HAR §16-39-302. Prospectus

(a) The prospectus of any security that is subject to registration under section 485A-303, HRS, or this chapter may be printed, mimeographed, lithographed, or typewritten, or prepared by any similar process in clearly legible copies. (b) Every subscription agreement concerning the registration of a security by qualification shall contain a statement by the purchaser that the purchaser has received a copy of the security's prospectus. (c) Interstate offerings shall contain the information required by the application form together with the following: (1) How the public offering price was established; (2) Whether there has been a public market for the securities; (3) The terms and conditions of the escrow agreement; and (4) Business history of the officers and directors. (d) Intrastate offerings shall contain the same information as interstate offerings, plus the following: (1) That the offering is only to bona fide residents of this State; (2) That during the public offering, no securities may be transferred to a nonresident of this State; (3) That in case of a sale to a nonresident, the issuer may rescind the sale and refund the purchase price; and (4) In an offering of interest-bearing securities, what reserves or sinking fund shall be provided to pay for the securities as they become due, or whether no reserves shall be provided. §16-39-302 39-22 (e) The prospectus shall be prepared in substantially the following form and shall contain the information required under chapter 485A, HRS, this chapter, and any additional information required by the commissioner. (The following specimen form has been prepared for use in connection with a speculative intrastate offering and may therefore be modified to the extent the provisions are inapplicable.) (1) Cover page: "PROSPECTUS (Date) (NAME OF ISSUER) (Address) Incorporated under the laws of the State of Hawaii (Date) ________ Shares of Common Stock of the Par Value of $_________ Per Share. Offering Sales Net Proceeds Price Commissions To Issuer* Per Share $_______ $_________ $__________ Aggregate $_______ $_________ $__________ *Before deducting expenses estimated not to exceed $ _________ to be borne by the issuer. THE SECURITY(IES) DESCRIBED IN THIS PROSPECTUS ARE SPECULATIVE. NEITHER THIS PROSPECTUS NOR THE SECURITIES DESCRIBED HEREIN HAVE BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF SECURITIES OF THE STATE OF HAWAII, NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS §16-39-302 39-23 PROSPECTUS. THIS OFFERING IS MADE ONLY TO BONA FIDE RESIDENTS OF THE STATE OF HAWAII. To be sold by _________________"; (2) Business. (A) State the history, showing capitalization, mergers, change of names, etc., general character and location of issuer's business, properties, branch offices, stores, plants, outlets, etc., and similar information concerning its predecessors, affiliates, and subsidiaries. There should also be a statement as to the length of time the issuer has been in business; (B) Describe the physical properties, equipment, claims, patents, or patent applications, etc., and nature of title or interest therein; (C) If the issuer leases its plant, office, or other physical properties, disclose briefly the terms of the lease and relationship of the lessor to any officer, director, promoter, or stockholder of the issuer; (D) State the nature of present or proposed products or services, the principal market therefor; (E) Set forth the general competitive conditions in the industry or business in which the issuer is, or proposes to be, engaged, and any particular risks or hazards to which it might be subjected; and (F) Describe the issuer's employee relations by setting forth the number of employees and whether any of them are covered by collective bargaining §16-39-302 39-24 agreements and, if so, approximately how many are so covered, when the agreements expire, and whether collective bargaining is on a company or industry wide basis. Also describe whether the issuer has experienced any work stoppages in recent years; (3) Use of proceeds. Outline the estimated monetary proceeds to be received by the issuer from the offering; the purposes for which the proceeds are to be used by the issuer; the estimated amount to be used for each purpose; the order or priority in which the proceeds will be used for the purposes stated; the amount of funds to be raised from other sources to achieve the purposes stated; the sources of those funds; and, if a part of the proceeds is to be used to acquire property (including goodwill) other than in the ordinary course of business, the names and addresses of the vendors, the purchase price, the names of any persons who have received commissions in connection with the acquisition, and the amounts of the commissions and other expenses in connection with the acquisition; (4) Method of offering. If the securities are to be offered through a broker-dealer, state the name and address of the broker-dealer, with a statement of any material relationship between the issuer and the broker-dealer. State whether the securities are to be offered for cash only or whether the securities may be paid for in installments and, if so, the specific terms and conditions. If a minimum purchase is required, it should also be disclosed. State briefly the commission to be paid to the broker-dealer, including cash, securities, contracts, options, or any other consideration. If the securities are to be sold by the issuer, it should also be stated §16-39-302 39-25 that the offering shall be done by securities agents duly registered with the commissioner. If the proceeds of the offering are to be placed in escrow, state the terms and conditions of the escrow; and state the other terms prescribed by the commissioner for the certification by the escrow agent to the commissioner when the amount specified in the escrow agreement has been met in the specified time and the conditions whereby the funds shall be released to the subscribers by the escrow agent. State also that during the public offering, no securities may be transferred to a nonresident and that in case of a sale to a nonresident, the issuer shall rescind the sale and refund the purchase price; (5) Speculative features of the offering. Explain generally the speculative features of the offering and any special conditions that may affect the success or failure of the enterprise or the investor's interest therein. State how the public offering price was established and whether there has been a public market for the shares. In a speculative offering, the front cover shall contain a clear and conspicuous statement that the securities are speculative. If the officers, directors, or promoters are receiving or have received salaries, fees, or other compensation from the issuer, indicate the amounts, how paid, and services rendered; (6) Description of securities. Outline briefly as follows: (A) In the case of shares, the par or stated value, if any; the rate of dividend, if fixed, whether cumulative or noncumulative and any restrictions on dividend payments; the preference, if any; and if convertible, the §16-39-302 39-26 conversion rate; the restrictions, if any, on the transfer of the securities; (B) In the case of debt securities, the rate of interest; the date of maturity or, if the issue matures serially, a brief indication of the serial maturities; if the issue is redeemable before maturity, a brief statement of the redemption date or dates and price or prices; if payment of principal or interest is contingent, an indication of the contingency; a brief indication of the priority of the issue; and if convertible, the conversion rate; and (C) In the case of any other kind of security, appropriate information of a comparable character; (7) Management and control. With respect to each director and officer of the issuer, and other person having a similar status or performing similar functions, the person's name, address, and principal occupation for the previous five years; the amount of securities of the issuer held by the person as of the thirtieth day before the filing of the registration statement; the amount of the securities covered by the registration statement to which the person has indicated an intention to subscribe; and a description of any material interest of the person in any material transaction with the issuer or a significant subsidiary effected within the previous three years or proposed to be effected. With respect to a promoter, if the issuer was organized within the previous three years, the information or records specified above, any amount paid to the promoter within that period or intended to be paid to the promoter, and the consideration for the payment; (8) Interests of management. Provide a description of all direct or indirect §16-39-302 39-27 interests, by security holdings or otherwise, of each officer and director of the issuer and, if the issuer was organized within the last three years, of each promoter of the issuer: (A) In the issuer or its affiliates; and (B) In any material transactions within the past two years or in any material proposed transactions to which the issuer or any of its predecessors or affiliates was or is to be a party, stating the cost to those persons of any property or services for which payment by or for the account of the issuer has been or is to be made; (9) Ownership. With respect to a person owning of record or owning beneficially, if known, ten per cent or more of the outstanding shares or any class or equity security of the issuer, the information specified in paragraph (7) other than the person's occupation; (10) Options and warrants. A description of any stock options or other security options outstanding, or to be created in connection with the offering, including the names of the holders thereof, the cost thereof to the holders, the terms and conditions on which they may be exercised, and the price at which the securities may be acquired pursuant thereto; (11) Litigation. A description of any pending litigation, action, or proceeding to which the issuer or any of its subsidiaries is a party or of which any of their property is the subject and that materially affects its business or assets, and any litigation, action, or proceeding known to be contemplated by governmental authorities; (12) Legal opinion. State the name and address of the attorney who has advised the issuer with respect to the legality of the offered §16-39-302 39-28 securities, with an English translation if it is in a language other than English, which states whether the security when sold will be validly issued, fully paid, and nonassessable and, if a debt security, a binding obligation of the issuer; (13) Escrow provisions. If the officers, directors, promoters, or insiders have stock which is subject to escrow pursuant to section 485A-304(f), HRS, or subject to escrow pursuant to any state or federal statute or regulation, make a complete disclosure of the number of shares escrowed, names of persons escrowing the stock, where escrowed, and the terms and conditions of the escrow; and (14) Financial statements. Provide a balance sheet of the issuer at the close of the issuer's last fiscal year preceding the date of filing of the prospectus, and a profit and loss statement and analysis of surplus for the fiscal year ended at the date of the balance sheet, all certified by an independent public accountant; together with a balance sheet of the issuer as of a date within ninety days prior to the date of filing of the prospectus and a statement of profit and loss for the period from the close of the last preceding fiscal year to the date of the balance sheet, both verified by a duly authorized officer, or the equivalent, of the issuer or, if the issuer has been in existence for less than one year, a balance sheet of the issuer as of a date within ninety days prior to the date of filing and a statement of profit and loss for the period from the date of the issuer's organization to the date of the balance sheet, both certified by an independent public accountant. If consolidated financial statements are used, there should also be a financial §16-39-311 39-29 statement of the issuer alone. If the issuer has not yet commenced business, there should be submitted in lieu of the statement of profit and loss a statement of receipts and disbursements certified to by an independent public accountant. [Eff 6/30/08; comp 11/18/23] (Auth: HRS §485A- 606) (Imp: HRS §§485A-303, 485A-304) B. Statements of Policy Relating to Registration of Securities §16-39-310 Registration of securities by qualification. The commissioner may deny an application for registration of a security as being fraudulent or working or tending to work a fraud upon the purchaser, or may find that the enterprise or business of the issuer is based on unsound business principles, unless the requirements of chapter 485A, HRS, and this chapter are met or good cause is shown for an exception. [Eff 6/30/08; comp 11/18/23] (Auth: HRS §§485A-303, 485A-606) (Imp: HRS §§485A- 303, 485A-606)