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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-31726
PROSPECTUS
MSI HOLDINGS, INC.
20,551,793 SHARES OF COMMON STOCK
The shares of our common stock covered by this prospectus are offered
by the shareholders listed under "Selling Shareholders" beginning on page 9. We
will not receive any of the proceeds from this offering.
In addition to the shares covered by this prospectus, we have
registered or are in the process of registering an additional 13,148,720 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 document 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 document 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.
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.
-----------------------------
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 OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------------------------
The date of this prospectus is July 14, 2000
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Additional information is incorporated in this prospectus by reference
to our reports filed with the SEC. The additional information includes our
financial statements for the year ended March 31, 2000. Please refer to "Where
You Can Find More Information" on page 19 for instructions on obtaining copies
of our filed reports. You are urged to read this prospectus and our SEC reports
in their entirety. All references to the "MSI," "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 March 31, 2000, our accumulated deficit was approximately
$46.0 million. Approximately $33.1 million of the deficit relates to losses from
operations. The remaining $12.9 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 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.
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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.
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
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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.
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.
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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 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
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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 Securities and Exchange Commission 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 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 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.
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.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock sold in this offering.
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 with the Securities and Exchange Commission on June 9,
2000, file number 000-08164.
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SELLING SHAREHOLDERS
The following table lists the owners of the common stock to be included
in this registration statement. The table assumes exercise and conversion of all
outstanding warrants and options covered by the shares contained in this
registration statement. The percentages were based on an aggregate of 36,502,875
shares of common stock outstanding as of March 31, 2000. The absence of an entry
indicates the shares amount to less than one percent of our fully diluted common
stock.
<TABLE>
<CAPTION>
RELATION TOTAL
NAME TO US SHARES PERCENT
---- -------- --------- -------
<S> <C> <C> <C>
ACM Strategic Investment 224,200
ACM Technology Hedge Fund 135,100
Acorn USA 350,000
AIG Soundshore Opportunity Holding Fund Ltd. 35,750
AIG Soundshore Holdings Ltd. 111,125
AIG Soundshore Strategic Holding Fund Ltd. 19,792
AIM VI Capital Development Fund 8,612
AIM Capital Development Fund 824,712 2.26%
Alliance Technology Partners, LP 40,700
Ardsley Institutional Fund, L.P. 175,000
Ardsley Partners Fund I, L.P. 165,000
Ardsley Partners Fund II, L.P. 235,000
Ardsley Offshore Fund Ltd. 275,000
Bald Eagle Fund, Ltd 29,900
Barnstorm & Co. 54,000
Bricoleur Partners, LP 254,000
C.E. Unterberg, Towbin Capital Partners I, L.P. 74,990
Cascade Capital Partners, LP 585,000 1.60%
Coutts & Co. 6,900
Dorado Capital Partners LP 100,000
Endeavor Asset Management, L.P. 166,667
Finwell & Co. 166,000
Firestar Trust Co. 166,667
Gerlach & Co. 13,000
Gryphon Offshore Fund 114,000
</TABLE>
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<TABLE>
<CAPTION>
RELATION TOTAL
NAME TO US SHARES PERCENT
---- -------- --------- -------
<S> <C> <C> <C>
Guilder Gagnon Howe & Co. LLC 166,667
Hammerhead & Co. 80,000
HH Managed Account 1, Ltd. 150,000
Irvine Capital Partners, L.P. 100,000
Irvine Capital Partners II, L.P. 16,670
J.I.B. Associates, Ltd. 46,000
Job & Company, LP 51,000
Kahn Capital Partners LP 350,000
Kensington Partners II L.P. 7,667
Kensington Partners L.P. 129,100
Kimberlite Partners L.P. 33,333
Landwatch & Co. 172,000
Libra Offshore Fund Ltd. 33,333
Libra Fund, LP 133,334
MAS Funds Small Cap Value Portfolio 628,900 1.72%
MSDW SICAV Global Small Cap Equity Fund 9,600
MSDW SICAV Small Cap Value Equity Fund 41,500
Pantheon Partners L.P. 133,334
Pitt & Co. 95,000
Shottenfeld Assoc. LP 250,000
SunAmerica Inc. 333,334
Tarp & Co. 60,000
Tiedemann Investment Group 166,667
TSG Financial Limited Partnership 336,198
UT Capital Partners International, LDC 33,340
UT Technology Partners, LDC 133,330
Van Kampen American Value Fund 563,100 1.54%
Wanger US Small Cap Advisor 350,000
Westcoast & Co. 235,000
Westcore Small Cap Growth Fund 166,667
Zeke, LP 166,667
</TABLE>
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<TABLE>
<CAPTION>
RELATION TOTAL
NAME TO US SHARES PERCENT
---- -------- --------- -------
<S> <C> <C> <C>
C. J. and Florence Adams 100
Gerald and Gay Adams 500
Mark and Patricia Adams 250
Michael E. Austin Consultant 2,000
Larry Awalt Employee 1,500
Dr. Clifton Barnhart 15,000
Roy Barrientes Employee 1,000
Emma Barrientos Employee 1,000
Rainer Bischoff 2,388
Shane Black Employee 500
Sandra Boesch Employee 3,000
Lauro Bustamante Employee 1,500
Scott Cannon Employee 1,000
Peter Cantu Employee 1,000
Blandina Cardenas Director 5,000
Ernesto Chavarria Director 75,000
Michael A. Chavez Employee 8,000
Susan Cloutier Employee 1,500
Crumble, Ltd. S.A. 800,000 2.19%
Charles W. and Priscilla L. Cupp 2,500
Christina DeLeon Employee 750
Mary Dietze 5,000
Cornelius Dornier 150,000
David Dornier 30,000
Gabriele Dornier 150,863
Matthia Dornier 100,576
Silvius Dornier 380,000 1.04%
Herman Ebel 191,094
Neil Edwards Employee 3,500
Entrepreneurial Investors, Ltd. 5,843,582 16.00%
Equity Services, Ltd. 82,529
</TABLE>
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<TABLE>
<CAPTION>
RELATION TOTAL
NAME TO US SHARES PERCENT
---- -------- --------- -------
<S> <C> <C> <C>
Matt Evans Employee 8,000
Donna Gandy Consultant 1,500
Jim Haren Employee 1,500
Helmut Heinzel 80,576
Thomas Heinzel 70,576
Abel Herrerra Employee 100
Duffy Hobbs Employee 800
Stephen J. Hoelscher Employee 12,700
Michael Jahr 60,576
Fred Kettrick 1,330
Steve Laird Employee 1,000
Robert Loera Employee 5,000
Maria Lopez Employee 1,000
Marie Louissaint Consultant 2,000
Mary K. Marlatt Employee 3,500
Jesus Martines Employee 1,000
Ricardo Martinez Employee 500
Norm Mendeke 3,000
Jaime Munoz Former Officer 4,500
Lisa Nieri Employee 4,500
David Painter Employee 1,500
Stephen Pampush 10,058
Beula Mae Pearce 2,500
Jim Pearce 3,000
Luana Pearce, Trustee of Luana Pearce Trust 15,000
Peninsular Corp. 50,288
Pinecrest Associates, Inc. (1) 418,020 1.14%
Dave Pistorius 7,000
Richard Ray Employee 2,500
Joseph Rodrigues Employee 2,500
Nydia Rojas Employee 1,000
</TABLE>
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<TABLE>
<CAPTION>
RELATION TOTAL
NAME TO US SHARES PERCENT
---- -------- --------- -------
<S> <C> <C> <C>
Paul Samaripa Employee 6,000
Beatrice Schaefer 104,144
Heinz Schmitz 85,076
Fred Shelton 1,500
Tamara Shiplet Employee 2,500
Iona Smith Employee 1,000
John Stockton 3,500
Floyd Tate 3
Trisha Truong Employee 3,000
Ventura Investments, Ltd. 800,000 2.19%
Vesta Holdings, S.A. 800,000 2.19%
Todd Wagner Employee 2,000
Peter Widenmann 10,058
Heinz C. Winzeler 590,000 1.61%
Linda Wolf Employee 500
Dick Young Employee 2,000
----------
TOTAL 20,551,793
----------
</TABLE>
(1) This number consists of 120,000 shares of common stock and 298,020 shares of
common stock issuable upon the exercise of options.
The following summarizes who has voting and investment control over the
shares held by several of the selling shareholders. The shareholder is named in
a heading followed by an explanation of who has either sole or shared voting and
investment control over the shares.
ACM STRATEGIC INVESTMENT
ACM TECHNOLOGY HEDGE FUND
ALLIANCE TECHNOLOGY PARTNERS, L.P.
Gerald Malone and Peter Anastos have shared voting and investment
control over the shares held by these shareholders.
ACORN USA
WANGER U.S. SMALL CAP ADVISOR
Wanger Asset Management, L.P. has voting and investment control over
the shares held by these shareholders.
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AIG SOUNDSHORE HOLDINGS, LTD.
AIG SOUNDSHORE OPPORTUNITY HOLDING FUND LTD.
AIG SOUNDSHORE STRATEGIC HOLDING FUND LTD.
AIG International Management Company, Inc. is the investment manager of
these shareholders. AIG International Management Company, Inc. delegated its
portfolio management services to Basso Securities Ltd. Howard I. Fischer,
president of Basso Securities, Ltd., has voting and investment control over the
shares held by these shareholders.
AIM VI CAPITAL DEVELOPMENT FUND
AIM CAPITAL DEVELOPMENT FUND
AIM VI Capital Development Fund and AIM Capital Development Fund are
mutual funds and public reporting companies.
ARDSLEY OFFSHORE FUND, LTD.
ARDSLEY PARTNERS FUND I, L.P.
ARDSLEY PARTNERS FUND II, L.P.
ARDSLEY INSTITUTIONAL FUND, L.P.
HH MANAGED ACCOUNT 1, LTD.
Philip J. Hempleman has voting and investment control over the shares
held by these shareholders. Philip J. Hempleman is managing general partner of
Ardsley Advisory Partners, the investment advisor for these shareholders.
KENSINGTON PARTNERS, L.P.
KENSINGTON PARTNERS L.P.
KENSINGTON PARTNERS II, L.P.
BALD EAGLE FUND LTD.
Grainne M. Coen and Richard J. Keim, partners of Kensington Partners,
L.P., the investment advisor for these shareholders, have shared voting and
investment control over their shares.
BRICOLEUR PARTNERS, L.P.
J.I.B. ASSOCIATES, LTD.
Bricoleur Capital Management, LLC owns these shareholders. Bob Poole,
Dain Winsatt, and Rick Hornbuckle, partners of Bricoleur Capital Management,
LLC, have shared voting and investment control over the shares held by these
shareholders.
C.E. UNTERBERG TOWBIN CAPITAL PARTNERS I, L.P.
UTCM LLC, the general partner of C.E. Unterberg Towbin Capital Partners
I, L.P., has voting and investment control over its shares.
CASCADE CAPITAL PARTNERS, LP
GRYPHON OFFSHORE FUND
JOB & COMPANY LP
Joseph E. Sweeney, III, manager of Gryphon Capital Management, LLC, has
voting and investment control over the shares held by these shareholders.
Gryphon Capital Management, LLC is:
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o the general partner of Cascade Capital Partners, LP,
o the director of Gryphon Offshore Fund, and
o the investment manager of Job & Company LP.
MAS FUNDS SMALL CAP VALUE PORTFOLIO
VAN KAMPEN AMERICAN VALUE FUND
MSDW SICAV SMALL CAP VALUE EQUITY FUND
MSDW SICAV GLOBAL SMALL CAP EQUITY FUND
COUTTS & CO.
Miller Anderson & Sherrerd, LLP, is the investment manager for these
shareholders. Gary G. Schlarbaum, a managing partner of Miller Anderson &
Sherrerd, LLP, has voting and investment control over their shares.
DORADO CAPITAL PARTNERS, L.P.
Gregory D. Parise, the general partner of Dorado Capital Partners, LP,
has voting and investment control over its shares.
ENDEAVOR ASSET MANAGEMENT, L.P.
Patrick Tully, Mark Fain and Chad Comiteau have shared voting and
investment control over the shares held by Endeavor Asset Management, L.P.
BARNSTORM & CO.
FINWELL & CO.
GERLACH & CO.
HAMMERHEAD & CO.
LANDWATCH & CO.
PITT & CO
TARP & CO.
WESTCOAST & CO.
Wellington Management Company, L.L.P. has voting and investment control
over the shares held by these shareholders.
FIRESTAR TRUST CO.
Peter B. Doyle, Steven Tuen and Fred A. Froewiss have shared voting and
investment control over the shares held by Firestar Trust Co.
GUILDER GAGNON HOWE & CO. LLC
Walter J. Weadock and John Colton have shared voting and investment
control over the shares held by Guilder Gagnon Howe & Co. LLC.
IRVINE CAPITAL PARTNERS, L.P.
IRVINE CAPITAL PARTNERS II, L.P.
David Bunzel has voting and investment control over the shares held by
these shareholders.
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KAHN CAPITAL PARTNERS, LP
Brian Kahn, the fund manager of Kahn Capital Partners, LP, has voting
and investment control over its shares.
KIMBERLITE PARTNERS, L.P.
PANTHEON PARTNERS, L.P.
Kelly Pam, partner of Kimberlite Partners, L.P. and general partner of
Pantheon Partners, L.P., has voting and investment control over their shares.
LIBRA OFFSHORE FUND, LTD.
LIBRA FUND, L.P.
Ranjan Tandon, director of Libra Offshore Fund, Ltd. and general
partner of Libra Fund, L.P., has voting and investment control over their
shares.
SCHOTTENFELD ASSOCIATES, L.P.
Richard Schottenfeld, president of Schottenfeld Associates, LP's
general partner, Winchester Holdings, has voting and investment control over its
shares.
SUNAMERICA, INC.
SunAmerica Inc. is a wholly owned subsidiary of American International
Group, Inc., a public reporting company.
TIEDMANN INVESTMENT GROUP
Carl H. Tiedmann, Hans Tiedmann, George Boltres, Barbara Warga Navatil,
Laurie Jelenex, partners of Tiedmann Investment Group, have shared voting and
investment control over its shares.
TSG FINANCIAL LIMITED PARTNERS
John Gorman, president of TSG Financial Limited Partner's general
partner, TSG Investments, Inc., has voting and investment control over its
shares.
UT TECHNOLOGY PARTNERS, LDC
UT CAPITAL PARTNERS INTERNATIONAL, LDC
CPI Holdings LDC, majority shareholder of these shareholders, has
voting and investment control over their shares.
WESTCORE SMALL CAP GROWTH FUND
Denver Investment Advisors, investment advisor for Westcore Small Cap
Growth Fund, has voting and investment control over its shares.
ZEKE LP
Ed Antoian, president of Zeke LP's general partner, Zeke GP, Inc., has
voting and investment control over its shares.
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<PAGE> 17
CRUMBLE, LTD. SA
Dr. Urs Schaefer has voting and investment control over the shares held
by Crumble, Ltd. SA.
ENTREPRENEURIAL INVESTORS, LTD.
Robert E. Cordes has voting and investment control over the shares held
by Entrepreneurial Investors, Ltd.
EQUITY SERVICES, LTD.
Lynn Turnquest has voting and investment control over the shares held
by Equity Services, Ltd.
PENINSULAR CORP.
Robert E. Cordes, Peninsular Corp.'s president, has voting and
investment control over its shares.
PINECREST ASSOCIATES, INC.
Sylvia G. Seymour, president, has voting and investment control over
its shares.
VENTURA INVESTMENTS LTD.
Michael Schnezier has voting and investment control over the shares
held by Ventura Investments Ltd.
VESTA HOLDINGS, SA
Ernst Kuhn has voting and investment control over the shares held by
Vesta Holdings, SA.
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PLAN OF DISTRIBUTION
The shares of common stock being offered by the selling shareholders
will be sold in one or more transactions on the Over-The-Counter Bulletin Board
or on any other market on which the common stock may be trading. The
transactions may include block transactions. The shares may be sold in any of
the following manners:
o privately negotiated transactions
o through the writing of options on the shares of common stock
o short sales
o any combination of private transactions, writing options or
short sales.
The sale price to the public may be the market price prevailing at the
time of sale, a price related to the prevailing market price or any other price
the selling shareholder determines. The shares of common stock may also be sold
under Rule 144. The selling shareholder will have the sole and absolute
discretion not to accept any purchase offer or make any sale of shares if they
believe the purchase price to be unsatisfactory at any particular time.
The selling shareholders may also sell the shares directly to market
makers acting as principals or broker-dealers acting as agents for themselves or
their customers. Brokers acting as agents for the selling shareholders will
receive usual and customary commissions for brokerage transactions. Market
makers and block purchasers purchasing shares will do so for their own account
and at their own risk. It is possible that the selling shareholders will attempt
to sell shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. There
can be no assurance that any of the shares will be sold by the selling
shareholders. After completing the sale of any of the shares offered by the
selling shareholders, the selling shareholders and any brokers, dealers or
agents may be underwriters.
If we are notified of any material arrangement by a selling shareholder
with a broker or dealer for the sale of shares through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, a supplemental prospectus will be filed, if required, under
Rule 424(c) of the Securities Act. If filed, the supplemental prospectus will
disclose:
o the name of each broker-dealer involved in the arrangement
o the number of shares involved
o the price at which shares were sold
o any commissions paid or discounts or concessions allowed to
each broker-dealer
o that each broker-dealer did not conduct any investigation to
verify the information presented or incorporated by reference
in this document, as supplemented
o other facts material to the transaction.
The selling shareholders and any other persons participating in the
sale or distribution of the shares will be subject to applicable provisions of
the Exchange Act and its rules and regulations. The Exchange Act and its rules
and regulations may limit the timing of purchases and sales of any of the
shares, which may affect the marketability of the shares.
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<PAGE> 19
Each of the selling shareholders in the following list is an affiliate
of a registered broker or dealer and has assured us that they acquired the
shares in the ordinary course of their business and that they did not have an
agreement or understanding, directly or indirectly, with any person to
distribute the shares at the time the shares were acquired:
AIM Capital Development Fund
AIM VI Capital Development Fund
Alliance Technology Partners, L.P.
ACM Strat Investment
ACM Technology Hedge Fund
Guilder Gagnon Howe & Co. LLC
Firestar Trust Co.
Coutts & Co.
MAS Funds Small Cap Value Portfolio
MSDW SICAV Small Cap Value Equity Fund
MSDW SICAV Global Small Cap Equity Fund
Van Kampen American Value Fund
Kimberlite Partners L.P.
Pantheon Partners L.P.
SunAmerica Inc.
TSG Financial Limited Partnership
UT Capital Partners International, LDC
UT Technology Partners, LDC
C.E. Unterberg, Towbin Capital Partners I, L.P.
Acorn USA
Wanger US. Small Cap Advisor
We have agreed to indemnify the selling shareholders, or their
transferees or assignees, against liabilities under the Securities Act, or to
contribute to payments the selling shareholders may be required to make for
liabilities under the Securities Act.
We are bearing all costs relating to the registration of the shares,
other than fees and expenses, if any, of counsel or other advisers to the
selling shareholders. Any commissions, discounts or other fees payable to
broker-dealers with any sale of the shares will be paid by the selling
shareholders.
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<PAGE> 20
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. No shares of preferred stock are outstanding and the board of
directors has no intention or plan to issue preferred stock.
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 shareholders, including elections of directors. 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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<PAGE> 21
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 document, 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 Preliminary proxy statement on Schedule 14A, filed with the
SEC on June 9, 2000, file number 000-08164
o Annual report on Form 10-KSB for the year ended March 31, 2000
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, 2000
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 receiving this document, 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 East 7th Street
Austin, Texas 78702
Attn: Robert J. Gibbs
Telephone: (512) 476-6925
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
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<PAGE> 22
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 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 9,502,856 of the shares offered by this document has
been passed upon for us by Parr Waddoups Brown Gee & Loveless P.C. of Salt Lake
City, Utah.
The validity of 11,048,937 of the shares offered by this document has
been passed upon for us by Vial, Hamilton, Koch & Knox, L.L.P. of Dallas, Texas.
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<PAGE> 23
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our annual report on Form 10-KSB for the years
ended March 31, 1999 and March 31, 2000, 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 represented 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
Brown, Graham and Company, P.C.'s report, given on their authority as experts in
accounting and auditing.
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<PAGE> 24
You should rely on the information contained in this document. We have not
authorized anyone to provide you with information different from that contained
in this document. The statements and representations contained in this document
are true and correct as of the date indicated on the coverage page. The delivery
of this document does not, under any circumstances, create the implication that
there has been no change since that date. This document is not an offer to sell
or a solicitation of an offer to buy any securities other than those securities
to which the document relates. Moreover, this document does not constitute an
offer to sell or a solicitation of an offer to buy in any circumstances in which
an offer or solicitation is unlawful.
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Table of Contents
<TABLE>
<CAPTION>
Page
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<S> <C>
Risk Factors......................................... 2
Use of Proceeds...................................... 8
Selling Shareholders................................. 9
Plan of Distribution.................................18
The Securities Offered...............................20
Where You Can Find More Information..................21
Indemnification......................................21
Legal Matters........................................22
Experts..............................................23
</TABLE>
20,551,793
MSI HOLDINGS, INC.
Common Stock
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PROSPECTUS
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