<PAGE> 1
As Filed with the Securities and Exchange Commission on March 17, 2000
Registration No. 333-92413
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3; AMENDMENT NO. 2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Exact name of registrant as specified in charter
------------------------------------------------
MSI HOLDINGS, INC.
<TABLE>
<S> <C> <C>
State or jurisdiction of Address, including zip code, and telephone number, including area I.R.S. Employer
incorporation or organization code, of registrant's principal executive offices Identification Number
----------------------------- ------------------------------------------------- ---------------------
UTAH MSI HOLDINGS, INC. 87-0280886
1121 E. 7TH STREET
AUSTIN, TEXAS 78702
(512) 476-6925
</TABLE>
<TABLE>
<S> <C>
Name, address, including zip code, and telephone number, With a copy to:
including area code, of agent for service ---------------
----------------------------------------- GARY L. WOOLFOLK
ROBERT J. GIBBS VIAL HAMILTON, KOCH & KNOX, L.L.P.
1121 E. 7TH STREET 1717 MAIN STREET, SUITE 4400
AUSTIN, TEXAS 78702 DALLAS, TEXAS 75201
(512) 476-6925 (214) 712-4344
</TABLE>
Approximate date of commencement of proposed sale to the public
---------------------------------------------------------------
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registrations statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
Title of each class of Amount to be Proposed maximum unit Proposed maximum Amount of
securities to be registered registered offering price aggregate offering price registration fee
- ------------------------------ --------------- ----------------------- -------------------------- ------------------
<S> <C> <C> <C> <C>
Common stock
$0.10 par value(1) 3,103,720(2) $38.875(3) $19,829,515(4) $5,512.61(5)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
(1) Such securities have been registered for issuance by the registrant on a
delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, as amended.
(2) Consists of 3,054,720 shares previously covered by this filing, through
amendment number 1 and 49,000 shares added pursuant to this Amendment
No. 2.
(3) Estimated solely for the purpose of computing the amount of registration
fee in accordance with Rule 457(c) promulgated under the Securities Act.
(4) Consists of $17,924,640 previously set forth in this filing, through
amendment number 1, plus $1,904,875 calculated for purpose of this
Amendment No. 2 at $38.875 (the closing price on March 8, 2000).
(5) Wire transfers of $4,983.05 were previously submitted in connection with
this filing, through amendment number one. Remittance for the balance of
$529.56 has been sent by wire transfer.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE> 3
SUBJECT TO COMPLETION, DATED MARCH 17, 2000
PROSPECTUS
MSI HOLDINGS, INC.
1121 E. 7th Street
Austin, Texas 78702
(512) 476-6925
3,103,720 SHARES OF COMMON STOCK
The shares of common stock of MSI Holdings, Inc., covered by this
prospectus are offered by the shareholders listed under "Selling Shareholders"
on page 10. We will not receive any of the proceeds from the shares offered by
the selling shareholders.
In addition to the shares covered by this prospectus, we have
registered or are in the process of registering an additional 27,273,982 shares
of our common stock. These additional shares are being offered for sale
contemporaneously with the shares covered by this prospectus.
The information in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is declared effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy
securities in any state where the offer or sale is not permitted.
Trading symbol: MSIA Market: OTC-BB
----------------------------------
THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE
"RISK FACTORS" BEGINNING ON PAGE 2.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------------
, 2000
<PAGE> 4
Additional information, including "Risk Factors" and our financial
statements for the year ended March 31, 1999 and notes to the financial
statements, is incorporated in to this prospectus by reference to our Form
10-KSB/A filed with the SEC. You are urged to read this prospectus and the
10-KSB/A in their entirety. All references to "MSHI," "we," "us," and "our,"
mean MSI Holdings, Inc., and its subsidiaries.
RISK FACTORS
You should carefully consider the following factors in evaluating us
and our business before purchasing the shares of common stock offered by this
prospectus.
RISKS RELATED TO OUR BUSINESS
WE ARE OPERATING UNDER AN UNPROVEN BUSINESS MODEL. OUR BUSINESS MODEL
MAY CONTAIN INACCURATE ASSUMPTIONS AND PROVE TO BE LESS ATTRACTIVE THAN
CURRENTLY ANTICIPATED OR EVEN INFEASIBLE.
Our business model generates revenues by providing customers with
bandwidth and related services, which are relatively new products to the
marketplace. Our success depends on our products achieving wide acceptance in
the market at competitive prices. Our forecasts for future demand and operations
are based on the successful development of a market for our products and
services. We may be unable to attain expected demand levels, curtail expenses or
successfully achieve other benchmarks necessary for the success of our business
plan.
THERE IS LIMITED INFORMATION ON WHICH TO EVALUATE OUR OPERATIONS WHICH
WILL NECESSARILY AFFECT YOUR ABILITY TO ACCURATELY APPRAISE OUR
PERFORMANCE.
Since March 1999, we have changed the focus of our business from
providing hardware and systems integration services to providing a suite of
high-speed Internet access, data transport and networking services, co-location
services and web site hosting services. Because of our limited operating history
in providing our current product mix, there is limited operating and financial
data about our business for you to use in evaluating us or our performance.
WE HAVE INCURRED NET LOSSES SINCE OUR INCEPTION AND ANTICIPATE
CONTINUING LOSSES. AS A SHAREHOLDER, YOUR INVESTMENT MAY BE LOST IF WE
FAIL TO BECOME PROFITABLE.
To date, we have had limited revenues and have not shown a profit in
our operations. As of December 31, 1999, our accumulated deficit was
approximately $32.3 million. Approximately $19.9 million of the deficit relates
to losses from operations, while the remaining $12.4 million relates to losses
incurred due to discounts recorded on issuances and conversions of common and
preferred stock. We cannot predict when, or if, profitability might be achieved
or if we will be able to sustain it. If we are unable to obtain profitability or
sustain it, we may have to discontinue operations.
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<PAGE> 5
WE HAVE A GOING CONCERN QUALIFICATION CONTAINED IN OUR AUDITORS'
REPORTS INDICATING A POSSIBILITY THAT WE WILL BE UNABLE TO ACHIEVE
PROFITABILITY OR MAINTAIN OPERATIONS.
The auditors' reports relating to our audited balance sheets as of
March 31, 1999 and 1998 and the related consolidated statements of operations,
shareholders' equity and cash flows for the years then ended each contain an
explanatory paragraph about our ability to continue as a going concern. If we
continue to experience operating losses, we will be unable to continue
operations.
IF WE ARE UNABLE TO MANAGE COMPLICATIONS THAT ARISE DURING THE BUILD
OUT OF ADDITIONAL DATA CENTERS, WE MAY NOT SUCCEED IN OUR EXPANSION
PLANS.
We are planning to build out up to 15 new data centers across a wide
range of geographic regions. Any delay in the build out of new data centers
would significantly harm our plans to expand our business. Many of the risks
associated with significant expansion projects are beyond our control and any of
which could delay the build out of additional data centers. These risks include:
o cost estimation errors or overruns;
o permits, equipment and material delays or shortages.
WE MAY BE UNABLE TO MANAGE THE INCREASED EXPENSES OF DEVELOPING AND
OPERATING THE NEW DATA CENTERS.
New data centers, if completed, will result in substantial new
operating expenses. Moreover, our operations will be significantly harmed if we
do not institute adequate financial and managerial controls, reporting systems
and procedures with which to operate multiple facilities in geographically
dispersed locations. Failure to manage the data center's increased expenses
could result in our inability to service existing obligations.
WE HAVE HAD RECENT CHANGES IN MANAGEMENT AND OUR CURRENT MANAGEMENT MAY
BE UNABLE TO LEAD US INTO PROFITABILITY.
Several member of our management team during calendar year 1999, are no
longer with us. We have a new management team that has not had the opportunity
to work together in the past. There is no assurance the new management team will
be able to successfully lead us into profitability.
WE WILL BE UNABLE TO EFFECTIVELY COMPETE IF WE ARE UNABLE TO ATTRACT
AND RETAIN KEY PERSONNEL.
Our future success depends on our continuing ability to identify, hire,
train and retain highly qualified technical, sales, marketing and customer
service personnel. The industry in which
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<PAGE> 6
we compete has a high level of employee mobility and aggressive recruiting of
skilled personnel. We face intense competition for qualified personnel,
particularly in software development, network engineering and product
management. If we are unable to attract and retain qualified personnel, our
ability to compete will be compromised.
OUR EXPENSES MAY INCREASE UNEXPECTEDLY BECAUSE OF OUR POSSIBLE EXPOSURE
TO INFRINGEMENT CLAIMS.
Our management personnel were previously employees of and may have had
contracts with other telecommunications companies. In many cases, these
individuals conduct activities for us in areas similar to those in which they
were involved before joining us. As a result, we or our employees could be
subject to allegations of violation of trade secrets, breach of contract or
unfair competition. These claims may distract our management and employees from
their duties and requires reallocation of our resources. Moreover, an
unfavorable ruling may hinder our ability to obtain a license or similar
agreement to use technology we need to conduct our business. Defending against
and the exposure to liability under these claims could reduce revenues, increase
expenses and adversely affect our ability to compete.
OUR OPERATIONS DEPEND ON OUR ABILITY TO MAINTAIN FAVORABLE
RELATIONSHIPS WITH THIRD PARTY SUPPLIERS. WE CAN NOT ASSURE THE
CONTINUITY OF THOSE RELATIONSHIPS.
We have entered into several alliance and contractual agreements to
utilize third parties' infrastructures and networks to deliver our products and
services to our customers. Moreover, we are dependent on the continued
availability of these infrastructures and networks for our growth and
development. If we are unable to maintain or replace the relationships with
these third parties, we will be unable to provide the current level of services
to our customers. Our failure to consistently provide current levels of service
could result in a reduction of our client base and sales volume.
SYSTEM FAILURES COULD DISRUPT OUR SERVICES AND CAUSE US TO LOSE
CUSTOMERS.
Our target market is particularly sensitive to service failures. If
service failures occur, they could result in reductions in, or terminations of,
services supplied to our customers, which could have a material adverse effect
on our operations and financial results. Our system is vulnerable to damage from
human error, power loss, facility failures, fire, earthquake, floods,
telecommunications failure, break-ins, sabotage, and vandalism. Moreover, we do
not presently have a disaster recovery plan, carry any business interruption
insurance or have any secondary off-site systems. These risks are aggravated by
the fact that substantially all of our communications and computer hardware is
located within a single facility in Austin, Texas.
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<PAGE> 7
RISKS RELATED TO OUR INDUSTRY
OUR GROWTH AND PERFORMANCE MAY BE HINDERED IF INTERNET USE FAILS TO
INCREASE AS PREDICTED.
Demand for our services could be reduced if the market for
business-related Internet solutions fails to further develop. Critical issues
concerning the commercial use of the Internet remain unresolved and may hinder
the growth of Internet use, especially in the business sector -- our target
market. If demand for our services fails to materialize at the anticipated
levels, our revenues will also fail to reach expectations.
THE MARKET FOR OUR PRODUCTS AND SERVICES IS HIGHLY COMPETITIVE, AND WE
MAY NOT BE ABLE TO COMPETE EFFECTIVELY.
The market for Internet access, data transport, networking services,
web-hosting and related services is rapidly evolving, intensely competitive and
has relatively low barriers to entry. Many of our competitors and potential
competitors have longer operating histories, greater name recognition and
substantially greater financial, technical and marketing resources. Moreover,
our competitors may be able to negotiate contracts with suppliers on more
favorable terms than we can. Some of these competitors may also provide products
with some performance advantages over our products. Given the fierce competition
which we operate and our comparatively limited resources, we may not be able to
compete effectively.
OUR SERVICES ARE SUBJECT TO UNCERTAIN GOVERNMENT REGULATION. CHANGES IN
LAWS OR REGULATIONS COULD RESTRICT THE WAY WE OPERATE OUR BUSINESS.
We operate in an environment of unstable and evolving regulations.
Changes in applicable laws or regulations could impact our operations, and
impact our costs, service requirements and the scope of competition. Incumbent
local carriers are likely to pursue efforts to affect the applicable laws and
regulations in a manner that would be more favorable to them and that may be
against our interests. Additionally, we may choose to expend significant
resources to participate in regulatory proceedings at the federal or state level
without achieving favorable results. The expenses associated with participating
in and complying with an evolving regulatory framework may increase our
operating expenses beyond expectations, adversely affecting our net income.
DEMAND FOR OUR PRODUCTS AND OUR PROJECTED INCOME WILL FAIL TO MEET
EXPECTATIONS IF DIGITAL SUBSCRIBER LINE SERVICES ARE NOT ACCEPTED BY
BUSINESSES AT PROFITABLE PRICES.
The market for high-speed Internet access, data transport and
networking services using copper telephone lines is in the early stages of
development. If the market for our digital subscriber line services fails to
develop, grows more slowly than anticipated or becomes saturated with
competitors, our operations and future revenue stream could be materially
adversely affected. We cannot accurately predict the rate at which this market
will grow or whether new or
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<PAGE> 8
increased competition will result in market saturation. The failure of demand
for our products to materialize at the expected levels may reduce our
anticipated revenues.
INTERNET SECURITY CONCERNS COULD HINDER THE DEVELOPMENT ELECTRONIC
COMMERCE AND THE DEMAND FOR OUR PRODUCTS AND SERVICES.
A significant barrier to commerce and communications over the Internet
has been the need for the secure transmission of confidential information.
Security breaches or the inadvertent transmission of computer viruses could
expose us to a risk of loss or litigation and possible liability. We may incur
significant costs to protect against the threat of security breaches or to
alleviate problems caused by breaches. A party who is able to penetrate our
network security could misuse our users' personal information and our users
might sue us or bring claims against us. If any well-publicized compromise of
security occurs, Internet usage and the demand for our services could decline.
RISKS RELATED TO THE OFFERING
SOME SHAREHOLDERS HAVE SUBSTANTIAL CONTROL OVER US. INVESTORS IN THIS
OFFERING MAY HAVE NO EFFECTIVE VOICE IN OUR MANAGEMENT.
If you purchase our common stock, you may not have an effective voice
in our management. As of February 29, 2000, our current directors and executive
officers owned approximately 1.46% of the outstanding shares of our common
stock. Also as of February 29, 2000, Entrepreneurial Investors, Ltd. owned
approximately 13.59% of the outstanding shares of our common stock.
These persons and entities may continue to exert significant influence
over our business and affairs and will possess substantial control over our
operations. This control may allow them to amend corporate filings, elect all of
our board of directors, other than the director to be designated by some of our
preferred shareholders, and substantially control all matters requiring approval
by our shareholders, including approval of significant corporate transactions.
They will also have the ability to delay or prevent a change in our control and
to discourage a potential acquirer for us or our securities.
OUR ARTICLES OF INCORPORATION AND BYLAWS CONTAIN PROVISIONS THAT COULD
DELAY OR PREVENT A CHANGE IN CONTROL AND THEREFORE COULD HURT OUR
SHAREHOLDERS.
Provisions of our articles of incorporation and bylaws could make it
more difficult for a third party to acquire control of MSI Holdings, Inc., even
if a change in control would be beneficial to shareholders. Our articles of
incorporation allow our board of directors to issue, without shareholder
approval, preferred stock with terms set by the board of directors. The
preferred stock could be issued quickly with terms that delay or prevent the
change in control of
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<PAGE> 9
MSI Holdings, Inc. or make removal of management more difficult. Also, the
issuance of preferred stock may cause the market price of our common stock to
decrease.
YOUR MAY HAVE LIMITED LIQUIDITY IF YOU INVEST IN OUR STOCK BECAUSE WE
HAVE A LIMITED MARKET FOR OUR COMMON STOCK AND OUR STOCK PRICE IS
VOLATILE.
Trading on the Over-The-Counter Bulletin is sporadic and highly
volatile. The market prices of Internet-related stocks, such as ourselves, tend
to be more volatile than the market as a whole. The market price of our common
stock has fluctuated in the past and may continue to be volatile in the future.
There can be no assurance that an active trading market will develop or be
maintained. Failure to develop or maintain an active trading market could
negatively affect the price of our securities, as well as affect your ability to
sell your shares.
AS AN INCREASING AMOUNT OF OUR COMMON STOCK BECOMES ELIGIBLE FOR SALE,
THE DOWNWARD PRESSURES FROM INCREASED SELLING MAY CAUSE THE MARKET
PRICE FOR YOUR SHARES, TO DECREASE.
Sales, or the perception of sales, of substantial amounts of common
stock in the public market could materially and adversely affect the market
price of our common stock or our ability to raise capital through an offering of
equity securities. As an increasing number of shares become eligible for sale,
the related transactions may place downward sell pressures on our market price.
The adverse affect on the market price of our common stock may occur even if the
results of our operations are positive. As of February 29, 2000, we had
35,795,254 shares of common stock outstanding. The following table illustrates
the shares of common stock eligible for future sale if all of the preferred
shares were converted to their common stock equivalents and all outstanding
warrants and options were exercised.
<TABLE>
<CAPTION>
Fully Diluted %
------------- ---
<S> <C> <C>
Total Shares 41,320,683 100.00
Eligible for Future Sale 17,557,095 42.5
Subject to Rule 144 restrictions 23,763,588 57.5
</TABLE>
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<PAGE> 10
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
The prospectus may contain "forward-looking statements." Any statement
in this prospectus, other than a statement of historical fact, may be a
forward-looking statement.
You can generally identify forward-looking statements by looking for
words such as "may," "will," "expect," "intend," "estimate," "anticipate,"
"believe" or "continue." Variations on those or similar words, or the negatives
of such words, also may indicate forward-looking statements.
The discussions in this prospectus and in the documents incorporated by
reference contain forward-looking statements. Although we believe that the
expectations reflected in this prospectus are reasonable, we cannot assure you
that our expectations will be correct. Our actual results may differ
significantly from the results discussed in the forward-looking statements. This
prospectus includes a discussion entitled "Risk Factors," discussing important
factors that could cause our actual results to differ materially from our
expectations. These risk factors and other more remote risks are further
discussed in the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" sections of the 10-KSB/A and in our
Form 8-K dated February 17, 2000.
The forward-looking statements in this prospectus are accurate only as
of its date. If our expectations change, or if new events, conditions or
circumstances arise, we are not required to, and may not, update or revise any
forward-looking statement in this prospectus.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock offered by this prospectus. However, we will receive proceeds from the
exercise of the options and warrants, the underlying shares of which are being
registered in this registration statement. The exercise price received by us
from issuance of the shares of common stock underlying the warrants and options
will be used for general corporate purposes. The proceeds received and to be
received upon exercise of the warrants and options are:
<TABLE>
<CAPTION>
As of
February 29, 2000
-----------------
<S> <C>
Proceeds received $ 81,500.00
Proceeds receivable if remaining options and
warrants are exercised $405,453.00
-----------
Total Proceeds from options and warrants $486,953.00
===========
</TABLE>
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<PAGE> 11
PRICE RANGE OF COMMON STOCK
The table below reflects the high and low closing sale price of our
common stock for the periods indicated, as reported by the OTC Bulletin Board.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- ------------- -------- -------
<S> <C> <C>
December 31, 1997.................................................................. 3.500 0.500
March 31, 1998..................................................................... 2.560 0.750
June 30, 1998...................................................................... 8.430 2.500
September 30, 1998................................................................. 12.000 5.500
December 31, 1998.................................................................. 7.250 6.187
March 31, 1999..................................................................... 10.062 3.500
June 30, 1999...................................................................... 10.750 4.250
September 30, 1999................................................................. 6.187 4.000
December 31, 1999.................................................................. 7.125 4.000
</TABLE>
On March 8, 2000, the closing sale price for a share of our common
stock, as reported on the OTC Bulletin Board, was $38.875.
SELLING SHAREHOLDERS
The following table lists the ownership of the common stock included in
this registration statement, assuming conversion of the series E preferred stock
and assuming the exercise of the warrants and options covered by the shares
contained in this registration statement. Percentage ownership calculations are
based upon the 35,795,254 shares of common stock outstanding as of February 29,
2000. Unless otherwise indicated, the total shares reflected are comprised of
shares issued and outstanding.
<TABLE>
<CAPTION>
RELATION TO
NAME MSHI TOTAL SHARES PERCENT
---- -------------- ------------ -------
<S> <C> <C> <C>
Rainer Bischoff 80,000
Cornelius Dornier 65,000
Daniel Dornier(1) director 80,000
David Dornier 50,000
Gabrielle Dornier 30,000
Silvius Dornier 100,000
Graf Von Hardenberg 100,000
Andreas Preuschoff 10,000
Rainer Doerflinger 15,000
Greenwich AG(2) 603,340 1.68%
Frank C. Erwin 30,000
Will B. Houston(3) 20,000
James E. Thorp(4) 593,666 1.65%
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
RELATION TO
NAME MSHI TOTAL SHARES PERCENT
---- -------------- ------------ -------
<S> <C> <C> <C>
Edward R. Coleman 10,000
Jim Troxel 100,000
G. Robert Barker 5,000
Beatrice Schaefer 100,000
Heinz Winzeler 120,840
Equity Services, Ltd.(5) 181,674
Pinecrest Associates, Inc.(6) 150,000
Panther Consulting, Inc.(7) 150,000
Peninsular Corp.(8 ) 50,000
Jaime Munoz(9) former officer 44,000
Tejas Holdings, Inc.(10) consultant 33,000
Capital Solutions, Inc.(11) consultant 1,200
Ronnie D. Henry(12) consultant 25,000
Carolyn S. Henry(12) consultant 10,000
Randall N. Williamson(12) consultant 5,000
Benjamin A. Siddons(12) consultant 5,000
Austex Enterprises(13) consultant 5,000
Hemisphere Trading Co.(14) 69,500
Terama Company Limited(15) 50,000
Amador DeLeon, Jr.(16) former employee 2,500
MMH Investment, Inc.(17) consultant 150,000
Robert Hersch(18) former officer 10,000
Mayo DeLeon former employee 5,000
Roger Lane former employee 40,000
Ashley LeMarie(19) consultant 2,000
John Walters(19) consultant 2,000
</TABLE>
- ----------
(1) Consists of: (a) 79,950 shares of common stock; and (b) 50 shares of
common stock issuable upon conversion of 5 shares of series E preferred.
(2) Greenwich AG is a German corporation. Rainer Bischoff is its chief
executive officer and has voting control over its shares.
(3) Consists of: (a) 10,000 shares of common stock; and (b) 10,000 shares of
common stock issuable upon conversion of 1,000 shares of series E
preferred.
(4) Consists of: (a) 543,666 shares of common stock; and (b) 50,000 shares
of common stock issuable upon conversion of 5,000 shares of series E
preferred.
(5) Consists of: (a) 88,340 shares of common stock; and (b) 93,334 shares of
common stock covering placement agent's options. Equity Services Ltd. is
owned by four foreign corporations. Ms. Lynn Turnquest is ESL's managing
director and has voting control over its shares.
(6) Sylvia Seymour is Pinecrest's president and has voting control over its
shares.
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(7) D.A. Kent is Panther's president and has voting control over its shares.
(8) Penninsular is a Nevis corporation. Robert E. Cordes is Penninsular's
president and has voting control over its shares.
(9) Consists of 44,000 shares previously issued to Mr. Munoz, a former
officer of ours.
(10) Consists of 33,000 shares issued for consulting services. Mike Hale is
the president and chief executive officer of Tejas Holding and has
voting control over its shares.
(11) Consists of 1,200 shares previously issued for consulting services.
Michael King is the president and chief executive officer of Capital
Solutions and has voting control over its shares.
(12) Consist of 50,000 shares of common stock issued upon the exercise of the
warrants granted to Henry & Associates, a consultant.
(13) Austex Enterprises a Texas partnership. Its general partner is Stara
Corp and Stara's president is Stephen R. Smith. As president of Austex's
general partner, Mr. Smith has voting control over Austex's shares.
(14) Consists of 69,500 shares of common stock. Hemisphere is a Liberian
corporation. Robert E. Cordes is its president and has voting control
over its shares.
(15) Consists of 50,000 shares acquired from and previously issued to Phoenix
Energy Partners in satisfaction of an over-subscription for the series D
preferred stock. D. A. Kent is Terama's president and has voting control
over its shares
(16) Consists of 2,500 shares issued to a former employee in settlement of a
dispute over compensation.
(17) Consists of 150,000 shares of common stock previously issued to a
consultant. Robert Hersch is MMH's president and has voting control over
its shares.
(18) Consists of 10,000 shares of common stock to Robert Hersch, one of our
officers.
(19) Consists of 4,000 shares issued for the benefit of the Volo Group, a
consultant.
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<PAGE> 14
PLAN OF DISTRIBUTION
The shares of common stock may be offered and sold from time to time by
the selling shareholders, or by pledges, donees, transferees or other successors
in interest. We have no control over the selling shareholders in making their
decisions to offer, sell or transfer their shares at prices related to the then
current market price or in negotiated transactions. The shares may be sold by
the selling shareholders in one or more transactions at the then prevailing
market prices or in privately negotiated transactions. The shares may be sold by
one or more of the following methods:
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o purchases and resale by a broker-dealer for its account under this
prospectus;
o private sales; and
o block trades in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction.
We have not been advised by the selling shareholders that they have, as
of the date of this prospectus, made any arrangements relating to the
distribution of the shares covered by this prospectus. In effecting sales,
broker-dealers engaged by the selling shareholders may arrange for other
broker-dealers to participate and broker-dealers may receive commissions or
discounts from the selling shareholders in amounts to be negotiated immediately
before sale.
In offering the shares, the selling shareholders and any broker-dealers
and any other participating broker-dealers who execute sales for the selling
shareholders may be underwriters within the meaning of the Securities Act. An
underwriter is someone who acquired shares from us or an affiliate of ours with
a view towards distributing the shares to the public. Since these individuals
may be underwriters, any profits realized by the selling shareholders and the
compensation of the broker-dealers involved may be underwriting discounts and
commissions.
Any shares covered by this prospectus which qualify for sale under Rule
144 may be sold under Rule 144 rather than under this prospectus.
THE SECURITIES OFFERED
We are authorized to issue up to 50,000,000 shares of common stock, and
up to 10,000,000 shares of preferred stock. As of February 29, 2000, there were
35,795,254 shares of common stock outstanding.
The following is a summary of the material provisions and terms of our
articles and bylaws that might be important to you as a shareholder. You should
refer to our articles of
-12-
<PAGE> 15
incorporation and bylaws for a complete statement of your rights as a
stockholder. Both the articles of incorporation and the bylaws are filed with
the SEC as Exhibit No. 3 to our registration statement, file #33-24265-LA
As a holder of our common stock you will have one vote per share on all
matters voted on by stockholders, including elections of directors. Unless
required by law or provided in any resolution adopted by the board of directors
about any series of preferred stock, only holders of our common stock have
voting rights. The articles of incorporation do not provide for cumulative
voting. Cumulative voting is the ability to cast as many votes for a director as
the shareholder has shares of stock multiplied by the numbers of directors to be
elected, in the election of directors. The articles of incorporation also do not
provide for preemptive rights, i.e. a shareholder's right to acquire new shares
issued by a company to preserve their proportional interest. Owners of our
common stock will receive dividends if the board declares them out of available
funds. However, we do not expect to declare or pay dividends on our common
stock.
The transfer agent for our common stock is Interwest Transfer Company,
Inc.
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<PAGE> 16
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms located at:
Securities and Exchange Commission or Securities and Exchange Commission
450 Fifth Street, N.W. 801 Cherry Street, 19th Floor
Washington, D.C. 20549 Ft. Worth, Texas 76102
Further information on the SEC's public reference rooms, is available from the
SEC at 1-800-SEC-0330. Our SEC filings are also available on the Internet at
http://www.sec.gov.
The SEC allows us to incorporate by reference information from other
documents that we file with them, which means that we can disclose important
information by referring to those documents. The information incorporated by
reference is considered to be part of this prospectus, and information that we
file later with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 before the sale of all the shares covered by
this prospectus:
o Annual report on Form 10-KSB/A for the year ended March 31, 1999;
o All other reports filed with the SEC in compliance with Sections
13(a) or 15(d) of the Exchange Act since the end of the fiscal
year ended March 31, 1999; and
o The description of our common stock contained in our registration
statement on Form 10, filed with the SEC on October 27, 1975, file
number M862263.
We will deliver to each person, including any beneficial owner,
receiving this prospectus, a copy of any or all of the information that has been
incorporated by reference and not delivered with this prospectus. You may
request a copy of these filings, at no cost, by writing or telephoning:
MSI Holdings, Inc.
1121 E. 7th Street
Austin, Texas 78702
Attn: Robert J. Gibbs
Telephone: (512) 476-6925
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<PAGE> 17
INDEMNIFICATION
Our revised articles of incorporation state that we may indemnify each
of our directors, officers, employees, or agents to the full extent permitted by
the laws of the state of Utah. In summary, the Utah Revised Business Corporation
Act:
o authorizes any corporation to indemnify directors and officers
against any judgments, fines, amounts paid in settlement and
reasonable expenses, including attorney's fees, incurred by reason
of his having been a corporate director or officer;
o confers on the director or officer an absolute right to
indemnification for expenses, including attorney's fees, actually
and reasonably incurred to the extent he is successful on the
merits or defense of any claim, issue, or matter;
o allows a corporation to pay attorney's fees and other litigation
expenses on behalf of a director or officer in advance of the
final disposition of the action, provided the director or officer
undertakes to reimburse the corporation, if it is ultimately
determined that he is not entitled to be indemnified by the
corporation or if the advances exceed the indemnification to which
he is entitled; and
o recognizes that a director or officer may be entitled to
additional indemnification under the corporation's certificate or
articles of incorporation, bylaws, agreements, shareholders's vote
or otherwise.
However, the indemnification authorized by the Utah Revised Business
Corporation Act is limited to those situations where:
o the director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the corporation;
o if in criminal proceedings, the director or officer had no
reasonable cause to believe his conduct was unlawful; and
o either the board of directors, acting through a quorum of
disinterested directors or on the advice of independent legal
counsel, has or the shareholders have made a determination that
indemnification is proper in the circumstances.
Moreover, we may not indemnify a director if the director is adjudged
liable to us or has derived an improper personal benefit in an action in which
the director is adjudged liable. We may also purchase and maintain insurance to
provide indemnification.
Though indemnification for liabilities arising under the Securities Act
may be permitted to members of the board of directors, officers, employees, or
person controlling us under the provisions outlined above, we have been advised
that in the opinion of the Securities and
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<PAGE> 18
Exchange Commission indemnification for liabilities arising under the Securities
Act is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
LEGAL MATTERS
The validity of the shares offered by this prospectus has been passed
upon for us by Vial, Hamilton, Koch & Knox, L.L.P., Dallas, Texas.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our annual report on Form 10-KSB/A for the year
ended March 31, 1999, as set forth in their report which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
Brown, Graham and Company, P.C., independent auditors, have audited our
consolidated financial statements included in our annual report on Form 10-KSB/A
for the year ended March 31, 1998, as set forth in their report which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Brown Graham and Company, P.C.'s report contains an explanatory
paragraph describing conditions that raise substantial doubt about our ability
to continue as a going concern as described in note 1 to the consolidated
financial statements. Our financial statements are incorporated by reference in
reliance on Brown, Graham and Company, P.C.'s report, given on their authority
as experts in accounting and auditing.
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<PAGE> 19
You should rely on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The statements and representations contained
within this prospectus are true and correct as of the date indicated on the
cover page. The delivery of this prospectus does not, under any circumstances,
create the implication that there has been no change since that date. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
securities other than those registered securities to which the prospectus
relates. Moreover, this prospectus does not constitute an offer to sell or a
solicitation of an offer to buy in any circumstances in which such an offer or
solicitation is unlawful.
We will bear all of the cost of preparing and printing the registration
statement, prospectus and any prospectus supplements and all filing fees and
legal and accounting expenses associated with registration under federal and
state securities laws, which are estimated at $60,000.
------------
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk Factors 2
A Warning about Forward-looking Statements 8
Use of Proceeds 8
Price Range of Common Stock 9
Selling Shareholders 9
Plan of Distribution 12
The Securities Offered 12
Where You Can Find More Information 14
Indemnification 15
Legal. Matters 16
Experts 16
</TABLE>
3,103,720 Shares
MSI HOLDINGS, INC.
Common Stock
---------------
PROSPECTUS
---------------
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses payable by us in
connection with the sale and distribution of the securities being registered.
All amounts are estimates except the SEC registration fee.
<TABLE>
<S> <C>
Filing Fee-Securities and Exchange Commission.............. $ 5,000
Accountants' Fees and Expenses............................. $ 20,000
Fees and Expenses of Counsel for the Registrant............ $ 20,000
Printing and Communication Expenses........................ $ 10,000
Blue Sky Fees and Expenses................................. $ 3,500
Miscellaneous Expenses..................................... $ 1,500
--------
Total............................................... $ 60,000
========
</TABLE>
The selling security holders are bearing no portion of the expenses of
the offering pursuant to agreement.
ITEM 15. Indemnification of Directors and Officers.
The registrant's revised articles of incorporation and by-laws permit
the registrant to indemnify its directors and officers to the fullest extent
authorized under the Utah Business Corporation Act ("UBCA"). In general, a Utah
corporation may indemnify a director or officer who was, is or is threatened to
be made, a named defendant or respondent in a proceeding by virtue of his
position in the corporation if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, in the case of criminal proceedings, had no reasonable cause
to believe his conduct was unlawful. A Utah corporation may indemnify a
director, officer, employee, or agent ("fiduciary") in an action brought by or
in the right of the corporation only if such fiduciary was not found liable to
the corporation, unless or only to the extent that a court finds him to be
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions (set forth in Item 14
above), or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE> 21
ITEM 16. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION LOCATION
- ------- ------------------- --------
<S> <C> <C>
4 Specimen of Securities(1) Incorporated by reference to Exhibit Nos. 1A and 1B
of Registrant's Form 8-A Registration Statement
(File #0-8146)
4.1 Certificate of Designation for Series E Incorporated by reference to Form 10-QSB/A filed
Preferred Shares(1) November 12, 1998, for the period ended June 30, 1998
4.2 Amendment to the Certificate of Designation Incorporated by reference to Form 10-QSB filed
for Series E Preferred Shares(1) August 16, 1999, for the period ended June 30, 1999
5 Legal Opinion of Vial, Hamilton, Koch & Knox,
L.L.P.(3)
23.1 Consent of Ernst & Young, LLP(2) Exhibit 23.1
23.2 Consent of Brown, Graham and Company, P.C.(2) Exhibit 23.2
23.3 Consent of Vial, Hamilton, Koch & Knox, Exhibit 23.3
L.L.P.(2)
</TABLE>
- -------------------------
(1) Previously filed with the Securities and Exchange Commission and
incorporated by reference pursuant to Rule 12b-32 of the Securities
Exchange Act of 1934.
(2) Filed herewith.
(3) To be filed by amendment.
ITEM 17. Undertakings.
The Undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered in that post-effective amendment, and the offering of those
securities at that time shall be deemed to be the initial bona fide
offering of those securities.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
<PAGE> 22
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Austin,
State of Texas, on March 16, 2000.
MSI HOLDINGS, INC.
By: /s/ Robert J. Gibbs
-----------------------------------
Robert J. Gibbs, President & CEO
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert J. Gibbs
- ---------------------------
Robert J. Gibbs President, CEO and Director March 16, 2000
/s/ Douglas W. Banister Vice President and
- --------------------------- Chief Financial Officer March 16, 2000
Douglas W. Banister
- ---------------------------
Chris Brickler Director March ___, 2000
/s/ Blandina Cardenas
- ---------------------------
Blandina Cardenas Director March 16, 2000
- ---------------------------
Ernesto Chavarria Director March ___, 2000
/s/ Daniel Dornier
- ---------------------------
Daniel Dornier Director March 16, 2000
/s/ Steve Metzger
- ---------------------------
Steve Metzger Director March 16, 2000
- ---------------------------
Humbert B. Powell, III Director March ___, 2000
/s/ Davinder Sethi
- ---------------------------
Davinder Sethi Director March 16, 2000
</TABLE>
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION LOCATION
- ------- ------------------- --------
<S> <C> <C>
4 Specimen of Securities(1) Incorporated by reference to Exhibit Nos. 1A and 1B
of Registrant's Form 8-A Registration Statement
(File #0-8146)
4.1 Certificate of Designation for Series E Incorporated by reference to Form 10-QSB/A filed
Preferred Shares(1) November 12, 1998, for the period ended June 30, 1998
4.2 Amendment to the Certificate of Designation Incorporated by reference to Form 10-QSB filed
for Series E Preferred Shares(1) August 16, 1999, for the period ended June 30, 1999
5 Legal Opinion of Vial, Hamilton, Koch & Knox,
L.L.P.(3)
23.1 Consent of Ernst & Young, LLP(2) Exhibit 23.1
23.2 Consent of Brown, Graham and Company, P.C.(2) Exhibit 23.2
23.3 Consent of Vial, Hamilton, Koch & Knox, Exhibit 23.3
L.L.P.(2)
</TABLE>
- -------------------------
(1) Previously filed with the Securities and Exchange Commission and
incorporated by reference pursuant to Rule 12b-32 of the Securities
Exchange Act of 1934.
(2) Filed herewith.
(3) To be filed by amendment.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the registration statement amendment number 2 (Form S-3, Registration No.
333-92413) and related prospectus of MSI Holdings, Inc. for the registration of
3,103,720 shares of its common stock and to the incorporation by reference
therein of our report dated September 28, 1999, except for notes 1, 13 and 15,
as to which the date is February 29, 2000, with respect to the consolidated
financial statements and schedules of MSI Holdings, Inc. included in its Annual
Report (Form 10-KSB/A) for the year ended March 31, 1999, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young, LLP
- ----------------------
Ernst & Young, LLP
Austin, Texas
March 16, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF BROWN, GRAHAM AND COMPANY, P.C.
To the Board of Directors of MSI Holdings, Inc., a Utah corporation:
We consent to the use of our report, incorporated by reference herein,
dated June 9, 1998, as restated on September 24, 1999, and to the reference to
our firm under the heading "Experts" in the registration statement amendment
number 2 on Form S-3 for the above named company.
/s/ Brown, Graham and Company, P.C.
- -----------------------------------
Brown, Graham and Company, P.C.
Georgetown, Texas
March 16, 2000
<PAGE> 1
EXHIBIT 23.3
To the Board of Directors of MSI Holdings, Inc.
We consent to the use of our name under the heading Legal Matters in
the registration statement amendment number 2 on form S-3 for the above named
company.
Vial, Hamilton, Koch & Knox, L.L.P.
/s/ Gary Woolfolk
Dallas, Texas
March 16, 2000
