              
              
              17,899,643
              
              
              17,899,643Net
                  income per share-diluted
              
              $
              0.52
              
              $
              0.18
              
              $
              0.02Weighted
                  average number of shares -diluted
              
              
              19,694,481
              
              
              17,899,643
              
              
              17,899,643
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements
 
 F-3
 
 **JADE
        MOUNTAIN CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
        (RESTATED)**
 
 Redeemable
              
              
              
              
              
              Additional
              
              Unappropriated
              
              Appropriated
              
              Accumulated
              
              Total
                  CommonCommon
              
              Common
                  Stock
              
              Paid-in
              
              Retained
              
              Retained
              
              Other
                  Comprehensive
              
              Stock
                  and Other
              
              ComprehensiveStock
              
              Shares
              
              Amount
              
              Capital
              
              Earnings
              
              Earnings
              
              Income
              
              Stockholders'
                  Equity
              
              IncomeBalance
                  at January 1, 2005
              
              $
              -
              
              
              17,899,643
              
              $
              1,790
              
              $
              846,577
              
              $
              (156,972
              )
              $
              -
              
              $
              -
              
              $
              691,395Contribution
                  by stockholders
              
              
              -
              
              
              -
              
              
              -
              
              
              2,274,135
              
              
              -
              
              
              -
              
              
              -
              
              
              2,274,135Imputed
                  interest on advances from a stockholder
              
              
              -
              
              
              -
              
              
              -
              
              
              22,744
              
              
              -
              
              
              -
              
              
              -
              
              
              22,744Net
                  income for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              270,999
              
              
              -
              
              
              -
              
              
              270,999Transfer
                  to statutory surplus reserve
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (11,243
              )
              
              11,243
              
              
              -
              
              
              -Foreign
                  currency translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              22,975
              
              
              22,975
              
              
              -Comprehensive
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              293,974Balance
                  at December 31, 2005
              
              
              -
              
              
              17,899,643
              
              
              1,790
              
              
              3,143,456
              
              
              102,784
              
              
              11,243
              
              
              22,975
              
              
              3,282,248Contribution
                  by stockholders
              
              
              -
              
              
              -
              
              
              -
              
              
              657,509
              
              
              -
              
              
              -
              
              
              -
              
              
              657,509Imputed
                  interest on advances from a stockholder
              
              
              -
              
              
              -
              
              
              -
              
              
              26,482
              
              
              -
              
              
              -
              
              
              -
              
              
              26,482Net
                  income for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,152,870
              
              
              -
              
              
              -
              
              
              3,152,870Transfer
                  to statutory surplus reserve
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (315,313
              )
              
              315,313
              
              
              -
              
              
              -Foreign
                  currency translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              174,303
              
              
              174,303
              
              
              -Comprehensive
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,327,173Balance
                  at December 31, 2006
              
              
              -
              
              
              17,899,643
              
              
              1,790
              
              
              3,827,447
              
              
              2,940,341
              
              
              326,556
              
              
              197,278
              
              
              7,293,412Recapitalization
              
              
              -
              
              
              491,000
              
              
              49
              
              
              (49
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Shares
                  issued in private placement less costs of issuance
              
              
              24,480,319
              
              
              5,464,357
              
              
              546
              
              
              (2,227,143
              )
              
              -
              
              
              -
              
              
              -
              
              
              (2,226,597
              )Shares
                  issued in cost of private placement
              
              
              -
              
              
              1,125,000
              
              
              113
              
              
              (113
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Stock
                  compensation expenses - shares issued
              
              
              -
              
              
              20,000
              
              
              2
              
              
              48,998
              
              
              -
              
              
              -
              
              
              -
              
              
              49,000Stock
                  compensation expenses - shares issued
              
              
              -
              
              
              -
              
              
              -
              
              
              38,204
              
              
              -
              
              
              -
              
              
              -
              
              
              38,204Stock
                  compensation expenses - escrow shares
              
              
              -
              
              
              -
              
              
              -
              
              
              7,499,520
              
              
              -
              
              
              -
              
              
              -
              
              
              7,499,520Provision
                  for liquidated damages
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,000,000
              )
              
              -
              
              
              -
              
              
              -
              
              
              (1,000,000
              )Contribution
                  by stockholders
              
              
              -
              
              
              -
              
              
              -
              
              
              1,780
              
              
              -
              
              
              -
              
              
              -
              
              
              1,780Imputed
                  interest on advances from a stockholder
              
              
              -
              
              
              -
              
              
              -
              
              
              33,019
              
              
              -
              
              
              -
              
              
              -
              
              
              33,019Net
                  income for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              10,218,805
              
              
              -
              
              
              -
              
              
              10,218,805Transfer
                  to statutory surplus reserve
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,782,983
              )
              
              1,782,983
              
              
              -
              
              
              -Foreign
                  currency translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,789,994
              
              
              1,789,994
              
              
              -Comprehensive
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              12,008,799Balance
                  at December 31, 2007
              
              $
              24,480,319
              
              
              25,000,000
              
              $
              2,500
              
              $
              8,221,663
              
              $
              11,376,163
              
              $
              2,109,539
              
              $
              1,987,272
              
              $
              23,697,137
  The
          accompanying notes are an integral part of these consolidated financial
          statements
 F-4
 
 **JADE
        MOUNTAIN CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 
 For the Year Ended December 31,2007
              
              2006
              
              2005Restated
              
              Restated**CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  income
              
              $
              10,218,805
              
              $
              3,152,870
              
              $
              270,999Adjusted
                  to reconcile net income to cash (used in) provided by operating
                  activities:Depreciation
                  - cost of sales
              
              
              571,267
              
              
              279,880
              
              
              146,944Depreciation-operating
                  expenses
              
              
              87,670
              
              
              87,750
              
              
              87,766Amortization
                  of intangible assets
              
              
              42,667
              
              
              -
              
              
              -Amortization
                  of land use rights
              
              
              11,654
              
              
              11,122
              
              
              10,821Stock
                  compensation expenses-shares issued
              
              
              49,000
              
              
              -
              
              
              -Stock
                  compensation expenses-options issued
              
              
              38,204
              
              
              -
              
              
              -Stock
                  compensation expenses-shares placed in Escrow
              
              
              7,499,520
              
              
              -
              
              
              -Imputed
                  interest on advances from a stockholder
              
              
              33,019
              
              
              26,482
              
              
              22,744Changes
                  in operating assets and liabilities(Increase)
                  decrease in:Accounts
                  receivable
              
              
              (14,435,613
              )
              
              (5,011,716
              )
              
              2,287,423Contracts
                  in progress
              
              
              (2,705,985
              )
              
              739,686
              
              
              (498,034
              )Inventories
              
              
              (57,130
              )
              
              796,329
              
              
              (843,331
              )Deposits
                  with suppliers****
              
              
              (11,337,385
              )
              
              1,965,146
              
              
              (795,539
              )Other
                  current assets and prepaid expenses****
              
              
              (951,441
              )
              
              (66,090
              )
              
              114,849Value
                  added tax recoverable
              
              
              -
              
              
              464,353
              
              
              (451,821
              )Prepaid
                  expenses ( non-current)
              
              
              (91,898
              )
              
              -
              
              
              -Increase
                  (decrease) in:Accounts
                  payable
              
              
              (1,525,537
              )
              
              2,542,849
              
              
              (1,149,324
              )Other
                  payables and accrued liabilities
              
              
              (138,641
              )
              
              (2,250,644
              )
              
              611,674Business
                  tax payable
              
              
              357,730
              
              
              191,413
              
              
              -Income
                  tax payable
              
              
              5,178,462
              
              
              508,199
              
              
              (1,218
              )Value
                  added tax payable
              
              
              2,857,585
              
              
              12,243
              
              
              (25,220
              )Deferred
                  tax liabilities
              
              
              (672,947
              )
              
              575,642
              
              
              64,762Net
                  cash (used in) provided by operating activities
              
              
              (4,970,994
              )
              
              4,025,514
              
              
              (146,505
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Purchase
                  of property and equipment
              
              
              (831,886
              )
              
              (4,235,354
              )
              
              (4,298,778
              )Purchase
                  of intangible assets
              
              
              (380,717
              )
              
              (263,096
              )
              
              -Purchase
                  of land use rights
              
              
              (410,125
              )
              
              -
              
              
              -Deposits
                  on property and equipment****
              
              
              (3,053,405
              )
              
              (523,598
              )
              
              -Net
                  cash used in investing activities
              
              
              (4,676,133
              )
              
              (5,022,048
              )
              
              (4,298,778
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Contribution
                  by stockholders
              
              
              1,780
              
              
              657,509
              
              
              2,274,135Net
                  proceeds from redeemable preferred stock issuance in private
                  placement
              
              
              22,253,722
              
              
              -
              
              
              -Restricted
                  cash in escrow
              
              
              (1,000,000
              )
              
              -
              
              
              -Due
                  to a stockholder
              
              
              (361,098
              )
              
              53,065
              
              
              (2,122,999
              )Bank
                  loans borrowed
              
              
              -
              
              
              7,517,017
              
              
              3,657,070Bank
                  loans repaid
              
              
              (7,876,910
              )
              
              (3,758,508
              )
              
              -Net
                  cash provided by financing activities
              
              
              13,017,494
              
              
              4,469,083
              
              
              3,808,206**EFFECT
                  OF EXCHANGE RATES ON CASH**
              
              
              415,914
              
              
              61,475
              
              
              (27,441
              )**NET
                  INCREASE IN CASH AND CASH EQUIVALENTS**
              
              
              3,786,281
              
              
              3,534,024
              
              
              (664,518
              )**CASH
                  AND CASH EQUIVALENTS AT BEGINNING OF YEAR**
              
              
              3,604,350
              
              
              70,326
              
              
              734,844**CASH
                  AND CASH EQUIVALENTS AT END OF YEAR**
              
              $
              7,390,631
              
              $
              3,604,350
              
              $
              70,326**SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION**Cash
                  paid for interest expenses
              
              $
              531,334
              
              $
              297,303
              
              $
              85,457Cash
                  paid for income tax
              
              $
              519,258
              
              $
              67,459
              
              $
              21,844
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements
 
 F-5
 
 JADE
        MOUNTAIN CORPORATION AND SUBSIDIARIES
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 AS
        OF
        DECEMBER 31, 2007 AND 2006
 
 1.
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES AND
                  ORGANIZATION**
 
 (A)
              Organization
 
 Jade
        Mountain Corporation (“JMC”) was originally incorporated in 1984 as Applied
        Biometrics, Inc. in accordance with the laws of the State of Minnesota. On
        December 27, 2006, the shareholders of JMC approved a proposal to re-domicile
        JMC from the State of Minnesota to the State of Nevada. JMC effected the
        re-domicile through a merger with a new Nevada corporation which was formed
        by
        JMC on September 12, 2006 solely and specifically for the purpose of effecting
        the re-domicile of JMC. At this time, JMC changed its name to Jade Mountain
        Corporation. During the first six months ended June 30, 2007, JMC ceased
        all
        business operations and disposed of all its assets, liabilities and operating
        activities. JMC has had no operations or significant assets since the year
        ended
        December 31, 2006.
 
 Innomind
        Group Limited (“Innomind”) was incorporated in the British Virgin Islands
        (“BVI”) on November 17, 2006 as an investment holding company. Through its
        wholly owned subsidiary, Dalian Innomind Environment Engineering Co., Ltd.
        (“Dalian Innomind”) incorporated in the People’s Republic of China (“PRC”) as a
        wholly owned foreign limited liability company on July 9, 2007, Dalian
        Innomind’s principal activities are the design, development, manufacturing and
        installation of industrial equipment used mainly for environmental protection
        purposes in the PRC. In accordance with the business permit, Dalian Innomind’s
        right of operation expires on July 8, 2022 and is renewable on
        expiry.
 
 Dalian
        Rino Environment Engineering Science And Technology Co., Ltd. (“Dalian Rino”)
        was incorporated in the PRC on March 5, 2003 as a limited liability company.
        The
        business activities of Dalian Rino are the same with those of Dalian Innomind.
        In accordance with the business permit, Dalian Rino’s right of operation expires
        on March 4, 2021 and is renewable.
  On
        October 5, 2007, JMC consummated a Share Exchange Agreement (“the Agreement”)
        with the shareholders of Innomind pursuant to which JMC issued 17,899,643
        shares
        of Common Stock, par value $0.0001 per share to the stockholders of Innomind
        for
        100% equity interest in Innomind.
 
 The
        merger of JMC and Innomind is being treated for accounting purposes as a
        capital
        transaction and recapitalization by Innomind (“the accounting acquirer”) and
        re-organization by JMC (“the accounting acquiree”). The financial statements
        have been prepared as if the re-organization had occurred
        retroactively.
 
 Accordingly,
        these financial statements include the following:
 
 (1)
              The
                  balance sheet consisting of the net assets of the acquirer at historical
                  cost and the net assets of the acquiree at historical
                  cost.
 
 (2)
              The
                  statement of operations including the operations of the acquirer
                  for the
                  periods presented and the operations of the acquiree from the date
                  of the
                  transaction.
 
 On
        October 3, 2007, Dalian Innomind entered into a series of agreements
        (collectively known as the Restructuring Agreements) with Dalian Rino and
        the
        shareholders of Dalian Rino in which Dalian Innomind assumed the management
        of
        the business activities of Dalian Rino, making Dalian Rino a contractually
        controlled affiliate under Emerging Issues Task Force (“EITF”) 97-2. As both
        companies were under common control after the consummation of the Restructuring
        Agreements on October 5, 2007, this was accounted for as a reorganization
        of
        entities under common control and consolidated financial statements were
        prepared as if the reorganization occurred at the beginning of the first
        period
        presented.
 
 JMC,
        Innomind, Dalian Innomind and Dalian Rino are hereinafter referred to as
        (“the
        Company”).
  (B)
              Principles
                  of consolidation
 
 The
        accompanying consolidated financial statements include the financial statements
        of JMC and its wholly owned subsidiaries, Innomind, Dalian Innomind and its
        contractually controlled affiliate, Dalian Rino. All significant inter-company
        transactions and balances have been eliminated in consolidation.
 
 
 F-6
 
 
 (C)
              Use
                  of estimates
 
 The
        preparation of the financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amount of assets and liabilities and disclosure of
        contingent assets and liabilities at the date of the financial statements
        and
        the reported amounts of revenues and expenses during the reporting period.
        Actual results could differ from those estimates.
 
 (D)
              Cash
                  and cash equivalents
 
 For
        purposes of the statements of cash flows, cash and cash equivalents include
        cash
        on hand and demand deposits with a bank with a maturity of less than 3
        months.
 
 The
        cash
        held in escrow pursuant to the Board Escrow Holdback as described in note
        13 is
        accounted for as restricted cash and is not shown as cash or cash equivalents
        on
        the balance sheet until such funds have been released from escrow pursuant
        to
        the terms of the Securities Purchase Agreement.
 
 (E)
              Accounts
                  receivable
 
 The
        Company extends unsecured credit to its customers in the ordinary course
        of
        business but mitigates the associated risks by performing credit checks and
        actively pursuing past due accounts. An allowance for doubtful accounts is
        established and recorded based on managements’ assessment of the credit history
        with the customers and current relationships with them.
 
 (F)
              Contracts
                  in progress
 
 Contracts
        in progress are stated at the lower of cost or market value and include the
        costs and earnings in excess of billings, pursuant to the percentage of
        completion method of accounting for long-term fixed price contracts. The
        inventoried costs include production costs and related overhead, including
        an
        applicable portion of general and administrative expenses.
 
 (G)
              Inventories
 
 Raw
        materials are stated at the lower of cost or market value, cost being calculated
        on the weighted average basis.
 
 The
        Company provided inventory allowances based on excess and obsolete inventories
        determined principally by customer demand.
 
 (H)
              Property
                  and equipment
 
 Property
        and equipment are stated at cost, less accumulated depreciation. Expenditures
        for additions, major renewals and betterments are capitalized and expenditures
        for maintenance and repairs are charged to expense as incurred.
 
 Depreciation
        is provided on a straight-line basis, less estimated residual value over
        the
        assets’ estimated useful lives. The estimated useful lives are as
        follows:
  Buildings
              30
                  YearsPlant
                  and machinery
              15
                  YearsMotor
                  vehicles
              10
                  YearsFurniture,
                  fixtures and equipment
              5
                  Years
 
 Land
        use
        rights are stated at cost, less accumulated amortization and are amortized
        over
        the term of the relevant rights of 50 years from the date of
        acquisition.
  (I)
              Long-lived
                  assets
 
 In
        accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
“Accounting for the impairment or disposal of Long-Lived Assets", long-lived
        assets and certain identifiable intangible assets held and used by the Company
        are reviewed for impairment whenever events or changes in circumstances indicate
        that the carrying amount of an asset may not be recoverable. For purposes
        of
        evaluating the recoverability of long-lived assets, the recoverability test
        is
        performed using undiscounted net cash flows related to the long- lived assets.
        The Company reviews long-lived assets to determine that carrying values are
        not
        impaired.
 
 (J)
              Fair
                  value of financial instruments
 
 SFAS
        No.
        107, "Disclosure About Fair Value of Financial Instruments," requires certain
        disclosures regarding the fair value of financial instruments. The carrying
        amounts of accounts receivable, other receivables and prepaid expenses, accounts
        payable, other payables and accrued liabilities and due to a stockholder
        approximate their fair values because of the short-term nature of the
        instruments. The fair value of long term notes payable approximates their
        carrying value as the interest rates does not significantly differ from
        market.
 
 F-7
 
 (K)
              Intangible
                  assets
 
 Under
        the
        SFAS No. 142, “Goodwill and Other Intangible Assets”, all goodwill and certain
        intangible assets determined to have indefinite lives will not be amortized
        but
        will be tested for impairment at least annually. Intangible assets other
        than
        goodwill will be amortized over their estimated useful lives and reviewed
        for
        impairment in accordance with SFAS No. 144, “Accounting for Impairment or
        Disposal of Long-Lived Assets”.
 
 (L)
              Revenue
                  recognition
 
 Contracts
 
 The
        Company enters into long-term fixed price contracts with customers to
        manufacture and install industrial equipment. Revenue on long-term fixed
        price
        contracts is recognized under the percentage-of-completion method in accordance
        with the American Institute of Certified Public Accountants Statement of
        Position (“SOP”) 81-1 “Accounting for Performance of Construction-Type and
        Certain Production-Type Contracts”. Under the percentage-of-completion method,
        management estimates the percentage-of-completion based upon costs incurred
        as a
        percentage of the total estimated costs to the customer. When total cost
        estimates exceed revenues, the Company accrues for the estimated losses
        immediately. The use of the percentage of completion method requires significant
        judgment relative to estimating total contract revenues and costs, including
        assumptions relative to the length of time to complete the project, the nature
        and complexity of the work to be performed, and anticipated changes in estimated
        costs. Estimates of total contract revenues and costs are continuously monitored
        during the term of the contract, and recorded revenues and costs are subject
        to
        revision as the contract progresses. When revisions in estimated contract
        revenues and costs are determined, such adjustments are recorded in the period
        in which they are first identified.
 
 In
        addition to our specialty equipment sales, the Company uses heavy machining
        equipment to perform machining services for third parties. These engagements
        -
        numbering several hundred per year - are essentially piecework and are completed
        in usually less than one month. Accordingly, these heavy machinery contracts
        do
        not fall within the scope of SOP 81-1. Each machining engagement is governed
        by
        a separate contract, indicating existence of an arrangement. Revenue is
        recognized when service is performed, which is usually concurrent with delivery
        to the customer, the price is set by contract, collectibility is reasonably
        assured . Accordingly, these revenues are recognized under Staff Accounting
        Bulletin No. 104.
 
 Services
 
 The
        Company also provides technical professional services to its customers based
        on
        a fixed-price time contract. The Company recognizes services-based revenue
        from
        all of its contracts when the services have been performed, the customers
        have
        approved the completion of the services and invoices have been issued and
        collectibility is reasonably assured.
 
 Government
        grant
 
 The
        local
        government of Dalian City also approved grants to the Company to encourage
        the
        high technology industry. The grants are recognized as revenue on receipt
        from
        the local government.
  (M)
              Income
                  taxes
 
 The
        Company accounts for income taxes under the SFAS No. 109, “Accounting for Income
        Taxes” (“Statement 109”). Under Statement 109, deferred tax assets and
        liabilities are recognized for the future tax consequences attributable to
        differences between the financial statement carrying amounts of existing
        assets
        and liabilities and their respective tax bases. Deferred tax assets and
        liabilities are measured using enacted tax rates expected to apply to taxable
        income in the years in which those temporary differences are expected to
        be
        recovered or settled. Under Statement 109, the effect on deferred tax assets
        and
        liabilities of a change in tax rates is recognized in income in the period
        included the enactment date.
 
 (N)
              Foreign
                  currency transactions
 
 JMC
        and
        Innomind maintain their accounting records in their functional currencies
        of
        United States Dollars (“US$”) and Hong Kong Dollars (“HK$”) respectively,
        whereas Dalian Innomind and Dalian Rino maintain their accounting records
        in
        their functional currency of Renminbi (“RMB”).
 
 F-8
 
 Foreign
        currency transactions during the year are translated to the functional currency
        at the approximate rates of exchange on the dates of transactions. Monetary
        assets and liabilities denominated in foreign currencies at the balance sheet
        date are translated at the approximate rates of exchange at that date.
        Non-monetary assets and liabilities are translated at the rates of exchange
        prevailing at the time the asset or liability was acquired. Exchange gains
        or
        losses are recorded in the statement of operations.
 
 (O)
              Foreign
                  currency translation
 
 The
        financial statements of Innomind, Dalian Innomind and Dalian Rino (whose
        functional currencies are HK$, RMB and RMB) are translated into US$ using
        the
        closing rate method. The balance sheet items are translated into US$ using
        the
        exchange rates at the respective balance sheet dates. The capital and various
        reserves are translated at historical exchange rates prevailing at the time
        of
        the transactions while income and expense items are translated at the average
        exchange rate for the year. All exchange translation differences are recorded
        as
        a component of accumulated other comprehensive income within common stock
        and
        other stockholders’ equity. The translation gain recorded for the years ended
        December 31, 2007, 2006 and 2005 was $1,789,994, $174,303 and $22,975
        respectively.
 
 (P)
              Comprehensive
                  income
 
 The
        foreign currency translation gain or loss resulting from translation of the
        financial statements expressed in RMB to US$ is reported as other comprehensive
        income gain (loss) in the statements of operations and stockholders’ equity.
        Other comprehensive income for the years ended December 31, 2007, 2006 and
        2005
        was $1,789,994, $174,303 and $22,975 respectively.
 
 (Q)
              Earnings
                  per share
 
 Earnings
        per share in accordance with the provisions of SFAS No. 128, "Earnings Per
        Share." SFAS No. 128 requires presentation of basic and diluted earnings
        per
        share in conjunction with the disclosure of the methodology used in computing
        such earnings per share. Basic earnings per share excludes dilution and is
        computed by dividing income available to common stockholders by the weighted
        average common shares outstanding during the period. Diluted earnings per
        share
        takes into account the potential dilution that could occur if securities
        or
        other contracts to issue common stock were exercised and converted into common
        stock using the treasury stock method.
 
 (R)
              Segments
 
 The
        Company designs and manufactures pollution control equipment and other equipment
        designed to reduce the resource intensity of steel production, effectively
        serving one segment. Accordingly, segment disclosure is not presented.
        Additional details on the composition of revenues are presented in Note 19,
        Concentrations and Risks below.
 
 (S)
              Stock-Based
                  Compensation
 
 The
        Company adopted SFAS No. 123R, “Share-Based Payments”. This Statement
        requires a public entity to measure the cost of services received in exchange
        for an award of equity instruments based on the grant-date fair value of
        the
        award. That cost will be recognized over the period during which services
        are
        received. Stock compensation for stock granted to non-employees has been
        determined in accordance with SFAS 123R and the Emerging Issues Task Force
        consensus Issue No. 96-18, "Accounting for Equity Instruments that are issued
        to
        Other than Employees for Acquiring, or in Conjunction with Selling Goods
        or
        Services" ("EITF 96-18"), as the fair value of the consideration received
        or the
        fair value of equity instruments issued, whichever is more reliably
        measured.
 
 (T)
              Recent
                  Accounting Pronouncements
 
 In
        September 2006, FASB issued SFAS No. 157, Fair Value Measurements. This
        statement defines fair value and establishes a framework for measuring fair
        value in generally accepted accounting principles (GAAP). More precisely,
        this
        statement sets forth a standard definition of fair value as it applies to
        assets
        or liabilities, the principal market (or most advantageous market) for
        determining fair value (price), the market participants, inputs and the
        application of the derived fair value to those assets and liabilities. The
        effective date of this pronouncement is for all full fiscal and interim periods
        beginning after November 15, 2007. The Company is currently evaluating the
        impact this new Standard, but believes that it will not have a material impact
        on the Company’s financial position.
 
 In
        February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
        Assets and Financial Liabilities—including an amendment of FASB Statement No.
        115 (“FAS 159”). FAS 159 permits companies to choose to measure many financial
        instruments and certain other items at fair value that are not currently
        required to be measured at fair value. The objective of FAS 159 is to provide
        opportunities to mitigate volatility in reported earnings caused by measuring
        related assets and liabilities differently without having to apply hedge
        accounting provisions. FAS 159 also establishes presentation and disclosure
        requirements designed to facilitate comparisons between companies that choose
        different measurement attributes for similar types of assets and liabilities.
        SFAS 159 will be effective in the first quarter of fiscal 2009. The Company
        is
        evaluating the impact that this statement will have on its consolidated
        financial statements.
 
 F-9
 
 In
        June
        2007, the 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” (“FSP EITF 07-3”), which addresses whether
        nonrefundable advance payments for goods or services that 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.
        The
        Company adopted FSP EITF 07-3 and expensed the research and development as
        incurred.
 
 In
        December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
        Consolidated Financial Statements - an amendment of Accounting Research Bulletin
        No. 51” (“SFAS 160”), which establishes accounting and reporting standards for
        ownership interests in subsidiaries held by parties other than the parent,
        the
        amount of consolidated net income attributable to the parent and to the
        noncontrolling interest, changes in a parent’s ownership interest and the
        valuation of retained non-controlling equity investments when a subsidiary
        is
        deconsolidated. The Statement also establishes reporting requirements that
        provide sufficient disclosures that clearly identify and distinguish between
        the
        interests of the parent and the interests of the non-controlling owners.
        SFAS
        160 is effective for fiscal years beginning after December 15, 2008. The
        Company
        has not determined the effect that the application of SFAS 160 will have
        on its
        consolidated financial statements.
 
 In
        December 2007, Statement of Financial Accounting Standards No. 141(R), *Business
        Combinations* , was
        issued. SFAS No. 141R replaces SFAS No. 141, *Business
        Combinations.* SFAS
        141R retains the fundamental requirements in SFAS 141 that the acquisition
        method of accounting (which SFAS 141 called the *purchase
        method* ) be
        used for all business combinations and for an acquirer to be identified for
        each
        business combination. SFAS 141R requires an acquirer to recognize the assets
        acquired, the liabilities assumed, and any noncontrolling interest in the
        acquiree at the acquisition date, measured at their fair values as of that
        date,
        with limited exceptions. This replaces SFAS 141’s cost-allocation process, which
        required the cost of an acquisition to be allocated to the individual assets
        acquired and liabilities assumed based on their estimated fair values. SFAS
        141R
        also requires the acquirer in a business combination achieved in stages
        (sometimes referred to as a step acquisition) to recognize the identifiable
        assets and liabilities, as well as the noncontrolling interest in the acquiree,
        at the full amounts of their fair values (or other amounts determined in
        accordance with SFAS 141R). SFAS 141R applies prospectively to business
        combinations for which the acquisition date is on or after the beginning
        of the
        first annual reporting period beginning on or after December 15, 2008. An
        entity
        may not apply it before that date. The adoption of adopting SFAS No. 141R
        will
        have an impact on its accounting for business combination once adopted, but
        the
        effect is dependent upon acquisition at that time.
  2.
              **ACCOUNTS
                  RECEIVABLE, NET OF
                  ALLOWANCES**
 
 Accounts
        receivable at December 31, 2007 and 2006 consisted of the
        following:
 
 2007
              
              2006Accounts
                  receivable
              
              $
              21,043,006
              
              $
              5,622,219Less:
                  allowance for doubtful accounts
              
              
              -
              
              
              -Accounts
                  receivable, net
              
              $
              21,043,006
              
              $
              5,622,219
 
 As
        of
        December 31, 2007, 2006 and 2005, the Company considered all accounts receivable
        collectible and has not recorded a provision for doubtful accounts. Our
        equipment sales contracts call for performance retainages of 10% of contract
        value for one year after commissioning. Accounts receivable as of December
        31,
        2007 and 2006 contain performance retainages of $1,618,203 and $1,171,405,
        respectively.
  3.
              **INVENTORIES**
 
 Inventories
        at December 31, 2007 and 2006 consisted of the following:
 
 2007
              
              2006Raw
                  materials
              
              $
              178,480
              
              $
              111,321Less:
                  provision for obsolescence
              
              
              -
              
              
              -$
              178,480
              
              $
              111,321
  F-10
 
 For
        the
        years ended December 31, 2007, 2006 and 2005, no provision for obsolete
        inventories was recorded by the Company.
  4.
              **DEPOSITS
                  WITH SUPPLIERS**
 
 Deposits
        with suppliers of $12,092,202 and $266,638 as of December 31, 2007 and 2006,
        respectively, represents prepayments for raw materials and parts. Down payments
        for manufacturing equipment related to the Company’s expansion of plant,
        property and equipment totaled $3,751,343 and $534,608 as of December 31,
        2007
        and 2006 and is reported on the balance sheet as deposits on property and
        equipment.
  5.
              **OTHER
                  CURRENTS ASSETS AND PREPAID
                  EXPENSES**
 
 Other
        current assets and prepaid expenses at December 31, 2007 and 2006 consisted
        of
        the following:
 
 2007
              
              2006Other
                  receivables
              
              $
              177,612
              
              $
              19,799Advances
                  to staff
              
              
              243,541
              
              
              25,334Short-term
                  advance to a supplier
              
              
              205,083
              
              
              -Prepaid
                  expenses
              
              
              548,228
              
              
              126,639$
              1,174,464
              
              $
              171,772
  6.
              **PROPERTY
                  AND EQUIPMENT**
 
 The
        following is a summary of property and equipment at December 31:
 
 2007
              
              2006Buildings
              
              $
              3,612,413
              
              $
              3,290,591Plant
                  and machinery
              
              
              7,430,865
              
              
              6,898,832Motor
                  vehicles
              
              
              986,274
              
              
              606,877Furniture
                  and office equipment
              
              
              352,840
              
              
              254,269Construction
                  in progress
              
              
              6,307
              
              
              66,83712,388,699
              
              
              11,117,406Less:
                  accumulated depreciation
              
              
              1,388,118
              
              
              656,679Property
                  and equipment, net
              
              $
              11,000,581
              
              $
              10,460,727
 
 Depreciation
        expense for the years ended December 31, 2007, 2006 and 2005 was $658,937,
        $367,630 and $234,710 respectively.
 
 7.
              **INTANGIBLE
                  ASSETS**
 
 In
        2006,
        the Company acquired from a third party an exclusive license under patent
        rights
        for $268,628 for a de-oxidation paint formula and production techniques for
        a
        period of three years subject to further renewal. In April 2007, the Company
        re-negotiated with the third party to extend the license to fifteen years
        for an
        additional cost of $259,772.
 
 In
        May
        2007, the Company acquired from a third party a patent right for $136,772
        for a
        desulphurization technology for a period of ten years.
 
 The
        following is a summary of intangible assets at December 31:
  2007
              
              2006Patents
              
              $
              683,611
              
              $
              268,628Less:
                  accumulated amortization
              
              
              44,435
              
              
              -$
              639,176
              
              $
              268,628
 
 Amortization
        expense for the years ended December 31, 2007, 2006 and 2005 was $42,667,
        $0 and
        $0, respectively.
 
 F-11
   8.
                **LAND
                    USE RIGHTS**
  The
        following is a summary of land use rights at December 31:
 
 2007
              
              2006Cost
              
              $
              1,033,970
              
              $
              567,772Less:
                  accumulated amortization
              
              
              54,556
              
              
              39,688$
              979,414
              
              $
              528,084
 
 The
        land
        use rights are amortized over fifty years from the term of the respective
        leases. The amortization expense for the years ended December 31, 2007, 2006
        and
        2005 was $11,654, $11,122 and $10,821, respectively.
  9.
              **OTHER
                  PAYABLES AND ACCRUED
                  LIABILITIES**
 
 Other
        payables and accrued liabilities at December 31, 2007 and 2006 consist of
        the
        following:
 
 2007
              
              2006Other
                  payables
              
              $
              536,707
              
              $
              279,273Deposits
                  from customers
              
              
              116,214
              
              
              4,973Short-term
                  advances from third parties
              
              
              -
              
              
              454,109Accrued
                  liabilities
              
              
              149,324
              
              
              147,319$
              802,245
              
              $
              885,674
   10.
              **LIQUIDATED
                  DAMAGES PAYABLE**
  2007
              
              2006Provision
                  for liquidated damage with regard to registration rights
                  agreement
              
              $
              500,000
              
              $
              -Provision
                  for payment of liquidated damage with regard to independent board
                  members
              
              
              500,000
              
              
              -$
              1,000,000
              
              $
              -
 
 Pursuant
        to the Securities Purchase Agreement entered into between the Company and
        a
        group of accredited investors (“Securities Purchase Agreement”) on September 27,
        2007, the Company was obligated to make efforts to file a registration statement
        with the SEC for the registration of 5,580,428 shares of Common Stock offered
        by
        selling stockholders to be declared effective by the SEC on or before March
        3,
        2008. After March 3, 2008 and for each 30-calender day period thereafter
        in
        which the registration statement fails to be declared effective, the Company
        shall pay liquidated damages to investors equal to 1% of the funds raised,
        or
        $244,803, subject to a cap of 10% of total funds raised, or total liquidated
        damages of $2,448,032.
 
 The
        Company accrued $500,000 as liquidated damages payable and recorded as a
        deduction from additional paid-in capital in accordance with the provisions
        of
        FSP EITF 00-19-2. This amount accrued is based on the penalties due between
        March 4, 2008 to May 3, 2008 on or before which the Company anticipates the
        registration statement will be declared effective.
 
 Pursuant
        to the Securities Purchase Agreement, the Company’s Board of Directors must
        consist of a minimum of 5 members, a majority of whom must be “independent
        directors” as defined in NASDAQ Marketplace Rule 4200(a)(15) not later than 120
        days after the date of the agreement. The Company was required to hold
        $1,000,000 in escrow (“Board Escrow Holdback”) and will only be released by the
        escrow agent on receiving requisite written notice from the investor
        representatives when this covenant is complied with. Failing to comply with
        this
        requirement, the Company shall pay liquidated damages to investors equal
        to 1%
        of the funds raised, or $244,803, subject to a cap of 10% of total funds
        raised,
        or total liquidating damages of $2,448,032.
 
 The
        Company accrued $500,000 as liquidated damages payable in accordance with
        the
        provisions of SFAS 5 and recorded the offset as a deduction from additional
        paid-in capital as a cost of capital. This amount accrued is based on the
        penalties due between February 1, 2008 to April 8, 2008 on or before which
        the
        Company anticipates the Board of Directors will consist of a minimum of 5
        members with a majority of which are independent directors.
 
 F-12
  11.
              **NOTES
                  PAYABLE**
  Balances
        at December 31, 2007 and 2006 consist of the following:
 
 2007
              
              2006Note
                  payable to a bank, interest rate of 6.732% per annum, collateralized
                  by
                  plant and machinery of the Company and guaranteed by a third party,
                  due
                  December 2007
              
              
              -
              
              
              537,256Note
                  payable to a bank, interest rate of 6.732% per annum, collateralized
                  by
                  plant and machinery of the Company and guaranteed by a third party,
                  due
                  November 2007
              
              
              -
              
              
              3,556,124Note
                  payable to a bank, interest rate of 7.128% per annum, collateralized
                  by
                  buildings of the Company and guaranteed by stockholders of the
                  Company and
                  a third party, due December 2007
              
              
              -
              
              
              127,918Note
                  payable to a bank, interest rate of 7.128% per annum, collateralized
                  by
                  buildings of the Company and guaranteed by stockholders of the
                  Company and
                  a third party, due December 2008
              
              
              -
              
              
              255,836Note
                  payable to a bank, interest rate of 7.128% per annum, collateralized
                  by
                  buildings of the Company and guaranteed by stockholders of the
                  Company and
                  a third party, due December 2009
              
              
              -
              
              
              639,592Note
                  payable to a bank, interest rate of 7.128% per annum, collateralized
                  by
                  buildings of the Company and guaranteed by stockholders of the
                  Company and
                  a third party, due December 2010
              
              
              -
              
              
              1,279,181Note
                  payable to a bank, interest rate of 7.128% per annum, collateralized
                  by
                  buildings of the Company and guaranteed by stockholders of the
                  Company and
                  a third party, due December 2011
              
              
              -
              
              
              1,279,181-
              
              
              7,675,088Less:
                  current maturities
              
              
              -
              
              
              4,221,298$
              -
              
              $
              3,453,790
 
 Interest
        expense paid in 2007, 2006 and 2005 was $531,334, $297,303 and $85,457,
        respectively.
  12.
              **INCOME
                  TAX**
  a.
                The
                    Company is subject to income taxes on an entity basis on income
                    arising in
                    or derived from the tax jurisdiction in which each entity is
                    domiciled.
  JMC
        was
        incorporated in the United States and has incurred net operating loss for
        income
        tax purpose for 2007, 2006 and 2005. JMC had loss carry forwards of
        approximately $86,200 for U.S. income tax purposes available for offset against
        future taxable U.S. income expiring in 2027. Management believes that the
        realization of the benefits from these losses appears uncertain due to the
        Company’s limited operating history income and continuing losses. Accordingly, a
        full deferred tax asset valuation allowance has been provided and no deferred
        tax asset benefit has been recorded. The valuation allowance as of December
        31,
        2007 was $86,200. The net change in the valuation allowance was an increase
        of
        $86,200.
  Innomind
        was incorporated in the BVI and under current laws of the BVI, income earned
        is
        not subject to income tax.
 
 F-13
  Dalian
        Innomind and Dalian Rino were incorporated in the PRC and are subject to
        PRC
        income tax which is computed according to the relevant laws and regulations
        in
        the PRC. The applicable tax rate has been 33% and no tax benefit is expected
        from the tax credits in the future. Dalian Innomind is a wholly owned foreign
        enterprise, is entitled to a two-year income tax exemption and a 50% income
        tax
        reduction for the following three years, no provision for income tax was
        made by
        Dalian Innomind.
 
 Income
        tax expense for 2007, 2006 and 2005 are summarized as follows:
  2007
              
              2006
              
              2005Current
              
              $
              5,024,774
              
              $
              575,658
              
              $
              85,390Deferred
              
              
              -
              
              
              575,642
              
              
              -$
              5,024,774
              
              $
              1,151,300
              
              $
              85,390
  b.
              Deferred
                  income tax liabilities for 2006 reflect the effect of temporary
                  differences between amounts of assets, liabilities, and equity
                  for
                  financial reporting purposes and the bases of such assets, liabilities,
                  and equity as measured by tax laws.
 
 Deferred
        income tax liabilities mainly result from temporary differences for revenues
        earned but not yet taxable under the PRC tax regulations. All the deferred
        tax
        liabilities are classified as long-term liabilities as the Company will not
        be
        demanded for payment within the next twelve months.
   c.
                The
                    reconciliation of income taxes computed at the statutory income
                    tax rates
                    to total income taxes for the years ended December 31, 2007,
                    2006 and 2005
                    is as follows:
 2007
              
              2006
              
              2005JMCIncome
                  tax computed at the federal statutory rate
              
              
              34
              %
              
              34
              %
              
              34
              %State
                  income taxes, net of federal tax benefit
              
              
              5
              %
              
              5
              %
              
              5
              %Valuation
                  allowance
              
              
              -39
              %
              
              -39
              %
              
              -39
              %Dalian
                  InnomindChina
                  income taxes
              
              
              33
              %
              
              -
              
              
              -China
                  income taxes exemption
              
              
              -33
              %
              
              -
              
              
              --
              
              
              -
              
              
              -Dalian
                  RinoChina
                  income taxes
              
              
              33
              %
              
              33
              %
              
              33
              %
  13.
                **RELATED
                    PARTY TRANSACTIONS**
 
 The
        Company owed $106,963 and $451,921 to a stockholder as of December 31, 2007
        and
        2006 respectively for advances made on an unsecured basis, repayable on demand
        and interest free. Imputed interest is charged per annum on the amount due
        at
        7%, 6% and 6% for the years ended December 31, 2007, 2006 and 2005 respectively.
        Total imputed interest recorded as additional paid-in capital amounted to
        $33,019, $26,482 and $22,744 for the years ended December 31, 2007, 2006
        and
        2005, respectively.
 
 F-14
  14.
                **EARNINGS
                    PER SHARE**
  The
        following is information of net income per share at December 31,
        2007:
 
 2007
              
              2006
              
              2005Net
                  income for basic and diluted earnings per share
              
              $
              10,218,805
              
              $
              3,152,870
              
              $
              270,999Weighted
                  average shares used in basic computation
              
              
              19,611,510
              
              
              17,899,643
              
              
              17,899,643Effect
                  of dilutive securities:Warrants
              
              
              47,632
              
              
              -
              
              
              -Option
              
              
              35,339
              
              
              -
              
              
              -Weighted
                  average shares used in diluted computation
              
              
              19,694,481
              
              
              17,899,643
              
              
              17,899,643Earnings
                  per share:Basic
              
              
              0.52
              
              
              0.18
              
              
              0.02Diluted
              
              
              0.52
              
              
              0.18
              
              
              0.02
 
 382,500
        warrants granted on October 12, 2007 at an exercise price of $5.376 were
        included in the diluted earnings per share calculation due to their dilutive
        effect.
 
 250,000
        options granted on October 1, 2007 at an excise price from $5.38 was included
        in
        the diluted earnings per share calculation due to their dilutive
        effect.
 15.
                **REDEEMABLE
                    COMMON STOCK**
  In
        accordance with the Securities Purchase Agreement, the Company received
        $24,480,319 (or $21,253,722 net proceeds after deducting the offering expenses)
        from a group of accredited investors (as defined under Rule 501(a) of Regulation
        D promulgated under the Securities Act) for an issue of 5,464,357 shares
        of
        restricted common stock at $4.48 in a private placement transaction. The
        Company
        relied on an exemption from registration pursuant to Section 4(2) under the
        Securities Act of 1933 in connection with the issuance of these shares. The
        Securities Purchase Agreement contained a transferable provision such that
        if
        any governmental agency in the PRC takes action that adversely affects the
        Restructuring Agreements or the Share Exchange Agreement and the company
        doesn’t
        mitigate the adverse effect to the investors’ reasonable satisfaction within 60
        days of the PRC action, then the company is required to pay liquidated damages
        in an amount equal to the initial investment without interest and the
        shareholder must return the shares acquired under the agreement. Consequently,
        the total amount of the gross proceeds has been excluded from permanent equity
        and recorded as redeemable common stock in accordance with Rule 5-02.28 of
        Regulation S-X and Section 211 of the Codification of Financial Reporting
        Policies. Although there is no fixed redemption requirement in any of the
        next
        five years, the entire amount of $24,480,319 could become redeemable in any
        of
        the next five years. These shares are included as outstanding common stock
        for
        purposes of earnings per share.
  16.
                **COMMON
                    STOCK AND OTHER STOCKHOLDERS’
EQUITY**
  **(A)**
              **Appropriated
                  retained earnings**
 
 The
        Company is required to make appropriations to the statutory surplus reserve
        based on the after-tax net income determined in accordance with the laws
        and
        regulations of the PRC. Prior to January 1, 2006 the appropriation to the
        statutory surplus reserve should be at least 10% of the after tax net income
        determined in accordance with the laws and regulations of the PRC until the
        reserve is equal to 50% of the entities’ registered capital. Appropriations to
        the statutory public welfare fund are at 5% to 10% of the after tax net income
        determined by the Board of Directors. Effective January 1, 2006, the Company
        is
        only required to contribute to one statutory reserve fund at 10 percent of
        net
        income after tax per annum, such contributions not to exceed 50 percent of
        the
        respective company’s registered capital.
 
 The
        statutory reserve funds are restricted for use to set off against prior period
        losses, expansion of production and operation or for the increase in the
        registered capital of the Company. These reserves are not transferable to
        the
        Company in the form of cash dividends, loans or advances. These reserves
        are
        therefore not available for distribution except in liquidation.
 
 During
        2007, 2006 and 2005, the Company appropriated $1,782,983, $315,313 and $11,243
        respectively to the reserve funds based on its net income in accordance with
        the
        laws and regulations of the PRC.
  **(B)**
              **Common
                  Stock and Warrants**
  (1)
              Issuance
                  of Common Stock in Private
                  Placement
 
 In
        connection with the private placement, 250,000 shares of common stock were
        issued to a consultant for advisory services. This expense is recorded as
        additional paid-in capital in the accompanying financial statements. The
        Company
        relied on an exemption from registration pursuant to Section 4(2) under the
        Securities Act of 1933 in connection with the issuance of these
        shares.
 
 In
        connection with the private placement and pursuant to the Engagement Agreement
        Providing for Investment Banking Services, dated January 19, 2007 between
        the
        Company and the placement agent, the placement agent received the following
        compensation: (i) $80,000 cash as an engagement and documentation fee; (ii)
        $1,750,000 as a placement commission; (iii) 875,000 shares of Common Stock,
        and
        (iv) warrants to purchase 382,500 shares of Common Stock at an exercise price
        of
        $5.376 per share, exercisable within 6 years of the date of issue. The exercise
        price of the warrant is subject to adjustments under certain circumstances
        and
        the warrants permit cashless exercise by the holders. This expense is recorded
        as additional paid-in capital in the accompanying financial statements. The
        Company relied on the exemption from registration provided by Section 4(2)
        of
        the Securities Act for the issuance of common stock and warrants to the
        placement agent.
  F-15
  The
        warrants issued to the placement agent, qualify as permanent equity under
        EITF
        00-19, the value of which warrants has created offsetting debit and credit
        entries to additional paid-in capital.
  (2)
              Issuance
                  of Common Stock to former Chief Financial Officer of Dalian
                  Rino
 
 At
        the
        Closing of the Share Exchange Agreement and the private placement, the Company
        issued 20,000 shares of common stock to the former Chief Financial Officer
        of
        Dalian Rino, in full satisfaction of Dalain Rino’s obligations to the former
        Chief Financial Officer under a Compensation Agreement dated July 30, 2007.
        The
        shares were valued at the market price on the date of issuance, yielding
        an
        aggregate fair value of $49,000. This expense is recorded as stock compensation
        expenses in the accompanying financial statements. The Company relied on
        an
        exemption from registration pursuant to Section 4(2) under the Securities
        Act of
        1933 in connection with the issuance of these shares.
  17.
              **STOCK-BASED
                  COMPENSATION**
  (A)
              Stock-based
                  compensation-option
  On
        September 27, 2007, the Company granted to the current Chief Financial Officer
        and Secretary, a non-qualified stock option to purchase 250,000 shares of
        its
        Common Stock at an exercise price of $5.38 per share, vesting in 3 equal
        annual
        installments beginning on January 2, 2009. The options will be granted as
        soon
        as practical after January 2, 2009.
 
 The
        fair
        value of stock options granted was estimated at the date of grant using the
        Black-Scholes option-pricing model with the following assumptions:
 Expected
                  
                  Expected
                  
                  Dividend
                  
                  Risk
                      Free
                  
                  Grant
                      DateLife
                  
                  Volatility
                  
                  Yield
                  
                  Interest
                      Rate
                  
                  Fair
                      Value2
                      yrs
                  
                  
                  50
                  %
                  
                  0
                  %
                  
                  4.05
                  %
                  $
                  1.8338
  -
                  Volatility:
                      One year historical volatility of our stock is 82.04%. Adjustment
                      is made
                      based on volatility of industry peers average which is 31%,
                      to arrive at
                      50% as expected volatility.
  -
                  Dividend
                      Yield: The expected dividend yield is zero. The Company has
                      not paid a
                      dividend and does not anticipate paying dividends in the foreseeable
                      future.
 
 -
                  Risk
                      Free Rate: Risk-free interest rate of 4.05% was used. The risk-free
                      interest rate was based on U.S. Treasury yields with a remaining
                      term that
                      corresponded to the expected term of the option calculated
                      on the granted
                      date.
 
 -
                  Expected
                      Life:  Because the Company has no historical share option exercise
                      experience to estimate future exercise patterns, the expected
                      life was
                      determined using the simplified method as these awards meet
                      the definition
                      of "plain-vanilla" options under the rules prescribed by Staff
                      Accounting
                      Bulletin No. 107.
 
 Stock
        compensation expense is recognized based on awards expected to vest. There
        was
        no estimated forfeiture as the Company has a short history of issuing options.
        SFAS No. 123R requires forfeiture to be estimated at the time of grant and
        revised in subsequent periods, if necessary, if actual forfeitures differ
        from
        those estimates.
 
 The
        250,000 options issued during the year of 2007 had fair value of approximately
        $458 , 448. The Company recognized $38,204 of compensation expenses in general
        and administrative expenses for the year ended December 31, 2007.
 
 As
        of
        December 31, 2007, the total compensation cost related to stock options not
        yet
        recognized was $420,244 and will be recognized over the life of
        3 years.
 
 F-16
  The
        following is a summary of the stock options activity:
  Number of
                Options
                Outstanding
              
              Exercise
                Price
              
              Aggregate
                Intrinsic ValueBalance,
                  December 31, 2005
              
              
              -
              
              
              -
              
              
              -GrantedForfeitedExercisedBalance,
                  December 31, 2006
              
              
              -
              
              
              -
              
              
              -Granted
              
              
              250,000
              
              $
              5.38
              
              
              -Forfeited
              
              
              -
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -
              
              
              -Balance,
                  December 31, 2007
              
              
              250,000
              
              $
              5.38
              
              $
              1,717,500
 
 The
        following is a summary of the status of options outstanding at December 31,
        2007:
 
 Outstanding Option
              
              Exercisable OptionsExercise
                  Price
              
              Number
              
              Remaining
                Contractual
                Life
              
              Average
                Exercise
                Price
              
              Number
              
              Weighted
                Average
                Exercise Price$
              5.38
              
              
              250,000
              
              
              2.75
                  years
              
              
              5.38
              
              
              0
  (B)
              Escrowed
                  share arrangement
 
 In
        accordance with the Securities Purchase Agreement, the two founders of Dalian
        Rino who collectively control 71.6% of the Company’s outstanding common stock,
        delivered to an escrow agent a total of 5,580,000 of their beneficially owned
        shares of common stock in order to secure the Company’s obligations under the
        Securities Purchase Agreement to deliver additional common stock to the private
        placement investors in the event the Company fails to achieve certain after-tax
        net income targets for fiscal years 2007 and 2008 (“Make Good Escrow Shares”).
        Those targets are $16,000,000 in after-tax net income for the fiscal year
        ended
        December 31, 2007, and $28,000,000 in after-tax net income for the fiscal
        year
        ending December 31, 2008. In the event the Company does not achieve the 2007
        net
        income target, the Company obligated to transfer 1,674,000 shares of their
        common stock to the private placement investors on a pro-rata basis, and
        if the
        Company fails to achieve the 2008 net income target, we must transfer to
        the
        investors a further 3,906,000 shares to the investors. Of the 17,899,643
        shares
        of common stock issued in the Share Exchange, 5,580,000 have been deposited
        by
        the founders of Dalian Rino into escrow to secure these obligations. The
        two
        founders are the Chairman of the Board and Chief Executive Officer of the
        Company.
 
 Under
        U.S. generally accepted accounting principles, the release of any of such
        escrow
        shares to any of our employees based on our fulfillment of stated performance
        thresholds constitutes a compensatory plan to such employees, which requires
        us
        to record a corresponding compensation expense in our financial statements.
        The
        key provisions of SFAS-123R require that share-based compensation awards
        to
        employees be measured at the grant-date fair value and the cost recognized over
        the period during which the employee is required to provide service in exchange
        for the award.
 
 As
        the
        performance threshold was satisfied for fiscal 2007, 1,674,000 escrowed shares
        will be released to the employee stockholders in 2008, the remaining 3,906,000
        shares will be released in fiscal 2009 if the performance threshold for fiscal
        2008 is also satisfied.
 
 The
        grant
        date of the escrowed share agreement is October 5, 2007 and the grant date
        fair
        value is $4.48 per share. Since the 2007 net income target was met, the Company
        recognized $7,499,520 of compensation expense in selling, general and
        administrative expenses for the year ended December 31, 2007. The potential
        compensation expense in 2008 is $17,498,880.
  18.
              **COMMITMENTS
                  AND CONTINGENCIES**
  (A)
                Employee
                    benefits
  The
        full
        time employees of the Company are entitled to employee benefits including
        medical care, welfare subsidies, unemployment insurance and pension benefits
        through a Chinese government mandated multi-employer defined contribution
        plan.
        The Company is required to accrue for those benefits based on certain
        percentages of the employees’ salaries and make contributions to the plans out
        of the amounts accrued for medical and pension benefits. The total provisions
        and contributions made for such employee benefits was $150, $9,746 and $14,043
        for the years ended December 31, 2007, 2006 and 2005, respectively. The Chinese
        government is responsible for the medical benefits and the pension liability
        to
        be paid to these employees.
 
 F-17
  (B)
                Capital
                    commitments
  As
        of
        December 31, 2007 and 2006, the Company had firm purchase commitments for
        capital projects in progress of $750,844 and $702,494
        respectively.
  19.
                **CONCENTRATIONS
                    AND RISKS**
  During
        2007 and 2006, 100% of the Company’s assets were located in China and 100% of
        the Company’s revenues were derived from companies located in
        China.
 
 The
        Company relied on a small number of customers in China. Five major customers
        accounted for 88% of the sales for the year ended December 31, 2007, four
        customers accounted for 97% of the Company’s total sales for the year ended
        December 31, 2006, and five largest customers accounted for 95% of the Company’s
        total sales for the year ended December 31, 2005. At December 31, 2007 and
        2006,
        accounts receivable from those customers totaled $18,479,541 and $3,647,913,
        respectively.
  20.
                **ESCROW
                    ACCOUNTS**
  In
        accordance with the Securities Purchase Agreement, the founders of Dalian
        Rino
        who collectively control 71.6% of the Company’s outstanding common stock,
        delivered to an escrow agent a total of 5,580,000 of their beneficially owned
        shares of common stock in order to secure the Company’s obligations under the
        Securities Purchase Agreement to deliver additional common stock to the private
        placement investors in the event the Company fails to achieve certain after-tax
        net income targets for fiscal years 2007 and 2008 (“Make Good Escrow Shares”).
        Those targets are $16,000,000 in after-tax net income for the fiscal year
        ended
        December 31, 2007, and $28,000,000 in after-tax net income for the fiscal
        year
        ending December 31, 2008. In the event the Company does not achieve the 2007
        net
        income target, the Company obligated to transfer 1,674,000 shares of their
        common stock to the private placement investors on a pro-rata basis, and
        if the
        Company fails to achieve the 2008 net income target, we must transfer to
        the
        investors a further 3,906,000 shares to the investors. Of the 17,899,643
        shares
        of common stock issued in the Share Exchange, 5,580,000 have been deposited
        by
        the founders of Dalian Rino into escrow to secure these
        obligations.
 
 No
        later
        than February 2, 2008, the Company’s Board of Directors were to consist of a
        minimum of 5 members, a majority of whom must be “independent directors” as
        defined in NASDAQ Marketplace Rule 4200(a)(15). This covenant has not yet
        been
        complied with. Until this covenant is complied with, we are required to hold
        $1,000,000 in escrow (“Board Escrow Holdback”). If for any reason or no reason
        the escrow agent does not receive requisite written notice from the investor
        representatives as to releasing this sum from escrow within 65 days after
        the
        private placement closing, we are required to pay liquidated damages of $244,803
        per month (or partial month) until the default is cured. No liquidated damages
        have yet been paid.
 
 The
        cash
        held in escrow pursuant to the Board Escrow Holdback as described above will
        be
        accounted for as restricted cash and will not be shown as cash or cash
        equivalents on the our balance sheet until such funds have been released
        from
        escrow pursuant to the terms of the Securities Purchase Agreement. The shares
        are held in escrow as Make Good Escrow Shares.
  21.
              **RESTATEMENT**
 
 Subsequent
        to the publication of the financial statements Management determined that
        there
        were material errors in the presentation of current assets and cash flows
        related to the payment of deposits for the acquisition of property and
        equipment. There were also errors causing redeemable stock to be presented
        as
        permanent equity, as described in Note 15. These financial statements have
        been
        restated to correct those errors. Each financial statement line item that
        was
        affected is detailed in the following table.
  2007
              
              2007
              
              2006
              
              2006Original
              
              Restated
              
              Original
              
              RestatedConsolidated
                  Balance SheetsDeposits
                  with suppliers
              
              $
              15,843,545
              
              $
              12,092,202
              
              $
              801,246
              
              $
              266,638Total
                  Current Assets
              
              
              49,448,248
              
              
              45,696,905
              
              
              10,310,908
              
              
              9,776,300Deposits
                  on property and equipment
              
              
              -
              
              
              3,751,343
              
              
              -
              
              
              534,608Redeemable
                  common stock
              
              
              -
              
              
              24,480,319
              
              
              -
              
              
              -Additional
                  paid-in capital
              
              
              32,701,982
              
              
              8,221,663
              
              
              3,827,447
              
              
              3,827,447Total
                  common stock and other stockholders’ equity (previously ‘Stockholders’
                  equity’)
              
              
              48,177,456
              
              
              23,697,137
              
              
              7,293,412
              
              
              7,293,412Consolidated
                  Statements of Cash Flows(Increase)
                  decrease in: Deposits with suppliers
              
              
              (14,390,791
              )
              
              (11,337,385
              )
              
              1,441,549
              
              
              1,965,146Net
                  cash (used in) provided by operating activities
              
              
              (8,024,400
              )
              
              (4,970,994
              )
              
              3,501,917
              
              
              4,025,514Deposits
                  on property and equipment
              
              
              -
              
              
              (3,053,405
              )
              
              -
              
              
              (523,598
              )Net
                  cash used in investing activities
              
              
              (1,622,728
              )
              
              (4,676,133
              )
              
              (4,498,450
              )
              
              (5,022,048
              )
 
 The
        restatement had no effect on the income statement, including net income and
        earnings per share.
 
 F-18




Part
      IV





Item
      15.
      Exhibits and Financial Statement Schedules.





3.1
            Certificate
                of Incorporation. (1)3.2
            Bylaws.
                (1)4.1
            Common
                Stock Specimen (4)4.2
            Form
                of Warrant (2)5.1
            Legal
                Opinion of Guzov Ofsink, LLC re legality of the common stock being
                registered (5)10.1
            Share
                Exchange Agreement dated October 5, 2007 by and among the Company,
                Zhang
                Ze and Innomind Group Limited (2)10.2
            Translation
                of Purchase Agreement, dated as of October 3, 2007, by and among
                Dalian
                Rino Engineering Science and Technology Co., Ltd., and Dalian Innomind
                Environment Engineering Co., Ltd. (2)10.3.1
            Translation
                of Entrusted Management Agreement, dated as of October 3, 2007, by
                and
                among Dalian Innomund Environment Engineering Co., Ltd., Dalian Rino
                Engineering Science and Technology Co., Ltd., Zou Dejun and Qiu Jianping
                (2)10.4
            Translation
                of Patent Transfer Contract, dated as of October 3, 2007, by and
                among
                Dalian Rino Engineering Science and Technology Co., Ltd., and Dalian
                Innomind Environment Engineering Co., Ltd. (2)10.5
            Translation
                of Shareholders’ Voting Proxy Agreement, dated as of October 3, 2007, by
                and among Dalian Innomind Environment Engineering Co., Ltd., Zou
                Dejun and
                Qiu Jianping (2)





38




10.6
            Translation
                of Exclusive Option Agreement, dated as of October 3, 2007, by and
                among
                Dalian Innomind Environment Engineering Co., Ltd., Zou Dejun and
                Qiu
                Jianping (2)10.7
            Translation
                of Pledge of Equity Agreement, dated as of October 3, 2007, by and
                among
                Dalian Innomind Environment Engineering Co., Ltd., Zou Dejun and
                Qiu
                Jianping (2)10.8
            Securities
                Purchase Agreement, dated as of September 27, 2007 by and among the
                Company and the named investors (2)10.9
            Lock-Up
                Agreement, dated September 27, 2007, by and among Jade Mountain
                Corporation and Zou Dejun and Qiu Jianping (4)10.9.1
            Lock-Up
                Agreement, dated September 27, 2007, by and among Jade Mountain
                Corporation and The Innomind Trust (4)10.9.2
            Lock-Up
                Agreement, dated September 27, 2007, by and among Jade Mountain
                Corporation and Bruce Richardson (4)10.10
            Registration
                Rights Agreement, dated as of September 27, 2007, by and among Jade
                Mountain Corporation and the investors signatory - thereto
                (4)10.11
            Engagement
                Agreement Providing for Investment Banking Services, dated January
                19,
                2007 by and between RINO and Douglas Financial (5)10.12
            Side
                Letter Agreement dated July 27, 2007 by and between Douglas Financial
                LLC
                and Dalian RINO Environmental Engineering Science and Technology
                Co., Ltd.
                (5)




10.13
            Employment Agreement dated September 27, 2007, by and between Jade
                Mountain Corporation and Bruce Richardson (5)14.1
            Code
                of Ethics21.1
            List of subsidiaries (4)31.1
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002*31.2
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002*32.1
            Certification
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                Section
                906 of the Sarbanes-Oxley Act of
                2002*


*
      Filed
      herewith


(1)
            Incorporated
                herein by reference to the Registration Statement on Form 10-SB filed
                with
                the SEC on April 5, 2007.(2)
            Incorporated
                herein by reference to the Current Report on Form 8-K filed by the
                Current
                Report filed by the Company on October 12, 2007.(3)
            Incorporated
                herein by reference to the Current Report on Form 8-K/A filed by
                the
                Company on October 19, 2007.(4)
            Incorporated
                herein by reference to the Current Report on Form SB-2 filed by the
                Company on November 19, 2007.(5)
            Incorporated
                herein by reference to the Registration Statement on Form S-1/A filed
                with
                the SEC on March 11, 2008.





39


SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed on August 1,
      2008
      on its behalf by the undersigned, thereunto duly authorized.




RINO
                International Corporation (formerly Jade Mountain
                Corporation)By
            /s/
                Zou DejunZou
                DejunChief
                Executive Officer and Director








Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated.




**SIGNATURE**
            
            **TITLE**
            
            **DATE**/s/
                Zou Dejun
            
            Chief
                Executive Officer and Director
            
            August
                1, 2008Zou
                Dejun
            
            (Principal
                Executive Officer)/s/
                Bruce Richardson
            
            Chief
                Financial Officer and Secretary
            
            August
                1, 2008Bruce
                Richardson
            
            (Principal
                Financial Officer)/s/
                Qiu Jianping
            
            Chairman
                of the Board
            
            August
                1, 2008Qiu
                Jianping/s/
                Zhang Weiguo
            
            Director
            
            August
                1, 2008Zhang
                Weiguo/s/
                Quan Xie
            
            Director
            
            August
                1, 2008Quan
                Xie/s/
                Kennith Johnson
            
            Director
            
            August
                1, 2008Kennith
                Johnson




40