China Green Material (PINK:CAGM)

During 2011 we have employed, or intend to employ, our cash resources for marketing and brand building, for completion of our new production facility, for increasing production at the new facility, and for general and corporate purposes. As part of our marketing strategy, during 2011 we intend to begin an advertising campaign in selected mass media in the area of Northeast China and in Shandong province of China, including magazines, newspapers, television and radio. We expect that total expenditures for this media campaign may total approximately RMB20 million (US$3.0 million) during 2011. During the first quarter of 2011 we made additional expenditures of approximately US$1.5 million to acquire the remaining necessary high voltage power transformers and substation equipment needed to bring our new production facility on line. During 2011 we have made investments in labor, raw materials and supplies to support the production at this new facility; in addition, we anticipate additional investments in labor, raw materials and supplies to support higher levels of production at the new facility as we continue to expand our sales in China and internationally. We may recover substantially all of the investments necessary for production at the new facility during 2011 in the normal cycle of business through collection of receivables generated by the sale of the finished products from the new facility. In addition, in the event that our patent application is granted, we will be required to pay approximately US$1.5 million to the sellers of the underlying technology; and in the event we decide to purchase the technology underlying the other patent subject to the supplemental agreement described elsewhere in this annual report under Item 1. “Business – Our Technology.” We believe our current resources are sufficient to fund ongoing operations as well as our currently projected cash need for the foreseeable future.

We believe that our present capacity will adequately serve the demand we currently project for our products during 2011 and beyond. However, in the event we determine to expand our product lines to include grocery and shopping bags, as discussed elsewhere in this annual report, or other products, we anticipate that additional production capacity would be required. In that case, we would need to purchase or construct additional facilities, and we anticipate that we would likely need additional financial resources for such purpose.