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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-92413
PROSPECTUS
MSI HOLDINGS, INC.
1121 E. 7th Street
Austin, Texas 78702
(512) 476-6925
3,148,720 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 25,062,293 shares
of our common stock. These additional shares are being offered for sale
contemporaneously with the shares covered by this prospectus.
Our common stock recently has been approved for listing on the Nasdaq
Stock Market under the trading symbol APRN. Before this approval, our common
stock traded on the Over-the-Counter Bulletin Board under the trading symbol
MSIA.
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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.
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JULY 14, 2000
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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
OUR FORECASTS ARE BASED ON AN UNPROVEN BUSINESS MODEL. IF OUR MODEL'S
ASSUMPTIONS ARE NOT ACCURATE WE MAY FAIL TO GENERATE PROFITS AND MAY
CONTINUE TO RECOGNIZE LOSSES.
The success of our business model depends on developing a market for
unproven products and services. We generate revenues by providing customers with
bandwidth and related services, relatively new products and services. Our
success relies on our products and services achieving wide acceptance in the
market at competitive prices. Because of the relative novelty of our products
and services, our business model is based on limited and uncertain information
about future demand and costs. As a result, we may not generate revenues at the
expected levels or control expenses. If our earnings are lower than anticipated,
we may disappoint investors, which could cause our stock price to decline.
YOU HAVE LIMITED INFORMATION ON WHICH TO EVALUATE US. OUR FUTURE
RESULTS MAY VARY SIGNIFICANTLY FROM OUR PAST 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 A HISTORY OF LOSSES AND EXPECT 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. The remaining $12.4 million of deficit relates to
losses incurred due to discounts recorded on issuances and conversions of common
and preferred stock. We cannot predict when profitability might be achieved, if
at all. If
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we are able to become profitable, we may not be able to sustain it. If we are
unable to obtain profitability or sustain it, we may have to discontinue
operations.
WE MAY BE UNABLE TO MANAGE COMPLICATIONS THAT ARISE DURING THE BUILD
OUT OF ADDITIONAL DATA CENTERS. THESE BUILD OUTS MAY COST MORE THAN
BUDGETED AND NOT GENERATE REVENUES AS QUICKLY AS ANTICIPATED.
We are planning to build out up to 15 new data centers across a wide
range of geographic regions. The build out of data centers is a key element of
our business strategy. Each data center takes approximately 30 to 90 days to
complete. Any delay in the build out of new data centers would significantly
harm our expansion plans. Many of the risks associated with significant
expansion projects are beyond our control and could delay the build out of
additional data centers. These risks include cost estimation errors or overruns,
equipment and material delays or shortages, and the inability to obtain
necessary permits on a timely basis, if at all.
IF OUR NEW DATA CENTERS EXCEED OUR MANAGERIAL AND CAPITAL RESOURCES,
OUR CUSTOMER SERVICE MAY SUFFER, CAUSING US TO LOSE CUSTOMERS.
If completed, new data centers will result in substantial new operating
expenses and managerial burdens. Moreover, a failure to institute adequate
financial and managerial controls, reporting systems and procedures for multiple
facilities would significantly harm our operations. Failure to manage the data
centers' increased expenses and managerial burdens could interrupt operations
causing us to lose customers.
WE HAVE HAD RECENT CHANGES IN MANAGEMENT. OUR CURRENT MANAGEMENT MAY BE
UNABLE TO LEAD US INTO PROFITABILITY.
Several members of our calendar year 1999 management team are no longer
with us. We are continuing to build a new management team. This team 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 COMPETE EFFECTIVELY IF WE ARE UNABLE TO ATTRACT
AND RETAIN KEY PERSONNEL.
Our future success depends on highly qualified technical, sales,
marketing and customer service personnel. The industry in which we compete has a
high level of employee mobility and aggressive recruiting of skilled personnel.
We face intense competition for qualified personnel 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.
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OUR POSSIBLE EXPOSURE TO INFRINGEMENT CLAIMS MAY CAUSE UNEXPECTED LEGAL
EXPENSES AND DIVERT MANAGEMENT RESOURCES.
Our management personnel were previously employees of other
telecommunications companies. Our management personnel may have had contracts
with the prior 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, our employees or we 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 require reallocation
of our resources. Moreover, an unfavorable ruling may hinder our ability to use
technology we need to conduct our business. Liability and defense costs under
these claims could increase our expenses and adversely affect our ability to
compete.
OUR OPERATIONS DEPEND ON OUR ABILITY TO MAINTAIN FAVORABLE
RELATIONSHIPS WITH THIRD PARTY SUPPLIERS. WE CANNOT ASSURE THE
CONTINUITY OF THOSE RELATIONSHIPS.
We have entered into several alliance and contractual agreements to
utilize third parties' infrastructures and networks for our products and
services. 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 our relationships with our suppliers, we will be unable to
provide the current level of services to our customers. Our failure to
consistently provide our 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.
Service failures may reduce or terminate the services we supply to our
customers. Any reduction or termination of our services could cause our
customers to switch their business to our competitors and may hinder our ability
to obtain new customers. 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 have a disaster
recovery plan, carry any business interruption insurance or have any secondary
off-site systems.
RISKS RELATED TO OUR INDUSTRY
OUR GROWTH AND PERFORMANCE MAY BE HINDERED IF THE INTERNET USE FAILS TO
INCREASE AS PREDICTED.
Demand for our services could be reduced if the market for
business-related Internet solutions fails to develop further. Critical issues
concerning the commercial use of the Internet remain unresolved and may hinder
the growth of Internet use. These issues are particularly critical 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.
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THE MARKET FOR OUR PRODUCTS AND SERVICES IS HIGHLY COMPETITIVE, AND WE
MAY NOT BE ABLE TO COMPETE EFFECTIVELY.
The market for our products and services is rapidly evolving. Our
market is also intensely competitive, partly due to 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 than us. 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 in our industry 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 laws and
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. The likely means to affect the laws
include litigation in courts, administrative proceedings with the Federal
Communications Commission and state telecommunications regulators and lobbying
the U.S. Congress. We may choose to expend significant resources to participate
in regulatory proceedings at the federal or state level. The expenses associated
with participating in and complying with an evolving regulatory framework may
increase our operating expenses beyond expectations. Despite our possible
expenditures, we cannot assure any favorable results.
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 may not achieve our
expectations. We cannot accurately predict the rate at which this market will
grow or whether new or increased competition will result in market saturation.
If demand for our products and services does not meet expectations, our revenues
may be lower than anticipated.
INTERNET SECURITY CONCERNS MAY HINDER THE DEVELOPMENT OF ELECTRONIC
COMMERCE AND 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
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transmission of computer viruses could expose us to 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
OUR ARTICLES OF INCORPORATION AND BYLAWS CONTAIN PROVISIONS THAT COULD
PREVENT A THIRD PARTY FROM BUYING MSI. AS A SHAREHOLDER, YOU MAY BE
PREVENTED FROM CONSIDERING A THIRD PARTY'S OFFER.
Provisions of our articles of incorporation and bylaws could make it
more difficult for a third party to acquire control of MSI, even if a change in
control would be beneficial to shareholders. Our articles of incorporation allow
our board of directors to issue preferred stock with terms set by the board of
directors and without shareholder approval. The preferred stock could be issued
quickly with terms that delay or prevent a change in control or make removal of
management more difficult. Also, the issuance of preferred stock may cause the
market price of our common stock to decrease.
In addition, if we successfully reincorporate from Utah to Delaware,
our new articles of incorporation and bylaws will contain additional
antitakeover provisions. Please see our preliminary proxy statement, filed with
the SEC on June 9, 2000, file number 000-08164.
WE HAVE A LIMITED MARKET FOR OUR COMMON STOCK AND OUR STOCK PRICE IS
VOLATILE, WHICH MAY LIMIT YOUR ABILITY TO SELL YOUR SHARES.
The market prices of Internet-related stocks 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 MARKET PRICE FOR YOUR SHARES MAY DECREASE.
Sales in the public market of substantial amounts of common stock or
the perception that substantial sales may occur could materially and adversely
affect the market price of our common stock. These sales or perceptions could
also limit our ability to raise capital through an offering of equity
securities. An increasing number of shares eligible for sale may decrease the
price of our common stock. The adverse affect on the market price of our common
stock may occur even if the results of our operations are positive. As of March
31, 2000, we had 36,502,875 shares of
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common stock outstanding. The following table illustrates the shares of common
stock eligible for future sale if all outstanding warrants and options were
exercised.
<TABLE>
<CAPTION>
Fully Diluted %
------------- -----
<S> <C> <C>
Total shares 44,826,429 100.0
Eligible for future sale 36,134,718 80.6
Subject to Rule 144 restrictions 8,691,711 19.4
</TABLE>
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A WARNING ABOUT 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 like: may, will, expect, intend, estimate, anticipate, believe or
continue. Variations on those or similar words, or the negatives of those or
similar words, also may indicate forward-looking statements.
This prospectus and 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
March 31, 2000
--------------
<S> <C>
Proceeds received $ 81,500.00
Proceeds receivable if remaining options and
warrants are exercised $649,453.00
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Total proceeds from options and warrants $730,953.00
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</TABLE>
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REINCORPORATION
We have filed a preliminary proxy statement with the SEC to permit us
to seek shareholder approval of our reincorporation from Utah to Delaware. As
part of the reincorporation, we will adopt a new certificate of incorporation
and new bylaws. For further details, please see our preliminary proxy statement
on Schedule 14A, filed June 9, 2000, file number 000-08164.
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>
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
March 31, 2000...................................... $ 44.500 $ 6.000
</TABLE>
On May 31, 2000, the closing sale price for a share of our common
stock, as reported on the OTC Bulletin Board, was $8.875.
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 36,502,875 shares of common stock outstanding as of March 31,
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> <C>
Rainer Bischoff 80,000
Cornelius Dornier 65,000
Daniel Dornier (1) director 80,000
David Dornier 50,000
Gabrielle Dornier 30,000
</TABLE>
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<TABLE>
<CAPTION>
RELATION TO
NAME MSHI TOTAL SHARES PERCENT
---- ---- ------------ -------
<S> <C> <C> <C> <C>
Relation to
Silvius Dornier 100,000
Graf Von Hardenberg 100,000
Andreas Preuschoff 10,000
Rainer Doerflinger 15,000
Greenwich AG (2) 603,340 1.65%
Frank C. Erwin 30,000
Will B. Houston (3) 20,000
James E. Thorp (4) 593,666 1.63%
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 83,000
Capital Solutions, Inc. (11) consultant 1,200
Ronnie D. Henry (12) consultant 25,000
Carolyn S. Henry (12) 10,000
Randall N. Williamson (12) 5,000
Benjamin A. Siddons (12) 5,000
Austex Enterprises (12)(13) 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
Roger Lane former employee 40,000
Ashley LeMarie (19) consultant 2,000
John Walters (19) consultant 2,000
</TABLE>
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(1) Consists of:
o 79,950 shares of common stock; and
o 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 and investment control
over its shares.
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(3) Consists of:
o 10,000 shares of common stock; and
o 10,000 shares of common stock issuable upon conversion of
1,000 shares of series E preferred.
(4) Consists of:
o 543,666 shares of common stock; and
o 50,000 shares of common stock issuable upon conversion of
5,000 shares of series E preferred.
(5) Ms. Lynn Turnquest is ESL's managing director and has voting
and investment control over its shares. Equity Services Ltd.
is owned by four foreign corporations:
o Aspen Investments, Inc., a Panama corporation;
o Mercer, Inc., a Nevis corporation;
o Nesting, Inc., a Nevis corporation; and
o Peninsular Inc., a Nevis corporation.
Ms. Turnquest is the managing director for Aspen, Mercer and
Nesting and has voting and investment control over each
entity. Robert E. Cordes is Peninsular's president and has
voting and investment control over its shares.
The shares included on behalf of ESL consist of:
o 88,340 shares of common stock; and
o 93,334 shares of common stock covering placement agent's
options.
(6) Sylvia Seymour is Pinecrest's president and has voting and
investment control over its shares.
(7) D.A. Kent is Panther's president and has voting and investment
control over its shares.
(8) Peninsular is a Nevis corporation. Robert E. Cordes is
Peninsular's president and has voting and investment control
over its shares.
(9) Consists of 44,000 shares previously issued to Mr. Munoz, a
former officer of ours.
(10) Mike Hale is the president and chief executive officer of
Tejas Holding and has voting and investment control over its
shares. The Tejas' shares listed consist of: o 33,000 shares
issued for consulting services; and o 50,000 shares covering
options granted in conjunction with settlement of a dispute
regarding the consulting agreement and compensation.
(11) Michael King is the president and chief executive officer of
Capital Solutions and has voting and investment control over
its shares. These shares consist of 1,200 shares previously
issued for consulting services.
(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 is 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
and investment control over Austex's shares. The shares listed
herein were transferred to Austex from Henry & Associates.
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(14) Hemisphere is a Liberian corporation. Robert E. Cordes is its
president and has voting and investment 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 and investment 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 and investment control over its shares.
(18) Consists of 10,000 shares of common stock to Robert Hersch, a
former officer.
(19) Consists of 4,000 shares issued for the benefit of the Volo
Group, a consultant.
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
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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 March 31, 2000, there were
36,502,875 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 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. A preemptive right is a shareholder's right to
acquire new shares issued by a company to preserve his 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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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:
<TABLE>
<S> <C> <C>
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
</TABLE>
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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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, or by
shareholders' vote.
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> 16
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 reflected 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 reflected 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.
-16-
<PAGE> 17
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 PROSPECTUS
registration under federal and state securities laws, _______________ which are
estimated at $60,000.
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Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk Factors 2
A Warning about Forward-looking Statements 8
Use of Proceeds 8
Reincorporation 9
Price Range of Common Stock 9
Selling Shareholders 9
Plan of Distribution 12
The Securities Offered 13
Where You Can Find More Information 14
Indemnification 15
Legal Matters 16
Experts 16
</TABLE>
3,148,720 SHARES
MSI HOLDINGS, INC.
Common Stock
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PROSPECTUS
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