<PAGE> 1
As Filed with the Securities and Exchange Commission on March 3, 2000
Registration No. _________
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
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 EAST 7TH STREET
AUSTIN, TEXAS 78702
(512) 476-6925
Name, address, including zip code, and telephone number, including With a copy to:
area code, of agent for service ---------------
------------------------------- JEFFREY A. CHAPMAN
ROBERT J. GIBBS VINSON & ELKINS L.L.P.
1121 EAST 7TH STREET 3700 TRAMMELL CROW CENTER
AUSTIN, TEXAS 78702 2001 ROSS AVENUE
(512) 476-6925 DALLAS, TX 75201
(214) 220-7797
</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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each class of Amount to Proposed maximum Proposed maximum Amount of
securities to be registered be registered unit offering price aggregate offering price registration fee
- --------------------------- ------------- ------------------- ------------------------ ----------------
<S> <C> <C> <C> <C>
Common stock
$0.10 par value(1) 9,502,865 $21.125(2) $200,748,023 $52,998
</TABLE>
(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.
(2) Estimated solely for the purpose of computing the amount of
registration fee in accordance with Rule 457(c) promulgated under the
Securities Act. The proposed maximum unit offering price is the average
of the high and low prices quoted on February 28, 2000.
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> 2
SUBJECT TO COMPLETION, DATED MARCH 3, 2000
PROSPECTUS
MSI HOLDINGS, INC.
1121 East 7th Street
Austin, Texas 78702
(512) 476-6925
9,502,865 SHARES OF COMMON STOCK
The shares of common stock of MSI Holdings, Inc., covered by this
prospectus are offered by the shareholders listed under the heading "Selling
Shareholders." We will not receive any of the proceeds from the shares offered
by the selling shareholders.
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.
The selling shareholders may sell their shares from time to time
through or to brokers or dealers, or directly to investors, at a fixed price or
prices, which may be changed from time to time, at market prices prevailing at
the time of such sale, at prices related to such market prices, or at negotiated
prices. In connection with any sales, distributors' or sellers' commissions may
be paid or allowed. We have agreed to pay the registration expenses related to
the sale of shares by the selling shareholders. All other expenses relating to
the sale of the shares by the selling shareholders will be paid by the selling
shareholders.
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 OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------------
, 2000
<PAGE> 3
Additional information and our financial statements for the year ended
March 31, 1999 and notes to the financial statements is incorporated in this
prospectus by reference to our reports filed with the SEC. See "Where You Can
Find More Information." You are urged to read this prospectus and our SEC
reports in their entirety. All references to the "Company," "MSHI," "we," "us,"
and "our," mean MSI Holdings, Inc., and its subsidiaries.
RISK FACTORS
In addition to the other information in this prospectus, you should
carefully consider the following factors in evaluating us and our business
before purchasing the shares of common stock offered by this prospectus. You
should not participate in the offering unless you can afford a complete loss of
your investment. The discussions in this prospectus and in our reports filed
with the SEC contain forward-looking statements that involve risks and
uncertainties. Our actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to a difference in our actual results are discussed below.
Additionally, further discussion of these risk factors and other risks may be
found 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, incorporated into this prospectus by reference.
RISKS RELATED TO OUR BUSINESS
WE ARE OPERATING UNDER AN UNPROVEN BUSINESS MODEL. DEMAND FOR OUR
PRODUCTS MAY FAIL TO MATERIALIZE AT THE ANTICIPATED LEVELS, ADVERSELY
AFFECTING OUR PERFORMANCE.
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. Given the relative novelty of our products and services, there is
limited data available on which to base a reliable forecast. There is no
assurance that we will be successful in developing the market for our products
and services. We deliver our products and services through:
o Internet connectivity - High speed direct Internet connections and
data transport with a usage-based billing system;
o Broadband co-location and web-hosting - data center facilities for
hosting customer web sites on our servers and housing customer
owned servers;
o Broadband webcasting - production and webcasting services for
audio-video broadcasting over the Internet; o Private label
Internet service providers - Internet services and connectivity
branded with an organization's logo;
o Digital subscriber lines - Digital subscriber lines services for
our Internet service provider customers to offer their end-users;
and
o Private portals - Web sites and extranets for online virtual
communities.
-2-
<PAGE> 4
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.
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 $32.2 million. Approximately $19.8 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.
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. The build out of data centers, each of which takes
approximately 30 to 90 days to complete, is a key element of our business
strategy. 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 obtaining sites;
o cost estimation errors or overruns;
o equipment and material delays or shortages; and
o the inability to obtain necessary permits on a timely basis, if at
all.
-3-
<PAGE> 5
WE MAY BE UNABLE TO EFFECTIVELY INTEGRATE ADDITIONAL DATA CENTERS INTO
OUR EXISTING NETWORK, WHICH COULD DISRUPT OUR SERVICE.
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. The following expenses are representative of the new
operating expenses we anticipate incurring in connection with developing new
data centers:
o hiring, training, retaining and managing new employees;
o purchasing new equipment and implementing new systems; and
o leasing additional real estate.
WE HAVE HAD RECENT CHANGES IN MANAGEMENT AND CAN NOT ACCURATELY PREDICT
CURRENT MANAGEMENT'S EFFECTIVENESS.
Several member of our calendar year 1999 management team 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. The following table identifies the
new members of our management team and those who are no longer with us.
ARRIVALS
<TABLE>
<CAPTION>
NAME POSITION
- ---- ---------
<S> <C>
Robert Gibbs president and chief executive officer
Robert Frank executive vice president
Patricia Hrabina vice president of human resources
Douglas W. Banister chief financial officer and vice president of finance
Robert Hersch vice president of corporate finance
Cliff Luckey chief technology officer and vice president of
technology & solutions
</TABLE>
DEPARTURES
<TABLE>
<CAPTION>
NAME FORMER POSITION
- ---- ---------------
<S> <C>
Jose Chavez president and chief executive officer
Mitchell Kettrick vice president - technology and secretary
Jaime Munoz vice president of operations
Roger M. Lane chief operating officer
David Hill chief financial officer
</TABLE>
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 we
-4-
<PAGE> 6
compete has a high level of employee mobility and aggressive recruiting of
skilled personnel. In particular, 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. There can be no assurances that we will
be successful in our recruiting or retention efforts.
WE MAY BE SUBJECT TO INFRINGEMENT CLAIMS THAT COULD MATERIALLY
ADVERSELY AFFECT US.
Our management personnel were previously employees of and may have had
contracts with other telecommunications companies. In many cases, these
individuals are conducting 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. If such claims materialize, they 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 with
certain third parties to utilize their 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. Although we have not
previously experience any system failures, we have implemented security measures
that meet the standards adopted by BBN, the GTE division credited with
pioneering the Internet. However, our network and computer systems could still
be vulnerable to computer viruses, intrusions, or breaches of security that
might result in service interruptions. 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.
-5-
<PAGE> 7
RISKS RELATED TO OUR INDUSTRY
OUR BUSINESS IS DEPENDENT ON THE CONTINUED GROWTH OF THE INTERNET,
WHICH MAY FACE RESISTANCE FROM THE MARKETPLACE.
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.
Despite growing interest in the varied commercial uses of the Internet,
many businesses have been deterred from purchasing Internet connectivity
services for a number of reasons, including:
o inconsistent or unreliable quality of service;
o lack of availability of cost-effective, high-speed options;
o inability to integrate business applications on the Internet; and
o the need to deal with multiple and frequently incompatible vendors.
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. Our
services are not currently directly regulated by any federal or state agency.
However, many of the facilities and services we need to provide Internet
connectivity are subject to regulation at the federal, state and local levels.
Changes in applicable laws or regulations could impact our operations, and
impact our costs, service requirements and the scope of competition. Incumbent
local carriers, like Bell Atlantic and Southwestern Bell, are likely to pursue
litigation in courts, institute administrative proceedings with the FCC and
state telecommunications regulators and lobby the U.S. Congress in an effort 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.
-6-
<PAGE> 8
DIGITAL SUBSCRIBER LINE SERVICES ARE NEW AND EVOLVING AND WE CANNOT
PREDICT WHETHER THEY WILL BE 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, if at all, or whether new or increased competition will result in
market saturation. Any of these factors could result in a reduction of demand
for our products and a corresponding reduction in 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. We strive to protect ourselves and our
customers from such intrusions and from exposure to liability from a security
breach. However, these actions could occur in the future. To date we have not
experienced any security breaches nor are we aware of any attempts to penetrate
our network security. 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 have no effective voice in
our management. As of January 31, 2000, our current directors and executive
officers owned approximately 2.4% of the outstanding shares of our common stock.
Also as of January 31, 2000, Entrepreneurial Investors, Ltd. owned approximately
19.8% of the outstanding shares of our common stock.
These persons and entities may continue to exert significant influence
over our business and affairs. Accordingly, these shareholders 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. Such shareholders 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.
Additionally, Messrs. Chavez, Kettrick and Munoz, who were terminated
by us on April 20, 1999, hold an aggregate of 4,057,750 shares or 15.2% of the
outstanding shares of our common stock
-7-
<PAGE> 9
as of January 31, 2000. These persons have recently settled litigation with us
and may oppose management.
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 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.
YOU 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.
THE SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY
AFFECT OUR STOCK PRICE.
Sales in the public market of substantial amounts of common stock or
the perception that such sales may occur 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 January 31,
2000, we had 26,628,587 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 32,154,016 100.0
Eligible for Future Sale 17,557,095 54.6
Subject to Rule 144 Restrictions 14,596,921 45.4
</TABLE>
-8-
<PAGE> 10
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock offered pursuant to this prospectus.
-9-
<PAGE> 11
SELLING SHAREHOLDERS
The following table lists the ownership of the common stock offered by
means of this prospectus, assuming the exercise of the warrants and options
covering shares offered by means of this prospectus.
<TABLE>
<CAPTION>
RELATION
NAME TO US TOTAL SHARES PERCENT (+)
- ---- ----- ------------ -----------
<S> <C> <C> <C>
Guilder Gagnon Howe & Co. LLC 166,667
Kahn Capital Partners LP 350,000
Dorado Capital Partners LP 100,000
Bricoleur Partners 240,000
JIB 46,000
Aaces 14,000
SunAmerica Inc. 333,334
Ardsley Offshore Fund Ltd. 275,000
Ardsley Partners Fund II, L.P. 235,000
Ardsley Institutional Fund, L.P. 175,000
Ardsley Partners Fund I, L.P. 165,000
HH Managed Account 1, Ltd. 150,000
AIM Capital Dev. Fund 824,712
AIM VI Capital Dev. Fund 8,612
Acorn USA Fund 350,000
Wanger US Small Cap Advisor 350,000
C.E. Unterberg, Towbin Capital Partners I, L.P. 74,990
UT Technology Partners, LDC 133,330
UT Capital Partners International, LDC 33,340
Irvine Capital Partners, L.P. 100,000
Irvine Capital Partners II, L.P. 16,670
Endeavor Asset Management 166,667
Chartwell Investment Partners 166,667
Kensington Partners L.P. 129,100
Kensington Partners II L.P. 7,667
Bald Eagle Fund, Ltd 29,900
Firestar Trust Co. 166,667
Libra Fund 133,334
Libra Offshore Fund Ltd. 33,333
Tiedeman Investment Group 166,667
Pantheon Partners L.P. 133,334
Kimberlite Partners L.P. 33,333
MAS Funds Small Cap Value Portfolio 628,900
Van Kampen American Value Fund 563,100
MSDW SICAV Small Cap Value Equity Fund 41,500
MSDW SICAV Global Small Cap Equity Fund 9,600
Coutts & Co. 6,900
Shottenfeld Assoc. LP 250,000
AIG Soundshore Holdings Ltd. 111,125
AIG Soundshore Opportunity Holding Fund Ltd. 35,750
</TABLE>
-10-
<PAGE> 12
<TABLE>
<CAPTION>
RELATION
NAME TO US TOTAL SHARES PERCENT (+)
- ---- ----- ------------ -----------
<S> <C> <C> <C>
AIG Soundshore Strategic Holding Fund Ltd. 19,792
Westcore Small Cap Growth Fund 166,667
Cascade Capital Partners 585,000
Gryphon Offshore Fund 114,000
Job & Company 51,000
ACM Strategic Investments 224,200
ACM Technology Hedge FD 135,100
Alliance Technology Partners 40,700
Pitt & Co. 95,000
Hammerhead & Co. 80,000
Tarp & Co. 60,000
Westcoast & Co. 235,000
Finwell & Co. 166,000
Landwatch & Co. 172,000
Gerlach & Co. 13,000
Barnstorm & Co. 54,000
TSG Financial Limited Partnership 336,198
----------
TOTAL 9,502,865
==========
</TABLE>
(+) The calculations used to drive the percentages assume exercise and
conversion of all warrants and conversion rights into the underlying shares of
Common Stock. Consequently, the percentages were based on an aggregate of
41,520,683 shares of Common Stock outstanding. The absence of an entry indicates
the shares amount to less than one percent of the Company's full diluted Common
Stock.
-11-
<PAGE> 13
PLAN OF DISTRIBUTION
The shares of common stock being offered by the selling shareholders or
their respective pledgees, donees, transferees or other successors in interest,
will be sold in one or more transactions (which may involve block transactions)
on the NASD Over-The-Counter Bulletin Board or on such other market on which the
common stock may from time to time be trading, in privately negotiated
transactions, through the writing of options on the shares of common stock,
short sales or any combination thereof. The sale price to the public may be the
market price prevailing at the time of sale, a price related to such prevailing
market price or such other price as the selling shareholder determines from time
to time. The shares of common stock may also be sold pursuant to 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 deem the purchase price to be
unsatisfactory at any particular time.
The selling shareholders or their respective pledgees, donees, transferee
or other successors in interest, may also sell the Shares directly to market
makers acting as principals and/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, and 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 with all or any of the shares
offered hereby will be issued to, or sold by, the selling shareholders. The
selling shareholders and any brokers, dealers or agents, upon effecting the sale
of any of the shares offered hereby, may be deemed "underwriters" as that term
is defined under the Securities Act or the Exchange Act, or the rules and
regulations thereunder.
Upon the Company being notified by a selling shareholder that any material
arrangement has been entered into 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, pursuant to Rule 424(c) under the Securities Act,
disclosing (a) the name of each such broker-dealer, (b) the number of shares
involved, (c) the price at which such shares were sold, (d) the commissions paid
or discounts or concessions allowed to such broker-dealer(s), where applicable,
(e) that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated be reference in this document, as
supplemented, and (f) 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 the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the shares by the selling
shareholders or any other such person. The foregoing may affect the
marketability of the shares.
We have agreed to indemnify the selling shareholders, or their transferees
or assignees, against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the selling shareholders or their
respective pledgees, donees, transferees or other successors in interest, may be
required to make in respect thereof.
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 in connection with any sale of the shares will be borne by the
selling shareholders.
-12-
<PAGE> 14
DESCRIPTION OF SECURITIES
We are authorized to issue up to 50,000,000 shares of common stock, and
up to 10,000,000 shares of preferred stock.
COMMON STOCK
As of January 31, 2000, there were 26,628,587 shares of common stock
outstanding. The following is a summary of some of the rights of shareholders
that might be important to you. You should refer to our articles of
incorporation and bylaws for a complete statement of your rights as a
shareholder. Both the articles of incorporation and the bylaws are filed with
the SEC as an exhibit to our registration statement, of which this prospectus is
a part.
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. Unless
required by law or provided in any resolution adopted by the board of directors
regarding any series of preferred stock, only holders of our common stock have
voting rights. The articles of incorporation do not provide for cumulative
voting, i.e. 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.
PREFERRED STOCK
The board of directors has the authority to cause us to issue, without
further vote or action by the stockholders, up to 10,000,000 shares of preferred
stock, in one or more series, and to designate the number of shares constituting
any series, and to fix the rights, preferences, privileges and restrictions of
the preferred stock. The issuance of preferred stock may have the effect of
delaying, deferring or preventing a change in control of us without further
action by our stockholders. The issuance of preferred stock with conversion
rights may adversely affect the voting power of the holders of common stock,
including the loss of voting control.
-13-
<PAGE> 15
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 East 7th Street
Austin, Texas 78702
Attn: Robert J. Gibbs
Telephone: (512) 476-6925
INDEMNIFICATION
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. 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
-14-
<PAGE> 16
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 in an action
brought by or in the right of the corporation only if he 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, 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.
LEGAL MATTERS
The validity of the shares offered by this prospectus has been passed
upon for us by Parr Waddoups Brown Gee & Loveless P.C. of Salt Lake City, Utah.
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 represented 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.
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
-15-
<PAGE> 17
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.
-16-
<PAGE> 18
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 coverage 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.
-----------------
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk Factors......................................................2
Use of Proceeds...................................................9
Selling Shareholders.............................................10
Plan of Distribution.............................................12
Description of Securities........................................13
Where You Can Find More Information..............................14
Indemnification..................................................14
Legal Matters....................................................15
Experts..........................................................15
</TABLE>
9,502,865 Shares
MSI HOLDINGS, INC.
Common Stock
-----------------
PROSPECTUS
-----------------
<PAGE> 19
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.
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 otherwise 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 upon receipt of
an undertaking by or on behalf of such director or officer to
reimburse the corporation, if it is ultimately determined that
he is not entitled to be indemnified by the corporation or to
the extent the advances exceed the indemnification to which
that officer or director is entitled; and
o recognizes that a director or officer may be entitled to
additional indemnification
11-1
<PAGE> 20
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 deemed to have 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.
ITEM 16. Exhibits
EXHIBIT NO. EXHIBIT DESCRIPTION LOCATION
- ----------- ------------------- --------
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)
5 Legal Opinion of Parr Waddoups
Brown Gee & Loveless P.C.(3)
23.1 Consent of Ernst & Young LLP(2) Exhibit 23.1
23.2 Consent of Brown, Graham and Exhibit 23.2
Company, P.C.(2)
23.3 Consent of Parr Waddoups Brown Exhibit 23.3
Gee & Loveless P.C.(3)
- ------------------
(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:
II-2
<PAGE> 21
(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 in which remain unsold at the termination of the
offering.
(4) 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, 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.
II-3
<PAGE> 22
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has responsible 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 3, 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 3, 2000
Vice President and
/s/ DOUGLAS W. BANISTER Chief Financial Officer March 3, 2000
- ------------------------------------------
Douglas W. Banister
- ------------------------------------------
Chris Brickler Director March 3, 2000
- ------------------------------------------
Blandina Cardenas Director March 3, 2000
- ------------------------------------------
Ernesto Chavarria Director March 3, 2000
/s/ DANIEL DORNIER
- ------------------------------------------
Daniel Dornier Director March 3, 2000
/s/ STEVE METZGER
- ------------------------------------------
Steve Metzger Director March 3, 2000
</TABLE>
11-4
<PAGE> 23
<TABLE>
<S> <C> <C>
/s/ HUMBERT B. POWELL, III
- ------------------------------------------
Humbert B. Powell, III Director March 3, 2000
/s/ DAVINDER SETHI
- ------------------------------------------
Davinder Sethi Director March 3, 2000
</TABLE>
11-5
<PAGE> 24
INDEX TO 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)
5 Legal Opinion of Parr Waddoups
Brown Gee & Loveless P.C.(3)
23.1 Consent of Ernst & Young LLP(2) Exhibit 23.1
23.2 Consent of Brown, Graham and Exhibit 23.2
Company, P.C.(2)
23.3 Consent of Parr Waddoups Brown Exhibit 23.3
Gee & Loveless P.C.(3)
</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 (Form S-3) and related prospectus of MSI Holdings,
Inc. for the registration of 9,502,865 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
Austin, Texas
February 29, 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 on Form S-3
for the above named company.
/s/ BROWN, GRAHAM AND COMPANY, P.C.
Georgetown, Texas
March 3, 2000
