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  "documentTitle": "RINO International Corp. (RINO)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson C. Block",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2010-11-10 00:00:00",
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  "notes": "This is a text-heavy research note page detailing financial irregularities and potential fraud.",
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      "kind": "callout",
      "text": "Even Worse, Innomind Appears to Have Provided VIE $35 - $40 million of Shareholders' Money. Because We are Skeptical of Much of the “Paper” in RINO’s Balance Sheet, These Funds Could Have Been Misappropriated.",
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      "text": "Even Worse, Innomind Appears to Have Provided VIE $35 - $40 million of Shareholders’ Money. Because We are Skeptical of Much of the “Paper” in RINO’s Balance Sheet, These Funds Could Have Been Misappropriated.",
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      "text": "There are two reasons why VIE has never made these payments. The first is that the money simply is not there. As this report shows, RINO has significantly inflated its revenue and profits. The second reason is that to the extent VIE is profitable, Mr. Zou and Ms. Qiu want to keep the profits in the company of which they own 100%, rather than sharing with the shareholders.",
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      "text": "The money that went into Innomind came directly from RINO’s equity raises. Innomind was originally incorporated with $20 million in paid-in-capital, which RINO paid in following its $21.3 million (net) raise in October 2007. Almost all of the money paid in had become receivables by December 31, 2008. In late 2009, Innomind applied to increase its capital to $80 million; and, has contributed a total of $40 million to date. (The additional $20 million would have had to come from the December 2009 equity raise. By law, VIE would not have been able to contribute equity capital to Innomind.) Note below that Innomind ended the year with $40.7 million in receivables. The December 2009 raise funded the increase in Innomind’s receivables.",
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      "text": "The SAIC balance sheets we obtained through a reputable credit bureau show VIE’s Other Accounts Payable approximate Innomind’s Accounts Receivable plus Other Accounts Receivable. As of December 31, 2009, the approximate amount of these totals is $40 million. Given the $36.5 million difference between US GAAP cumulative pretax income and VIE’s payable to Rino International, it is clear that roughly $35 million to $40 million has improperly flowed from Innomind to VIE.",
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      "text": "The $36.5 million difference between the payable and the cumulative pretax income (discussed in the prior section) is likely due to VIE borrowing money from Innomind.",
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      "text": "Because RINO does not own VIE, it has agreements with VIE designed to transfer money and value to RINO. Beyond not honoring those agreements, the management is causing money to flow the wrong way – into VIE. Innomind is lending money to VIE, which is highly improper and alarming because it would mean that VIE is actually taking money directly from RINO’s shareholders. Approximately $40 million in raised funds have been paid into Innomind, yet according to SAIC financials, Innomind is nearly devoid of cash or any tangible assets. Clearly, were VIE sitting on $120.0 million it owes Innomind, it would not need to pull $35 - $40 million more out of Innomind.",
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      "kind": "source-note",
      "text": "18 RINO International Corp. December 31, 2009 Form 10-K (filed March 31, 2010), p. 29.\n19 All balance sheet numbers converted at RMB 6.83:$1.\n20 RINO International Corp. December 31, 2009 Form 10-K (filed March 31, 2010), p. 29.",
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