Disclaimer Regarding Forward-looking Statements

Certain statements made in this report, and other written or oral statements made by or on behalf of RINO International Corporation, may constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, which represent the expectations or beliefs of, including, but not limited to, statements concerning the operations, performance, financial condition and growth of RINO International Corporation, together with its direct and indirect subsidiaries and controlled affiliates. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Without limiting the generality of the foregoing, when used in this report, the word "believes," "expects," "estimates," "intends," "will," "may," "anticipate," "could," "should," "can," or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. Examples of such statements in this report include descriptions of our plans and strategies with respect to developing certain market opportunities, our overall business plan, our plans to develop additional strategic partnerships, our intention to develop our products and platform technologies, our continuing growth and our ability to contain our operating expenses. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected, including those described under the caption "Risk Factors" in our Annual Report on Form 10-K, the risk factors described under Item 1A. Risk Factors of Part II of this report, and matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and accompanying notes and the other financial information appearing in Part IV, Item 15 and elsewhere in this report.

Except as otherwise specifically stated or unless the context otherwise requires, the "Company", "we," "us," and "our" refer to (i) RINO International Corporation (formerly Jade Mountain Corporation), (ii) Innomind Group Limited ("Innomind Group"), a wholly-owned subsidiary of RINO International Corporation organized under the laws of the British Virgin Islands, (iii) Dalian Innomind Environment Engineering Co., Ltd. ("Dalian Innomind"), a wholly-owned subsidiary of Innomind organized under the laws of the People's Republic of China (the "PRC" or China), (iv) Dalian Rino Environment Engineering Science and Technology Co., Ltd., a contractually controlled affiliate of Dalian Innomind organized under the laws of the PRC ("Dalian Rino") and, (v) Dalian Rino's wholly owned subsidiaries, Dalian Rino Environmental Engineering Project Design Co., Ltd. ("Dalian Rino Design") and Dalian Rino Environmental Construction & Installation Project Co., Ltd. ("Dalian Rino Installation").

Company Overview

The Company is engaged in designing, developing, manufacturing, and installing environmental protection and energy saving equipment for the Chinese iron and steel industry. 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 dioxide emissions and untreated wastewater discharges. Failure to meet mandated emission and discharge standards can result in financial penalties. Consequently, despite the recent global financial crisis, our revenues, gross profit, income from operations and net income continued to grow across our product lines. During the year ended December 31, 2008, our revenues reached $139.3 million, representing an increase of 119.8% from the total revenues of $63.4 for the year ended December 31, 2007. Our gross profit increased from $30.5 million for the year ended December 31, 2007 to $54.3 million for the year ended December 31, 2008, representing an increase of 78.3%. Our income from operations reached $21.6 million for the year ended December 31, 2008 from $15.8 million for the year ended December 31, 2007, representing an increase of 36.9%. Our net income for the year ended December 31, 2008 grew to $21.3 million from $10.2 million for the year ended December 31, 2007, representing an increase of 108.3%.

Traditionally, we have three principal products and product lines:

· Lamella Inclined Tube Settler Waste Water Treatment System, a highly efficient wastewater treatment system that incorporates our proprietary and patented 'Lamella Inclined Tube Settler' technology.

· Circulating, Fluidized Bed, Flue Gas Desulphurization System, a highly effective system that removes particulate sulphur from flue gas emissions generated by the sintering process in the production of iron and steel (a process in which sulphur and other impurities are removed from iron ore by heating, without melting, pulverized iron ore) with the resulting discharge meeting all relevant PRC air pollution standards, and

· High Temperature Anti-Oxidation System for Hot Rolled Steel, a set of products and a mechanized system that substantially reduce oxidation-related output losses in the production of continuous cast, hot rolled steel.

In addition to the environmental remediation and protection systems above, since late 2005 we have also being using our over capacity during "down time" to perform contract machining services for third-party industrial enterprises.

We have also been active in developing new products and technologies to expand the scope of our produce offering. In the first quarter of 2008, we commercialized and received initial purchase orders for a new integrated dust catching system which removes up to 99% of the dust from sintering iron during the production process and complements our current desulphurization equipment. The revenue generated from the integrated dust catching system in 2008 amounted to $1,942,920. In November 2007, we developed a new sludge treatment system which we expect to generate sales in 2009.

Demand for our Lamella Wastewater System, increased 107.3% to $14.4 million for the year ended December 31, 2008, as compared with $7.0 million for the year ended December 31, 2007.

Our Desulphurization System, which we introduced in late 2006, utilizes 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 anticipate strong demand from the iron and steel industry for the solutions that our Desulphurization System offers for airborne sulphur dioxide emissions. For the year ended December 31, 2008, we recorded revenues of $105.3 million, as compared to revenues of $33.1 million for the year ended December 31, 2007, representing an increase of 217.7%.

Starting in January 2007, we launched another new product, our Anti-Oxidation System that materially reduces oxidation loss in the production of hot rolled steel plates. Anti-oxidation is a long-sought solution in the iron and steel industry. We believe our Anti-Oxidation System, including coatings 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. For the year ended December 31, 2008, we recorded revenues of $5.7 million anti-oxidation equipment and related coatings sales, as compared to revenues of $2.0 million for the year ended December 31, 2007, representing an increase of 192.3%. The increase in revenues largely reflects our increased pricing and demand as the value of the anti-oxidation technology has been proven in commercial practice.

In addition to the foregoing, we provide machining services to third parties, utilizing our heavy machine tools' idle time to generate contract manufacturing revenue. The revenue generated from our machining services fluctuates based on the level of our using our heavy machining equipment to produce more of our own products rather than for third-party contract work. For the year ended December 31, 2008, revenues accounted for 9.9% of the total revenue as compared to 18.7% for the corresponding period in 2007, reflecting a higher level of our own production and reduced level of contractual work.

We also receive grants from the local government in Dalian, China, 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, 2008, we received government grants of $474,830, totaling 0.3% of respective revenues for the twelve months ended December 31, 2008.

All of our products are custom-built to our customers' specific requirements. We enter into fixed price equipment sales contracts with our customers that are performed in engineering, manufacturing, construction and installation phases. Equipment and components are engineered and manufactured primarily at our Dalian facilities. Generally, we fulfill our contractual obligations within twelve months.

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

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

Recent Developments

Departure of a Certain Officer

On September 5, 2008, Bruce Richardson resigned from his positions as the Chief Financial Officer and Secretary of the Company to pursue other interests. The Company accepted Mr. Richardson's resignation. Thereafter, Mr. Richardson's duties have been assumed by Ms. Qiu Jianping and several managers pending the hiring of a replacement. The Company does not believe that Mr. Richardson's departure will have an adverse impact on the Company's operations over the short-medium term. The Company has been actively searching for a qualified CFO candidate through international recruiting firms and expects to hire a CFO in the near future.

New Products

Integrated Dust Catching System

In the first quarter of 2008, the Company commercialized and received initial purchase orders for a new integrated dust catching system which removes up to 99% of the dust from sintering iron during the production process and which complements its current desulphurization equipment.

The integrated dust catching system uses electric preceptors to remove part of the dust load from flue gases, followed by a bag filtration system, which together achieve dust removal rates of up to 99%. The integrated dust catching system completes the treatment of sintering flue gases begun by the Company's desulphurization equipment. Adoption of the integrated dust catching system is being driven in part by China's regulatory pressure to reduce particulate emissions to as low as 30mg/cubic meter of flue gas, down from levels usually above 80mg/cubic meter. New Chinese regulations for dust content of flue gases in major cities will be comparable to those in place in the European Union. To date, the Company's integrated dust catchers have been installed in the flues of several steelmakers in China. The Company anticipates the average selling price will be around US$2.0 million and the time from contract signing to final installation will equate to approximately two to three months.

Sludge Treatment System

In November 2008, we successfully developed a new sludge treatment system through cooperation with the Dalian University of Technology. The new sludge treatment system can be used to treat sludge generated by municipal wastewater treatment process, industrial sludge generated by chemical industry and oil sludge generated by oil industry. We estimate that there is a market of approximately $28.8 billion for the treatment of sludge generated by various municipal wastewater and industrial processing systems in the PRC market. To treat the sludge, the first and most critical step is to remove water from the sludge through a dehydration process, which will reduce the quantity of the sludge and make it easier to be incinerated. Depending on the heavy metal content of the desiccated sludge, the final product can be used as agricultural fertilizer if the heavy metal content is low, or, after further processing, as a component in various construction materials if the heavy metal content is high.

The current best sludge treatment technology available in the PRC market (provided by a Korean company) allows for a 30% reduction of water in the sludge while our technology, using superheated steam to dehydrate sludge, provides an improvement of 10% in water reduction. In addition, our new sludge treatment system costs approximately 50% less than imported products and the costs of daily operation are approximately 45% less. The Chinese government recently promulgated a new regulation requiring at least 60% of municipal wastewater be treated by 2010, the implementation of which is expected to significantly increase the amount of sludge generated by the wastewater treatment process in China in the next several years. We estimate the profit to process one ton of sludge generated by municipal wastewater treatment process varies between $12 and $19 depending on the steam source. Currently approximately 27.8 million metric tons of sludge is being generated by wastewater treatment process annually with a water content of approximately 80%.

Northeastern China, where Dalian RINO is located, is the oil industry center and this region generates approximately 2 million tons of oil sludge annually. The profit to process one ton of oil sludge ranges between $39 and $44.

Dalian University of Technology has made a patent application for this technology in China (Application number: 200710011115.0). Based our agreement with Dalian University of Technology, Dalian Rino will pay an ongoing royalty of approximately 5% of sales to the university.

Formation of Subsidiaries

On September 24, 2008, Dalian Rino formed a wholly-owned subsidiary, Dalian Rino Environmental Engineering Project Design Co., Ltd. ("Dalian Rino Design"), to focus on research, development and the technical design aspects of our business. Pursuant to the business permits, Dalian Rino Design's right of operation expires on September 23, 2018 and its business permit is renewable upon expiration.

On October 14, 2008, Dalian Rino formed Dalian Rino Environmental Construction & Installation Project Co., Ltd. ("Dalian Rino Installation"), also a wholly-owned subsidiary of Dalian Rino under the laws of PRC. Pursuant to its business license, Dalian Rino Installation is permitted and will focus primarily on installation of environmental protection and energy saving equipment. Dalian Rino Installation's right of operation expires on October 13, 2018 and its business permit is renewable upon expiration.

Under the PRC tax law, in addition to income taxes, there are indirect taxes applied to businesses in China. A value-added tax of 17 percent applies to sales of tangible goods. However, some exemptions and reduced-rate concessions exist. For example, there is no value-added tax on basic foods and necessities. A business tax of 3% applies to telecommunications, construction and transportation. A business tax of 5% rate applies to general services, banking and finance, hotels, restaurant, leasing, and advertising. The formation of Dalian Rino Design and Dalian Rino Installation enables us to potentially take advantage of this preferential tax treatment based on the nature of the business. The revenue of Dalian Rino Design and Dalian Rino Installation are currently subjected to a business tax of 5%.

Results of Operations

Twelve Months Ended December 31, 2008 And December 31, 2007.

Net Sales

Net sales increased by $76.0 million to $139.3 million or an increase of 119.8% for the twelve months ended December 31, 2008, as compared to the net sales of $63.4 million for the twelve months ended December 31, 2007. Such increase was due to continued growth in demand across our entire product lines in 2008, the main reason for the increase of demand was because after June 2008, the Chinese government tightened gas emission control and is now requiring all coal-fired sinters to have desulphurization equipment installed. For the year ended December 31, 2008, we had 6 wastewater treatment equipment contracts and sales amounted to $14.4 million compared with 3 contracts and $7.0 million sales for the year ended December 31, 2007. For the year ended December 31, 2008, the Company had 25 flue gas desulphurization contracts and sales amounted to $105.3 million compared with 5 contracts and $33.1 million sales for the year ended December 31, 2007. The breakdown of the revenue growth is as follows:

                                                    For the twelve months ended December 31,
                                              2008                                     2007
                                  Net Sales                         Net Sales
                                     (in             % to              (in             % to              %
                                  thousand)       Total Sales       thousand)       Total Sales       Increase
Wastewater treatment equipment    $   14,444              10.4 %   $     6,968              11.0 %        107.3 %
Flue gas desulphurization            105,288              75.6 %        33,140              52.3 %        217.7 %
Anti-oxidation equipment and
coatings                               5,747               4.1 %         1,966               3.1 %        192.3 %
Machining services                    13,864               9.9 %        11,859              18.7 %         16.9 %
Other services                             -                 - %         9,454              14.9 %       -100.0 %
Total Net Sales                   $  139,343             100.0 %   $    63,387             100.0 %        119.8 %

Cost of Sales

The cost of sales for the twelve months ended December 31, 2008 increased by $52.1 million to $85.0 million from $32.9 million for the twelve months ended December 31, 2007, representing an increase of 158.2%. The increase was largely due to increased sales. As a percentage of sales, the cost of sales rose to 61.0% for the twelve months ended December 31, 2008 compared to 51.9% for the same period of 2007. The breakdown of the cost of sales is as follows (with Cost of Sales for Services shown below including Cost of Sales for both machining services and other services):

                                                                   For the twelve months ended December 31,
                                                               2008                                         2007
                                              Total (in thousands)         % of sales       Total (in thousands)      % of sales
Revenues
Contracts                                                   119,921                                        42,073
Services                                                     19,423                                        21,314
Cost of Sales
Contracts                                                    74,247               61.9 %                   24,171            57.5 %
Services                                                     10,100               52.0 %                    8,179            38.4 %

The increase of cost of sales as percentage of sales was mainly due to the increased cost related to our service revenue. In 2007, we used in-house service team and costs were closely monitored. In 2008, in order for us to meet the increasing demand in our contract revenue sector, we decided to hire outside contractors to provide machining services, the cost of which can not be fully controlled and monitored. This reflected in the higher cost related to service revenue, from 38.4% in 2007 to 52.0% in 2008. The cost related to our contract revenue remained relatively stable, from 57.5% in 2007 to 61.9% in 2008.

Operating Expense

Operating expenses for the twelve months ended December 31, 2008 increased to $32.7 million from $14.6 million for the same period ended December 31, 2007, representing an increase of 123.1%. The $18.0 million increase in our operating expenses was largely consisted of (1) a $10.0 million increase in charge for stock compensation expense related to the 2008 Make Good shares as described below in this section of the Report; (2) the increase of selling, general & administrative expenses of approximately $6.8 million in Dalian Innomind from $0.6 million for the twelve month period ended December 31, 2007 to $7.4 million for the same period in 2008, after Dalian Innomind was incorporated on July 9, 2007; and (3) the reserve of liquidated damage expense of $1.6 million in 2008 as a result of: (a) our delay in causing the registration statement that we filed with the SEC to be declared effective for the resale of the shares purchased by the investors in the private financing that we closed in October 2007, and (b) our delay in appointing independent directors as required by the investors in connection with the same private financing that we closed in October 2007.

In the twelve month period ended December 31, 2008 and 2007, we incurred a charge for stock compensation expense related to the 2007 Make Good Shares in the amount of $17.5 million and $7.5 million, respectively. Without taking into account of such make good escrow related stock compensation expenses, our operating expenses for the twelve months ended December 31, 2008 and 2007 were $15.2 million and $7.1 million, respectively, indicating an increase of 112.5%.

Stock Compensation Expenses - Make Good Shares

Pursuant to the Securities Purchase Agreement, 5,580,000 shares of our common stock beneficially owned by our founders Zou Dejun and Qiu Jianping - who, through The Innomind Trust, together control 71.5% of the Company's outstanding common stock as of the date of this Report, were required to be subject to escrow in order to secure our obligation under the Securities Purchase Agreement to deliver additional common stock to the private placement investors in the event we fail to achieve certain after-tax net income targets for fiscal years 2007 and 2008. The shares held in escrow as Make Good Escrow Shares will not be accounted for on our books until such shares became releasable from escrow pursuant to the terms of the Securities Purchase Agreement. If any Make Good Escrow Shares are released to the company management or employees, the value of such shares at the time of release will be recorded as compensation expense with a corresponding offset to additional paid-in capital in accordance with SFAS 123(R) paragraph 11.

As a result of us achieving the 2007 earnings targets, presently, there are 3,906,000 shares remaining in escrow. For fiscal year 2008, the earnings targets are $28.0 million in after-tax net income and $1.12 in earnings per share on a fully diluted basis. We met these earnings targets for fiscal year 2008, and as a result, the 3,906,000 shares currently in escrow will be released to the Innomind Trust with Mr. Zou and Ms. Qiu as the sole beneficiaries. 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. The grant date of the escrowed share agreement is October 5, 2007 and the grant date fair value is $4.48 per share. The 3,515,400 shares of our common stock to released to the Innomind Trust to be beneficially owned by Mr. Zou were recognized as a stock award to him in 2008 with a value of $15,748,992. The 390,600 shares of our common stock to be released to the Innomind Trust to be beneficially held by Ms. Qiu were recognized as a stock award to her in 2008 with a value of $1,749,888. We accrued $17.5 and $7.5 million of compensation expense for the year ended December 31, 2008 and 2007, respectively, to Mr. Zou and Ms. Qiu.

Liquidated Damage Expenses

Pursuant to the Securities Purchase Agreement entered into between the Company and a group of accredited investors (the "Securities Purchase Agreement") on October 5, 2007, we are required to register for resale shares of our common stock issued to the investors and cause the registration statement to be declared effective by the SEC on or before March 3, 2008. In addition, we are required to appoint a 5 member board and a majority of the board members 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 Securities Purchase Agreement requires us to pay liquidated damages to the investors if we do not timely comply with these requirements. We were late in complying with both requirements. As a result, we accrued liquidated damages on both accounts in the aggregate amount of $2.6 million, with $1 million and $1.6 million of liquidated damages accrued for the year ended December 31, 2007 and 2008, respectively. We are in the process of negotiating with the investors for potential waiver and reduction of such liquidated damages.

Other Expense, net

Other Expense, net, for twelve months ended December 31, 2008 decreased by $0.2 million to $0.4 million from other expenses, net, of $0.6 million in 2007, a decrease of 36.1%. The decrease in other expense, net, was mainly due to increase in interest income and decrease in interest expenses. Interest income . . .