<PAGE> 1
As Filed with the Securities and Exchange Commission on February 4, 2000
Registration No. 333-92413
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3; AMENDMENT NO. 1
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 I.R.S. Employer
incorporation or organization area code, of registrant's principal executive offices Identification Number
----------------------------- ------------------------------------------------------------ ---------------------
UTAH MSI HOLDINGS, INC. 87-0280886
501 WALLER STREET
AUSTIN, TEXAS 78702
(512) 476-6925
Name, address, including zip code, and telephone number,
including area code, of agent for service With a copy to:
----------------------------------------- ---------------
ROBERT J. GIBBS GARY L. WOOLFOLK
501 WALLER STREET VIAL HAMILTON, KOCH & KNOX, L.L.P.
AUSTIN, TEXAS 78702 1717 MAIN STREET, SUITE 4400
(512) 476-6925 DALLAS, TEXAS 75201
(214) 712-4344
</TABLE>
Approximate date of commencement of proposed sale to the public
---------------------------------------------------------------
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registrations statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Title of each class of Amount to be Proposed maximum unit Proposed maximum Amount of
securities to be registered registered offering price aggregate offering price registration fee
- --------------------------- -------------- --------------------- ------------------------ ------------------
<S> <C> <C> <C> <C>
Common stock
$0.10 par value (1) 3,054,720 (2) $8.00 (3) $17,924,640 (4) $4,983.05 (5)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
(1) Such securities have been registered for issuance by the
registrant on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, as amended.
(2) Consists of 2,894,7230 shares previously covered by the original
filing and 160,000 shares added pursuant to this Amendment No. 1.
(3) Estimated solely for the purpose of computing the amount of
registration fee in accordance with Rule 457(c) promulgated under
the Securities Act.
(4) Consists of $16,644,640 previously set forth in the original
filing plus $1,280,000 calculated for purpose of this Amendment
No. 1 at $8.00 (the closing price on January 21, 2000).
(5) A wire transfer of $4,627.21 was previously submitted in
connection with the original filing. Remittance for the balance of
$355.84 has been sent by wire transfer.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE> 3
SUBJECT TO COMPLETION, DATED FEBRUARY 4, 2000
PROSPECTUS
MSI HOLDINGS, INC.
501 Waller Street
Austin, Texas 78702
(512) 476-6925
3,054,720 SHARES OF COMMON STOCK
The shares of common stock of MSI Holdings, Inc., covered by this
prospectus are offered by the shareholders listed under 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 OFFERING
<TABLE>
- ------------------------------------------------------
<S> <C>
Number of shares 3,054,720
Price as of Jan. 21, 2000 $8.00
Aggregate offering price $17,924,640
- ------------------------------------------------------
</TABLE>
We will bear all of the cost of preparing and printing the registration
statement, prospectus and any prospectus supplements and all filing fees and
legal and accounting expenses associated with registration under federal and
state securities laws, which are estimated at $60,000.
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 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
, 2000
<PAGE> 4
Additional information, including "Risk Factors" and our financial
statements for the year ended March 31, 1999 and notes to the financial
statements, is incorporated in to this prospectus by reference to our Form
10-KSB/A filed with the SEC. You are urged to read this prospectus and the
10-KSB/A in their entirety. All references to 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 most current
annual report filed with the SEC on Form 10-KSB/A 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 more remote 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, 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;
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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.
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 September 30, 1999, our accumulated deficit was
approximately $27.1 million. Approximately $16 million of the deficit relates to
losses from operations, while the remaining $11.1 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.
WE HAVE A GOING CONCERN QUALIFICATION CONTAINED IN OUR AUDITORS'
REPORTS INDICATING A POSSIBILITY THAT WE WILL BE UNABLE TO ACHIEVE
PROFITABILITY OR MAINTAIN OPERATIONS.
The auditors' reports relating to our audited balance sheets as of
March 31, 1999 and 1998 and the related consolidated statements of operations,
shareholders' equity and cash flows for the years then ended each contain an
explanatory paragraph regarding our ability to continue as a going concern. Such
going concern explanation relates only to our financial statements covered by
the auditors' reports. In short, if we continue to experience operating losses
we will be unable to continue operations.
IF WE ARE UNABLE TO MANAGE COMPLICATIONS THAT ARISE DURING THE BUILD
OUT OF ADDITIONAL DATA CENTERS, WE MAY NOT SUCCEED IN OUR EXPANSION
PLANS.
We are planning to build out up to 15 new data centers across a wide
range of geographic regions. 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:
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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.
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 management team during calendar year 1999, are no
longer with us. We have a new management team that has not had the opportunity
to work together in the past. There is no assurance the new management team will
be able to successfully lead us into profitability. The following table
identifies the new members of our management team and those who are no longer
with us.
ARRIVALS
[/R]
<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>
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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 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
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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.
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.
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THE MARKET FOR OUR PRODUCTS AND SERVICES IS HIGHLY COMPETITIVE, AND WE
MAY NOT BE ABLE TO COMPETE EFFECTIVELY.
The market for 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.
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.
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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 September 30, 1999, our current directors and executive
officers owned approximately 1.48% of the outstanding shares of our common
stock. Also as of September 30, 1999, Entrepreneurial Investors, Ltd. owned
approximately 25.36% 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 4,561,500 shares or 19.7% of the
outstanding shares of our common stock as of September 30, 1999. These persons
have recently settled litigation with us and may oppose management.
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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 September 30,
1999, we had 23,135,083 shares of common stock outstanding. The following table
illustrates the shares of common stock eligible for future sale if all of the
preferred shares were converted to their common stock equivalents and all
outstanding warrants and options were exercised.
<TABLE>
<CAPTION>
Fully Diluted %
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<S> <C> <C>
Total Shares 29,612,037 100.00
Eligible for Future Sale 10,760,166 36.34
Subject to Rule 144 restrictions 18,851,871 63.66
</TABLE>
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock offered by this prospectus until the options granted in connection with
the placement of the series E preferred shares and the common stock private
placement and the warrants granted to consultants for services rendered are
exercised. As of November 30, 1999, we have received $81,500 in proceeds from
the exercise of some of the warrants, the underlying shares of which are being
registered in this registration statement. If all the remaining warrants and
options whose underlying shares are being registered are exercised, we will
receive net proceeds of up to $405,453, for a total aggregate of up to $486,953.
The exercise price received by us from issuance of the shares of common stock
underlying the warrants will be used for general corporate purposes. In
addition, we will not receive any proceeds from the sale of the shares of common
stock included in this registration statement that were issued to employees and
consultants for services rendered.
PRICE RANGE OF COMMON STOCK
The table below reflects the high and low closing sale price of our
common stock for the periods indicated, as reported by the OTC Bulletin Board.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- ------------- ---------- ----------
<S> <C> <C>
December 31, 1996 .................................... $ 2.00 $ 0.0625
March 31, 1997 ....................................... 2.00 0.25
June 30, 1997 ........................................ 2.00 0.125
September 30, 1997 ................................... 2.25 0.50
December 31, 1997 .................................... 3.50 0.50
March 31, 1998 ....................................... 2.56 1.75
June 30, 1998 ........................................ 9.03 2.37
September 30, 1998 ................................... 12.87 4.06
December 31, 1998 .................................... 7.75 6.0625
March 31, 1999 ....................................... 10.75 3.25
June 30, 1999 ........................................ 10.75 4.187
September 30, 1999 ................................... 7.00 3.75
December 31, 1999 .................................... 7.562 3.937
</TABLE>
On January 21, 2000, the closing sale price for a share of our common
stock, as reported on the OTC Bulletin Board, was $8.00. See "Risk Factors - We
have a limited market for our common stock, and our stock price is volatile."
SELLING SHAREHOLDERS
The following table lists the ownership of the common stock included in
this registration statement, assuming conversion of the series E preferred stock
and assuming the exercise of the
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warrants and options covered by the shares contained in this registration
statement. Percentage ownership calculations are based upon the 23,135,083
shares of common stock outstanding as of September 30, 1999. Unless otherwise
indicated, the Total Shares reflected are comprised of shares issued upon
conversion of series E preferred stock or acquired in the private placement.
<TABLE>
<CAPTION>
NAME RELATION TO MSHI TOTAL SHARES PERCENT
---- ---------------- ------------ -------
<S> <C> <C> <C>
Rainer Bischoff 80,000
Cornelius Dornier 65,000
Daniel Dornier (1) director 80,000
David Dornier 50,000
Gabrielle Dornier 30,000
Silvius Dornier 100,000
Graf Von Hardenberg 100,000
Andreas Preuschoff 10,000
Rainer Doerflinger 15,000
Greenwich AG (2) 603,340 2.61%
Frank C. Erwin 30,000
Will B. Houston (3) 20,000
James E. Thorp (4) 593,666 2.57%
Edward R. Coleman 10,000
Jim Troxel 100,000
G. Robert Barker 5,000
Beatrice Schaefer 100,000
Heinz Winzeler 120,840
Equity Services, Ltd. (5) 181,674
Pinecrest Associates, Inc.(6) 150,000
Panther Consulting, Inc. (7) 150,000
Peninsular Corp. (8) 50,000
Jaime Munoz (9) former officer 44,000
Tejas Holdings, Inc.(10) consultant 33,000
Capital Solutions, Inc. (11) consultant 1,200
Ronnie D. Henry (12) consultant 25,000
Carolyn S. Henry (12) consultant 10,000
Randall N. Williamson (12) consultant 5,000
Benjamin A. Siddons (12) consultant 5,000
Austex Enterprises (13) consultant 5,000
Hemisphere Trading Co. (14) 69,500
Terama Company Limited (15) 50,000
Amador DeLeon, Jr. (16) former employee 2,500
MMH Investment, Inc. (17) consultant 150,000
Robert Hersch (18) officer 10,000
</TABLE>
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(1) Consists of: (a) 79,950 shares of common stock issued upon
conversion of 7,995 shares of series E preferred; and (b) 50
shares of common stock issuable upon conversion of 5 shares of
series E preferred.
(2) Greenwich AG is a German corporation. Rainer Bischoff is its
chief executive officer.
(3) Consists of: (a) 10,000 shares of common stock acquired in the
private placement; and (b) 10,000 shares of common stock
issuable upon conversion of 1,000 shares of series E
preferred.
(4) Consists of: (a) 543,666 shares of common stock acquired in
the private placement; and (b) 50,000 shares of common stock
issuable upon conversion of 5,000 shares of series E
preferred.
(5) Equity Services Ltd. is owned by four foreign corporations.
Ms. Lynn Turnquest is ESL's managing director. Consists of:
(a) 65,840 shares of common stock issued upon conversion of
6,584 shares of series E preferred issued as placement agent
shares; (b) 65,834 shares of common stock covering the
placement agent's options granted in connection with the
placement of the series E preferred; (c) 22,500 shares of
common stock issued as placement agent shares in connection
with the private placement; (d) 22,500 shares of common stock
covering the placement agent's options granted in connection
with the private placement; and (e) 5,000 shares covering
options granted to the placement agent in connection with the
placement of the series D preferred.
(6) Sylvia Seymour is Pinecrest's president.
(7) D.A. Kent is Panther's president.
(8) Penninsular is a Nevis corporation. Robert E. Cordes is
Penninsular's president.
(9) Consists of 44,000 shares previously issued to Mr. Munoz, a
former officer of ours.
(10) Consists of 33,000 shares issued for consulting services. Mike
Hale is the president and chief executive officer of Tejas
Holding.
(11) Consists of 1,200 shares previously issued for consulting
services. Michael King is the president and chief executive
officer of Capital Solutions.
(12) Consist of 50,000 shares of common stock issued upon the
exercise of the warrants granted to Henry & Associates, a
consultant, for services rendered.
(13) Austex Enterprises a Texas partnership. Its general partner is
Stara Corp and Stara's president is Stephen R. Smith.
(14) Consists of: (a) 62,500 shares of common stock issued upon
conversion of 6,250 shares of series E preferred; and (b)
7,000 shares of common stock purchased from another
shareholder in a private transaction. Hemisphere is a Liberian
corporation and Robert E. Cordes is its president.
(15) Consists of 50,000 shares acquired from and previously issued
to Phoenix Energy Partners in satisfaction of an
over-subscription for the series D preferred stock. D. A. Kent
is Terama's president.
-12-
<PAGE> 15
(16) Consists of 2,500 shares issued to a former employee in
settlement of a dispute over compensation for services
rendered.
(17) Consists of 150,000 shares of common stock previously issued
to a consultant for services rendered. Robert Hersch is MMH's
president.
(18) Consists of 10,000 shares of common stock to Robert Hersch,
one of our officers, for services rendered.
-13-
<PAGE> 16
PLAN OF DISTRIBUTION
The shares of common stock may be offered and sold from time to time by
the selling shareholders, or by pledges, donees, transferees or other successors
in interest. We have no control over the selling shareholders in making their
decisions regarding the offer, sale or transfer of their shares at prices
related to the then current market price or in negotiated transactions. The
shares may be sold by the selling shareholders in one or more transactions at
the then prevailing market prices or in privately negotiated transactions. The
shares may be sold by one or more of the following methods:
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o purchases and resale by a broker-dealer for its account under
this prospectus;
o private sales; and
o block trades in which the broker-dealer so engaged will
attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the
transaction.
We have not been advised by the selling shareholders that they have, as
of the date of this prospectus, made any arrangements relating to the
distribution of the shares covered by this prospectus. In effecting sales,
broker-dealers engaged by the selling shareholders may arrange for other
broker-dealers to participate, and, in such case, broker-dealers may receive
commissions or discounts from the selling shareholders in amounts to be
negotiated immediately before sale.
In offering the shares, the selling shareholders and any broker-dealers
and any other participating broker-dealers who execute sales for the selling
shareholders may be deemed to be underwriters within the meaning of the
Securities Act, i.e. someone who acquired shares from us or an affiliate of ours
with a view towards distributing the shares to the public, in connection with
such sales. Since these individuals may be deemed underwriters, any profits
realized by the selling shareholders and the compensation of such broker-dealer
may be deemed to be underwriting discounts and commissions. Any shares covered
by this prospectus which qualify for sale under Rule 144 may be sold under Rule
144 rather than under this prospectus.
THE SECURITIES OFFERED
We are authorized to issue up to 50,000,000 shares of common stock, and
up to 10,000,000 shares of preferred stock. As of September 30, 1999, there were
23,135,083 shares of common stock outstanding and 25,015 shares of preferred
stock outstanding. The following is a summary of some of the rights of
stockholders 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
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
-14-
<PAGE> 17
As a holder of our common stock you will have one vote per share on all
matters voted on by stockholders, including elections of directors. Unless
required by law or provided in any resolution adopted by the board of directors
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.
-15-
<PAGE> 18
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.
501 Waller Street
Austin, Texas 78702
Attn: Robert J. Gibbs
Telephone: (512) 476-6925
-16-
<PAGE> 19
INDEMNIFICATION
Our revised articles of incorporation state that we may indemnify each
of our directors, officers, employees, or agents to the full extent permitted by
the laws of the state of Utah. In summary, the Utah Revised Business Corporation
Act:
o authorizes any corporation to indemnify directors and officers
against any judgments, fines, amounts paid in settlement and
reasonable expenses, including attorney's fees, incurred by
reason of his having been a corporate director or officer;
o confers on the director or officer an absolute right to
indemnification for expenses, including attorney's fees,
actually and reasonably incurred to the extent he is
successful on the merits or 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 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.
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
-17-
<PAGE> 20
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the shares offered by this prospectus has been passed
upon for us by Vial, Hamilton, Koch & Knox, L.L.P., Dallas, Texas.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our annual report on Form 10-KSB/A for the year
ended March 31, 1999, as represented in their report which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Ernst
& Young LLP'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 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.
-18-
<PAGE> 21
You should rely on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The statements and representations contained
within this prospectus are true and correct as of the date indicated on the
cover page. The delivery of this prospectus does not, under any circumstances,
create the implication that there has been no change since that date. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
securities other than those registered securities to which the prospectus
relates. Moreover, this prospectus does not constitute an offer to sell or a
solicitation of an offer to buy in any circumstances in which such an offer or
solicitation is unlawful.
-----------------
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk Factors 2
Use of Proceeds 10
Price Range of Common Stock 10
Selling Shareholders 10
Plan of Distribution 14
The Securities Offered 14
Where You Can Find More Information 16
Indemnification 17
Legal Matters 18
Experts 18
</TABLE>
3,054,720 Shares
MSI HOLDINGS, INC.
Common Stock
-----------------
PROSPECTUS
-----------------
<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses payable by us in
connection with the sale and distribution of the securities being registered.
All amounts are estimates except the SEC registration fee.
<TABLE>
<S> <C>
Filing Fee-Securities and Exchange Commission........................ $ 5,000
Accountants' Fees and Expenses....................................... $ 20,000
Fees and Expenses of Counsel for the Registrant...................... $ 20,000
Printing and Communication Expenses.................................. $ 10,000
Blue Sky Fees and Expenses........................................... $ 3,500
Miscellaneous Expenses............................................... $ 1,500
---------
Total....................................................... $ 60,000
=========
</TABLE>
The selling security holders are bearing no portion of the expenses of
the offering pursuant to agreement.
ITEM 15. Indemnification of Directors and Officers.
The registrant's revised articles of incorporation and by-laws permit
the registrant to indemnify its directors and officers to the fullest extent
authorized under the Utah Business Corporation Act ("UBCA"). In general, a Utah
corporation may indemnify a director or officer who was, is or is threatened to
be made, a named defendant or respondent in a proceeding by virtue of his
position in the corporation if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, in the case of criminal proceedings, had no reasonable cause
to believe his conduct was unlawful. A Utah corporation may indemnify a
director, officer, employee, or agent ("fiduciary") in an action brought by or
in the right of the corporation only if such fiduciary was not found liable to
the corporation, unless or only to the extent that a court finds him to be
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions (set forth in Item 14
above), or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE> 23
ITEM 16. Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION LOCATION
- ----------- ------------------- --------
<S> <C> <C>
4 Specimen of Securities(1) Incorporated by reference to Exhibit Nos. 1A and 1B
of Registrant's Form 8-A Registration Statement
(File #0-8146)
4.1 Certificate of Designation for Series E Incorporated by reference to Form 10-QSB/A filed
Preferred Shares (1) November 12, 1998, for the period ended June 30,
1998
4.2 Amendment to the Certificate of Designation for Incorporated by reference to Form 10-QSB filed
Series E Preferred Shares (1) August 16, 1999, for the period ended June 30,
1999
5 Legal Opinion of Vial, Hamilton, Koch & Knox,
L.L.P.(3)
23.1 Consent of Ernst & Young, L.L.P.(2) Exhibit 23.1
23.2 Consent of Brown, Graham and Company, P.C.(2) Exhibit 23.2
23.3 Consent of Vial, Hamilton, Koch & Knox, Exhibit 23.3
L.L.P.(2)
</TABLE>
- -----------------------
(1) Previously filed with the Securities and Exchange Commission and
incorporated by reference pursuant to Rule 12b-32 of the Securities
Exchange Act of 1934.
(2) Filed herewith.
(3) To be filed by amendment.
ITEM 17. Undertakings.
The Undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered in that post-effective amendment, and the offering of those
securities at that time shall be deemed to be the initial bona fide
offering of those securities.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
<PAGE> 24
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Austin,
State of Texas, on January 24, 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 January 24, 2000
/s/ Douglas W. Banister Vice President and
- ------------------------------- Chief Financial Officer January 24, 2000
Douglas W. Banister
/s/
- -------------------------------
Chris Brickler Director January 24, 2000
- -------------------------------
Blandina Cardenas Director January 24, 2000
- -------------------------------
Ernesto Chavarria Director January 24, 2000
/s/ Daniel Dornier
- -------------------------------
Daniel Dornier Director January 24, 2000
/s/ Steve Metzger
- -------------------------------
Steve Metzger Director January 24, 2000
/s/ Humbert B. Powell, III
- -------------------------------
Humbert B. Powell, III Director January 24, 2000
/s/ Davinder Sethi
- -------------------------------
Davinder Sethi Director January 24, 2000
</TABLE>
<PAGE> 25
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)
4.1 Certificate of Designation for Series E Incorporated by reference to Form 10-QSB/A filed
Preferred Shares (1) November 12, 1998, for the period ended June 30,
1998
4.2 Amendment to the Certificate of Designation for Incorporated by reference to Form 10-QSB filed
Series E Preferred Shares (1) August 16, 1999, for the period ended June 30,
1999
5 Legal Opinion of Vial, Hamilton, Koch & Knox,
L.L.P.(3)
23.1 Consent of Ernst & Young, L.L.P.(2) Exhibit 23.1
23.2 Consent of Brown, Graham and Company, P.C.(2) Exhibit 23.2
23.3 Consent of Vial, Hamilton, Koch & Knox, Exhibit 23.3
L.L.P.(2)
</TABLE>
- -----------------------
(1) Previously filed with the Securities and Exchange Commission and
incorporated by reference pursuant to Rule 12b-32 of the Securities
Exchange Act of 1934.
(2) Filed herewith.
(3) To be filed by amendment.
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
registration statement amendment number 1 (Form S-3) and related prospectus of
MSI Holdings, Inc. for the registration of 3,054,720 shares of its common stock
and to the incorporation by reference therein of our report dated September 28,
1999, with respect to the consolidated financial statements and schedules of MSI
Holdings, Inc. included in its Annual Report (Form 10-K) for the year ended
March 31, 1999, filed with the Securities and Exchange Commission.
/s/ Ernst & Young, L.L.P.
- ------------------------------
Ernst & Young, L.L.P.
Austin, Texas
January 31, 2000
<PAGE> 1
Exhibit 23.2
CONSENT OF BROWN, GRAHAM AND COMPANY, P.C.
To the Board of Directors of MSI Holdings, Inc., a Utah corporation:
We consent to the use of our report, incorporated by reference herein, dated
June 9, 1998, as restated on September 24, 1999, and to the reference to our
firm under the heading "Experts" in the registration statement amendment number
1 on Form S-3 for the above named company.
/s/ Brown, Graham and Company, P.C.
- --------------------------------------
Brown, Graham and Company, P.C.
Georgetown, Texas
January 28, 2000
<PAGE> 1
Exhibit 23.3
To the Board of Directors of MSI Holdings, Inc.
We consent to the use of our name under the heading Legal Matters in
the registration statement amendment number 1 on form S-3 for the above named
company.
Vial, Hamilton, Koch & Knox, L.L.P.
/s/ Gary Woolfolk
Dallas, Texas
February 3, 2000
