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1 Haidian Avenue Beijing 100080 China SALE OF SHARES IN A CHINESE MANUFACTURER October 15, 2003 [Prospective Investor] Dear [Prospective Investor], Thank you for your interest in Green Leaf Appliances Inc. (the "Company"). The Company is located in Beijing, China at ### ##### ############# #####, ########### District with postal code 100###. We are seeking to raise exactly $1,000,000 through this offering in the Company (the "Offering"). The Offering consists of shares, each Unit (the "Unit") of which is priced at $100,000 (one hundred thousand United States dollars). Each Unit consists of 3.5% of the Company. In its entirety, this Offering constitutes 35% of the equity interest in the Company and will remain undilutable for a period of 7 years without the written consent of a majority of the Common Stock Shares. The Company reserves the right to reject, in whole or in part, any subscription. Before accepting subscriptions for the Units in this Offering, the Company may request information with respect to the investment experience and sophistication of the purchaser/investor. If the Company has not received subscriptions for $1,000,000, by the time of the closing of the Offering, January 31, 2004, the Company may extend the offering period for one additional month. Proceeds of the Offering will be held in escrow in a separate bank account until the minimum amount has been invested. The separate escrow account will only be accessible at closing with BOTH of the signatures of both ATTORNEY and David Ma. If the Company is unable to raise all $1,000,000, before the time of the closing, all funds paid to the Company in this Offering will be returned. Notification of the condition of the investment and all reports and matters of the Factory available in English will be made available to the partners via the Internet at: https://cha4mot.com/greenleaf in a timely and complete manner until further notice.Information regarding this investment is attached and includes its a) use of proceeds, b) tax considerations, c) description of stock, d) price, dilution and control, e) risk factors, f) investment procedure, g) general information, h) buy back provisions, i) intellectual property, j) summary of financial projections, k) discussion of financial projections, l) abbreviated resumes of principals, m) marketing considerations (redacted), n) product description (redacted), o) joint venture investment agreement, p) subscription agreement, and q) financial projections (click on the blue underlined items to view their contents).The financial projections of the Company, in the form of Excel® spreadsheets, are part, perhaps the most crucial part, of the representations of this Offering. Although they are forward looking, the financials and the other information represent the "best information" and "best efforts" at portraying the Company's investment prospects. Please review all of this information before making a decision to purchase. Only those persons who can afford a loss of their entire investment should consider a purchase of these Units. See "Risk Factors" below. The Company will make available to each purchaser at a reasonable time before his or her subscription in the Offering the opportunity to ask questions of and receive answers from the Company's officers and directors concerning the business of the Company and the terms and conditions of the Offering. USE OF PROCEEDS The Company intends to use $940,000 of the proceeds from this Offering for working capital (salaries for workers, outlays for materials, and expenses such as rent and utilities) and for the purchase of capital equipment and the start up of production. Further, exactly $60,000 of the proceeds are already committed as an organization and management fee to Mr. David Ma, Mr. James Cook, and Mr. ####### ###, which proceeds are to be used by the Company until cash flow is positive for two consecutive months at which time these fees will be remitted to Messrs. Ma, Cook and ###. The proceeds from this Offering are expected to enable the Company to reach a positive cash flow this calendar year without recourse to additional funds. TAX CONSIDERATIONS The Company will be a registered Chinese Company. As a result, the Company is not subject to U. S. Federal Income Tax, except on its U. S. income and/or operations (none are anticipated). In the event of loss on the sale of any of these shares and/or the discontinuance of operations, there may be U. S. Federal Income Tax relief for U. S. investors, however, you should rely on the advice of your own accountant and/or attorney for advice before purchasing shares and in such an eventuality. DESCRIPTION OF STOCK The total number of the Company's authorized shares will be fixed at the conclusion of this Offering (at 100/35 times the shares of this Offering). The authorized shares will not be permitted to expand without the written consent of a majority of the Common Stock Shares. Shares can be transferred as permitted by applicable law and subject to the constraints and considerations of the Shareholder's Agreement. There is not and there will not be any other forms of equity interest, actual or hypothecated, unless authorized by a written consent of a majority of the Common Stock Shares. Holders of outstanding Common Stock are entitled to one vote per share on all matters to be voted upon by the shareholders, including the election of directors, to receive dividends when and as declared by the Board of Directors of the Company out of funds legally available therefore, and to share ratably in the Company's assets legally available for distribution to shareholders in the event of liquidation, dissolution, or winding-up, after payment of any preferences to other classes of stock hereafter established which have a priority to such distributions. Holders of outstanding Common Stock have no preemptive, subscription, conversion, or other rights to acquire unissued shares of the Company's Common Stock. The Company is restrained from creating any class of preferred stock or any other class of capital stock or to issue additional shares of any capital stock for any reason whatsoever, without the consent of a majority of the existing Common Stock Shares. Subscribers participating in this Offering will be subject to the stock transfer restrictions and a right of first refusal provision that will apply to the sale of the Common Stock according to the provisions of the Shareholder's Agreement contained herewith. PRICE, DILUTION AND CONTROL The price of the Common Stock in this Offering does not and will not necessarily bear any relationship to the Company's asset value, net worth, or other established criteria of value and should not be considered an indication of the Company's actual value. In fact, the price of these Shares far exceeds their value according to established accounting measures, especially since the Company currently has a negative Net Worth and no operating history. When all 10 Units are purchased, the Company will have 10,000 authorized and issued Common Stock Shares in the following amounts:
Dilution of ownership is restricted by the Joint Venture Investment Agreement (Paragraph #5, therein) and requires a majority consent of the Common Stock Shares to overrule. Additional shares, to attract key people, for example, will require either the majority vote just mentioned and/or the exchange of some existing shares or treasury shares for that purpose. RISK FACTORS This investment in the Company is extremely risky and highly speculative. The following factors, among others, should be considered carefully before investing in the Company. Marketing Risk: The failure of the Company to secure the level of sales contemplated in the projections and which it feels confident today could materially jeopardize the return of the investment. Production Risks: The "flagship product" is comprised of several hundred parts (a screw is considered one part, a washer, nut, and bolt are three), the interruption of any one of which may delay deliveries to such an extent as to bring serious consequential results. The Company is working on multiple sources for its parts and a "buffer inventory" for others. Financial Risks: Although the Company has already received assurances of prompt payment, there is no absolute guarantee that the full price of shipped products will be paid promptly. The Company has made prudent allowances for late payment and even for a small percentage of uncollectables, nonetheless, even these figures may not be achieved. Technological Risks: Although the Company has extensively tested its "flagship product," there is no absolute guarantee that it will not encounter significant unforeseen economic costs in areas not thoroughly tested such as packaging, shipping, handling, installation, and/or warranty. Diplomatic Risks: China seems diplomatically bound to the West, but it is not yet a full-fledged member of the World Trade Organization. Some critical parts needed for production must be imported from Germany. Further, recent events suggest that the relations between China and the West could change rapidly. However, no sales outside China are necessary for the success of the Company. Key Management Personnel: The loss of Mr. #####, through a tragic accident or otherwise, would have devastating effect on the Company's operations. The loss of others, with adequate notice, should not be material to the Company's success due to the alternatives readily available. The theft of proprietary information and/or actual product or parts is a continuing threat that the Company takes seriously and exercises diligence. Lack of Liquidity: There will be no public market for the Company's Common Stock Shares following this offering. The Company cannot assure investors that a public market will develop at any time in the future. However, every year (around the month of December) the Company will make every reasonable effort to offer (acceptance at the sole discretion of the Shareholder) to buy 10% of any and all Shareholders' equity for 50%, pro rata, of the past year's earnings (provided sales of the preceding year exceed 100,000,000 RMB or, at today's exchange rate, about $8,275,000 and earnings exceed some practical minimum, such as 10,000,000 RMB, to be determined by the Board of Directors). Purchasers of the Shares of this Offering may have difficulty selling and/or transferring their resulting Common Stock Shares in the future, and there can be no assurance that any of the Shares can be resold at or near the Offering Price. All certificates evidencing the Common Stock Shares issued in this Offering will bear a legend restricting transfer except upon satisfaction of certain conditions. As such, any purchase of Shares herein offered should be considered a long-term investment. If you have any questions concerning your rights to transfer or resell shares offered herein, you should consult your legal counsel. Determination of Price: The price of the Common Stock Shares offered in this Offering is completely arbitrary. The price of any future offer by the Company to buy back shares is by a formula (10% of your shares for pro-rata 50% of the past year's earnings) that may or may not have any market price relevance, and may even be below the price offered herein. There is no plan or expectation to offer dividends in the foreseeable future. INVESTMENT PROCEDURE All of the information you have been provided about the Company should indicate to you that there are very substantial risks and real risks surrounding this Company's prospects. If, after considering this information, you decide you like to purchase Shares, you should take the following steps:
The Company reserves the right not to accept subscriptions or to accept them only in part. If you wish to obtain additional information about the Company or the offering or ask questions, please advise me at: david@cha4mot.com. I want to thank you in advance for your time and consideration. Very truly yours, GREEN LEAF APPLIANCES INC.
___________________________________ By: David Ma, Financial Advisor
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