China Armco Metals (NYSE AMEX:CNAM)

As of December 30, 2010, we had invested a total of approximately $33.9 million for the acquisition of land use rights, construction and equipment purchases for the Facility.  We expect to expand the production capacity at the Facility in the future and expect to build or acquire additional facilities in the future, depending on market conditions.  We have not set a timeframe for this expansion. 
 
We have not yet determined how we plan to finance this future expansion if we determine to proceed with it.  Unless we can obtain additional financing on terms we deem favorable to us, we will be unable to complete any such expansion or construct additional facilities in the future, and there can be no assurance that we will be successful in obtaining any such additional financing, or that such financing would be on terms deemed to be desirable to our management.  Moreover, in the event we do obtain such financing, there can be no assurance that such investment will result in enhanced operating performance or produce significant revenues and related profits in the future.

In addition, we will continue to need to fund future capital expenditures for our existing operations, service our debt and purchase the raw materials required in our recycling operations.  We have historically financed our cash needs primarily through the sales of our common stock and warrants, internally generated funds and debt financing.  We collect cash from our customers based on our sales to them and their respective payment terms.