Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-162373
and Registration No. 333-163436
PROSPECTUS
SUPPLEMENT
(To
Prospectus Dated November 25, 2009)
RINO
INTERNATIONAL CORPORATION
3,252,032 Shares
of Common Stock
Warrants
to Purchase 2,276,422 Shares of Common Stock
_______________________
Pursuant
to this prospectus supplement and the accompanying prospectus, we are offering
(1) up to 3,252,032 shares of our common stock, (2) warrants to purchase up to
1,138,211 shares of our common stock (and the shares of common stock issuable
from time to time upon exercise of these warrants), exercisable within six
months of the closing date (the “Series A Warrants”), and (3) warrants to
purchase up to 1,138,211 shares of our common stock (and the shares of common
stock issuable from time to time upon exercise of these warrants), exercisable
beginning on the six month one day anniversary of the closing day until the one
year one day anniversary of the closing date (the “Series B Warrants”; together
with the Series A Warrants, the “Warrants”), to selected institutional investors
under one or more securities purchase agreements, each dated December 2, 2009,
between us and each of the investors. The purchase price for each common share
together with Series A Warrants exercisable into 0.35 of a common
share and Series B Warrants exercisable into 0.35 of a common share is
$30.75, or Per-Share Offering Price. Each Warrant entitles the investor
to purchase one
common share at
$34.50, or approximately 112% of the per share purchase price, subject to
anti-dilution provisions that require adjustment to reflect stock dividends and
splits, pro-rata distributions, issuance of rights, options, or warrants to all
holders of common stock (but not the holders of the Warrants) entitling them to
purchase shares of common stock at a price per share less than the VWAP as
described in the Warrants, and certain fundamental transactions.
The common stock and the
warrants will be issued separately but will be purchased together in the
offering.
Our
common stock is listed on the NASDAQ Global Market under the symbol
“RINO.” On December 2, 2009, the last reported sale price of our
common stock was $30.51 per share. The warrants are not and will not
be listed for trading on the NASDAQ Global Market.
Rodman
& Renshaw, LLC acted as the lead placement agent in connection with this
offering. The lead placement agent is not purchasing or selling any
of these securities nor is it required to sell any specific number or dollar
amount of securities, but has agreed to use its reasonable best efforts to sell
the securities offered by this prospectus supplement. We have agreed to pay the
placement agent the placement agent fees set forth in the table
below. This table does not reflect the placement agent fee equal to
3% of the aggregate cash exercise price received by us in respect of the
exercise, if any, of the Warrants.
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|
|
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Public
offering price
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$
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30.75
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$
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99,999,984
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|
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Placement
agent’s fee
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$
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1.38
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$
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4,487,804
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Proceeds,
before expenses, to us
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$
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29.37
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$
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95,512,180
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We expect
delivery of the common stock and warrants sold in this offering to be made on or
about December 7, 2009, subject to ordinary closing conditions, including
against payment of immediately available funds.
Investing in our common stock
involves a high degree of risk. See “Risk Factors” beginning on page
S-6
of this prospectus
supplement.
Neither
the Securities and Exchange Commission (the “Commission”, or the “SEC”) nor any
state securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying prospectus are
accurate or complete. Any representation to the contrary is a criminal
offense.
_______________________
The date
of this prospectus supplement is December 2, 2009.
TABLE
OF CONTENTS
PROSPECTUS
SUPPLEMENT
|
ABOUT
THIS PROSPECTUS SUPPLEMENT
|
ii
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PROSPECTUS
SUPPLEMENT SUMMARY
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S-1
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RISK
FACTORS
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S-6
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CAUTIONARY
NOTE ON FORWARD-LOOKING STATEMENTS
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S-27
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USE
OF PROCEEDS
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S-27
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PRICE
RANGE OF OUR COMMON STOCK
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S-29
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DIVIDEND
POLICY
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S-29
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DESCRIPTION
OF SECURITIES WE ARE OFFERING
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S-30
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PLAN
OF DISTRIBUTION
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S-31
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LEGAL
MATTERS
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S-32
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EXPERTS
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S-33
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WHERE
YOU CAN FIND MORE INFORMATION
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S-33
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|
DOCUMENTS
INCORPORATED BY REFERENCE
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S-33
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PROSPECTUS
|
WHERE YOU CAN FIND MORE
INFORMATION
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ii
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|
DOCUMENTS
INCORPORATED BY REFERENCE
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ii
|
|
ABOUT
THIS PROSPECTUS
|
1
|
|
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
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4
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RISK
FACTORS
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5
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SECURITIES
WE MAY OFFER
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5
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USE
OF PROCEEDS
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6
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DESCRIPTION
OF CAPITAL STOCK
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7
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DESCRIPTION
OF THE DEPOSITARY SHARES
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10
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DESCRIPTION
OF THE WARRANTS
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13
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DESCRIPTION
OF THE DEBT SECURITIES
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16
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PLAN
OF DISTRIBUTION
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28
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LEGAL MATTERS
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30
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EXPERTS
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30
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_______________________
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
document is in two parts. The first part is the prospectus supplement, which
describes the specific terms of the securities we are offering and also adds to
and updates information contained in the accompanying prospectus and the
documents incorporated by reference into the accompanying prospectus. The second
part, the accompanying prospectus, including the documents incorporated by
reference, provides more general information, some of which may not apply to
this offering. Generally, when we refer to this prospectus, we are referring to
both parts of this document combined. To the extent there is a conflict between
the information contained in this prospectus supplement, on the one hand, and
the information contained in the accompanying prospectus or in any document
incorporated by reference that was filed with the Securities and Exchange
Commission, or the SEC, before the date of this prospectus supplement, on the
other hand, you should rely on the information in this prospectus supplement. If
any statement in one of these documents is inconsistent with a statement in
another document having a later date — for example, a document incorporated by
reference in the accompanying prospectus — the statement in the document having
the later date modifies or supersedes the earlier statement.
Unless we
have indicated otherwise, or the context otherwise requires, references in this
prospectus supplement and the accompanying prospectus to “RINO,” “we,” “us” and
“our” or similar terms are to (i) RINO International Corporation (“RINO
International,” formerly Jade Mountain Corporation), a Nevada corporation, (ii)
Innomind Group Limited (“Innomind Group”), a wholly-owned subsidiary of RINO
International organized under the laws of the British Virgin Islands, (iii)
Dalian Innomind Environment Engineering Co., Ltd. (“Dalian Innomind”), a
wholly-owned subsidiary of Innomind Group 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 Environmental Engineering Project Design Co., Ltd.
and Dalian Rino Environmental Construction & Installation Project Co., Ltd.,
wholly-owned subsidiaries of Dalian Rino organized under the laws of the
PRC.
This
prospectus supplement and the accompanying prospectus are part of a registration
statement on Form S-3 (Registration No. 333-162373) (the “Prior
Registration Statement”) that we filed on October 7, 2009 with the SEC, as
amended, using a “shelf” registration process with respect to up to $150,000,000
in securities that may be sold thereunder, which was declared
effective by the Securities and Exchange Commission (the “Commission”) on
November 25, 2009, and the registration statement on Form S-3MEF (Registration
No. 333-163436) filed with the SEC on December 2, 2009 pursuant to Rule 462(b)
under the Securities Act of 1933, as amended, to increase the dollar amount of
securities registered under the Prior Registration Statement by $29,985,000.
Under the shelf registration process, we may offer and sell any combination of
securities described in the accompanying prospectus in one or more offerings.
The accompanying prospectus provides you with a general description of the
securities we may offer. Each time we use the accompanying prospectus to offer
securities, we will provide a prospectus supplement that will contain specific
information about the terms of the offering. The prospectus supplement may also
add, update or change information contained in the prospectus. The purpose of
this prospectus supplement is to provide supplemental information regarding us
in connection with this offering of common stock.
You
should read this prospectus supplement, along with the accompanying prospectus
and the documents we incorporate by reference in this prospectus supplement and
the accompanying prospectus and any related free writing prospectus that we
authorized to be delivered to you carefully before you invest. Both documents
contain important information you should consider when making your investment
decision. You should also read and consider the information in the documents we
have referred you to in the section of the accompanying prospectus entitled
“Where You Can Find More Information.”
You may
rely only on the information contained in this prospectus supplement and the
accompanying prospectus and the documents we incorporate by reference in this
prospectus supplement and the accompanying prospectus, and any related free
writing prospectus that we authorized to be distributed to you. We have not, and
the placement agents have not, authorized anyone to provide you with information
or to make representations that are different. If anyone provides you with
different or inconsistent information, you should not rely on it. Neither this
prospectus supplement nor the accompanying prospectus is an offer to sell or a
solicitation of an offer to buy any securities other than those registered by
this prospectus, nor is it an offer to sell or a solicitation of an offer to buy
securities in any jurisdiction where an offer, sale or solicitation would be
unlawful. Persons outside the United States who come into possession of this
prospectus must inform themselves about, and observe any restrictions relating
to, the offering of the common stock and warrants to purchase common stock and
the distribution of this prospectus outside the United States.
You
should assume that the information appearing in this prospectus supplement, the
accompanying prospectus, the documents incorporated by reference in this
prospectus supplement and the accompanying prospectus and any related free
writing prospectus that we authorized to be delivered to you is accurate only as
of the respective dates of those documents. Our business, financial condition,
results of operations and prospects may have changed since those
dates.
PROSPECTUS
SUPPLEMENT SUMMARY
The
following information supplements, and should be read together with, the
information contained or incorporated by reference in other parts of this
prospectus supplement and in the accompanying prospectus. This
summary highlights selected information contained elsewhere in this prospectus
supplement or the documents incorporated by reference herein. Because
the following is only a summary, it does not contain all of the information that
you should consider before investing in our common stock. You should
carefully read this entire prospectus supplement and the accompanying
prospectus, including the factors described under the heading “Risk Factors”
included in this prospectus supplement and the financial statements and other
information incorporated by reference in this prospectus supplement and the
accompanying prospectus before making an investment decision.
RINO
INTERNATIONAL CORPORATION
We are an
industrial technology-based environmental protection and remediation company
based in China. Specifically, through our subsidiaries and controlled
affiliates in China, we are engaged in the business of designing, manufacturing,
installing and servicing wastewater treatment and exhaust emission
desulphurization equipment principally for use in China's iron and steel
industry, and anti-oxidation products and equipment designed for use in the
manufacture of hot rolled steel plate products. All of our products
are custom-built for specific project installations, and we execute supply
contracts during the design phase of our projects. Our products are
all designed to reduce industrial pollution, energy utilization, or
both, and the manufacturing facilities of our products comply with ISO
9001 Quality Management System and ISO 14001 Environment Management System
requirements, for which Dalian Rino received certificates in 2004 and
2008.
Since
1978, the PRC has undergone a substantial economic transformation and rapid
economic growth, becoming the world's third largest national economy in 2007,
and the world's largest iron and steel producer, with rapidly increasing levels
of iron and steel production. As a result of its continuous focus on
nation-wide economic development, China's overall industrial pollution output
has become a central issue for the national government, and a priority in the
PRC's eleventh five-year plan. For example, in 2008 China's
industrial enterprises emitted about 20 million tons of sulphur dioxide, the
principal cause of "acid-rain," and the PRC has become the world's largest
emitter of sulphur dioxide pollution. As a consequence of this and
other industrially-based environmental challenges, Dalian Rino's customer base –
the Chinese iron and steel industry – faces governmental mandates to decrease or
eliminate water pollution and sulphur emissions, which are key applications for
our products and technologies.
Accordingly,
environmental protection and remediation is a relatively new industry in the
PRC. Nonetheless, like the Chinese economy, it is rapidly growing –
we estimate that in the next five years the addressable market for wastewater
and desulphurization products collectively could represent a market of more than
$2 billion while the anti-oxidation product addresses a market which could be
over $1 billion during the same period. Further, the market for our
products is highly regulated by the central PRC government, which sets specific
pollution output targets for industrial enterprises. For this reason,
we believe that the demand for our products will continue to be driven by the
growth of the PRC's iron and steel industry and government-mandated pollution
control standards that are being made more stringent annually. We
also believe that our revenue and profitability growth to date arises largely
from these same factors. Our revenues increased 41.7% to $139.6
million for the nine months ended September 30, 2009 from our revenues for the
corresponding period of 2008. Our revenues increased 119.8% to $139.3 million
for fiscal year 2008 from $63.4 million for fiscal year 2007. Our gross
profit increased 29.0% to $56.3 million for the nine months ended September 30,
2009 from our gross profit for the corresponding period of 2008. Our gross
profit increased 78.3% to $54.3 million for fiscal year 2008 from $30.5 million
for fiscal year 2007. Our income from operations increased 106.2% to
$42.2 million for the nine months ended September 30, 2009 from income from
operations for the corresponding period of 2008. Our income from
operations increased 36.9% to $21.6 million for fiscal year 2008 from $15.8
million for fiscal year 2007. Our after-tax net income increased
94.5% to $39.4 million for the nine months ended September 30, 2009 from
our after-tax net income for the corresponding period of 2008. Our after-tax net
income increased 108.3% to $21.3 million for fiscal year 2008 from $10.2 million
for fiscal year 2007.
Principal
Products
We have
three principal products and product lines: the “Lamella Inclined Tube Settler
Waste Water Treatment System,” the “Circulating, Fluidized Bed, Flue Gas
Desulphurization System,” and the “High Temperature Anti-Oxidation System for
Hot Rolled Steel.”
Our core
product, the Lamella Inclined Tube Settler Waste Water Treatment System (the
“Waste Water System”), is a highly efficient wastewater treatment system that
incorporates our proprietary and patented "Lamella Inclined Tube Settler"
technology. We believe the Waste Water System is among the most
technologically advanced wastewater treatment systems presently in use in
China's iron and steel industry. It includes industrial water
treatment equipment, complete sets of effluent-condensing equipment, highly
efficient solid and liquid abstraction dewatering equipment and coal gas dust
removal and cleaning equipment. The Waste Water System has received
numerous regional and national design awards, and has been successfully
installed and used at a number of large steel mills in China, including Jinan
Iron & Steel Group Co., Ltd., Benxi Iron & Steel (Group) Co., Ltd.,
Handan Iron & Steel Group Co., Ltd., Tianjin Tiangang Group Co., Ltd.,
Panzhihua Iron & Steel Group Co., Ltd., Anyang Iron & Steel Group Co.,
Ltd., Nanchang Changli Steel Co., Ltd., Shaogang Steel Co., Ltd., Linggang Steel
Co., Ltd., Puyang Steel and Hunan Lianyuan Iron and Steel Co., Ltd.
Our
Circulating, Fluidized Bed, Flue Gas Desulphurization System (the
"Desulphurization System") is 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 current relevant PRC air
pollution standards. As compared with equipment using other
desulphurization technologies, we believe our proprietary technology has the
following primary advantages: our equipment has a smaller footprint, a shorter
circulation process and a low calcium sulphur ratio; the cost of operating the
system is lower; and the system is more efficient with higher desulphurization
rates (for coal with a high (i.e., 6%) sulphur content, desulphurization rates
can reach 92%). The Desulphurization System does not generate
wastewater, dust or other secondary pollutants. Our Desulphurization
System is designed using proprietary technologies developed primarily through
our own internal research and development efforts.
Our High
Temperature Anti-Oxidation System for Hot Rolled Steel (the “Anti-Oxidation
System”) is a set of products and a mechanized system, that substantially
reduces oxidation-related output losses in the production of continuous cast,
hot rolled steel. We believe that in design and technology the
Anti-Oxidation System is the only anti-oxidation process available for the iron
and steel industry (both in the PRC and internationally) that can be applied in
high temperature environments, and is a unique solution to the loss of
production output due to high-temperature oxidation, which is a long-standing
problem in the world-wide iron and steel industry.
The
technology used in our Anti-Oxidation System was jointly developed by Dalian
Rino and the Chinese Academy of Sciences. In March 2006, Dalian Rino
acquired the technology from the Chinese Academy of Sciences under an agreement
that provides for the co-ownership of the intellectual property rights to the
formula for the anti-oxidizing paint used in the Anti-Oxidation System and to
the spray system for applying the paint as well as co-ownership of any patents
granted and the transfer to Dalian Rino of all commercialization rights related
to the Anti-Oxidation System.
Contract
Machining Services
In
addition to the environmental remediation and protection systems above, since
late 2005 we have also used our over capacity during "down time" to perform
contract machining services for third-party industrial enterprises.
The
specialized heavy machinery and equipment that we use to produce the Waste Water
System, the Desulphurization System and the Anti-Oxidation System also provides
us with a substantial capacity to undertake the machining of other large,
high-precision and advanced structures. To this end, Dalian Rino
established and we maintain strategic cooperation relationships with such
companies as Dalian Heavy Industry (Zhonggong) and China First Heavy Industries
with which we contract to provide production time on our heavier machine tools,
during "down time" on the manufacture of our own
products.
We expect
that as sales of our products increase, we will reduce or eliminate contracting
the use of our machines and equipment to third parties.
New
Products and Product Development
Sludge Treatment
System
In
November 2008, Dalian University of Technology successfully developed a new
sludge treatment system with our cooperation. The new sludge
treatment system can be used to treat sludge generated by the municipal
wastewater treatment process, industrial sludge generated by the chemical
industry and oil sludge generated by the 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 reduces the quantity of the sludge and makes it easier to
incinerate. 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.
We
believe the current best sludge treatment technology available in the PRC market
(provided by third parties) allows for a 30% reduction of water in the sludge
while our sludge treatment technology, by using superheated steam to dehydrate
sludge, provides an improvement of 10% in water reduction. In
addition, we believe 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, we estimate that
approximately 27.8 million metric tons of sludge is being generated by the
wastewater treatment process annually with a water content of approximately
80%.
We
believe Northeastern China, where Dalian RINO is located, is regarded as the
center of the Chinese oil industry and this region generates approximately 2
million tons of oil sludge annually. We estimate the profit to
process one ton of oil sludge averages $30.
Dalian
University of Technology has made a patent application for the technology
embodied in the new sludge treatment system in China (Application number:
200710011115.0). Based on our agreement in principle with Dalian
University of Technology, Dalian Rino receives certain rights to use such
technology and will pay an ongoing royalty of approximately 5% of sales to
Dalian University of Technology.
DXT
System
In early
September 2009, we commenced installation of our new proprietary ammonia-based
desulphurization system (the "DXT system") on a 280m
2
sinter
system at Hunan Lianyuan Iron and Steel Company. The total contract
value is approximately $10 million with the installation scheduled to be
completed during the second quarter of 2010. The DXT system
utilizes a technology, through a contractual arrangement, that has been applied
by Baosteel Group Co., China's largest steel producer, to its manufacturing
process during the past 10 years. Our DXT system applies such
technology, to the best of our knowledge for the first time, in the
desulphurization process in China's iron and steel industry. Our new
DXT operating system utilizes coking waste ammonia in the flue gas
to effectively remove the sulphur dioxide from the sinter flue gas and
produces ammonia sulfate as a by-product, which can be used as
fertilizer. We believe that in addition to our commitment to
filtering out up to 99% of the harmful sulphur emissions, the DXT
system utilizes less energy, decreases operating and maintenance costs, and
creates a sustainable revenue generating activity through the production of
fertilizer. The Chinese government strongly supports technologies
which are both environmentally friendly and economical. Our customers
in the iron and steel manufacturing industry that use the DXT system will be
eligible for tax credits and government subsidies to offset the
costs.
_________________
We were
originally incorporated in the State of Minnesota in 1984 as Applied Biometrics,
Inc. In 2007, we became a Nevada corporation and changed our name to
RINO International Corporation. Our executive offices are located at
11 Youquan Road, Zhanqian Street, Jinzhou District, Dalian, PRC, and our
telephone number at that address is +86-411-8766-2700. We maintain a
website on the internet at www.rinogroup.com. Our website, and the
information contained therein, is not a part of this prospectus
supplement.
The
Offering
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Common
stock offered by us
|
3,252,032
shares directly
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Warrants
offered by us
|
2,276,422
shares issuable upon exercise of warrants
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Common
stock outstanding immediately following the offering
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28,603,321
shares, based on 25,351,289 shares of common stock outstanding as of
December 2, 2009 and excluding any shares of our common stock issuable
upon exercise of outstanding warrants (including warrants issued in this
offering), options or other rights to purchase shares of our common stock,
including the warrants.
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Use
of proceeds
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We
currently intend to use the net proceeds from this offering for working
capital requirements.
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Risk
factors
|
You
should carefully consider the risk factors contained and incorporated by
reference in this prospectus supplement before making an investment
decision. The specific risks are set forth under the caption “Risk
Factors” section beginning on page S-6 of this prospectus
supplement.
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Nasdaq
Global Market symbol
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“RINO”
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RISK
FACTORS
Investing
in our common stock involves a high degree of risk. In addition to
the other information contained in this prospectus supplement, the accompanying
prospectus and in documents that we incorporate by reference, you should
carefully consider the risks discussed below before making a decision about
investing in our securities. If any of these risks occur, our
business, financial condition and results of operations could be harmed, the
trading price of our common stock could decline and you could lose part or all
of your investment.
Risks
Related to Our Business
The
recent global financial crisis could negatively affect our business, results of
operations and financial condition.
The
recent credit crisis and turmoil in the global financial system may have an
adverse impact on our business and our financial condition, and we may face
challenges if conditions in the financial markets do not improve. Our
ability to access the capital markets may be restricted at a time when we would
like, or need, to raise capital, which could have an impact on our flexibility
to react to changing economic and business conditions. In addition,
these economic conditions also impact levels of commercial and consumer
spending, which have recently deteriorated significantly and may remain
depressed for the foreseeable future. It is uncertain how long the
global crisis in the financial services and credit markets will continue and how
much of an impact it will have on the global economy in general or the Chinese
economy in particular. If demand for our products and services
fluctuates as a result of economic conditions or otherwise, our revenue and
gross margin could be harmed.
Pollution
control for China’s iron and steel sector is a relatively immature and growing
sector, but we do not know how sensitive we might be to a slowdown in economic
growth or other adverse changes in the PRC economy which might affect demand for
iron and steel pollution control equipment. A slowdown in overall
economic growth, an economic downturn, a recession or other adverse economic
developments in the PRC could significantly reduce the demand for our products
and harm our business.
Although
compliance with environmental regulations suggests continued growth with respect
to our target market, we believe that the success and growth of our business for
the foreseeable future will continue to depend upon the sustained presence of
clients in our target markets, primarily associated with the iron and steel
industries. Our clients’ need to comply with government regulations
extends only to the degree that they survive the current economic
crisis. As such, many of our customers may be subject to budgetary
constraints and our continued performance under our contracts could be
jeopardized by spending reductions or budget cutbacks at these
clients.
Our
limited operating history may not serve as an adequate basis to judge our future
prospects and results of operations.
Dalian
Rino began its operations in 2003. Our limited operating history in
the environmental protection industry may not provide a meaningful basis on
which to evaluate our business. Although Dalian Rino’s revenues have
grown rapidly since its inception, we cannot assure you that we will maintain
our profitability or that we will not incur net losses in the
future. We expect that our operating expenses will increase as we
expand. Any significant failure to realize anticipated revenue growth
could result in significant operating losses. We will continue to
encounter risks and difficulties frequently experienced by companies at a
similar stage of development, including our potential failure to:
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maintain
our proprietary technology;
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expand
our product offerings and maintain the high quality of our
products;
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manage
our expanding operations, including the integration of any future
acquisitions;
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obtain
sufficient working capital to support our expansion and to fill customers’
orders in time;
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maintain
adequate control of our expenses;
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implement
our product development, marketing, sales and acquisition strategies and
adapt and modify them as needed;
and
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·
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anticipate
and adapt to changing conditions in the iron and steel industry markets in
which we operate as well as the impact of any changes in government
regulation, mergers and acquisitions involving our competitors,
technological developments and other significant competitive and market
dynamics.
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If we are
not successful in addressing any or all of these risks, our business may be
materially and adversely affected.
We
may encounter substantial competition in our business and our failure to compete
effectively may adversely affect our ability to generate revenue.
We
believe that we compete with the following entities in the wastewater treatment
serving the steel and iron industry: Fujian Longjing Environmental Company,
Zhongtai Hangda, Beijing University of Science and Technology, Wuhan Municipal
Environmental Co. In our desulphurization business, we believe we are
the first company to design, manufacture and complete an iron and steel sinter
machine desulphurization installation in the PRC and have far more experience
than our competitors in this area. Currently, we believe that our
anti-oxidation system is unique and virtually without competition in the PRC
market. However, because of the growing attention to environmental
considerations in the PRC iron and steel industry, there is no guarantee that
there will not be more companies that will enter into the markets in which we
operate to serve the iron and steel industry in the PRC. Further, we
believe that our existing and new competitors will continue to improve the
design and performance of their products and introduce new products with
competitive price and performance characteristics. We expect that we
will be required to continue to invest in product development and productivity
improvements to compete effectively in our markets. Our competitors
could develop a more efficient product or undertake more aggressive and costly
marketing campaigns than ours, which may adversely affect our marketing
strategies and could have a material adverse effect on our business, results of
operations and financial condition
Our major
competitors may be better able than we to successfully endure downturns in our
industrial sector. In periods of reduced demand for our products, we
can either choose to maintain market share by reducing our selling prices to
meet competition or maintain selling prices at the expense of our market
share. In addition, we cannot assure you that additional competitors
will not enter our existing markets, or that we will be able to compete
successfully against existing or new competition.
We
may not be able to effectively control and manage our growth.
Our
revenues increased 41.7% to $139.6 million for the nine months ended September
30, 2009 from our revenues for the corresponding period of 2008. Our
revenues have increased from $63.4 million for the fiscal year ended December
31, 2007 to $139.3 million for the fiscal year ended December 31,
2008. If our business and markets continue to grow and develop, it
will be necessary for us to finance and manage expansion in an orderly
fashion. In addition, we may face challenges in managing expanding
product offerings and in integrating acquired businesses with our
own. These eventualities will increase demands on our existing
management, workforce and facilities. Failure to satisfy these kinds
of increased demands could interrupt or adversely affect our operations and
cause production backlogs, longer product development time frames and
administrative inefficiencies.
We
may not have adequate internal accounting controls. While we have certain
internal procedures in our budgeting, forecasting and in the management and
allocation of funds, our internal controls may not be adequate.
We are
constantly striving to improve our internal accounting controls. We
hope to develop an adequate internal accounting control system to budget,
forecast, manage and allocate our funds and account for them. There
is no guarantee that such improvements will be adequate or successful or that
such improvements will be carried out in a timely basis. If we do not
have adequate internal accounting controls, we may not be able to appropriately
budget, forecast, manage and allocate our funds, we may also be unable to
prepare accurate accounts in a timely basis to meet our continuing financial
reporting obligations and we may not be able to satisfy our obligations under
U.S. securities and corporate governance laws.
On May
30, 2008, our management of determined in consultation with our prior
independent accountants that there were material errors in the presentation of
current assets, concentration of risks related to our largest customers and cash
flows related to the payment of deposits for the acquisition of property and
equipment in our financial statements for the fiscal years ended December 31,
2007 and 2006 and that such financial statements should not be relied
upon. As a result, we restated the financial statements in Amendment
No. 2 to the Annual Report on 10-K for the fiscal year ended December 31, 2007
(“2007 10-K”) which was filed with the SEC on June 11, 2008. On July
24, 2008, our management determined in consultation with our current and prior
independent accountants that there were also errors in the restated financial
statements filed with Amendment No. 2 to the 2007 10-K as well as our unaudited
financial statements as of March 31, 2008 and for the three months then ended
which were filed with the as part of our Quarterly Report on Form
10-Q for the quarter ended March 31, 2008 (the “March 2008 10-Q”) causing
redeemable stock to be presented as permanent equity and that such financial
statements should not be relied upon. As a result, we restated the
financial statements contained in Amendment No. 2 to the 2007 10-K by filing on
August 4, 2008 Amendment No. 3 to the 2007 10-K and also restated the financial
statements contained in the March 2008 10-Q by filing on August 5, 2008
Amendment No. 1 to the March 2008 10-Q. The restatements had no
effect on the income statement, including net income and earnings per share for
the periods covered by the restated financial statements.
On
September 5, 2008, Bruce Richardson resigned from his positions as the Chief
Financial Officer and Secretary to pursue other interests. We
accepted Mr. Richardson’s resignation. Mr. Richardson’s duties were
assumed by Ms. Qiu Jianping and several managers pending the hiring of a
replacement. Jenny Liu was hired on June 30, 2009 as our Chief
Financial Officer. Our principal accounting officer, Ms. Yu Li has
been our accounting manager since our inception. Even though Ms. Yu
Li is assisted by accounting staff with experience and training on US generally
accepted accounting principles, Ms. Yu Li does not have formal education and
training in US generally accepted accounting principles. We continue
to look for US GAAP qualified accounting and finance personnel to work for
us.
Our
internal controls over financial reporting were ineffective as of December 31,
2008, and management’s report was not subject to attestation by our independent
auditor as to their effectiveness for the fiscal year ended December 31, 2008,
which could have a significant and adverse effect on our results of
operations.
Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, assessed the effectiveness of our internal control over
financial reporting as of December 31, 2008. In making this
assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in
Internal Control—Integrated
Framework
. A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of our
annual or interim financial statements will not be prevented or detected in a
timely basis. Management identified material weaknesses in our
internal controls in connection with:
1. ineffective controls over
accounting for revenue and billing process, 2. ineffective controls over
financial statement closing process, 3. lack of controls over construction in
process and fixed asset management, 4. insufficient U.S. GAAP qualified
accounting and finance personnel, and 5. lack of internal audit
function
. As a result of the material weaknesses described
above, management has concluded that our internal control over financial
reporting was ineffective as of December 31, 2008 based on the “Internal
Control— Integrated Framework” set forth in COSO.
Management
intends to implement the following measures to remediate the material weaknesses
that had a material impact on our internal control over financial
reporting:
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Hire
finance personnel with experience with complex revenue recognition rules
including accounting for multiple element
contracts.
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Institute
a formal contract review process to establish and document the revenue
recognition events and methodology at the inception of revenue generating
contracts.
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Institute
a new process for review of multiple element contracts with standardized
documentation which allows for both allocation of revenue based on
available objective evidence of fair value as well as the associated
billing schedule.
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Deliver
training on revenue recognition principles to sales and operational
members of our divisions.
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Enhance
reconciliations, analysis and related reviews for all accounts that give
rise to income tax effects in the financial
statements.
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Hire
more qualified and experienced accounting personnel to perform the month
end review and closing processes as well as provide additional oversight
and supervision within the accounting
department.
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Rules
adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002
require annual assessment of our internal control over financial reporting, and
attestation of this assessment by our independent registered public
accountants. We believe that the attestation requirement of
management’s assessment by our independent registered public accountants will
first apply to our annual report for the 2010 fiscal year. The
standards that must be met for management to assess the internal control over
financial reporting as effective are new and complex, and require significant
documentation, testing and possible remediation to meet the detailed
standards. Even though we intend to adopt measures to remediate the
weaknesses that management identified as of December 31, 2008, there is no
guarantee that these remedial measures will be effective to remediate the
existing material weaknesses. Our lack of familiarity with Section
404 may unduly divert management’s time and resources in executing the business
plan. If, in the future, management identifies one or more material
weaknesses, or our external auditors are unable to attest that our management’s
report is fairly stated or to express an opinion on the effectiveness of our
internal controls, this could result in a loss of investor confidence in our
financial reports, have an adverse effect on our stock price and/or subject us
to sanctions or investigation by regulatory authorities.
Our
recognition of revenue could prove inaccurate.
We use
the percentage completion method to recognize revenue. The inherent
difficulty of measuring completed output in our projects prior to full
completion requires us to estimate percentage completion by measuring actual
inputs in a given period relative to total estimated inputs required for a
project. An incorrect estimate of total inputs required for a
project, or an inaccurate accounting of actual inputs in any given period could
cause us to misstate revenues by a material amount. If revenues were
overestimated or underestimated, net income would also be overestimated or
underestimated, as would accounts receivable.
Our
accounts receivable have historically been high relative to our revenue for a
given period.
We record
our revenue based on the percentage completion method, but are paid according to
contract terms which only indirectly use percentage completion, causing leads
and lags between our recording of revenue and our customers’ repayment of
receivables. Moreover, we sell to large steel manufacturers which
require time to fulfill internal control procedures before effecting
payment. Finally, performance retainages of 10% of contract value are
recorded at project commissioning and remain in our accounts receivable until
one year after project commissioning. These factors all combine to
raise our receivables as days sales outstanding. While to date we
have only recorded de minimis bad debt, we cannot guarantee that all our
accounts receivable will be collected or that they will be collected in a timely
manner.
Due
to the large size of our projects, we may depend on a concentration of customers
at a given period of time.
Historically,
we generate revenues from large scale projects based on fixed price contracts
with customers for the manufacturing and installation of customized industrial
equipment. Due to the size of our projects, we generally work on a
limited number of projects with a limited number of customers at any given
period of time. Generally, each of our projects involves the
manufacturing, installation and testing of the equipment we sell. Due
to the size of our projects and the length of time to complete our projects
(averaging six to eight months), our revenues are generated from a limited
number of customers during any given quarter. Given the cost of our
Lamella Wastewater System, Desulphurization System and Anti-Oxidation System
products, we believe that for the foreseeable future we will continue to rely on
large customers for a substantial portion of our revenue. Our
inability to continue to secure and maintain a sufficient number of large
customers would have a material adverse effect on our business, financial
condition and results of operations. Moreover, our success will
depend in part upon our ability to obtain orders from new customers, as well as
the financial condition and success of our customers and general economic
conditions.
Any
significant fluctuation in price of our raw materials may have a material
adverse effect on the manufacturing cost of our products.
The
prices of steel, electronic components and power systems, valves, machine tools,
paints and welding rods, and our principal raw materials, are subject to market
conditions and generally we do not, and do not expect to, have long-term
contracts with our suppliers for those items. We cannot assure you
that the necessary materials will continue to be available to us at prices
currently in effect or acceptable to us. The prices for these raw materials have
varied significantly and may vary significantly in the future. Numerous factors,
most of which are beyond our control, influence prices of our raw materials.
These factors include general economic conditions, industry capacity
utilization, vendor backlogs and transportation delays and other
uncertainties.
We may
not be able to adjust our product prices, especially in the short-term, to
recover cost increases in these raw materials. Our future
profitability may be adversely affected to the extent we are unable to pass on
higher raw material costs to our customers.
We
may engage in future acquisitions that could dilute the ownership interests of
our stockholders, cause us to incur debt and assume contingent
liabilities.
As part
of our business strategy, we review acquisition and strategic investment
prospects that we believe would complement our current product offerings,
augment our market coverage or enhance our technological capabilities, or
otherwise offer growth opportunities. From time to time, we review
investments in new businesses and we expect to make investments in, and to
acquire, businesses, products, or technologies in the future. In the
event of any future acquisitions, we could:
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issue
equity securities which would dilute current stockholders’ percentage
ownership;
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incur
substantial debt;
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assume
contingent liabilities; or
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expend
significant cash.
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These
actions could have a material adverse effect on our results of operations or the
price of our common stock. Moreover, even if we do obtain benefits in
the form of increased sales and earnings, there may be a lag between the time
when the expenses associated with an acquisition are incurred and the time when
we recognize such benefits. Acquisitions and investment activities
also entail numerous risks, including:
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difficulties
in the assimilation of acquired operations, technologies and/or
products;
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unanticipated
costs associated with the acquisition or investment
transaction;
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the
diversion of management’s attention from other business
concerns;
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adverse
effects on existing business relationships with suppliers and
customers;
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risks
associated with entering markets in which we have no or limited prior
experience;
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the
potential loss of key employees of acquired organizations;
and
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substantial
charges for the amortization of certain purchased intangible assets,
deferred stock compensation or similar
items.
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We cannot
assure you that we will be able to successfully integrate any businesses,
products, technologies, or personnel that we might acquire in the future, and
our failure to do so could have a material adverse effect on our business,
financial condition and results of operations.
If
we are unable to successfully complete and integrate strategic acquisitions in a
timely manner, our growth strategy may be adversely impacted.
An
important element of our growth strategy is expected to be the pursuit of
acquisitions of other businesses that increase our existing market share and
expand our production capacity. However, integrating businesses
involves a number of special risks, including the possibility that management
may be distracted from regular business concerns by the need to integrate
operations, unforeseen difficulties in integrating operations and systems,
problems relating to assimilating and retaining the employees of the acquired
business, accounting issues that arise in connection with the acquisition,
challenges in retaining customers, and potential adverse short-term effects on
results of operations. In addition, we may incur debt to finance
future acquisitions, and we may issue securities in connection with future
acquisitions that may dilute the holdings of our current or future
stockholders. If we are unable to successfully complete and integrate
strategic acquisitions in a timely manner, our growth strategy may be adversely
impacted.
We
may not be able to prevent others from unauthorized use of our patents, which
could harm our business and competitive position.
Our
success depends, in part, on our ability to protect our proprietary
technologies. We own two patents in the PRC covering our waste water treatment
technology and one international patent covering anti-oxidation
technology. We also have applied for two international invention
patents and seven domestic invention patents covering technologies relating to
waster water treatment, flue gas desulphurization, anti-oxidation and sludge
treatment, which patents applications are currently under review. We applied for
both a domestic patent and an international patent under the International
Patent Cooperation Treaty with respect to one of the foregoing technologies that
relates to anti-oxidation.. The process of seeking patent protection
can be lengthy and expensive and we cannot assure you that our patent
applications will result in patents being granted, or that our existing or
future granted patents will be sufficient to provide us with meaningful
protection or commercial advantages.
We also
cannot assure you that our current or potential competitors do not have, and
will not obtain, patents that will prevent, limit or interfere with our ability
to make, use or sell our products in either the PRC or other
countries.
The
implementation and enforcement of PRC intellectual property laws historically
has not been vigorous or consistent, primarily because of ambiguities in the PRC
laws and a relative lack of developed enforcement
mechanisms. Accordingly, intellectual property rights and
confidentiality protections in the PRC are not as effective as in the United
States and other countries. Policing the unauthorized use of
proprietary technology is difficult and expensive, and we might need to resort
to litigation to enforce or defend patents issued to us or to determine the
enforceability, scope and validity of our proprietary rights or those of
others. Such litigation will require significant expenditures of cash
and management efforts and could harm our business, financial condition and
results of operations. An adverse determination in any such
litigation will impair our intellectual property rights and may harm our
business, competitive position, business prospects and reputation.
Our
inability to fund our capital expenditure requirements may adversely affect our
growth and profitability.
Our
continued growth is dependent upon our ability to raise capital from outside
sources. Our ability to obtain financing will depend upon a number of
factors, including:
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our
financial condition and results of
operations;
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the
condition of the PRC economy and the environmental protection product
industry in the PRC; and
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conditions
in relevant financial markets.
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As a
result of slowing global economic growth, the credit market crisis, declining
consumer and business confidence, fluctuating commodity prices, and other
challenges currently affecting the global economy, our ability to raise
financing from outside sources may be adversely affected. If we are
unable to obtain financing, as needed, in a timely basis and on acceptable
terms, our financial position, competitive position, growth and profitability
may be adversely affected.
We
may need additional capital to fund our future operations and, if it is not
available when needed, we may need to reduce our planned development and
marketing efforts, which may reduce our revenue.
We
believe that our existing working capital and cash available from operations
will enable us to meet our working capital requirements for at least the next 12
months. However, if cash from future operations is insufficient, or
if cash is used for acquisitions or other currently unanticipated uses, we may
need additional capital. The development and marketing of new
products and the expansion of distribution channels and associated support
personnel require a significant commitment of resources. In addition,
if the markets for our products develop more slowly than anticipated, or if we
fail to establish significant market share and achieve sufficient revenue, we
may continue to consume significant amounts of capital. As a result,
we could be required to raise additional capital. To the extent that
we raise additional capital through the sale of equity or convertible debt
securities, the issuance of such securities could result in dilution of the
shares held by existing stockholders. If additional funds are raised
through the issuance of debt securities, such securities may provide the holders
certain rights, preferences, and privileges senior to those of common
stockholders, and the terms of such debt could impose restrictions on our
operations. We cannot assure you that additional capital, if
required, will be available on acceptable terms, or at all. If we are
unable to obtain sufficient amounts of additional capital, we may be required to
reduce the scope of our planned product development and marketing efforts, which
could harm our business, financial condition and results of
operations.
We
may have difficulty establishing adequate management, legal and financial
controls in the PRC.
Companies
operating in the PRC historically have not adopted a Western style of management
and financial reporting concepts and practices. We may have
difficulty in hiring and retaining a sufficient number of qualified employees to
work in the PRC. As a result of these factors, we may experience
difficulty in establishing management, legal and financial controls, collecting
financial data and preparing financial statements, books of account and
corporate records and instituting business practices that meet Western
standards.
Potential
environmental liability could have a material adverse effect on our operations
and financial condition.
To our
knowledge, neither the production nor the sale of our products constitutes
activities, or generates materials that create any environmental
hazards. Although it has not been alleged by PRC government officials
that we have violated any current environmental regulations, we cannot assure
you that the PRC government will not interpret the current environmental
protection laws and regulations or amend the current PRC environmental
protection laws and regulations such that we are later determined to be in
violation of the PRC environmental protection laws and regulations so
interpreted or amended. Our business and results of operations may be
materially and adversely affected if we were to be held liable for violating
existing environmental regulations or if we were to increase expenditures to
comply with environmental regulations affecting our operations.
We
rely on our Chairman and CEO, the founders of Dalian Rino, for the management of
our business.
We
depend, to a large extent, on the abilities and participation of our current
management team, but have a particular reliance upon Mr. Zou Dejun, our CEO, Ms.
Qiu Jianping, our Chairman of the Board, and Ms. Jenny Y. Liu, our
CFO. The loss of the services of Mr. Zou, Ms. Qiu or Ms. Liu, for any
reason, may have a material adverse effect on our business and
prospects. We cannot assure you that the services of Mr. Zou, Ms. Qiu
or Ms. Liu will continue to be available to us, or that we will be able to find
a suitable replacement for any of them if they were no longer
available. We do not carry key man life insurance for Ms.
Liu. We carry key man life insurance of $5.0 million each for Mr. Zou
and Ms. Qiu, which may not be sufficient if something happened to one or both of
them, and do not carry key man life insurance for any other key
personnel.
We
may not be able to hire and retain qualified personnel to support our growth and
if we are unable to retain or hire such personnel in the future, our ability to
improve our products and implement our business objectives could be adversely
affected.
If one or
more of our senior executives or other key personnel are unable or unwilling to
continue in their present positions, we may not be able to replace them in a
timely fashion or at all, our business may be disrupted and our financial
condition and results of operations may be materially and adversely
affected. Competition for senior management and senior technology
personnel is intense, the pool of qualified candidates is very limited, and we
may not be able to retain the services of our senior executives or senior
technology personnel, or attract and retain high-quality senior executives or
senior technology personnel in the future. Any failure by us to
attract or retain high-quality senior executives or senior technology personnel
could materially and adversely affect our future growth and financial
condition.
We
do not presently maintain product liability insurance, and our property and
equipment insurance does not cover the full value of our property and equipment,
which leaves us exposed in the event of loss or damage to our properties or
claims filed against us.
We
currently do not carry any product liability or other similar
insurance. Unlike in the U.S. and other countries, product liability
claims and lawsuits are relatively rare in the PRC. However, we
cannot assure you that we would not face liability in the event of the failure
of any of our products. We cannot assure you that, especially as
China’s domestic consumer economy and industrial economy continues to expand,
product liability exposures and litigation will not become more commonplace in
the PRC, or that we will not face product liability exposure or actual liability
as we expand our sales into international markets, like the United States, where
product liability claims are more prevalent.
Except
for limited amount of property and automobile insurance, we do not have other
insurance such as business liability or disruption insurance coverage for our
operations in the PRC. If our property and equipment are damaged or
lost in accidents, or otherwise need replacement for reasons beyond ordinary
wear and tear, we cannot assure you that we will have adequate resource to
quickly replace our property and equipment to ensure that our business operation
will not be materially adversely affected.
Rapid
technological changes in our industry could render our products non-competitive
or obsolete and consequently affect our ability to generate
revenues.
The
environmental protection and remediation industry is subject to rapid
technological change. Our future success will depend on our ability
to respond to rapidly changing technologies and improve the quality of our
products. Our failure to adapt to these changes could harm our
business. Our future plans to market our products require them to be
innovative. If we are slow to develop new products and technologies
that are attractive to and useful solutions for the PRC iron and steel industry,
we may not be successful in capturing an increasingly significant share of this
market.
We
have significant outstanding short-term borrowings that have been increasing,
and we may not be able to obtain extensions when they mature.
Our short
term loans as of September 30, 2009 and December 31, 2008 were approximately
$8.8 million and $8.8 million, respectively, and bore weighted average interest
rates of 3.98% and 5.31%, respectively. Generally, these short-term
bank loans mature in one year or less and contain no specific renewal
terms. However, in China it is customary practice for banks and
borrowers to negotiate roll-overs or renewals of short-term borrowings on an
on-going basis shortly before they mature. Although we have renewed
our short-term borrowings in the past, we cannot assure you that we will be able
to renew these loans in the future as they mature. If we are unable
to obtain renewals of these loans or sufficient alternative funding on
reasonable terms from banks or other parties, we will have to repay these
borrowings with the cash on our balance sheet or cash generated by our future
operations, if any. We cannot assure you that our business will
generate sufficient cash flow from operations to repay these
borrowings.
Risks
Related to Doing Business in the PRC
We
face the risk that changes in the policies of the PRC government could have a
significant impact upon our business in the PRC and the profitability of such
business.
The PRC’s
economy is in a transition from a planned economy to a market oriented economy
subject to five-year and annual plans adopted by the government that set
national economic development goals. Policies of the PRC government can have
significant effects on economic conditions in China. The PRC government has
confirmed that economic development will follow the model of a market economy,
such as that of the United States. Under this direction, we believe
that the PRC will continue to strengthen its economic and trading relationships
with foreign countries and business development in the PRC will follow market
forces. While we believe that this trend will continue, we cannot
assure you that this will be the case. Our interests may be adversely
affected by changes in policies by the PRC government, including:
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changes
in laws, regulations or their
interpretation;
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restrictions
on currency conversion, imports or sources of supplies;
and
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expropriation
or nationalization of private
enterprises.
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Although
the PRC government has been pursuing economic reform policies for more than two
decades, we cannot assure you that the government will continue to pursue such
policies or that such policies may not be significantly altered, especially in
the event of a change in leadership, social or political disruption, or other
circumstances affecting the PRC’s political, economic and social
life.
The
PRC laws and regulations governing our current business operations are sometimes
vague and uncertain. Any changes in such PRC laws and regulations may harm our
business.
There are
substantial uncertainties regarding the interpretation and application of PRC
laws and regulations, including but not limited to the laws and regulations
governing our business, and the enforcement and performance of our arrangements
with customers in the event of the imposition of statutory liens, bankruptcy and
criminal proceedings. We and any future subsidiaries are considered
foreign persons or foreign funded enterprises under PRC laws and, as a result,
we are required to comply with PRC laws and regulations. These laws
and regulations are sometimes vague and may be subject to future changes, and
their official interpretation and enforcement may involve substantial
uncertainty. The effectiveness of newly enacted laws, regulations or
amendments may be delayed, resulting in detrimental reliance by foreign
investors. New laws and regulations that affect existing and proposed
future businesses may also be applied retroactively. We cannot
predict what effect the interpretation of existing or new PRC laws or
regulations may have on our business.
Our
restructuring agreements with Dalian Rino and its shareholders may not be as
effective in providing control over these entities as direct ownership and
potential conflicts of interest may occur in the performance and enforcement of
the Restructuring Agreements in the future.
We
operate our business through Dalian Innomind
, our indirectly wholly
-owned
subsidiary in the PRC, and rely on a series of contractual arrangements with
Dalian Rino and its shareholders, known as restructuring agreements, to control
the operations of Dalian Rino.
Pursuant to the restructuring
agreements that were entered into by and among Dalian Innomind, Dalian Rino and
the shareholders of Dalian Rino, Dalian Innomind will be managing and
controlling Dalian Rino’s business and operations in exchange for a management
fee until the earliest to occur of the termination of a certain entrusted
management agreement as determined by the parties thereto, the winding up of
Dalian Rino, or the completion of acquisition of Dalian Rino by Dalian Innomind,
which is not anticipated at the present time. Although
the
Restructuring Agreements provide Dalian Innomind with the legal right and power
to control Dalian Rino and any of its remaining assets and operations, the
contractual arrangements may not be as effective in providing control over
Dalian Rino as direct ownership as we depend on the shareholders of Dalian Rino
to perform their obligations under the restructuring agreements and the
effective enforcement of these agreements when necessary.
Consequently,
if Dalian Rino or any of its shareholders fails to perform its, his or her
respective obligations under the Restructuring Agreements, we may have to incur
substantial costs and resources to enforce those agreements, and rely on legal
remedies under PRC law, including seeking specific performance or injunctive
relief, and claiming damages, which may not be effective. For
example, if the shareholders of Dalian Rino refuse to transfer their equity
interest in Dalian Rino to us or our designee if we exercise the equity purchase
option under the Restructuring Agreements, then we will have to pursue available
remedies under PRC law for them to fulfill their contractual
obligations.
The terms
of the Restructuring Agreements were negotiated between Dalian Rino and the
investors in a private placement that we closed on October 5, 2007 at
arms-length, the approval of which by us was a condition precedent to closing of
the private placement. However, there may be potential conflicts of
interest in the performance and enforcement of the Restructuring Agreements,
because our CEO and director, Mr. Zou, and his wife, Ms. Qiu Jianping, Chairman
of the Board of Directors, together hold 100% of Dalian Rino’s equity interest
and they are also the sole beneficiaries of The Innomind Trust which holds
70.60% of our outstanding common stock immediately prior to the offering and
62.6% immediately after the offering (without taking into account shares
issuable upon exercise of the warrants offered) pursuant to this prospectus
supplement and the accompanying prospectus. As such, we cannot assure
you that Mr. Zou and Ms. Qiu Jianping, in their capacity as our CEO, director
and Chairman respectively, will act in our best interest when a conflict between
us and Dalian Rino arises because of their ownership interest in Dalian
Rino. For example, if Dalian Rino violates the Restructuring
Agreement because of its failure to pay any management fee to Dalian Innomind,
the fact that Mr. Zou and Ms. Qiu have a 100% ownership interest in Dalian Rino
may affect their decision as to whether and/or how vigorously we will seek to
enforce our rights under the Restructuring Agreements.
The
Restructuring Agreements are governed by PRC law and provide for the resolution
of disputes through arbitration in the PRC. Accordingly, these
agreements would be interpreted in accordance with PRC law and any disputes
would be resolved in accordance with PRC legal procedures. The legal
environment in the PRC is not as developed as in other jurisdictions, such as
the United States. As a result, uncertainties in the PRC legal system
could limit our ability to enforce the Restructuring Agreements. If
we are unable to enforce the Restructuring Agreements, we may not be able to
exert effective control over our operating entities, and our ability to conduct
our business may be negatively affected.
A
slowdown or other adverse developments in the PRC economy may harm our customers
and the demand for our services and our products.
All of
our operations are conducted in the PRC and all of our revenues are generated
from sales in the PRC. Although the PRC economy has grown
significantly in recent years, we cannot assure you that this growth will
continue. Pollution control for China’s iron and steel sector is a relatively
immature and growing sector, but we do not know how sensitive we might be to a
slowdown in economic growth or other adverse changes in the PRC economy which
might affect demand for iron and steel pollution control equipment. A
slowdown in overall economic growth, an economic downturn, a recession or other
adverse economic developments in the PRC could significantly reduce the demand
for our products and harm our business. Please refer to the Risk Factor titled
“
The recent global financial
crisis could negatively affect our business, results of operations, and
financial condition
” for more information regarding the recent economic
development and the impact on our business.
Inflation
in the PRC could negatively affect our profitability and growth.
While the
PRC economy has experienced rapid growth, such growth has been uneven among
various sectors of the economy and in different geographical areas of the
country. Rapid economic growth could lead to growth in the money
supply and rising inflation. If prices for our products rise at a
rate that is insufficient to compensate for the rise in the costs of supplies,
it may harm our profitability.
In order
to control inflation in the past, the PRC government has imposed controls on
bank credit, limits on loans for fixed assets and restrictions on state bank
lending. Such an austere policy can lead to a slowing of economic
growth. In October 2004, the People’s Bank of China, the PRC’s
central bank, raised interest rates for the first time in nearly a decade and
indicated in a statement that the measure was prompted by inflationary concerns
in the Chinese economy. Repeated raises in interest rates by the
central bank would likely slow economic activity in China which could, in turn,
materially increase our costs and also reduce demand for our
products.
Dalian
Innomind and RINO are subject to restrictions on paying dividends and making
other payments to us; therefore, we might in turn be unable to pay dividends to
you.
We are a
holding company incorporated in the State of Nevada and do not have any assets
or conduct any business operations other than our investments in our
subsidiaries and affiliates, Innomind, Dalian Innomind, Dalian Rino and the
subsidiaries of Dalian Rino. As a result of our holding company
structure, we rely entirely on dividend payments from Dalian Innomind, our
subsidiary in China. PRC regulations currently permit payment of
dividends only out of accumulated profits, as determined in accordance with PRC
accounting standards and regulations. Our subsidiary and consolidated affiliates
in the PRC also are required to set aside a portion of their after-tax profits
according to PRC accounting standards and regulations to fund certain reserve
funds. The PRC government also imposes controls on the conversion of
Renminbi into foreign currencies and the remittance of currencies out of the
PRC. We may experience difficulties in completing the administrative
procedures necessary to obtain and remit foreign
currency. Furthermore, if Dalian Innomind or Dalian Rino incurs debt
on its own in the future, the instruments governing the debt may restrict its
ability to pay dividends or make other payments. If we or Innomind
Group are unable to receive all of the revenues from Dalian Innominds’
operations, we may be unable to pay dividends on our common stock.
Governmental
control of currency conversion may affect the value of your
investment.
The PRC
government imposes controls on the convertibility of Renminbi into foreign
currencies and, in certain cases, the remittance of currency out of the
PRC. We receive substantially all of our revenues in Renminbi, which
is currently not a freely convertible currency. Shortages in the
availability of foreign currency may restrict our ability to remit sufficient
foreign currency to pay dividends, or otherwise satisfy foreign currency
denominated obligations. Under existing PRC foreign exchange
regulations, payments of current account items, including profit distributions,
interest payments and expenditures from the transaction, can be made in foreign
currencies without prior approval from the PRC State Administration of Foreign
Exchange by complying with certain procedural requirements. However,
approval from appropriate governmental authorities is required where Renminbi is
to be converted into foreign currency and remitted out of China to pay capital
expenses such as the repayment of bank loans denominated in foreign
currencies.
The PRC
government may also in the future restrict access to foreign currencies for
current account transactions. If the foreign exchange control system
prevents us from obtaining sufficient foreign currency to satisfy our currency
demands, we may not be able to pay certain of our expenses as they come
due.
The
fluctuation of the Renminbi may harm your investment.
The value
of the Renminbi against the U.S. dollar and other currencies may fluctuate and
is affected by, among other things, changes in the PRC’s political and economic
conditions. As we rely entirely on revenues earned in the PRC, any
significant revaluation of the Renminbi may materially and adversely affect our
cash flows, revenues and financial condition. For example, to the
extent that we need to convert U.S. dollars we receive from an offering of our
securities into Renminbi for our operations, appreciation of the Renminbi
against the U.S. dollar would diminish the value of the proceeds of the offering
and this could harm our business, financial condition and results of
operations. Conversely, if we decide to convert our Renminbi into
U.S. dollars for the purpose of making payments for dividends on our common
shares or for other business purposes and the U.S. dollar appreciates against
the Renminbi, the U.S. dollar equivalent of the Renminbi we convert would be
reduced. In addition, the depreciation of significant U.S. dollar
denominated assets could result in a charge to our income statement and a
reduction in the value of these assets.
On July
21, 2005, the PRC government changed its decade-old policy of pegging the value
of the Renminbi to the U.S. dollar. Under the new policy, the
Renminbi is permitted to fluctuate within a narrow and managed band against a
basket of certain foreign currencies. This change in policy has
resulted in significant appreciation of the Renminbi against the U.S.
dollar. There remains significant international pressure on the PRC
government to adopt an even more flexible currency policy, which could result in
a further and more significant appreciation of the Renminbi against the U.S.
dollar.
If
the PRC government were to revoke the “grandfathered” preferential tax benefits
currently enjoyed by Dalian Innomind, we would have to pay more taxes in the
PRC, which could have a material and adverse effect on our financial condition
and results of operations.
Recent
changes in the PRC’s tax laws have, effective January 1, 2008, made wholly
foreign-owned enterprises (“WFOEs”) subject to standard enterprise income tax
rates, which are 25%. Prior to these changes, WFOEs enjoyed tax
preferences consisting of multi-year exemptions followed by a period of reduced
rate taxation and ending with the application of standard tax
rates.
Because
Dalian Innomind was established before the effective date of these recent tax
law changes, Jinzhou District Branch of the State Tax Bureau, Dalian City
notified Dalian Innomind that it is entitled to: (i) a two-year exemption from
enterprise income taxation beginning in 2008; (ii) a 12.5% enterprise income tax
rate for the next three years; and (iii) application of the standard enterprise
income tax rate (25%) thereafter.
If the
PRC government were to eliminate these “grandfathered” tax preferences, and/or
if the applicable government entity later interprets and/or implements the PRC
tax law and related regulations differently and revoke the “grandfathered” tax
benefits to Dalian Innomind, Dalian Innomind would immediately be subject to the
standard statutory tax rate. Further, if the applicable tax entity
later determines that such standard statutory tax rate should be applied
retroactively, we could be required to pay additional taxes. The loss of these
preferential tax treatments, the retroactive payment of additional taxes and the
potential acceleration of the application of standard PRC tax rates to our
business, could have a material and adverse effect on our financial condition
and results of operations.
The
Restructuring Agreements we have entered into among our subsidiaries and
affiliated entities or persons may be subject to scrutiny by the PRC tax
authorities and a finding that we owe additional taxes or are ineligible for our
tax exemption, or both, could substantially increase the taxes we owe, and
reduce our net income and the value of your investment.
Dalian
Innomind has purchased assets from Dalian Rino at their book value and leased
the remaining assets from Dalian Rino at a nominal amount. Under PRC
law, arrangements and transactions among related parties may be subject to audit
or challenge by the PRC tax authorities. If any of the transactions
we have entered into between Dalian Innomind and Dalian RINO are found not to be
on an arm’s-length basis, or to result in an unreasonable reduction in tax under
PRC law, the PRC tax authorities have the authority to disallow our tax savings,
adjust the profits and losses of Dalian Innomind and Dalian Rino, and assess
late payment interest and penalties. A finding by the PRC tax
authorities that we are ineligible for the tax savings achieved in the past, or
that Dalian Rino or Dalian Innomind are ineligible for preferential tax
benefits, would substantially increase the taxes we owe and reduce our net
income and the value of your investment.
PRC
regulations relating to the establishment of offshore special purpose companies
by PRC residents, if applied to us, may subject our PRC resident shareholders or
our parent company to liability and limit our ability to acquire PRC companies
or to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability
to distribute profits to us or otherwise materially adversely affect
us.
In
October 2005, the PRC State Administration of Foreign Exchange (“SAFE”) issued a
public notice, the Notice on Relevant Issues in the Foreign Exchange Control
over Financing and Return Investment Through Special Purpose Companies by
Residents Inside China (the “SAFE Notice”), which requires PRC residents,
including both legal persons and natural persons, to register with the competent
local SAFE branch before establishing or controlling any company outside of
China, referred to as an “offshore special purpose company,” for the purpose of
overseas equity financing involving onshore assets or equity interests held by
them. In addition, any PRC resident that is the shareholder of an
offshore special purpose company is required to amend its SAFE registration with
the local SAFE branch with respect to that offshore special purpose company in
connection with any increase or decrease of capital, transfer of shares, merger,
division, equity investment or creation of any security interest over any assets
located in China. Moreover, if the offshore special purpose company
was established and owned the onshore assets or equity interests before the
implementation date of the SAFE Notice, a retroactive SAFE registration is
required to have been completed before March 31, 2006. If any PRC
shareholder of any offshore special purpose company fails to make the required
SAFE registration and amendment, the PRC subsidiaries of that offshore special
purpose company may be prohibited from distributing their profits and the
proceeds from any reduction in capital, share transfer or liquidation to the
offshore special purpose company. Moreover, failure to comply with
the SAFE registration and amendment requirements described above could result in
liability under PRC laws for evasion of applicable foreign exchange
restrictions. After the issuance of the SAFE Notice, an
implementation rule on the SAFE Notice was issued on May 29, 2007, which
provides for implementation guidance and supplements the procedures as provided
in the SAFE Notice. For an offshore special purpose company which was
established and owned the onshore assets or equity interests before the
implementation date of the SAFE Notice, a retroactive SAFE registration
requirement is repeated.
Due to
lack of official interpretation, some of the terms and provisions of the SAFE
Notice and its implementation rules remain unclear, and the implementation of
the SAFE Notice by central SAFE and local SAFE branches has been inconsistent
since its adoption. Based on the advice of our previous PRC counsel,
Global Law Offices, and current PRC counsel, Commerce & Finance Law Offices,
both located in Beijing, and after consultation with relevant SAFE officials, we
believe that the PRC resident shareholders of our parent company, RINO
International, were required to complete their respective SAFE registrations
pursuant to the SAFE Notice.
However,
they have not done so.
Failure to comply with such SAFE registration and
amendment requirements as described above could subject such resident
shareholders to liability and punishment for evasion of applicable foreign
exchange regulations.
Moreover,
because of uncertainty over how the SAFE Notice will be interpreted and
implemented, and how or whether the SAFE Notice and implementation rules will
apply to us, we cannot predict how SAFE will affect our business operations or
future strategies. For example, our present and prospective PRC
subsidiaries’ ability to conduct foreign exchange activities, such as the
remittance of dividends and foreign currency-denominated borrowings, may be
subject to compliance with the SAFE Notice by our or our parent company’s PRC
resident shareholders. In addition, such PRC residents may not always
be able to complete registration procedures required by the SAFE
Notice. We also have little control over either our present or
prospective direct or indirect shareholders or the outcome of such registration
procedures. A failure by our or our parent company’s PRC resident
shareholders or future PRC resident shareholders to comply with the SAFE Notice,
if SAFE requires it, could subject us to fines or legal sanctions, restrict our
overseas or cross-border investment activities, limit our subsidiary’s ability
to make distributions or pay dividends or affect our ownership structure, any
one or more of which could adversely affect our business and
prospects.
Ambiguities
in the merger and acquisition regulations implemented on September 8, 2006
relating to acquisitions of assets and equity interests of Chinese companies by
foreign persons may present risks in our compliance status under the
regulations.
On
September 8, 2006, the Ministry of Commerce (“MOFCOM”), together with several
other government agencies, promulgated a comprehensive set of regulations
governing the approval process by which a Chinese company may participate in an
acquisition of its assets or its equity interests and by which a Chinese company
may obtain public trading of its securities on a securities exchange outside the
PRC. Although prior to September 8, 2006, there was a complex series
of regulations in place for approval of Chinese enterprises that were
administered by a combination of provincial and centralized agencies, the new
regulations have largely centralized and expanded the approval process to
MOFCOM, the State Administration of Industry and Commerce, SAFE or its branch
offices, the State Asset Supervision and Administration Commission, and the
China Securities Regulatory Commission. Depending on the structure of
the transaction as determined once a definitive agreement is executed, these
regulations would require the Chinese parties to make a series of applications
and supplemental applications to the aforementioned agencies. The
merger and acquisition regulations set forth many specific requirements that
have to be followed, but there are still many ambiguities in the meaning of many
material provisions.
The
transactions contemplated under the Restructuring Agreements are structured in a
manner such that consummation of such transactions would not bring these
transactions within the regulatory scope of the September 8, 2006
regulations. However, due to the ambiguities in the meaning of many
provisions, until there has been clarification either by pronouncements,
regulation or practice, there is some uncertainty in the scope of the
regulations. Moreover, the ambiguities give the regulators wide
latitude in the enforcement of the regulations and the transactions to which
they may or may not apply. Therefore, it is not inconceivable that
future issuance of new regulations and pronouncement for the purposes of
clarifying the application of September 30, 2006 regulations may retroactively
make it apparent that the consummation of the transactions contemplated under
the Restructuring Agreements are subject to September 8, 2006 regulations and
failure to obtain approval required under the September 8, 2006 regulations may
cause the PRC government to take actions that adversely affect the Restructuring
Agreements including requiring us to unwind the Restructuring
Agreements. If this occurs, and if we do not mitigate the adverse
effect to the investors’ reasonable satisfaction within 60 days of such PRC
government actions, then we are required, within 30 days from the date of a
written demand from the investor, to pay liquidated damages in an amount equal
to the initial investment without interest and the shareholder must return the
shares acquired under the agreement. If we are obligated to pay
liquidated damages of the entire investment amount, we would be forced to raise
more capital or incur additional debt to satisfy such obligations and our
liquidity would be materially and adversely affected. If we do not
have sufficient liquidity to satisfy our short-term working capital requirements
and long-term capital expenditure requirements, our results of operations would
be materially adversely affected.
We
face risks related to natural disasters and health epidemics in China, which
could have a material adverse effect on our business and results of
operations.
Our
business could be materially and adversely affected by natural disasters or the
outbreak of health epidemics in China. For example, in May 2008,
Sichuan Province suffered a strong earthquake measuring approximately 8.0 on the
Richter scale that caused widespread damage and casualties. In
addition, in the last decade, the PRC has suffered health epidemics related to
the outbreak of avian influenza and severe acute respiratory syndrome, or
SARS. In April 2009, an outbreak of the H1N1 virus, also commonly
referred to as "swine flu," occurred in Mexico and has spread to other
countries. Cases of swine flu have been reported in Hong Kong and
mainland China. The Chinese government, and certain regional
governments within China, have enacted regulations to address the H1N1 virus
specifically within the education services market, which may have an affect on
our business. If the outbreak of swine flu were to become widespread
in China or increase in severity, it could have an adverse effect on economic
activity in China. Such events could severely disrupt our business
operations and harm our results of operations. Any future natural
disasters or health epidemics in the PRC could also have a material adverse
effect on our business and results of operations.
Because
our principal assets are located outside of the United States and some of our
directors and all our officers reside outside of the United States, it may be
difficult for you to use the United States Federal securities laws to enforce
your rights against us and our officers and some directors in the United States
or to enforce judgments of United States courts against us or them in the
PRC.
All of
our present officers and some of our directors reside outside of the United
States. In addition, our operating subsidiary, Dalian Innomind, and
controlled affiliate Dalian Rino and its subsidiaries, are located in the PRC
and substantially all of their assets are located outside of the United
States. It may therefore be difficult for investors in the United
States to enforce their legal rights based on the civil liability provisions of
the United States federal securities laws against us in the courts of either the
United States or the PRC and, even if civil judgments are obtained in courts of
the United States, to enforce such judgments in PRC courts. Further,
it is unclear if extradition treaties now in effect between the United States
and the PRC would permit effective enforcement against us or our officers and
directors of criminal penalties, under the United States federal securities laws
or otherwise.
The
PRC’s legal and judicial system may not adequately protect our business and
operations and the rights of foreign investors.
The PRC
legal and judicial system may negatively impact foreign investors. In
1982, the National People’s Congress amended the Constitution of China to
authorize foreign investment and guarantee the “lawful rights and interests” of
foreign investors in the PRC. However, the PRC’s system of laws is
not yet comprehensive. The legal and judicial systems in the PRC are
still rudimentary, and enforcement of existing laws is
inconsistent. Many judges in the PRC lack the depth of legal training
and experience that would be expected of a judge in a more developed
country. Because the PRC judiciary is relatively inexperienced in
enforcing the laws that do exist, anticipation of judicial decision making is
more uncertain than would be expected in a more developed country. It
may be impossible to obtain swift and equitable enforcement of laws that do
exist, or to obtain enforcement of the judgment of one court by a court of
another jurisdiction. The PRC’s legal system is based on the civil
law regime, that is, it is based on written statutes; a decision by one judge
does not set a legal precedent that is required to be followed by judges in
other cases. In addition, the interpretation of Chinese laws may be
varied to reflect domestic political changes.
The
promulgation of new laws, changes to existing laws and the preemption of local
regulations by national laws may adversely affect foreign
investors. Despite the trend of legislation over the last 20 years,
which has significantly enhanced the protection of foreign investment and
allowed for more control by foreign parties of their investments in Chinese
enterprises, there can be no assurance that a change in leadership, social or
political disruption, or unforeseen circumstances affecting the PRC’s political,
economic or social life, will not affect the PRC government’s ability to
continue to support and pursue these reforms. Such a shift could have
a material adverse effect on our business and prospects.
The
practical effect of the PRC legal system on our business operations in the PRC
can be viewed from two separate but intertwined
considerations. First, as a matter of substantive law, the Foreign
Invested Enterprise laws provide significant protection from government
interference. In addition, these laws guarantee the full enjoyment of
the benefits of corporate articles and contracts to foreign invested enterprise
participants. These laws, however, do impose standards concerning
corporate formation and governance, which are qualitatively different from the
general corporation laws in the United States. Similarly, the PRC
accounting laws mandate accounting practices, which are not consistent with U.S.
generally accepted accounting principles. PRC’s accounting laws
require that an annual “statutory audit” be performed in accordance with PRC
accounting standards and that the books of account of foreign invested
enterprises are maintained in accordance with Chinese accounting
laws. Article 14 of the PRC Wholly Foreign-Owned Enterprise Law
requires a wholly foreign-owned enterprise to submit certain periodic fiscal
reports and statements to designated financial and tax authorities, and failure
to do so may result at business license revocation. While the
enforcement of substantive rights may appear less clear than under United States
procedures, the foreign invested enterprises and wholly foreign-owned
enterprises are Chinese registered companies, which enjoy the same status as
other Chinese registered companies in business-to-business dispute
resolution. Any award rendered by an arbitration tribunal is
enforceable in accordance with the United Nations Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (1958).
We
may face obstacles from the communist system in the PRC.
Foreign
companies conducting operations in the PRC face significant political, economic
and legal risks. The communist regime in the PRC, which includes a
cumbersome bureaucracy, may hinder Western investment.
The
relative lack of public company experience of our management team may impair our
ability to fully comply with all requirements applicable to public
companies.
Our
management team lacks public company experience, which could impair our ability
to comply with legal and regulatory requirements such as those imposed by the
Sarbanes-Oxley Act of 2002. Our Chief Executive Officer, Mr. Zou
Dejun, our Chairman of the Board Ms. Qiu Jianping and our Controller (principal
accounting officer), Ms. Yu Li, have never had responsibility for managing a
publicly traded company. Such responsibilities include complying with
federal securities laws and making required disclosures in a timely
basis. Our senior management may not be able to implement programs
and policies in an effective and timely manner that adequately responds to such
increased legal, regulatory compliance and reporting
requirements. Our failure to comply with all applicable requirements
could lead to the imposition of fines and penalties and distract our management
from attending to the growth of our business.
Dividends
payable to us by our PRC subsidiaries may be subject to PRC withholding taxes,
we may be subject to PRC taxation on our worldwide income, and dividends
distributed to our non-PRC investors may be subject to PRC withholding taxes
under the PRC Enterprise Income Tax Law.
As a
result of our holding company structure, we rely entirely on dividend payments
from Dalian Innomind, our subsidiary in China. Under the PRC tax laws
effective prior to January 1, 2008, dividends paid to foreign investors by
foreign-invested enterprises, such as dividends paid to us by Dalian Innomind,
were exempt from PRC withholding tax. Under the PRC Enterprise Income
Tax Law and its implementation rules effective on January 1, 2008, all domestic
and foreign-invested companies in China are subject to a uniform enterprise
income tax at the rate of 25% and dividends from a PRC subsidiary to its foreign
parent company are subject to a withholding tax at the rate of 10%, unless such
foreign parent company’s jurisdiction of incorporation has a tax treaty with
China that provides for a reduced rate of withholding tax, or the tax is
otherwise exempted or reduced pursuant to the PRC tax laws.
Under the
PRC Enterprise Income Tax Law, enterprises organized under the laws of
jurisdictions outside China with their “de facto management bodies” located
within China are considered PRC resident enterprises and therefore be subject to
PRC enterprise income tax at the rate of 25% on their worldwide income. Under
the implementation rules of the PRC Enterprise Income Tax Law, “de facto
management bodies” is defined as the bodies that have material and overall
management and control over the manufacturing and business operations, personnel
and human resources, finances and treasury, and acquisition and disposition of
properties and other assets of an enterprise. In addition, a recent
circular issued by the State Administration of Taxation on April 22, 2009
provides that a foreign enterprise controlled by a PRC company or a PRC company
group will be classified as a “resident enterprise” with its “de facto
management bodies” located within China if the following requirements are
satisfied: (i) the senior management and core management departments in charge
of its daily operations function mainly in the PRC; (ii) its financial and human
resources decisions are subject to determination or approval by persons or
bodies in the PRC; (iii) its major assets, accounting books, company seals, and
minutes and files of its board and shareholders’ meetings are located or kept in
the PRC; and (iv) more than half of the enterprise’s directors or senior
management with voting rights reside in the PRC.
The PRC
Enterprise Income Tax Law and its implementation rules are relatively new and
ambiguities exist with respect to the interpretation of the provisions relating
to resident enterprise issues. Although our offshore holding
companies are not controlled by any PRC company or company group, we cannot
assure you that we will not be deemed to be a PRC resident enterprise under the
PRC Enterprise Income Tax Law and its implementation rules. If we are
deemed to be a PRC resident enterprise, we will be subject to PRC enterprise
income tax at the rate of 25% on our worldwide income. In that case,
however, dividend income we receive from Dalian Innomind may be exempt from PRC
enterprise income tax because the PRC Enterprise Income Tax Law and its
implementation rules generally provide that dividends received by a PRC resident
enterprise from its directly invested entity that is also a PRC resident
enterprise is exempt from enterprise income tax. However, as there is still
uncertainty as to how the PRC Enterprise Income Tax Law and its implementation
rules will be interpreted and implemented, we cannot assure you that we are
eligible for such PRC enterprise income tax exemptions or
reductions.
In
addition, ambiguities also exist with respect to the interpretation of the
provisions relating to identification of PRC-sourced income. If we
are deemed to be a PRC resident enterprise, dividends distributed to our non-PRC
entity investors by us, or the gain our non-PRC entity investors may realize
from the transfer of our ordinary shares, may be treated as PRC-sourced income
and therefore be subject to a 10% PRC withholding tax pursuant to the PRC
Enterprise Income Tax Law.
If we
became a PRC resident enterprise under the new PRC tax system and received
income other than dividends, our profitability and cash flows would be adversely
affected due to our worldwide income being taxed in China under the PRC
Enterprise Income Tax Law. Additionally, we would incur an
incremental PRC dividend withholding tax cost if we distributed our profits to
our ultimate shareholders. There is, however, not necessarily an
incremental PRC dividend withholding tax on the piece of the profits distributed
from our PRC subsidiaries, since they would have been subject to PRC dividend
withholding tax even if we were not a PRC tax resident.
The
Restructuring Agreements we have entered into with Dalian Rino and its
shareholders, may be subject to scrutiny by the PRC tax authorities and a
finding that Dalian Rino or its subsidiaries owe additional taxes could reduce
our net income and the value of your investment.
Under PRC
laws and regulations, arrangements and transactions among related parties may be
audited or challenged by the PRC tax authorities. We could face
material and adverse consequences if the PRC tax authorities determine that the
Restructuring Agreements we have entered into with Dalian Rino and its
shareholders do not represent an arm’s-length price and adjust the income of
Dalian Rino or its subsidiaries in the form of a transfer pricing
adjustment. A transfer pricing adjustment could, among other things,
result in a reduction, for PRC tax purposes, of expenses deductions recorded by
Dalian Rino or its subsidiaries, which could in turn increase their tax
liabilities. In addition, the PRC tax authorities may impose late
payment fees and other penalties to Dalian Rino or its subsidiaries for
under-paid taxes. Our consolidated net income may be materially and
adversely affected if Dalian Rino or its subsidiaries’ tax liabilities increase
or if they is found to be subject to late payment fees or other
penalties.
Failure
to comply with the United States Foreign Corrupt Practices Act could subject us
to penalties and other adverse consequences.
As our
ultimate holding company is a Nevada corporation, we are subject to the United
States Foreign Corrupt Practices Act, which generally prohibits United States
companies from engaging in bribery or other prohibited payments to foreign
officials for the purpose of obtaining or retaining business. Foreign
and local Chinese companies, including some that may compete with our company,
are not subject to these prohibitions. Corruption, extortion,
bribery, pay-offs, theft and other fraudulent practices may occur from
time-to-time in the PRC. We can make no assurance, however, that our
employees or other agents will not engage in such conduct for which we might be
held responsible. If our employees or other agents are found to have
engaged in such practices, we could suffer severe penalties and other
consequences that may have a material adverse effect on our business, financial
condition and results of operations.
Because
our funds are held in banks in the PRC that do not provide insurance, the
failure of any bank in which we deposit our funds could affect our ability to
continue in business.
Banks and
other financial institutions in the PRC do not provide insurance for funds held
on deposit. A significant portion of our assets are in the form of
cash deposited with banks in the PRC, and in the event of a bank failure, we may
not have access to our funds on deposit. Depending upon the amount of
money we maintain in a bank that fails, our inability to have access to our cash
could impair our operations, and, if we are not able to access funds to pay our
suppliers, employees and other creditors, we may be unable to continue in
business.
We
may not possess all of the licenses required to operate our business, or we may
fail to maintain the licenses we currently hold. This could subject
us to fines and other penalties, which may have a material adverse effect on our
business, financial condition and results of operations.
We are
required to hold a variety of permits and licenses to operate our business in
China. We may not possess all of the permits and licenses required
for all of our business activities. In addition, there may be
circumstances under which an approval, permit or license granted by a
governmental agency is subject to change without substantial advance notice, and
it is possible that we could fail to obtain an approval, permit or license that
is required to expand our business as we intend. If we fail to obtain
or to maintain such permits or licenses or renewals are granted with onerous
conditions, we could be subject to fines and other penalties and be limited in
the number or the quality of the products that we would be able to
offer. As a result, our business, financial condition and results of
operations could be materially and adversely affected.
Risks
Related to this Offering and Ownership of Our Common Stock
We
have broad discretion in the use of the net proceeds from this offering and may
not use them effectively.
Our
management will have broad discretion in the application of the net proceeds
from this offering and could spend the proceeds in ways with which you may not
agree. Accordingly, you will be relying on the judgment of our management with
regard to the use of these net proceeds, and you will not have the opportunity,
as part of your investment decision, to assess whether the proceeds are being
used appropriately. It is possible that the proceeds will be invested or
otherwise used in a way that does not yield a favorable, or any, return for our
company.
Our
officers, directors and affiliates control us through their positions and stock
ownership and their interests may differ from other stockholders.
Our
officers and directors beneficially own approximately 70.6% of our common stock
immediately prior to the offering and 62.6% immediately after the offering
(without taking into account shares issuable upon exercise of the warrants
offered) pursuant to this prospectus supplement and the accompanying
prospectus. As a result, they are able to control the outcome of
stockholder votes on various matters, including the election of directors and
extraordinary corporate transactions, including business
combinations. The interests of our directors and officers may differ
from that of other stockholders. Furthermore, the current ratios of
ownership of our common stock reduce the public float and liquidity of our
common stock which can, in turn, affect the market price of our common
stock.
We
are responsible for the indemnification of our officers and
directors.
Our
Bylaws provide for the indemnification of our directors, officers, employees,
and agents, under certain circumstances, against costs and expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on our behalf. Under the employment
agreement between us and Jenny Y. Liu, our CFO, we agree to indemnify and hold
harmless Ms. Liu to the fullest extent permitted by law for any action or
inaction of Ms. Liu while serving as our officer. Consequently, we
may be required to expend substantial funds to satisfy these indemnity
obligations.
Since
we have broad discretion in how we use the net proceeds from this offering, we
may use the net proceeds in ways in which you disagree.
We
intend to use the net proceeds from this offering for working capital
requirements. See “Use of Proceeds.” We have not allocated
specific amounts of the net proceeds from this offering for any specific
purpose. Accordingly, our management will have significant
flexibility in applying the net proceeds of this offering. You will
be relying on the judgment of our management with regard to the use of these net
proceeds, and you will not have the opportunity, as part of your investment
decision, to assess whether the proceeds are being used
appropriately. It is possible that the net proceeds will be invested
in a way that does not yield a favorable, or any, return for us. The
failure of our management to use such funds effectively could have a material
adverse effect on our business, financial condition, operating results and cash
flow.
The
market price of our common stock may be volatile, which could cause the value of
your investment to decline.
The
market price of our common stock may fluctuate widely. You may not be
able to resell your shares at or above the offering price due to fluctuations in
the market price of our common stock caused by changes in our operating
performance or prospects and other factors, including broad market fluctuations.
Some specific factors that may have a significant effect on the market price of
our common stock include:
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actual
or anticipated fluctuations in our operating results or future
prospects;
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the
public's reaction to our press releases, our other public announcements
and our filings with the SEC;
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strategic
actions by us or our competitors, such as acquisitions or
restructurings;
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new
laws or regulations or new interpretations of existing laws or regulations
applicable to our business;
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changes
in accounting standards, policies, guidance, interpretations or
principles;
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adverse
conditions in the financial markets or general economic conditions,
including those resulting from war, incidents of terrorism and responses
to such events;
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sales
of common stock by us, the selling stockholder or members of our
management team; and
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changes
in stock market analyst recommendations or earnings estimates regarding
our common stock, other comparable companies or in our industry
generally.
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Future
sales of our shares, or the perception by the market that future sales of our
shares may occur, could depress the market price of our common
stock.
Future
sales, or the perception of the availability for sale in the public market, of
substantial amounts of our common stock could adversely affect theprevailing
market price of our common stock and could impair our ability to raise capital
through future sales of equity securities at a time and price that we deem
appropriate. As of December 2, 2009, we had 25,351,289 shares of common stock
outstanding, all of which shares, were eligible for sale in the public market,
subject in some cases to compliance with the requirements of Rule 144,
including the volume limitations and manner of sale requirements. In addition,
all of the shares offered under this prospectus supplement and the accompanying
prospectus will be freely tradable without restriction or further registration
upon issuance.
The
exercise price of the warrants exceeds the market price of our common
stock.
The
warrants will have an exercise price of $34.50 per share of common stock (112 %
of the Per-Share Offering Price), which exceeds the current and recent market
prices of our common stock. If the market price of our common stock does not
exceed the exercise price of the warrants during the period in which the
warrants are exercisable, the warrants may not have any value.
There
is no public market for the warrants.
There is
no established public trading market for the warrants being offered in this
offering and we do not expect a market to develop. In addition, we do not intend
to apply for listing of the warrants on any securities exchange or automated
quotation system. Without an active market, investors in this offering may be
unable to readily sell the warrants. Furthermore, the warrants are transferable
only in whole and not in part, which may limit the range of potential
purchasers.
We
have never declared or paid dividends on our capital stock and we do not
anticipate paying dividends in the foreseeable future.
The
growth of our business requires significant funding, and we currently invest
available funds and earnings in product development and expansion of our
facilities. Therefore, we do not anticipate paying any cash dividends on our
common stock in the foreseeable future. We currently plan to invest all
available funds and future earnings in the development and growth of our
business. As a result, capital appreciation, if any, of our common stock will be
your sole source of potential gain for the foreseeable future.
You
will experience immediate dilution in the book value per share of the common
stock you purchase.
You will
suffer immediate dilution in the net tangible book value of the common stock you
purchase in this offering because the price per share of our common stock being
offered hereby is substantially higher than the book value per share of our
common stock.
CAUTIONARY
NOTE ON FORWARD-LOOKING STATEMENTS
This
prospectus supplement, the accompanying prospectus and the registration
statement of which it forms a part, and the documents incorporated by reference
into these documents contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements deal with our
current plans, intentions, beliefs and expectations and statements of future
economic performance. Statements containing terms such as “believe,”
“do not believe,” “plan,” “expect,” “intend,” “estimate,” “anticipate” and other
phrases of similar meaning are considered to contain uncertainty and are
forward-looking statements. In addition, from time to time we or our
representatives have made or will make forward-looking statements orally or in
writing. Furthermore, such forward-looking statements may be included
in various filings that we make with the Commission, or press releases or oral
statements made by or with the approval of one of our authorized executive
officers. These forward-looking statements are subject to certain
known and unknown risks and uncertainties, as well as assumptions that could
cause actual results to differ materially from those reflected in these
forward-looking statements. Factors that might cause actual results
to differ include, but are not limited to, those set forth under the section of
this prospectus supplement titled “Risk Factors” and those set forth under Item
1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008 and in our subsequent filings made with the
Commission. Readers are cautioned not to place undue reliance on any
forward-looking statements contained or incorporated by reference herein, which
reflect management’s opinions only as of the date such statements were
made. Except as required by law, we undertake no obligation to revise
or publicly release the results of any revisions to any forward-looking
statements. You are advised, however, to consult any additional
disclosures we have made or will make in our reports to the Commission on Forms
10-K, 10-Q and 8-K. All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements contained in this
prospectus supplement.
USE
OF PROCEEDS
We
estimate that the net proceeds from this offering, after deducting the placement
agent fee and offering expenses payable by us of approximately $5,100,000
million, will be approximately $94,899,709 (without taking into account any cash
payment for shares issuable upon exercise of the warrants issued in the
offering.).
We intend
to use the net proceeds from this offering for working capital
requirements. Pending these uses, we intend to invest our net
proceeds from this offering primarily in cash, or cash
equivalents. As of the date of this prospectus supplement, we cannot
specify with certainty all of the particular uses for the net proceeds we will
have upon completion of the offering. Accordingly, we will retain
broad discretion over the use of these proceeds.
PRICE
RANGE OF OUR COMMON STOCK
Our
common stock is listed on the Nasdaq Global Market under the symbol
“RINO”. The following table sets forth, for the periods indicated,
the range of high and low closing sales prices for our common stock as reported
by Bloomberg L.P.
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Fiscal
year ended December 31, 2007:
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Third
quarter
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56.00
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2.30
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Fourth
quarter
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12.25
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2.35
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Fiscal
year ended December 31, 2008:
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First
quarter
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$
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12.25
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$
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7.10
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Second
quarter
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11.50
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7.75
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Third
quarter
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11.50
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8.00
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Fourth
quarter
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8.25
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2.00
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Fiscal
year ended December 31, 2009:
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First
quarter
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$
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3.50
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$
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2.00
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Second
quarter
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9.89
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2.50
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Third
quarter
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21.14
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8.60
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Fourth
quarter (through November 30, 2009)
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34.25
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12.35
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As of
December 2, 2009, there were approximately 105 registered holders of record of
our common stock. A substantially greater number of holders of our
common stock are in “street name” or beneficial holders, whose shares are held
of record by banks, brokers and other financial institutions.
The last
reported sale price of our common stock on the Nasdaq Global Market on December
2, 2009, 2009 was $30.51 per share.
DIVIDEND
POLICY
We have
never paid any dividends. We do not intend to pay cash dividends on
our common stock for the foreseeable future.
DESCRIPTION
OF SECURITIES WE ARE OFFERING
We are offering to certain
institutional investors, pursuant to this prospectus supplement and the
accompanying prospectus, up to an aggregate of 3,252,032 shares of our common
stock, together with the warrants to purchase up to an aggregate of 2,276,422
shares
of our
common stock
. The purchase
price for each share of common stock and the related warrant is $30.75. Each
warrant has an exercise price of $34.50 per share (112%
of the per share price of the common
stock offered in this offering). The common stock and the warrants will be
issued separately but will be purchased together in the offering. This
prospectus supplement also relates to the offering of shares of common stock
upon the exercise, if any, of the warrants issued in this offering.
Common
Stock
The
material terms and provisions of our common stock are described in the sections
entitled "Description of Capital Stock" and "Common Stock" in the accompanying
prospectus. The shares of common stock issued in this offering will be, when
issued and paid for in accordance with the securities purchase agreement, duly
and validly authorized, issued and fully paid and non-assessable
Warrants
The
material terms and provisions of the warrants being offered pursuant to this
prospectus supplement and the accompanying prospectus are summarized below. This
summary is subject to, and qualified in its entirety by, the form of warrants,
which will be provided to the investors in this offering and was filed as an
exhibit to Current Report on Form 8-K filed with the Commission on December
2, 2009.
Series A
Warrants
The
Series A Warrants to be issued in this offering represent the right to purchase
up to an aggregate of 1,138,211 shares of common stock. The Series A Warrants
are exercisable beginning on the closing date and expire on the six month
anniversary of the closing date. Each Series A Warrant has an
exercise price of $34.50 per share (112% of the Per-Share Offering
Price).
Series B
Warrants
The
Series B Warrants to be issued in this offering represent the right to purchase
up to an aggregate of 1,138,211 shares of common stock. The Series B Warrants
are exercisable beginning on the six month one day anniversary of the closing
date and expire on the one year one day anniversary of the closing
date. Each Series B Warrant has an exercise price of $34.50 per share
(112% of the Per-Share Offering Price).
General
Exercisability
. A holder of
warrants does not have the right to exercise any portion of the warrant if such
holder would beneficially own in excess of 4.99% of the shares of our common
stock outstanding immediately after giving effect to such exercise. This
percentage may, however, be raised or lowered to an amount not to exceed 9.99%
at the option of the holder upon at least 61 days’ prior notice from the holder
to us.
Transferability
. The warrants
may be transferred at the option of the holder upon surrender of the warrants
with the appropriate instruments of transfer.
Purchase Rights
. If we
consummate any fundamental transaction, as described in the warrants, which
generally includes any consolidation or merger into another corporation, the
consummation of a transaction whereby another entity acquires more than 50% of
our outstanding common stock, the sale of all or substantially all of our
assets, or another transaction in which our common stock is converted into or
exchanged for other securities or other consideration, the holder of warrants
will thereafter receive upon exercise of the warrants the securities or other
consideration to which a holder of the number of shares of common stock then
deliverable upon the exercise or conversion of such warrants would have been
entitled upon such consolidation, merger or other transaction, and any
additional consideration receivable as a result of such fundamental transaction
by a holder of the number of shares of common stock for which the warrant is
exercisable immediately prior to such fundamental transactions.
Exchange Listing
. We do not
plan on making an application to list the warrants on the NASDAQ Global Market,
any national securities exchange or other nationally recognized trading system.
Our common stock underlying the warrants is listed on the NASDAQ Global Market.
Rights as Stockholder
. Except
as otherwise provided in the warrants (such as the rights described above of a
warrant holder upon our sale or grant of any rights to purchase stock, warrants
or securities or other property to our stockholders on a pro rata basis) or by
virtue of such holder’s ownership of shares of our common stock, the holders of
the warrants do not have the rights or privileges of holders of our common
stock, including any voting rights, dividends or other rights as our
stockholder, until they exercise their warrants.
Fractional
Shares. No fractional shares of common stock will be issued upon the exercise of
the warrants. Rather, the number of shares of common stock to be issued will be
rounded down to the nearest whole number.
PLAN
OF DISTRIBUTION
We are
offering our securities through a placement agent. Subject to the terms and
conditions contained in the placement agency agreement, dated December 2, 2009,
Rodman & Renshaw, LLC has agreed to act as the placement agents for the sale
of up to 3,252,032 shares of our common stock and warrants to purchase up to
2,276,422 shares of our common stock. The placement agents are not purchasing or
selling any shares or warrants by this prospectus supplement or the accompanying
prospectus, nor are they required to arrange for the purchase or sale of any
specific number or dollar amount of our common stock or warrants, but have
agreed to use its best efforts to arrange for the sale of all securities being
offered in this offering.
Confirmations
and definitive prospectuses will be distributed to all investors who agree to
purchase the securities in this offering, informing investors of the closing
date as to such units. We currently anticipate that closing of the sale of the
securities we are offering will take place on or about December 7, 2009.
Investors will also be informed of the date and manner in which they must
transmit the purchase price for their securities purchased.
On the
scheduled closing date, the following will occur:
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we
will receive funds in the amount of the aggregate purchase price for the
securities we sell;
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we
will deliver to each of the investors, through the Deposit Withdrawal
Agent Commission system, the shares of common stock being purchased;
and
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Rodman
& Renshaw, LLC will receive the placement agent’s fee in accordance
with the terms of the placement agency
agreement.
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Pursuant
to the placement agency agreement, we have agreed to pay the placement agent an
aggregate fee equal to 4.5% of the aggregate gross proceeds raised in connection
with the offering. Additionally, a cash fee payable within 48 hours of (but only
in the event of) the receipt by us of any proceeds from the exercise of the
warrants or options sold in the offering that are solicited by the Placement
Agent and otherwise in compliance with Financial Industry Regulatory Authority,
or FINRA, Rule 5110 equal to 3% of the aggregate cash exercise price received by
us upon such exercise, if any (the “Warrant Solicitation Fee”), provided,
however, the Warrant Solicitation Fee shall be reduced to the extent (and only
to the extent) that the placement agent’s aggregate compensation for the
placement, as determined under FINRA Rule 5110, would otherwise exceed
8%. The placement agent is required to bear its own out of pocket
expenses, including without limitation legal fees. The following table shows the
per share and total fees we will pay to the placement agents in connection with
the sale of our securities offered pursuant to this prospectus supplement and
the accompanying prospectus, assuming the purchase of all of the securities
offered hereby and excluding proceeds that we may receive upon exercise of the
warrants.
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Per share placement agent
fee
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$
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1.38
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Total placement agent
fees
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$
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$4,487,804
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We have
agreed to indemnify the placement agents against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, and liabilities
arising from breaches of representations and warranties contained in the
placement agency agreement. We have also agreed to contribute to payments the
placement agent may be required to make in respect of such
liabilities.
The
placement agency agreement is included as an exhibit to our Current Report on
Form 8-K that we filed with the Commission on December 2, 2009.
Transfer
agent and registrar
The
transfer agent and registrar for our common stock is Securities Transfer
Corporation, 2591 Dallas Parkway, Suite 102, Frisco, Texas 75034.
Our
common stock is traded on the Nasdaq Global Market under the symbol
“RINO.”
LEGAL
MATTERS
The
validity of the issuance of the common stock offered hereby will be passed upon
for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California and Holland & Hart LLP, Reno,
Nevada. Weinstein & Smith LLP will pass upon certain matters
relating to this offering for Rodman & Renshaw, LLC.
EXPERTS
Jimmy
C.H. Cheung & Co, CPAs and Moore Stephens Wurth Frazer and Torbet, LLP,
independent registered public accounting firms, have audited our consolidated
financial statements for the years ended December 31, 2007 and 2008,
respectively, which are incorporated by reference in reliance on their reports,
given on their authority as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus is part of a registration statement we filed with the Securities and
Exchange Commission. You should rely only on the information contained in this
prospectus or incorporated by reference. We have not authorized anyone else to
provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus is accurate as of any date other than
the date on the front page of this prospectus, regardless of the time of
delivery of this prospectus or any sale of common stock.
Federal
securities laws require us to file information with the Commission concerning
our business and operations. Accordingly, we file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy any document we file at the SEC’s public reference rooms, including those
located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on public reference rooms. Our SEC
filings are also available to the public from the SEC’s web site at
http://www.sec.gov.
DOCUMENTS
INCORPORATED BY REFERENCE
The
Commission allows us to incorporate by reference into this prospectus certain
information we file with them, which means that we can disclose important
information by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus, and
information that we file later with the Commission will automatically update and
supersede information contained in this prospectus and any accompanying
prospectus supplement. The documents incorporated by reference into
this prospectus contain information that you should read about us. We
incorporate by reference the documents listed below that we have previously
filed with the Commission:
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our
Annual Report on Form 10-K for the fiscal year ended December 31,
2008, filed on March 31, 2009;
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our
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009, June
30, 2009 and September 30, 2009, filed on May 15, 2009, August 10, 2009
and November 13, 2009,
respectively;
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our
Current Reports on Form 8-K filed on August 19, 2008, January 27, 2009,
February 18, 2009, February 20, 2009, April 8, 2009, May 22, 2009, July 1,
2009, July 13, 2009, July 20, 2009, August 10, 2009, November 16, 2009 and
December 2, 2009*; and
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the
description of our common stock contained in our Registration Statement on
Form 8-A as filed with the Commission on July 7, 2009 pursuant to Section
12(b) of the Exchange Act.
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We also
incorporate by reference into this prospectus additional documents that we may
file with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act, excluding, in each case, information deemed furnished and not
filed until we sell all of the securities we are offering or the termination of
the offering.
This
prospectus supplement may contain information that updates, modifies or is
contrary to information in one or more of the documents incorporated by
reference in this prospectus supplement. Reports we file with the SEC after the
date of this prospectus supplement may also contain information that updates,
modifies or is contrary to information in this prospectus supplement or in
documents incorporated by reference in this prospectus supplement. Investors
should review these reports as they may disclose a change in our business,
prospectus, financial condition or other affairs after the date of this
prospectus supplement.
You may
request a copy of these filings, at no cost to you, by telephoning us at
+86-411-8766-2700 or by writing us at the following address:
Chief
Financial Officer
RINO
International Corporation
No. 11,
Youquan Rd.
Zhanqian
Street, Jinzhou District
Dalian
City, 116100, People’s Republic of China
*
Pursuant to General Instruction B(2) of Form 8-K, information or reports
“furnished” on Form 8-K are not deemed to be “filed” for the purpose of Section
18 of the Exchange Act and are not subject to the liabilities of that section.
Unless otherwise specifically noted in the Form 8-K, we are not incorporating
and will not incorporate by reference future information or reports “furnished”
on Form 8-K into this prospectus.
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