As filed with the Securities and Exchange Commission on October 16, 2001
Registration Statement No. 333-69752
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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MICROSTRATEGY INCORPORATED
(Exact name of registrant as specified in its charter)
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Delaware 51-0323571
(State or other jurisdiction of incorporation or
organization) (I.R.S. Employer Identification No.)
1861 International Drive
McLean, Virginia 22102
(703) 848-8600
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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Mr. Michael J. Saylor
Chief Executive Officer
MicroStrategy Incorporated
1861 International Drive
McLean, Virginia 22102
(703) 848-8600
Copy to:
Thomas S. Ward, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
(617) 526-6000
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Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
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. [_] 333- .
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
registration statement number of the earlier effective registration statement
for the same offering. [_] 333- .
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities or accept an offer to buy these securities until +
+the registration statement filed with the Securities and Exchange Commission +
+is effective. This prospectus is not an offer to sell these securities and it +
+is not soliciting an offer to buy these securities in any state where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, dated October 16, 2001
PROSPECTUS
MICROSTRATEGY INCORPORATED
3,500,000 Shares of Class A Common Stock
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The shares of class A common stock described in this prospectus consist of
3,500,000 shares of class A common stock issued to the selling stockholders in
exchange for their shares of series A preferred stock of our subsidiary,
Strategy.com Incorporated.
The selling stockholders may sell the shares of common stock at various times
and in various types of transactions, including sales in the open market, sales
in negotiated transactions and sales by a combination of these methods. Shares
may be sold at the market price of the common stock at the time of a sale, at
prices relating to the market price over a period of time, or at prices
negotiated with the buyers of shares. More detailed information concerning the
distribution of the shares is contained in the section of this prospectus
entitled "Plan of Distribution" which begins on page 16.
The selling stockholders will pay all brokerage fees and commissions and
similar sale-related expenses. We are paying expenses relating to the
registration of the shares with the Securities and Exchange Commission. We have
also agreed to indemnify the selling stockholders against various liabilities.
We will not receive any of the proceeds from the sale of the shares.
We have filed a registration statement for the resale of 25,563,896 shares of
class A common stock by various selling stockholders, which were issued in
exchange for our series A preferred stock or are issuable upon conversion of or
as dividends on our series B preferred stock, series C preferred stock, series
D preferred stock and series E preferred stock. These 25,563,896 shares are not
offered by means of this prospectus. These shares may be sold by the selling
stockholders from time to time, including concurrently with the offering made
pursuant to this prospectus.
The selling stockholders, or their pledgees, donees, transferees or other
successors in interest, may offer the shares through public or private
transactions at prevailing market prices, at prices related to prevailing
market prices or at privately negotiated prices. Our class A common stock is
traded on the Nasdaq National Market under the symbol "MSTR." On October 15,
2001, the closing sale price of our class A common stock on Nasdaq was $2.098
per share.
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Investing in our class A common stock involves a high degree of risk. See
"Risk Factors" beginning on page 5.
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The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities or determined whether this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is , 2001.
TABLE OF CONTENTS
Page
----
Where to Find More Information............................................. 3
Incorporation of Certain Documents By Reference............................ 3
Special Note Regarding Forward-Looking Information......................... 4
Business................................................................... 4
Risk Factors............................................................... 5
Use of Proceeds............................................................ 15
Selling Stockholders....................................................... 15
Plan of Distribution....................................................... 16
Legal Matters.............................................................. 18
Experts.................................................................... 18
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We have not authorized anyone to provide you with information different from
that contained or incorporated by reference in this prospectus. The selling
stockholder is offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of
any sale of the shares.
2
WHERE TO FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and other
documents with the Securities and Exchange Commission (the "SEC"). You may
read and copy any document we file at the SEC's public reference room at
Judiciary Plaza Building, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. You should call 1-800-SEC-0330 for more information on the public
reference room. Our SEC filings are also available to you on the SEC's
Internet site at http://www.sec.gov. Our common stock is quoted on Nasdaq.
Reports, proxy statements and other information concerning MicroStrategy may
be inspected at the offices of The Nasdaq Stock Market, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
This prospectus is part of a registration statement that we filed with the
SEC. The registration statement contains more information than this prospectus
regarding MicroStrategy and the common stock, including certain exhibits and
schedules. You can obtain a copy of the registration statement from the SEC at
the address listed above or from its Internet site.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate" into this prospectus information we file
with the SEC in other documents. This means that we can disclose important
information to you by referring to other documents that contain that
information. The information incorporated by reference is considered to be
part of this prospectus, and information that we file with the SEC in the
future and incorporate by reference will automatically update and may
supersede the information contained in this prospectus. 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, as amended (the "Exchange Act"), prior to the sale of all the shares
covered by this prospectus.
The following documents that we have filed with the SEC are incorporated
herein by reference:
(1) Our Annual Report on Form 10-K for the year ended December 31, 2000,
as amended;
(2) Our Current Report on Form 8-K filed February 7, 2001;
(3) Our Current Report on Form 8-K filed February 15, 2001;
(4) Our Current Report on Form 8-K filed March 9, 2001;
(5) Our Current Report on Form 8-K filed April 4, 2001;
(6) Our Current Report on Form 8-K filed May 2, 2001;
(7) Our Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2001;
(8) Our Current Report on Form 8-K filed June 18, 2001;
(9) Our Current Report on Form 8-K filed June 20, 2001;
(10) Our Current Report on Form 8-K filed July 6, 2001;
(11) Our Current Report on Form 8-K filed August 7, 2001;
(12) Our Quarterly Report on Form 10-Q for the quarterly period ended June
30, 2001;
(13) Our Current Report on Form 8-K filed September 4, 2001;
(14) Our Current Report on Form 8-K filed October 1, 2001;
(15) Our Current Report on Form 8-K filed October 15, 2001;
(16) All of our filings pursuant to the Exchange Act after the date of
filing the initial registration statement and prior to effectiveness
of the registration statement; and
(17) The description of our class A common stock contained in our
Registration Statement on Form 8-A, including any amendments or
reports filed for the purpose of updating such description.
You may request a copy of these documents, at no cost, by writing to:
MicroStrategy Incorporated
1861 International Drive
McLean, Virginia 22102
Attention: Investor Relations
Telephone: (703) 848-8600
3
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus contains or incorporates forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Exchange Act. You can identify these
forward-looking statements by our use of the words "believes," "anticipates,"
"plans," "expects," "may," "will," "intends," "estimates" and similar
expressions, whether in the negative or affirmative. Although we believe that
these forward-looking statements reasonably reflect our plans, intentions and
expectations, we cannot guarantee that we actually will achieve these plans,
intentions or expectations. Our actual results could differ materially from
the plans, intentions and expectations disclosed in the forward-looking
statements we make. We have included important factors in the cautionary
statements below (particularly under the heading "Risk Factors") that we
believe could cause our actual results to differ materially from the forward-
looking statements that we make. We do not intend to update information
contained in any forward-looking statement we make.
BUSINESS
We are a leading worldwide provider of business intelligence software and
related services that enable the transaction of one-to-one electronic business
through web, wireless and voice communication channels. Our product line
enables both proactive and interactive delivery of information from large-
scale databases. Our objective is to provide businesses with a software
platform to develop solutions that deliver insight and intelligence to their
enterprises, customers and supply-chain partners.
Our software platform enables users to query and analyze the most detailed,
transaction-level databases, turning data into business intelligence. In
addition to supporting internal enterprise users, the platform delivers
critical business information beyond corporate boundaries to customers,
partners and supply-chain constituencies through a broad range of
communication channels such as the Internet, e-mail, telephone and wireless
communication devices. Our platform is designed for developing business
intelligence solutions that are personalized and proactive and that reach
millions of users. We offer a comprehensive set of consulting, education and
technical support services for our customers and partners.
Our principal corporate offices are located in McLean, Virginia. We also
maintain domestic sales offices throughout the United States and international
sales offices throughout Europe, South America and the Asia-Pacific region.
International sales accounted for 24.9%, 24.0% and 26.1% of our total revenues
in 2000, 1999 and 1998, respectively.
In July 1999, we launched a new business unit called Strategy.com, offering
a hosted messaging platform enabling third party content providers to offer
their customers highly personalized, timely information services through e-
mail, telephone and wireless devices. In August 2001, Strategy.com became a
wholly-owned subsidiary of MicroStrategy. In September 2001, MicroStrategy
determined that it would significantly reduce operations at Strategy.com and
eliminate Strategy.com's sales, marketing and research and development
efforts.
MicroStrategy's executive offices are located at 1861 International Drive,
McLean, Virginia 22102, its telephone number is (703) 848-8600 and its website
is located at http://www.microstrategy.com. MicroStrategy(R) is a registered
trademark of MicroStrategy.
4
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of our class A common stock could decline and you
may lose all or part of your investment.
We have experienced losses in the past and expect future losses through at
least the end of 2001
We have not achieved profitability and have incurred significant operating
losses in each of the last five years. We incurred net losses of $53.9 million
in the six months ended June 30, 2001 and $261.3 million, $33.7 million and
$2.3 million in the years ended December 31, 2000, 1999 and 1998,
respectively. As of June 30, 2001, our accumulated deficit was $353.1 million.
We expect our gross revenue to decline from the fiscal year ended December 31,
2000 to the fiscal year ending December 31, 2001. In connection with our April
2001 corporate restructuring and the additional Strategy.com restructurings in
April and May 2001, we recorded restructuring and impairment charges in the
second quarter of 2001 of $43.1 million.
We expect that we will not achieve sufficient revenue to become profitable
through at least the end of 2001. Even if we do achieve profitability, we
cannot assure you that we can sustain or increase profitability on a quarterly
or annual basis in the future. If revenue grows more slowly than we
anticipate, or if operating expenses exceed our expectations or cannot be
adjusted accordingly, our business, results of operations and financial
condition will be materially and adversely affected.
Our quarterly operating results, revenues and expenses may fluctuate
significantly, which could have an adverse effect on the market price of our
stock
For a number of reasons, including those described below, our operating
results, revenues and expenses may vary significantly from quarter to quarter.
These fluctuations could have an adverse effect on the market price of our
class A common stock.
Fluctuations in Quarterly Operating Results. Our quarterly operating results
may fluctuate as a result of:
. the size, timing and execution of significant orders and shipments;
. the mix of products and services of customer orders, which can affect
whether we recognize revenue upon the signing and delivery of our
software products or whether revenue must be recognized as work
progresses or over the entire contract period;
. the timing of new product announcements;
. changes in our pricing policies or those of our competitors;
. market acceptance of business intelligence software generally and of new
and enhanced versions of our products in particular;
. the length of our sales cycles;
. changes in our operating expenses;
. personnel changes;
. our success in adding to our indirect distribution channels;
. utilization of our consulting personnel, which can be affected by delays
or deferrals of customer implementation of our software products and
consulting, education and support services;
. changes in foreign currency exchange rates; and
. seasonal factors, such as our traditionally lower pace of new sales in
the summer.
5
Limited Ability to Adjust Expenses. We base our operating expense budgets on
expected revenue trends. Many of our expenses, such as office and equipment
leases, are relatively fixed. We may be unable to adjust spending quickly
enough to offset any unexpected revenue shortfall. Accordingly, any shortfall
in revenue may cause significant variation in operating results in any
quarter.
Based on the above factors, we believe that quarter-to-quarter comparisons
of our operating results are not a good indication of our future performance.
It is possible that in one or more future quarters, our operating results may
be below the expectations of public market analysts and investors. In that
event, the trading price of our class A common stock may fall.
We may lose sales, or sales may be delayed, due to the long sales and
implementation cycles for our products, which would reduce our revenues
To date, our customers have typically invested substantial time, money and
other resources and involved many people in the decision to license our
software products and purchase our consulting and other services. As a result,
we may wait nine months or more after the first contact with a customer for
that customer to place an order while they seek internal approval for the
purchase of our products and/or services. During this long sales cycle, events
may occur that affect the size or timing of the order or even cause it to be
canceled. For example, our competitors may introduce new products, or the
customer's own budget and purchasing priorities may change.
Even after an order is placed, the time it takes to deploy our products and
complete consulting engagements varies widely from one customer to the next.
Implementing our product can sometimes last several months, depending on the
customer's needs and may begin only with a pilot program. It may be difficult
to deploy our products if the customer has complicated deployment
requirements, which typically involve integrating databases, hardware and
software from different vendors. If a customer hires a third party to deploy
our products, we cannot be sure that our products will be deployed
successfully.
Our employees, investors, customers, vendors and lenders may react adversely
to the revision of our 1999, 1998 and 1997 revenues and operating results
Our future success depends in large part on the support of our key
employees, investors, customers, vendors and lenders, who may react adversely
to the revision of our 1999, 1998 and 1997 revenues and operating results. The
revision of our 1999, 1998 and 1997 revenues and operating results has
resulted in substantial amounts of negative publicity about us and we believe
that this publicity has caused some of our potential customers to defer
purchases of our software or to do business with other vendors. We may not be
able to retain key employees and customers if they lose confidence in us, and
our vendors and lenders may reexamine their willingness to do business with
us. In addition, investors may lose confidence, which may cause the trading
price of our class A common stock to decrease. If we lose the services of our
key employees or are unable to retain and attract our existing and new
customers, vendors and lenders, our business, operating results and financial
condition could be materially and adversely affected.
Our recognition of deferred revenue is subject to future performance
obligations and may not be representative of actual revenues for succeeding
periods
Our deferred revenue was approximately $70.5 million as of June 30, 2001.
The timing and ultimate recognition of our deferred revenue depend on our
performance of various service obligations. Because of the possibility of
customer changes in development schedules, delays in implementation and
development efforts and the need to satisfactorily perform product support
services, deferred revenue at any particular date may not be representative of
actual revenue for any succeeding period.
We may need additional financing which could be difficult to obtain
We may require additional external financing through credit facilities, sale
of additional debt or equity securities in MicroStrategy or by obtaining other
financing facilities to support our operations, as we expect to
6
incur operating losses through at least the third quarter of 2001 and possibly
longer. Obtaining additional financing will be subject to a number of factors,
including:
. market conditions;
. our operating performance; and
. investor sentiment.
These factors may make the timing, amount, terms and conditions of
additional financing unattractive to us. If we are unable to raise capital
needed to fund our operations, our business, operating results and financial
condition may be materially and adversely affected.
We face litigation that could have a material adverse effect on our business,
financial condition and results of operations
We and certain of our directors and executive officers are named as
defendants in a private securities class action lawsuit and a shareholder
derivative lawsuit relating to the restatement of our 1999, 1998 and 1997
financial results. Although we have entered into agreements to settle such
lawsuits and the settlements have received court approval, both settlements
are subject to various closing conditions. If the agreed upon settlements are
not consummated, it is possible that we may be required to pay substantial
damages or settlement costs which could have a material adverse effect on our
financial condition or results of operation. Regardless of the outcome of
these matters, it is likely that we will incur substantial defense costs and
that these actions may cause a diversion of management time and attention.
The issuance of class A common stock as part of the proposed settlement of
class action litigation and the exercise of warrants or conversion of notes
issued as part of the litigation settlement could result in a substantial
number of additional shares of class A common stock being issued
The agreements we entered into to settle the private securities class action
lawsuit and the derivative suit relating to the restatement of our 1999, 1998
and 1997 financial results require us to issue to members of the class
2,777,778 shares of class A common stock. At the time of that issuance, some
of our officers will tender to us for no consideration 1,683,502 shares of
class A common stock for cancellation, resulting in a net issuance of
1,094,276 shares of class A common stock. In addition, the settlement
agreements require the issuance of warrants to purchase 1,900,000 shares of
class A common stock and five-year unsecured subordinated promissory notes
having an aggregate principal amount of $80.5 million. We would have the
option at any time prior to the expiration of the five-year term of the notes
to convert the notes into a number of shares of class A common stock equal to
the principal amount of the notes being converted divided by 80% of the dollar
volume-weighted average trading price of the class A common stock over a ten-
day period preceding our delivery of a notice of conversion, which could
result in a substantial number of shares of class A common stock being issued.
For example, if the conversion price of the notes were based on the dollar
volume-weighted average trading price of the class A common stock during the
10 trading days ending October 1, 2001, we would be obligated to issue
65,243,468 shares of class A common stock if we elected to convert the notes.
The issuance of a substantial number of shares of class A common stock as part
of the litigation settlement and future exercises or conversions of securities
issued in the litigation settlement may result in substantial dilution to the
interests of holders of class A common stock and may result in downward
pressure on the price of our class A common stock.
The conversion of the shares of our preferred stock could result in
substantial numbers of additional shares of class A common stock being issued
if our market price declines during periods in which the conversion price of
the preferred stock may adjust
On June 14, 2001, holders of our series A preferred stock exchanged 11,850
shares of series A preferred stock for cash and shares of our class A common
stock, series B preferred stock, series C preferred stock, series D preferred
stock and series E preferred stock. On September 10, 2001, we redeemed all 630
outstanding shares of series E preferred stock. The series B preferred stock,
series C preferred stock and
7
series D preferred stock are convertible into shares of our class A common
stock at conversion prices currently equal to $12.50, $17.50 and $5.00 per
share, respectively. The outstanding shares of series B preferred stock,
series C preferred stock and series D preferred stock would currently convert
into 7,492,200 shares of class A common stock, plus a number of shares
reflecting accrued but unpaid dividends as of the conversion date. However, if
the holders of the series B preferred stock and series C preferred stock do
not convert their shares into shares of class A common stock prior to their
maturity three years from the date of issuance, and if we do not redeem their
outstanding shares of series B preferred stock and series C preferred stock at
maturity, the conversion price for such shares will be reset to a price equal
to 95% of the dollar volume-weighted average price of our class A common stock
for the 30 trading days prior to the maturity date. If the market price at
maturity of our class A common stock is less than the applicable conversion
price, the number of shares of class A common stock that we could be required
to issue upon conversion of the series B preferred stock and series C
preferred stock would increase. For instance, if the market price of our class
A common stock on the maturity date of our series B preferred stock and series
C preferred stock were $1.20, the closing sale price of our class A common
stock as of October 1, 2001, the holders of the series B preferred stock and
series C preferred stock did not elect to convert any of their shares prior to
the maturity date and we did not redeem such shares on the maturity date, we
would be required to issue a total of 50,791,667 shares of our class A common
stock upon conversion of such shares at maturity plus a number of shares
reflecting accrued but unpaid dividends.
After the exchange of shares of our series A preferred stock for shares of
our class A common stock, series B preferred stock, series C preferred stock,
series D preferred stock and series E preferred stock as described above, 650
shares of our series A preferred stock remain outstanding. We have the right
to redeem 120 of such shares through December 11, 2001. As of October 1, 2001,
shares of series A preferred stock are convertible into class A common stock
at a conversion price equal to $3.08313 per share. If any shares of series A
preferred stock remain outstanding on June 19, 2002, the conversion price may
be adjusted based on the average of the dollar volume-weighted average price
of our class A common stock during the ten trading days after that date and on
each subsequent anniversary of that date, if such adjustment would result in a
lower conversion price. The conversion price of the series A preferred stock
may also be adjusted upon the occurrence of various events, including the
failure to maintain the effectiveness of the registration statement to which
these shares relate and the issuance of certain equity securities. As a
result, the lower the price of our class A common stock at these intervals,
the greater the number of shares the holder will receive upon conversion after
any such adjustment.
To the extent the shares of our preferred stock are converted or dividends
on these shares are paid in shares of class A common stock rather than cash, a
significant number of shares of class A common stock may be sold into the
market, which could decrease the price of our class A common stock and
encourage short sales. Short sales could place further downward pressure on
the price of our class A common stock. In that case, we could be required to
issue an increasingly greater number of shares of our class A common stock
upon future conversions of the series A preferred stock, series B preferred
stock and series C preferred stock as a result of the annual and other
adjustments described above, sales of which could further depress the price of
our class A common stock.
The conversion of and the payment of dividends in shares of class A common
stock in lieu of cash on the preferred stock may result in substantial
dilution to the interests of other holders of our class A common stock. No
holder may convert its preferred stock if upon such conversion the holder
together with its affiliates would have acquired a number of shares of class A
common stock during the 60-day period ending on the date of conversion which,
when added to the number of shares of class A common stock held at the
beginning of such 60-day period, would exceed 9.99% of our then outstanding
class A common stock, excluding for purposes of such determination shares of
class A common stock issuable upon conversion of shares of preferred stock
which have not been converted. Nevertheless, a holder may still sell a
substantial number of shares in the market. By periodically selling shares
into the market, an individual holder could eventually sell more than 9.99% of
our outstanding class A common stock while never holding more than 9.99% at
any specific time.
8
We may be required to pay substantial penalties to the holders of the
preferred shares if specific events occur
In accordance with the terms of the agreements relating to the issuance of
our redeemable convertible preferred stock, we are required to pay substantial
penalties to a holder of preferred stock under specified circumstances,
including, among others:
. nonpayment of dividends on the series A preferred stock, series B
preferred stock and series C preferred stock in a timely manner;
. failure to deliver shares of our class A common stock upon conversion of
the preferred shares after a proper request;
. nonpayment of the redemption price at maturity of any remaining series A
preferred stock, series B preferred stock, and series C preferred stock;
or
. the unavailability of the registration statement relating to the shares
of class A common stock issuable upon conversion of and in lieu of cash
dividends on the preferred stock to cover the resale of such shares for
more than brief intervals.
These penalties are generally paid in the form of interest payments, subject
to any restrictions imposed by applicable law. In the third quarter of 2000,
we incurred $578,000 in penalties as a result of a 14-day delay in the filing
of a registration statement registering the shares of class A common stock
issuable upon conversion of and in lieu of dividends on the series A preferred
stock.
We are currently unable to borrow additional amounts under our master
equipment lease agreement
We signed a three-year master lease agreement to lease up to $40.0 million
of computer equipment in November 1999, of which we have leased approximately
$17.8 million as of September 30, 2001. Future drawdowns and interest rates
under the lease agreement are subject to our credit worthiness. Currently, we
are not able to draw down additional amounts under the lease agreement.
We face intense competition, which may lead to lower prices for our products,
reduced gross margins, loss of market share and reduced revenue
The markets for business intelligence software, customer relationship
management applications, portals and narrowcast messaging technologies are
intensely competitive and subject to rapidly changing technology. In addition,
many of our competitors in these markets are offering, or may soon offer,
products and services that may compete with MicroStrategy products.
MicroStrategy's most direct competitors provide:
. business intelligence software;
. online analytical processing, or OLAP, tools;
. query and reporting tools;
. web-based static reporting tools;
9
. information delivery and proactive reporting;
. analytical customer relationship management products;
. web traffic analysis applications; and
. marketing automation.
Each of these markets are discussed more fully below.
Business Intelligence Software. Makers of business intelligence software
provides business intelligence capabilities designed for integration,
customization and application development. Leading industry analysts classify
companies such as Microsoft, Oracle, Hyperion, SAP and SAS to be leading
providers of business intelligence software.
OLAP Tools. Companies that build software to perform OLAP provide offerings
competitive with the core MicroStrategy 7 platform. Whether web-based or
client-server, these tools give end users the ability to query underlying data
sources without having to hand code structured query language queries. Most
OLAP tools allow users to build their own calculations and specify report
layouts and other options. Additionally, OLAP tools provide users the ability
to navigate throughout the underlying data in an easy, graphical mode, often
referred to as drilling. Providers of OLAP tools include Cognos, Hyperion,
Brio, IBM, Seagate and Microsoft.
Query and Reporting Tools. Query and reporting tools allow large numbers of
end users to gain access to pre-defined reports for simple analysis. Often the
end users are able to specify some sort of run-time criteria that customizes
the result set for that particular person. Some limited drilling' is also
provided. Companies that produce query and reporting tools include Business
Objects, Cognos, Oracle, Seagate and Brio.
Web-based Static Reporting Tools. Companies that offer software to deliver
pre-built reports for end-user viewing and consumption can also compete with
MicroStrategy. These applications often lack the sophistication, robustness
and scalability of MicroStrategy applications, but can be attractive for
small, departmental applications. Vendors in this category include Actuate,
Business Objects, Seagate, Microsoft, Computer Associates and SAS.
Information Delivery and Proactive Reporting. Companies that focus on the
proactive delivery of information, via e-mail, website, or other medium can
compete with our offerings. Typically these tools serve to push out compiled
reports on a scheduled basis to sets of users based on job type. Our software
has this technology integrated into its core platforms. Vendors of such
technology include Actuate, nQuire, Information Builders and Business Objects.
Analytical Customer Relationship Management Products. Companies that deliver
customer relationship management products alone or in conjunction with e-
commerce applications, such as Broadbase, BroadVision, E.piphany and Vignette,
compete with our analytical customer relationship management applications. In
contrast with providers of operational customer relationship management
vendors, such as Vantive and Oracle, analytical customer relationship
management deals more with customer segmentation, analysis and interaction as
opposed to infrastructure and call centers.
Web Traffic Analysis Applications. Reporting and analysis tools can be
specialized to analyze visitors to a company's website. Typically this
involves extracting data from a web-log file and importing it into a usable
format, often in a relational database. A set of analysis, sometimes customer-
centric in nature, is performed, and limited ad-hoc reporting is permitted.
Advanced applications in this space merge data from the web-logs with other
customer centric attributes to help provide a complete view of the customer
base. Vendors in this space include Accrue, Net.Genesis and WebTrends.
Marketing Automation. Applications focused on the automation and execution
of marketing tasks, such as campaign management and delivery, compete with our
customer relationship management products and our Narrowcast Server platform.
Leading vendors in this space include E.piphany, Xchange, Chordiant and
Broadbase.
10
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing or other resources, and greater name
recognition than we do. In addition, many of our competitors have strong
relationships with current and potential customers and extensive knowledge of
the business intelligence industry. As a result, they may be able to respond
more quickly to new or emerging technologies and changes in customer
requirements or devote greater resources to the development, promotion and
sale of their products than we can. Increased competition may lead to price
cuts, reduced gross margins and loss of market share. We cannot be sure that
we will be able to compete successfully against current and future competitors
or that the competitive pressures we face will not have a material adverse
effect on our business, operating results and financial condition.
Current and future competitors may also make strategic acquisitions or
establish cooperative relationships among themselves or with others. By doing
so, they may increase their ability to meet the needs of our potential
customers. Our current or prospective indirect channel partners may establish
cooperative relationships with our current or future competitors. These
relationships may limit our ability to sell our products through specific
distribution channels. Accordingly, new competitors or alliances among current
and future competitors may emerge and rapidly gain significant market share.
These developments could harm our ability to obtain maintenance revenues for
new and existing product licenses on favorable terms.
If we are unable to recruit or retain skilled personnel, or if we lose the
services of any of our key management personnel, our business, operating
results and financial condition would be materially adversely affected
Our future success depends on our continuing ability to attract, train,
assimilate and retain highly skilled personnel. Competition for these
employees is intense. We may not be able to retain our current key employees
or attract, train, assimilate or retain other highly skilled personnel in the
future. In the second and third quarters of 2001, we implemented corporate
restructuring plans which included a reduction in our worldwide workforce of
approximately one-third. These reductions in force could adversely impact our
employee morale and our ability to attract and retain employees. Our future
success also depends in large part on the continued service of key management
personnel, particularly Michael J. Saylor, our Chairman and Chief Executive
Officer, and Sanju K. Bansal, our Vice Chairman, Executive Vice President and
Chief Operating Officer. If we lose the services of one or both of these
individuals or other key personnel, or if we are unable to attract, train,
assimilate and retain the highly skilled personnel we need, our business,
operating results and financial condition could be materially adversely
affected.
Our inability to develop and release product enhancements and new products to
respond to rapid technological change in a timely and cost-effective manner
would have a material adverse effect on our business, operating results and
financial condition
The market for our products is characterized by rapid technological change,
frequent new product introductions and enhancements, changing customer demands
and evolving industry standards. The introduction of products embodying new
technologies can quickly make existing products obsolete and unmarketable. We
believe that our future success depends largely on three factors:
. our ability to continue to support a number of popular operating systems
and databases;
. our ability to maintain and improve our current product line; and
. our ability to rapidly develop new products that achieve market
acceptance, maintain technological competitiveness and meet an expanding
range of customer requirements.
Business intelligence applications are inherently complex, and it can take a
long time to develop and test major new products and product enhancements. In
addition, customers may delay their purchasing decisions because they
anticipate that new or enhanced versions of our products will soon become
available. We cannot be sure that we will succeed in developing and marketing,
on a timely and cost-effective basis, product
11
enhancements or new products that respond to technological change,
introductions of new competitive products or customer requirements, nor can we
be sure that our new products and product enhancements will achieve market
acceptance.
The emergence of new industry standards may adversely affect our ability to
market our existing products
The emergence of new industry standards in related fields may adversely
affect the demand for our existing products. This could happen, for example,
if new web standards and technologies emerged that were incompatible with
customer deployments of our products. Although the core database component of
our business intelligence solutions is compatible with nearly all enterprise
server hardware and operating system combinations, such as OS/390, AS/400,
Unix and Windows, our application server component runs only on the Windows NT
operating system. Therefore, our ability to increase sales currently depends
on the continued acceptance of the Windows NT operating system. We cannot
market many of our current business intelligence products to potential
customers who use Unix operating systems as their application server. We would
have to invest substantial resources to develop a Unix product and we cannot
be sure that we could introduce such a product on a timely or cost- effective
basis, if at all.
If the market for business intelligence software fails to grow as we expect,
or if businesses fail to adopt our products, our business, operating results
and financial condition would be materially adversely affected
Nearly all of our revenues to date have come from sales of business
intelligence software and related technical support, consulting and education
services. We expect these sales to account for a large portion of our revenues
for the foreseeable future. Although demand for business intelligence software
has grown in recent years, the market for business intelligence software
applications is still emerging. Resistance from consumer and privacy groups to
increased commercial collection and use of data on spending patterns and other
personal behavior may impair the further growth of this market, as may other
developments. We cannot be sure that this market will continue to grow or,
even if it does grow, that businesses will adopt our solutions. We have spent,
and intend to keep spending, considerable resources to educate potential
customers about business intelligence software in general and our solutions in
particular. However, we cannot be sure that these expenditures will help our
products achieve any additional market acceptance. If the market fails to grow
or grows more slowly than we currently expect, our business, operating results
and financial condition would be materially adversely affected.
Because of the rights of our two classes of common stock, and because we are
controlled by our existing stockholders, these stockholders could transfer
control of MicroStrategy to a third party without anyone else's approval or
prevent a third party from acquiring MicroStrategy
We have two classes of common stock: class A common stock and class B common
stock. Holders of our class A common stock generally have the same rights as
holders of our class B common stock, except that holders of class A common
stock have one vote per share while holders of class B common stock have ten
votes per share. As of September 30, 2001, holders of our class B common stock
owned or controlled 49,421,262 shares of class B common stock, or 92.1% of the
total voting power. Michael J. Saylor, our Chairman and Chief Executive
Officer, controlled 2,749,106 shares of class A common stock and 38,581,556
shares of class B common stock, or 72.4% of total voting power, as of
September 30, 2001. Accordingly, Mr. Saylor is able to control MicroStrategy
through his ability to determine the outcome of elections of our directors,
amend our certificate of incorporation and bylaws and take other actions
requiring the vote or consent of stockholders, including mergers, going
private transactions and other extraordinary transactions and their terms.
Our certificate of incorporation allows holders of class B common stock,
almost all of whom are current employees or former employees of our company or
related parties, to transfer shares of class B common stock, subject to the
approval of stockholders possessing a majority of the outstanding class B
common stock.
12
Mr. Saylor or a group of stockholders possessing a majority of the outstanding
class B common stock could, without seeking anyone else's approval, transfer
voting control of MicroStrategy to a third party. Such a transfer of control
could have a material adverse effect on our business, operating results and
financial condition. Mr. Saylor will also be able to prevent a change of
control of MicroStrategy, regardless of whether holders of class A common
stock might otherwise receive a premium for their shares over the then current
market price.
We rely on our strategic channel partners and if we are unable to develop or
maintain successful relationships with them, our business, operating results
and financial condition will suffer
In addition to our direct sales force, we rely on strategic channel
partners, such as original equipment manufacturers, system integrators and
value-added resellers, to license and support our products in the United
States and internationally. In particular, for the six months ended June 30,
2001 and the years ended December 31, 2000, 1999 and 1998, channel partners
accounted for, directly or indirectly, approximately 35.3%, 44.4%, 39.2% and
33.6% of our total product license revenues, respectively. Our channel
partners generally offer customers the products of several different
companies, including some products that compete with ours. Although we believe
that direct sales will continue to account for a majority of product license
revenues, we intend to increase the level of indirect sales activities through
our strategic channel partners. However, we may not be successful in our
efforts to continue to expand indirect sales in this manner. We may not be
able to attract strategic partners who will market our products effectively
and who will be qualified to provide timely and cost-effective customer
support and service. Our ability to achieve revenue growth in the future will
depend in part on our success in developing and maintaining successful
relationships with those strategic partners. If we are unable to develop or
maintain our relationships with these strategic partners, our business,
operating results and financial condition will suffer.
We have only limited protection for our proprietary rights in our software,
which makes it difficult to prevent third parties from infringing upon our
rights
We rely primarily on a combination of copyright, patent, trademark and trade
secret laws, customer licensing agreements, employee and third-party
nondisclosure agreements and other methods to protect our proprietary rights.
However, these laws and contractual provisions provide only limited
protection. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use our
products or technology. Policing such unauthorized use is difficult, and we
cannot be certain that we can prevent it, particularly in countries where the
laws may not protect our proprietary rights as fully as in the United States.
Our products may be susceptible to claims by other companies that our products
infringe upon their proprietary rights, which could adversely affect our
business, operating results and financial condition
As the number of software products in our target markets increases and the
functionality of these products further overlaps, we may become increasingly
subject to claims by a third party that our technology infringes such party's
proprietary rights. Regardless of their merit, any such claims could be time
consuming and expensive to defend, may divert management's attention and
resources, could cause product shipment delays and could require us to enter
into costly royalty or licensing agreements. If successful, a claim of
infringement against us and our inability to license the infringed or similar
technology could have a material adverse effect on our business, operating
results and financial condition.
Managing our international operations is complex and our failure to do so
successfully or in a cost-effective manner would have a material adverse
effect on our business, operating results and financial condition
International sales accounted for 31.6%, 24.9%, 24.0% and 26.1% of our total
revenues for the six months ended June 30, 2001 and the years ended December
31, 2000, 1999 and 1998, respectively. Our international operations require
significant management attention and financial resources.
13
There are certain risks inherent in our international business activities
including:
. changes in foreign currency exchange rates;
. unexpected changes in regulatory requirements;
. tariffs and other trade barriers;
. costs of localizing products for foreign countries;
. lack of acceptance of localized products in foreign countries;
. longer accounts receivable payment cycles;
. difficulties in managing international operations;
. tax issues, including restrictions on repatriating earnings;
. weaker intellectual property protection in other countries; and
. the burden of complying with a wide variety of foreign laws.
These factors may have a material adverse effect on our future international
sales and, consequently, our business, operating results and financial
condition.
The nature of our products makes them particularly vulnerable to undetected
errors, or bugs, which could cause problems with how the products perform and
which could in turn reduce demand for our products, reduce our revenue and
lead to product liability claims against us
Software products as complex as ours may contain errors or defects,
especially when first or subsequent versions are released. Although we test
our products extensively, we have in the past discovered software errors in
new products after their introduction. Despite testing by us and by our
current and potential customers, errors may be found in new products or
releases after commercial shipments begin. This could result in lost revenue
or delays in market acceptance, which could have a material adverse effect
upon our business, operating results and financial condition.
Our license agreements with customers typically contain provisions designed
to limit our exposure to product liability claims. It is possible, however,
that these provisions may not be effective under the laws of certain domestic
or international jurisdictions. Although there have been no product liability
claims against us to date, our license and support of products may involve the
risk of these claims. A successful product liability claim against us could
have a material adverse effect on our business, operating results and
financial condition.
The price of our stock may be extremely volatile
The market price for our class A common stock has historically been volatile
and could fluctuate significantly for any of the following reasons:
. quarter-to-quarter variations in our operating results;
. developments or disputes concerning proprietary rights;
. technological innovations or new products;
. governmental regulatory action;
. general conditions in the software industry;
. increased price competition;
. changes in revenue or earnings estimates by analysts;
. any change in the actual or expected amount of dilution attributable to
issuances of additional shares of class A common stock upon conversion
of our preferred stock or as a result of the litigation settlement; or
. other events or factors.
14
Many of the above factors are beyond our control.
The stock market has recently experienced extreme price and volume
fluctuations. These fluctuations have particularly affected the market price
of many software companies, often without regard to their operating
performance.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the selling
stockholders.
We will bear all costs, fees and expenses (excluding any underwriting
discounts and commissions and expenses incurred by the selling stockholders
for brokerage, accounting, tax or legal services or any other expenses
incurred by the selling stockholders in disposing of the shares) incurred in
effecting the registration of the shares covered by this prospectus,
including, without limitation, all registration and filing fees, Nasdaq
listing fees, fees and expenses of our counsel, fees and expenses of our
accountants, and blue sky fees and expenses.
SELLING STOCKHOLDERS
The shares of class A common stock being offered by the selling stockholders
consist of shares of class A common stock issued to the selling stockholders
in exchange for their shares of series A preferred stock of Strategy.com.
We are registering the shares of class A common stock in order to permit the
selling stockholders to offer these shares for resale from time to time.
The table below lists the selling stockholders and other information
regarding the beneficial ownership of the class A common stock by each of the
selling stockholders as of September 14, 2001. The second column lists, for
each selling stockholder, the number of shares of class A common stock
beneficially owned. Beneficial ownership is determined in accordance with the
rules of the SEC, and includes voting or investment power with respect to
shares. Unless otherwise indicated below, to our knowledge, all persons named
in the table have sole voting and investment power with respect to their
shares of common stock, except to the extent authority is shared by spouses
under applicable law. The inclusion of any shares in this table does not
constitute an admission of beneficial ownership for the person named below.
The third column lists each selling stockholder's portion of the 3,500,000
shares of class A common stock being offered by this prospectus.
Number of Shares Number of Shares Percentage of
of Class A of Class A Shares of Class A
Common Stock Number of Shares Common Stock Common Stock
Beneficially of Class A Common Beneficially Beneficially Owned
Name of Selling Owned Prior to Stock Owned After After Offering
Stockholder Offering(1)(2) Offered Hereby(2) Offering (1)(3) (1)(3)(4)
--------------- ---------------- ----------------- ---------------- -------------------
Aether Capital, LLC(5).. 500,000 500,000 0 0%
New Venture Partners IV,
L.P.................... 162,162 162,162 0 0
Valhalla Capital
L.P.(6)................ 27,027 27,027 0 0
Snowdon Ltd. Partner-
ship................... 1,621,622 1,621,622 0 0
David R. Wilmerding,
III(7)................. 2,005,975 540,541 1,465,434 3.5
Nancy Casey and Art
Marks(6)............... 108,107 108,107 0 0
Jon C. Baker(7)......... 2,005,975 540,541 1,465,434 3.5
--------
(1) Except as otherwise indicated, the number of shares beneficially owned is
determined under rules promulgated by the SEC, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Each
selling stockholder has sole voting power and investment power with
respect to all shares listed as owned by that selling stockholder. No
selling stockholder owns any shares of the class B common stock of
MicroStrategy.
15
(2) Includes 3,500,000 shares of our class A common stock issued to the
selling stockholders in exchange for shares of series A preferred stock of
Strategy.com held by the selling stockholders.
(3) We do not know when or in what amounts the selling stockholders will offer
shares for sale, if at all. The selling stockholders may sell any or all
of the shares offered by this prospectus. Because the selling stockholders
may offer all or some of the shares pursuant to this offering, and because
there are currently no agreements, arrangements or understandings with
respect to the sale of any of the shares that will be held by the selling
stockholders after completion of the offering, we cannot estimate the
number of the shares that will be held by the selling stockholders after
completion of the offering. However, for purposes of this table, we have
assumed that, after completion of the offering, none of the shares covered
by this prospectus will be held by the selling stockholders.
(4) Calculated based on 41,811,213 shares of class A common stock outstanding
as of September 14, 2001.
(5) Aether Systems, Inc. is the sole member of Aether Capital, LLC and
consequently has voting control and investment discretion over securities
held by Aether Capital, LLC.
(6) Nancy Casey is the managing member of Valhalla Capital L.P. and
consequently has voting control and investment discretion over securities
held by Valhalla Capital L.P. The ownership information for Nancy Casey
and Art Marks does not include ownership information for Valhalla Capital,
L.P.
(7) Information regarding the number of shares of class A common stock owned
by Messrs. Wilmerding and Baker includes 1,465,434 shares of class A
common stock beneficially owned by Nevis Capital Management, Inc. Messrs.
Wilmerding and Baker each control 50% of Nevis Capital and consequently
have voting control and investment discretion over securities held by
Nevis Capital.
Except for ownership of class A common stock of MicroStrategy and series A
preferred stock of Strategy.com and the Memorandum of Understanding by and
among the registrant, Strategy.com and Aether Systems, Inc. dated October 18,
2000, no selling stockholder has had a material relationship with
MicroStrategy or any of its subsidiaries within the past three years. The
Memorandum of Understanding was terminated by the parties as of August 28,
2001.
PLAN OF DISTRIBUTION
We are registering shares of class A common stock issued to the selling
stockholders in exchange for shares of series A preferred stock of
Strategy.com to permit the resale of the shares of class A common stock by the
selling stockholders from time to time after the date of this prospectus. We
will not receive any of the proceeds from the sale by the selling stockholders
of the shares of class A common stock. We will bear all fees and expenses
incident to our obligation to register the shares of class A common stock.
The selling stockholders may sell all or a portion of the class A common
stock beneficially owned by them and offered hereby from time to time directly
through one or more underwriters, broker-dealers or agents. If the class A
common stock is sold through underwriters or broker-dealers, the selling
stockholder will be responsible for underwriting discounts or commissions or
agent's commissions. The class A common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated
prices. These sales may be effected in transactions, which may involve crosses
or block transactions,
. on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale,
. in the over-the-counter market,
. in transactions otherwise than on these exchanges or services or in the
over-the-counter market,
. through the writing of options, whether such options are listed on an
options exchange or otherwise, or
. through the settlement of short sales.
16
In connection with sales of the class A common stock or otherwise, the
selling stockholders may enter into hedging transactions with broker-dealers,
which may in turn engage in short sales of the class A common stock in the
course of hedging positions they assume. The selling stockholders may also
sell shares of class A common stock short and deliver shares of class A common
stock covered by this prospectus to close out short positions, provided that
the short sale is made after the registration statement is declared effective
and a copy of this prospectus is delivered in connection with the short sale.
The selling stockholder may also loan or pledge shares of class A common stock
to broker-dealers that in turn may sell such shares. If the selling
stockholders effect such transactions by selling shares of class A common
stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of class A common stock for whom they may act as
agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved).
The selling stockholders may pledge or grant a security interest in some or
all of the shares of class A common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of class A common stock from time to
time pursuant to the prospectus.
The selling stockholders also may transfer and donate the shares of class A
common stock in other circumstances in which case the transferees, donees,
pledgees or other successors in interest will be the selling beneficial owners
for purposes of the prospectus.
The selling stockholders and any broker-dealer participating in the
distribution of the shares of class A common stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
paid, or any discounts or concessions allowed to any such broker-dealer, may
be deemed to be underwriting commissions or discounts under the Securities
Act. At the time a particular offering of the shares of class A common stock
is made, a prospectus supplement, if required, will be distributed which will
set forth the aggregate amount of shares of class A common stock being offered
and the terms of the offering, including the name or names of any broker-
dealers or agents, any discounts, commissions and other terms constituting
compensation from the selling stockholders and any discounts, commissions or
concessions allowed or reallowed or paid to broker-dealers. In addition, upon
our being notified by a named selling shareholder that a donee or a pledgee
intends to sell more than 500 shares, a supplement to this prospectus will be
filed.
Under the securities laws of some states, the shares of class A common stock
may be sold in such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of class A common stock may
not be sold unless such shares have been registered or qualified for sale in
such state or an exemption from registration or qualification is available and
is complied with.
There can be no assurance that any selling stockholder will sell any or all
of the shares of class A common stock registered pursuant to the registration
statement, of which this prospectus forms a part.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation,
Regulation M of the Exchange Act, which may limit the timing of purchases and
sales of any of the shares of class A common stock by the selling stockholders
and any other participating person. Regulation M may also restrict the ability
of any person engaged in the distribution of the shares of class A common
stock to engage in market-making activities with respect to the shares of
class A common stock. All of the foregoing may affect the marketability of the
shares of class A common stock and the ability of any person or entity to
engage in market-making activities with respect to the shares of class A
common stock.
We will pay all expenses of the registration of the shares of class A common
stock pursuant to the registration rights agreement estimated to be $50,000 in
total, including, without limitation, SEC filing fees
17
and expenses of compliance with state securities or "blue sky" laws; provided,
however, that the selling stockholders will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling stockholders
against liabilities, including some liabilities under the Securities Act, in
accordance with the registration rights agreement or the selling stockholders
will be entitled to contribution. We will be indemnified by the selling
stockholders against civil liabilities, including liabilities under the
Securities Act that may arise from any written information furnished to us by
the selling stockholders for use in this prospectus, in accordance with the
related registration rights agreement or will be entitled to contribution.
Once sold under the registration statement, of which this prospectus forms a
part, the shares of class A common stock will be freely tradable in the hands
of persons other than our affiliates.
LEGAL MATTERS
The validity of the shares of class A common stock offered by this
prospectus has been passed upon by Hale and Dorr LLP, Boston, Massachusetts.
EXPERTS
The financial statements incorporated in this registration statement by
reference to the Annual Report on Form 10-K for the year ended December 31,
2000, as amended, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses to be incurred in
connection with the sale and distribution of the securities being registered
hereby, all of which will be borne by MicroStrategy Incorporated. All amounts
shown are estimates except the Securities and Exchange Commission registration
fee.
Filing Fee--Securities and Exchange Commission................. $ 1,553.13
Legal fees and expenses........................................ $25,000.00
Accounting fees and expenses................................... $20,000.00
Miscellaneous expenses......................................... $ 3,446.87
----------
Total Expenses............................................... $50,000.00
==========
Item 15. Indemnification of Directors and Officers.
Section 102 of the Delaware General Corporation Law allows a corporation to
eliminate the personal liability of directors of a corporation to the
corporation or its stockholders for monetary damages for a breach of fiduciary
duty as a director, except where the director breached his duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or knowingly
violated a law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an improper
personal benefit. MicroStrategy has included such a provision in its
Certificate of Incorporation.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent
of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred
in connection with an action or proceeding to which he is or is threatened to
be made a party by reason of such position, if such person shall have 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 any criminal proceeding, if
such person had no reasonable cause to believe his conduct was unlawful;
provided that, in the case of actions brought by or in the right of the
corporation, no indemnification shall be made with respect to any matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the adjudicating court determines that such
indemnification is proper under the circumstances.
MicroStrategy's certificate of incorporation provides that an officer or
director of MicroStrategy will not be personally liable to MicroStrategy or
its stockholders for monetary damages for any breach of his fiduciary duty as
an officer or director, except in certain cases where liability is mandated by
the Delaware General Corporation Law. The provision has no effect on any non-
monetary remedies that may be available to MicroStrategy or its stockholders,
nor does it relieve MicroStrategy or its officers or directors from compliance
with federal or state securities laws. MicroStrategy's certificate of
incorporation also generally provides that MicroStrategy shall indemnify, to
the fullest extent permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, investigation, administrative hearing or any other proceeding by reason
of the fact that he is or was a director or officer of MicroStrategy, or is or
was serving at the request of MicroStrategy as a director, officer, employee
or agent of another entity, against expenses incurred by him in connection
with such proceeding. An officer or director shall not be entitled to
indemnification by MicroStrategy if the officer or director did not act in
good faith and in a manner reasonably believed to be in, or not opposed to,
the best interests of the MicroStrategy, or with respect to any criminal
action or proceeding, the officer or director had reasonable cause to believe
his conduct was unlawful.
II-1
MicroStrategy has purchased directors' and officers' liability insurance
which would indemnify its directors and officers against damages arising out
of certain kinds of claims which might be made against them based on their
negligent acts or omissions while acting in their capacity as such.
Item 16. Exhibits
Exhibit
Number Description
------- -----------
5.1 Opinion of Hale and Dorr LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Hale and Dorr LLP (included in Exhibit 5.1 filed
herewith).
24.1 Power of Attorney (see the signature page to this Registration
Statement).
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:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included is a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that are
incorporated by reference in this Registration Statement.
(2) That, for the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Exchange Act) that is incorporated by reference in
this Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
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Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the indemnification provisions described herein, 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 Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of McLean, Commonwealth of Virginia, on October
16, 2001.
MicroStrategy Incorporated
/s/ Michael J. Saylor
By: _________________________________
Michael J. Saylor
Chief Executive Officer
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Michael J. Saylor Chairman of the Board of October 16, 2001
______________________________________ Directors and Chief
Michael J. Saylor Executive Officer
(Principal Executive
Officer)
/s/ Eric F. Brown President and Chief October 16, 2001
______________________________________ Financial Officer
Eric F. Brown (Principal Financial and
Accounting Officer)
* Director October 16, 2001
______________________________________
Sanju K. Bansal
* Director October 16, 2001
______________________________________
F. David Fowler
* Director October 16, 2001
______________________________________
Frank A. Ingari
* Director October 16, 2001
______________________________________
Jonathan J. Ledecky
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Signature Title Date
--------- ----- ----
* Director October 16, 2001
______________________________________
Stuart B. Ross
* Director October 16, 2001
______________________________________
John W. Sidgmore
* Director October 16, 2001
______________________________________
Ralph S. Terkowitz
*By: /s/ Eric F. Brown
______________________________________
Eric F. Brown
Attorney-in-Fact
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EXHIBIT INDEX
Exhibit
Number Description
------- -----------
5.1 Opinion of Hale and Dorr LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Hale and Dorr LLP (included in Exhibit 5.1 filed herewith).
24.1 Power of Attorney (see the signature page to this Registration
Statement).
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