**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**FORM 10-K/A**


**Amendment
      No. 2**








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. 2 (“ **Amendment
      No. 2** ”)
      is
      being filed by the registrant solely to amend Part II, Item 7 (Management’s
      Discussion and Analysis of Financial Condition and Results of Operations),
      Part
      II, 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. 1, which was filed with the Securities and Exchange
      Commission on April 1, 2008 (“ **Amendment
      No. 1** ”).





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. The registrant restated the
      financial statements as a result. The restatement had no effect on the income
      statement, including net income and earnings per share. This Amendment No.
      2 is
      being filed to replace the financial statements and footnotes thereto and the
      report of the independent public accountants in Amendment No. 1 and to correct
      the relevant disclosures in the Management’s Discussion and Analysis of
      Financial Condition and Results of Operations in Amendment No. 1.





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





**Part
      II**





**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.




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. 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.





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.





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.





***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”.





**Results
      of Operations**




***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
            %
            
            1,673
            
            
            16.23
            %
            
            1,799.00
            %Anti-oxidation
                equipment and coatings
            
            
            1,968
            
            
            3.10
            %Machining
                service contracts
            
            
            11,859
            
            
            18.70
            %
            
            3,136
            
            
            30.42
            %
            
            278.16
            %Technical
                support services
            
            
            9,452
            
            
            14.90
            %Total
                Net Sales
            
            $
            63,387
            
            
            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.








***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.




***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.





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.




***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.




***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:







For the twelve months ended
              December 31(In
                thousands)
            
            2006
            
            2005
            
            IncreaseWastewater
                treatment contracts
            
            $
            5,499
            
            $
            3,485
            
            $
            2,014Machining
                service contracts
            
            
            3,136
            
            
            100
            
            
            3,036Technical
                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
            )




***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.





**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**





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”. 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.





Our
      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. Significant
      production costs such as raw materials and labor are generally incurred pro
      rata
      over the time required to complete each project. 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.





Our
      equipment sales contracts for wastewater treatment generally specify the volume
      of water to be treated and the acceptable levels of particulates in the water
      after treatment. Our equipment sales contracts for desulphurization also specify
      the volumes of flue gas emissions and the acceptable levels of sulfur dioxide
      and required temperatures of the exhaust flue gas after treatment. Contract
      for
      sales of anti-oxidation equipment specify similar performance criteria.
      Depending on the customer, equipment sales contracts may also contain penalties
      for delays and definitions of breach of contract. All equipment sales contracts
      specify payment terms. General payment terms on these contracts are 30%, 30%,
      30% and 10%. The first 30% is due within 30 days of contract signing. 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. The contracts generally contain penalty
      provisions for failure to perform, including late penalties of up to 5% of
      contract value as well as penalties of up to 5% of contract value for technical
      failure.




The
      extended time period required to manufacture, deliver, and install our products
      entails recognizing revenue nearly always in more than one quarter and sometimes
      in more than one annual accounting period. This indicates to us that the
      percentage of completion method of revenue recognition offers financial
      statement users the most meaningful information on the Company’s revenues.







We
      estimate the percentage completion for each project based on the percentage
      of
      estimated total raw materials for the project actually installed and applied
      to
      work in progress in any period. 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. This is because using raw materials to drive percentage
      of completion estimates prevents other estimates, such as allocation of
      overheads and utilities, from affecting our recognition of revenues. 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.





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. 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.





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
      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, 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. Such liquidated damages have the initial appearance
      of
      a redemption provision, in that there is no apparent end date to the provision
      and it appears to be outside the control of the Company. 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, and
      therefore such liquidated damages are not recordable as a liability under SFAS
      5.







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.





**ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**




The
      Company's Consolidated Financial Statements, together with the independent
      registered public accounting firm report thereon, and supplementary data appear
      at pages starting from F-1of this Form 10-K.




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
            
            September30
            
            December31Net
                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
            
            September30
            
            December31Net
                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 Jade Mountain Corporation on
      Forms 10-QSB.




**Part
      IV.**





Item
      15.
      Exhibits and Financial Statement Schedules







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 June 11, 2008
      on its behalf by the undersigned, thereunto duly authorized.




RINO
                INTERNATIONAL CORPORATIONBy
            /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
            
            June
                11, 2008Zou
                Dejun
            
            (Principal
                Executive Officer)/s/
                Bruce Richardson
            
            Chief
                Financial Officer and Secretary
            
            June
                11, 2008Bruce
                Richardson
            
            (Principal
                Financial Officer)/s/
                Qiu Jianping
            
            Chairman
                of the Board
            
            June
                11, 2008Qiu
                Jianping/s/
                Quan Xie
            
            Director
            
            June
                11, 2008Quan
                Xie/s/
                Kennith Johnson
            
            Director
            
            June
                11, 2008Kennith
                Johnson









JADE
      MOUNTAIN CORPORATION AND SUBSIDIARIES





CONSOLIDATED
      FINANCIAL STATEMENTS


AS
      OF
      DECEMBER 31, 2007 AND 2006





**J** ADE
      MOUNTAIN CORPORATION AND SUBSIDIARIES





CONTENTS




PagesReport
                of Independent Registered Public Accounting Firm
            1Consolidated
                Balance Sheets
            2Consolidated
                Statements of Operations and Comprehensive Income
            3Consolidated
                Statements of Stockholders’ Equity
            4Consolidated
                Statements of Cash Flows
            5Notes
                to the Consolidated Financial Statements
            6
                -
                18












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**COMMITMENTS
                  AND CONTINGENCIES****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, 2006: 17,899,643 shares
                  issued
                  and outstanding)
              
              
              2,500
              
              
              1,790Additional
                  paid-in capital
              
              
              32,701,982
              
              
              3,827,447Retained
                  earningsUnappropriated
              
              
              11,376,163
              
              
              2,940,341Appropriated
              
              
              2,109,539
              
              
              326,556Accumulated
                  other comprehensive gain
              
              
              1,987,272
              
              
              197,278Total
                  Stockholders' Equity
              
              
              48,177,456
              
              
              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
  2
 
 **JADE
        MOUNTAIN CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        OPERATIONS AND COMPREHENSIVE INCOME**
 
 For
                  the Year Ended December 31,2007
              
              2006
              
              2005**NET
                  SALES**Contracts
              
              $
              53,935,016
              
              $
              8,635,094
              
              $
              3,585,299Services
              
              
              9,452,292
              
              
              1,672,536
              
              
              -Government
                  grant
              
              
              228,430
              
              
              448,515
              
              
              52,41863,615,738
              
              
              10,756,145
              
              
              3,637,717**COST
                  OF SALES**Cost
                  of contracts
              
              
              (30,984,925
              )
              
              (4,874,851
              )
              
              (2,626,882
              )Cost
                  of services
              
              
              (1,364,752
              )
              
              (190,213
              )
              
              -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
  3
 
 **JADE
        MOUNTAIN CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS' EQUITY**
 
 Additional
              
              Unappropriated
              
              Appropriated
              
              Accumulated otherCommon Stock
              
              paid-in
              
              retained
              
              retained
              
              comprehensive
              
              
              
              ComprehensiveShares
              
              Amount
              
              capital
              
              earnings
              
              earnings
              
              gain
              
              Total
              
              IncomeBalance
                  at December 31, 2004
              
              
              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 gain
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              22,975
              
              
              22,975Comprehensive
                  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 gain
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              174,303
              
              
              174,303Comprehensive
                  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 for placement
              
              
              5,464,357
              
              
              546
              
              
              22,253,176
              
              
              -
              
              
              -
              
              
              -
              
              
              22,253,722Shares
                  issued for services
              
              
              1,125,000
              
              
              113
              
              
              (113
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Stock
                  compensation expenses-shares issued
              
              
              20,000
              
              
              2
              
              
              48,998
              
              
              -
              
              
              -
              
              
              -
              
              
              49,000Stock
                  compensation expenses-options 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 gain
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,789,994
              
              
              1,789,994Comprehensive
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              12,008,799Balance
                  at December 31, 2007
              
              
              25,000,000
              
              $
              2,500
              
              $
              32,701,982
              
              $
              11,376,163
              
              $
              2,109,539
              
              $
              1,987,272
              
              $
              48,177,456
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements
  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 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
  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.


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.


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”).


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 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 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 17,
      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.


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.





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





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.


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.


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.


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.





14.
            **EARNINGS
                PER SHARE**





The
      following is information of net income per share at December 31,
      2007:


14





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.
            **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
      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 by a private placement. 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, 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.


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.




16.
            **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.





The
      following is a summary of the stock options activity:


16





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 pre-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.





17.
            **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.


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.





18.
            **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.





19.
            **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 pre-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.





**20.
       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. 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
            
            
            -
            
            
            534,608Consolidated
                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.





18