American Nano Silicon (OTC BB:ANNO)

To date, the Company has not commenced full-scale manufacture at its new facilities. The primary reason is a lack of working capital to purchase raw materials for its products. In the past, the Company received seller financing for its raw material purchases from its single largest supplier and customer, Chongqing Trading Company which supplied the Company with 99% and 98% of its raw materials and also accounted for 44% and 35% of revenues in the past two fiscal years. However, in an effort to minimize this concentration risk, the Company is actively negotiating with other raw materials suppliers to secure beneficial terms and long-term cooperation agreements to facilitate production at its new site. As a result of our negative cash flow and our inability to commence full-scale manufacture as of the date of this report, our auditors have issued a going concern opinion to us. If the Company is not able to reach favorable trade terms, it will seek additional capital resources, such as bank loans, an equity raise, or rely on our management to further loan capital to the Company, in order to fund these work capital needs.

Going forward, if we are able to raise additional capital, we expect to add more sales force to market our products beyond our regional base of customers.

The Company’s capital resources and cash flow are adequate to sustain operations as currently constituted. However, the Company expects to incur substantial additional costs, including costs related to ongoing research and development activities. The Company's future cash requirements will depend on many factors, including continued scientific progress in our research and development programs, the time and costs involved in obtaining regulatory approvals, the costs involved in filing, prosecuting and enforcing patents, competing technological and market development and the cost of product commercialization. We will require external financing to sustain our operations, perhaps for a significant period of time. We intend to seek additional funding through grants and through public or private financing transactions. At the present time, however, we have no commitment for financing from any source