SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
 _X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
                            OF 1934 [NO FEE REQUIRED]
                        For the year ended June 30, 1999

                                       OR
 __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                          ACT OF 1934 [NO FEE REQUIRED]
           For the transition period from ____________ to ____________


                         Commission file number 0-09358
                               3Si HOLDINGS, INC.
                               ------------------
             (Exact name of Registrant as specified in its charter)

            Wyoming                                         83-0245581
-------------------------------                         -------------------
(State or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                         Identification No.)

                              6886 S. Yosemite St.
                            Englewood, Colorado 80112
                -------------------------------------------------
              (Address of principal executive offices and zip code)

                                 (303) 749-0210
                    -----------------------------------------
              (Registrant's Telephone Number, including Area Code)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
                                (Title of class)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.     Yes |X|  No |_|

|X| Indicate by check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

         The aggregate market value of the voting stock of the Registrant, as of
September  15,  1999,  computed by  reference  to the closing  sale price of the
voting stock held by non-affiliates on such date, was approximately $0.125.

         As of September 15, 1999, there were outstanding  34,033,530  shares of
Common Stock.
                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None
<PAGE>

                        CONSOLIDATED FINANCIAL STATEMENTS

                                       AND

                          INDEPENDENT AUDITORS' REPORTS

                               3Si HOLDINGS, INC.

                                  JUNE 30, 1999


<PAGE>
                                    CONTENTS

                                                                            PAGE

INDEPENDENT AUDITORS' REPORTS                                       3-4

CONSOLIDATED FINANCIAL STATEMENTS

      BALANCE SHEETS                                                5-6

      STATEMENTS OF OPERATIONS                                       7

      STATEMENTS OF CASH FLOWS                                      8-9

      STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY       10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                        11-30





                                      -2-
<PAGE>


Board of Directors

3Si Holdings, Inc.


                          Independent Auditors' Report
                          ----------------------------


         We have audited the  accompanying  consolidated  balance  sheets of 3Si
Holdings,  Inc.  as of June  30,  1999 and  1998  and the  related  consolidated
statements of operations,  changes in stockholders'  (deficit) equity,  and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management, as well as evaluating the overall financial statement presentations.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects,  the financial position of 3Si Holdings,  Inc.
as of June 30,  1999 and 1998,  and the results of its  operations  and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

         The accompanying  financial statements have been prepared assuming that
the  Company  will  continue  as a going  concern.  At June  30,  1999,  current
liabilities  exceed  current  assets by  $1,908,685.  Also at June 30, 1999, the
Company has a deficit in  stockholders'  equity of  $1,944,715.  The Company has
sold its systems integration  business as of May 1, 1999. Its remaining business
is the licensing of its software products. Through June 30, 1999, there has been
nominal license fee revenue generated from its software  products.  A vendor has
filed suit to attempt to attach the  Company's  assets for the  collection  of a
$2,200,000  liability.  These  factors,  discussed at Note Q, raise  substantial
doubt about the Company's ability to continue as a going concern.  The financial
statements do not include any  adjustments  relating to the  recoverability  and
classification  of  recorded  assets,  or  the  amounts  and  classification  of
liabilities  that might be necessary in the event the Company cannot continue in
existence.

         As discussed in Note B to the financial statements,  an error resulting
in understatement  of previously  reported accounts payable as of June 30, 1998,
was   discovered  by  management  of  the  Company   during  the  current  year.
Accordingly,  the June 30,  1998  financial  statements  have been  restated  to
correct the error.

/s/ Balogh and Tjornehoj, LLP


Denver, Colorado

September 28, 1999


                                      -3-

<PAGE>
Board of Directors

3Si Holdings, Inc.


                          Independent Auditors' Report
                          ----------------------------


         We have audited the accompanying  statements of operations,  changes in
stockholders'  equity, and cash flows of 3Si Holdings,  Inc. (formerly Tyrex Oil
Company) for the period January 1, 1997 through June 30, 1997.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

         We conducted our audit in accordance with generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in all material  respects,  the results of operations and cash flows of
3Si Holdings,  Inc. (formerly  Tyrex Oil Company) for the period January 1, 1997
through  June  30,  1997  in  conformity  with  generally  accepted   accounting
principles.



/s/ John M. Hanson & Company, PC








Denver, Colorado

September 22, 1997


                                      -4-
<PAGE>
<TABLE>
<CAPTION>
                               3Si Holdings, Inc.
                   Statements of Balance Sheets (Page 1 of 2)
--------------------------------------------------------------------------------

                                     ASSETS

June 30,                                                1999             1998
--------------------------------------------------------------------------------
<S>                                                <C>              <C>
CURRENT ASSETS
   Cash and cash equivalents (Note B) ........     $ 1,372,293      $    13,843
   Accounts receivable - trade (Note D) ......         437,221        6,142,390
   Inventory (Note B) ........................            --            225,741
   Deferred income taxes (Note L) ............            --            171,000
   Other current assets (Note M) .............          11,000          193,029
--------------------------------------------------------------------------------
         Total current assets ................       1,820,514        6,746,003




PROPERTY AND EQUIPMENT AT COST
   Computer systems (Note B) .................          28,575          674,118
   Furniture and fixtures (Note G) ...........            --            169,178
   Leasehold improvements ....................            --             92,034
--------------------------------------------------------------------------------
     Total property and equipment ............          28,575          935,330

     Less accumulated depreciation
       and amortization (Note B) .............          (7,500)        (366,319)
--------------------------------------------------------------------------------
         Net property and equipment ..........          21,075          569,011



OTHER ASSETS
   Software development costs (Note K) .......          42,827          239,082
   Goodwill (Note C) .........................            --            591,146
   Other non-current assets ..................          50,000           31,330
--------------------------------------------------------------------------------
         Total other assets ..................          92,827          861,558
--------------------------------------------------------------------------------
Total assets $ ...............................       1,934,416      $ 8,176,572
================================================================================
</TABLE>

         The accompanying notes are an integral part of these statements

                                      -5-
<PAGE>
<TABLE>
<CAPTION>
                               3Si Holdings, Inc.
                          Balance Sheets (Page 2 of 2)

--------------------------------------------------------------------------------
                 LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

June 30,                                                   1999           1998
--------------------------------------------------------------------------------
<S>                                                   <C>            <C>
CURRENT LIABILITIES
   Revolving line of credit (Note E) ...............  $      --      $ 2,858,337
   Current portion of capital lease (Note G) .......         --           25,340
   Accounts payable - trade (Notes B and G) ........    3,301,354      3,974,661
   Customer deposits ...............................         --           98,185
   Income taxes payable (Note L) ...................         --           15,000
   Accrued liabilities (Notes F and G) .............      427,845        203,756
--------------------------------------------------------------------------------
         Total current liabilities .................    3,729,199      7,175,279

ON-CURRENT LIABILITIES
   Long-term debt (Note G) .........................         --           40,948
   Deferred income taxes (Note L) ..................         --          102,000
--------------------------------------------------------------------------------
         Total non-current liabilities .............         --          142,948

MINORITY INTEREST (NOTE I) .........................      149,932           --



COMMITMENTS AND CONTINGENCIES (NOTE G) .............         --             --


STOCKHOLDERS' (DEFICIT) EQUITY (NOTE J)
   Common stock - authorized 50,000,000
     shares of $.01 par value; 40,084,156 issued
     at June 30, 1999; 39,984,924 issued at
     June 30, 1998 .................................      400,842        399,849
   Additional paid in capital ......................    2,773,536      2,380,044
   Accumulated (deficit) ...........................   (3,261,740)       (64,195)
   Treasury stock at cost - 6,050,626 shares .......   (1,857,353)    (1,857,353)
--------------------------------------------------------------------------------
         Total stockholders' (deficit) equity ......   (1,944,715)       858,345
--------------------------------------------------------------------------------

Total liabilities and stockholders' (deficit) equity  $ 1,934,416    $ 8,176,572
================================================================================
</TABLE>
         The accompanying notes are an integral part of these statements

                                      -6-
<PAGE>
<TABLE>
<CAPTION>
                               3Si Holdings, Inc.
                            Statements of Operations

-------------------------------------------------------------------------------------------------
                                                        Year Ended     Year Ended     Six Mo. Ended
                                                         6/30/99         6/30/98         6/30/97
-------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>
Product sales ....................................   $ 10,741,248    $ 20,816,550    $  6,984,752
Consulting and other service revenue .............      5,737,080       8,567,957       2,991,784
-------------------------------------------------------------------------------------------------
Net revenues .....................................     16,478,328      29,384,507       9,976,536

Cost of revenues (Note B) ........................     14,698,967      24,267,452       8,151,600
-------------------------------------------------------------------------------------------------

         Gross profit ............................      1,779,361       5,117,055       1,824,936

Selling and administrative expenses ..............      4,458,757       5,138,499       2,014,999
-------------------------------------------------------------------------------------------------

         (Loss) from operations ..................     (2,679,396)        (21,444)       (190,063)
Other income (expense)
   Miscellaneous income ..........................         19,021          74,815           8,659
   Settlement of litigation (Note G) .............       (224,688)           --              --
   Interest expense ..............................       (230,424)       (180,124)        (93,794)
   Net (loss) gain on disposition of
     assets (Note P) .............................        (71,867)          9,835            --
-------------------------------------------------------------------------------------------------

     Total other income (expense) ................       (507,958)        (95,474)        (85,135)
-------------------------------------------------------------------------------------------------

         Net loss before minority interest .......     (3,187,354)       (116,918)       (275,198)

Minority interest (Note I) .......................         58,809            --              --
-------------------------------------------------------------------------------------------------

         Net (loss) before income taxes ..........     (3,128,545)       (116,918)       (275,198)

Income tax (expense) benefit (Note L) ............        (69,000)         54,000            --
-------------------------------------------------------------------------------------------------

         Net (loss) from continuing operations ...     (3,197,545)        (62,918)       (275,198)
Discontinued operations - gain on disposal
     of oil and gas properties (Note N) ..........           --              --           200,793
-------------------------------------------------------------------------------------------------

Net (loss) .......................................   $ (3,197,545)   $    (62,918)   $    (74,405)
=================================================================================================
Basic and diluted earnings (loss) per common share
     From continuing operations ..................   $       (.09)   $       --      $       (.04)

     From discontinued operations ................           --              --               .03
-------------------------------------------------------------------------------------------------

     Net (loss) ..................................   $       (.09)   $       --      $       (.01)
=================================================================================================

Weighted average shares outstanding (Note B) .....     33,944,332      36,571,766       6,541,654
=================================================================================================
</TABLE>
         The accompanying notes are an integral part of these statements

                                      -7-
<PAGE>
<TABLE>
<CAPTION>
                               3Si Holdings, Inc.
                     Statements of Cash Flows (Page 1 of 2)

---------------------------------------------------------------------------------------------
                                                      Year Ended      Year Ended   Six Mo. Ended
                                                       6/30/99         6/30/98        6/30/97
---------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>            <C>
Operating activities:
   Net (loss) ...................................   $(3,197,545)   $   (62,918)   $   (74,405)

   Reconciling adjustments:
     Depreciation and amortization ..............       228,242        161,498         51,025
     Software impairment ........................        57,400           --             --
     Provisions for doubtful accounts ...........       272,615        106,435         30,150
     Reserve for stockholders' loans ............       162,395           --             --
     Stock option compensation ..................        52,726           --             --
     Net loss (gain) on disposition of
         assets (Notes N and P) .................        71,867         (9,835)      (536,700)
     Loss attributable to minority interest .....       (58,809)          --             --
     Stock issued for services ..................        15,500          6,675           --

     Changes in operating assets and liabilities:
         Accounts receivable ....................     5,432,554     (2,917,257)     1,347,856
         Inventory ..............................        18,098        417,733       (357,264)
         Other assets ...........................        51,403        (62,841)        37,211
         Accounts payable and accrued expenses ..      (451,298)       976,751       (903,157)
         Income tax payable .....................       (15,000)        15,000           --
         Deferred taxes .........................        69,000        (69,000)          --
---------------------------------------------------------------------------------------------

              Total adjustments .................     5,906,693     (1,374,841)      (330,879)
---------------------------------------------------------------------------------------------

     Net cash provided by (used for)
          operating activities ..................     2,709,148     (1,437,759)      (405,284)


Investing activities:
   Proceeds from sale of assets .................       802,167         12,500      1,342,184
   Proceeds from assignment of
     government contracts .......................       500,000           --             --
   Purchases of equipment .......................      (215,263)      (339,182)       (41,414)
   Software development costs ...................       (10,827)      (142,975)          --
   Loans to stockholders ........................       (82,513)       (77,020)          --
   Cost of merger ...............................          --           (8,278)       (48,924)
   Prepaid royalty (goodwill) ...................          --             --         (625,000)
   Cash acquired in merger ......................          --             --        1,887,653
---------------------------------------------------------------------------------------------
     Net cash provided by (used for)
       investing activities .....................   $   993,564    $  (554,955)   $ 2,514,499
</TABLE>
         The accompanying notes are an integral part of these statements

                                      -8-
<PAGE>
<TABLE>
<CAPTION>
                               3Si Holdings, Inc.
                     Statements of Cash Flows (Page 2 of 2)

--------------------------------------------------------------------------------------------
                                                     Year Ended     Year Ended    Six Mo. Ended
                                                      6/30/99        6/30/98         6/30/97
--------------------------------------------------------------------------------------------
<S>                                                <C>            <C>            <C>
Financing activities:
   (Payments on) proceeds from note payable ....   $(2,858,337)   $(1,264,271)   $   499,783
   Revolving line of credit, net ...............          --        2,858,337           --
   Payments on notes payable and capital lease .       (20,925)       (20,948)      (421,065)
   Proceeds from exercise of options (Note J) ..          --           65,660           --
   Minority interest investment (Note I) .......       535,000           --             --
   Payments on self-tender .....................          --       (1,851,366)          --
   Advances from owners ........................          --             --           23,884
   Dividends paid, prior to merger .............          --             --          (39,838)
--------------------------------------------------------------------------------------------

     Net cash (used for) provided by
         financing activities ..................    (2,344,262)      (212,588)        62,764
--------------------------------------------------------------------------------------------

Net change in cash and cash equivalents ........     1,358,450     (2,205,302)     2,171,979
Cash and cash equivalents at beginning of period        13,843      2,219,145         47,166
--------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period .....   $ 1,372,293    $    13,843    $ 2,219,145
============================================================================================
</TABLE>

Summary of noncash investing and financing activity:

To  complete  the May 1997 merger of Tyrex (now,  3Si  Holdings,  Inc.) and 3Si,
Tyrex  issued  28,333,333  of its $.01 par common  shares to the three owners of
3Si.  These shares were issued based on the value of the  outstanding  shares of
Tyrex on May 28, 1997. In connection with the merger,  the following  assets and
liabilities were acquired:
         Cash                                        $    1,887,653
         Oil and gas properties                           1,001,867
         Other assets                                       192,647
         Liabilities                                       (353,394)
                                                     --------------
              Fair market value of stock issued      $    2,728,773
                                                     ==============

3SiH sold  substantially all of its assets effective as of May 1, 1999
(See Note A). The following is a summary of this sale:

         Sales proceeds                                                $ 802,167
         Net property and equipment sold                $  331,480
         Inventory and other assets sold                   239,716
         Capital lease obligation assumed by purchaser      (45,363)     525,833
                                                        -----------    ---------

         Gain on sale (See Note P)                                     $ 276,334
                                                                       =========

Interest paid                             $  230,424      $ 180,124    $  93,794
Income tax paid                           $   15,000      $       -    $       -

         The accompanying notes are an integral part of these statements

                                      -9-
<PAGE>
<TABLE>
<CAPTION>
                               3Si Holdings, Inc.
             Statements of Changes in Stockholders' (Deficit) Equity

-----------------------------------------------------------------------------------------------------------------------------------

                                                 #                          Additional      Retained                      Total
                                               Common            Common      Paid-In        Earnings        Treasury   Stockholders'
                                               Shares            Stock       Capital        (Deficit)         Stock  (Deficit)Equity
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>            <C>            <C>            <C>            <C>
Balance, December 31, 1996 ...............           300    $    30,000    $      --      $   112,966    $      --      $   142,966
Stock of 3Si acquired by Tyrex ...........          (300)       (30,000)          --             --             --          (30,000)
Stock of Tyrex outstanding
  prior to the merger with 3Si ...........    10,960,091        109,601           --             --             --          109,601
Stock of Tyrex issued to 3Si
  stockholders ...........................    28,333,333        283,333           --             --             --          283,333
Treasury stock of Tyrex prior
  to the merger (45,000 shares) ..........          --             --             --             --           (5,987)        (5,987)
Additional paid-in capital of
  Tyrex ..................................          --             --        2,322,902           --             --        2,322,902
Net loss for the period ended
  June 30, 1997 ..........................          --             --             --          (74,405)          --          (74,405)
Dividends declared by 3Si prior
  to the merger with Tyrex ...............          --             --             --          (39,838)          --          (39,838)
-----------------------------------------------------------------------------------------------------------------------------------
Balance June 30, 1997 ....................    39,293,424        392,934      2,322,902         (1,277)        (5,987)     2,708,572

Merger costs .............................          --             --           (8,278)          --             --           (8,278)
Exercise of options at $.14
  per share ..............................       469,000          4,690         60,970           --             --           65,660
Shares acquired in self-tender,
  6,005,626 at $.30 per share (net of
  offering costs of $49,678) .............          --             --             --             --       (1,851,366)    (1,851,366)
Shares issued for compensation
  (222,500 shares at $.03 per
  share) .................................       222,500          2,225          4,450           --             --            6,675
Net loss for the year ended
  June 30, 1998 - restated ...............          --             --             --          (62,918)          --          (62,918)
-----------------------------------------------------------------------------------------------------------------------------------

Balance June 30, 1998 ....................    39,984,924        399,849      2,380,044        (64,195)    (1,857,353)       858,345

Shares issued for services
  at $.16 per share ......................        99,232            993         14,507           --             --           15,500
Stock option grants and revisions ........          --             --           52,726           --             --           52,726
Minority interest proceeds
  in excess of carrying value ............          --             --          326,259           --             --          326,259
Net loss for the year ended
  June 30, 1999 ..........................          --             --             --       (3,197,545)          --       (3,197,545)
-----------------------------------------------------------------------------------------------------------------------------------

Balance June 30, 1999 ....................    40,084,156    $   400,842    $ 2,773,536    $(3,261,740)   $(1,857,353)   $(1,944,715)
===================================================================================================================================
</TABLE>
         The accompanying notes are an integral part of these statements

                                      -10-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note A - Organization

Name Change
Effective  September 15, 1998, the Company's name changed from Tyrex Oil Company
("Tyrex") to 3Si Holdings, Inc. ("3SiH" or the "Company").

Merger
On May 28, 1997,  Tyrex acquired 100% of the common stock of Kimbrough  Computer
Sales,  Inc.  d/b/a 3Si Inc.  ("3Si").  Under the terms of the merger,  3Si is a
wholly  owned  subsidiary  of Tyrex.  The  merger  has been  accounted  for as a
purchase of Tyrex by 3Si,  since the merger  resulted in 72% of the  outstanding
stock of Tyrex being held by the 3Si stockholders.

The financial statements for the period ended June 30, 1997, contain the results
of operations of 3Si for the six months ended June 30, 1997,  and the results of
operations of Tyrex from the date of acquisition (May 28, 1997) through June 30,
1997.  On May 30,  1997,  Tyrex  sold  all of its oil  and  gas  properties  and
discontinued  its  operations.  The gain on the  disposal of Tyrex's oil and gas
properties is included in the financial  statements as discontinued  operations.
There are no oil and gas activities included in these financial statements.

Operations through May 1, 1999
3Si was  incorporated in Colorado in 1979.  Until May 1, 1999, 3SiH operated one
business  segment  providing  services  as a  systems  integrator.  The  systems
integration  business was sold as of May 1, 1999, and 3SiH's continuing business
is the licensing of its software products (See KEWi below).

The  principal  markets for 3SiH's sales and  services had been the U.S.  Postal
Service, government agencies, and large corporations located in Colorado and New
Mexico.  The corporate  offices were located in Englewood,  Colorado.  3SiH also
maintained  offices in Albuquerque,  New Mexico,  Raleigh,  North Carolina,  and
Colorado Springs, Colorado until May 1, 1999.

Sale of Substantially All Assets
Effective as of January 1, 1999,  3SiH assigned the contracts of its  government
division to Storage Area Networks for total consideration of $500,000. A gain of
$500,000 was realized on this sale (See Note P).

On  June  30,  1999,  3SiH  consummated  the  sale of  substantially  all of its
remaining  assets  (excluding  cash,  accounts  receivable,  and its subsidiary,
Kewi.net, Inc.) to P.C. Specialists,  Inc., a California corporation.  A gain of
$276,334 was realized on this sale (See Notes P and R).

                                      -11-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note A - Organization (continued)

Sale of Substantially All Assets (continued)
The effective  date of the asset sale is May 1, 1999.  3SiH was paid $802,167 of
the  purchase  price  at  closing.  3SiH  will  also  be  able  to earn up to an
additional  $2,200,000 over a three-year period based upon the contingencies set
forth in the agreement.  The agreement provides for contingent  payments to 3SiH
of $325,000  when key contracts  are renewed.  The  agreement  also provides for
contingent  payments to 3SiH of 75% of the profits in excess of contract renewal
payments  from the sold  business for the first year,  and 50% of the profits in
excess of contract  renewal payments for the second and third years. In no event
will the  purchase  price of the assets  sold plus  contingent  payments  exceed
$3,000,000.   Revenue  under  this  provision   will  be  recognized   when  the
contingencies have been satisfied and payment is assured.  There is currently no
assurance as to when or if any contingent payments will be received.

KEWi
KEWi.net,  Inc.  ("KEWi") was  incorporated  as a 3SiH subsidiary in Colorado in
February  1999.  3SiH  contributed  its KEWi  product and  technologies  to KEWi
effective April 1, 1999.

KEWi raised  $535,000  (net of expenses)  through a private  offering for 26% of
KEWi's common  stock.  KEWi also issued 5% of its common stock to an entity that
assisted  in the private  offering.  As of June 30,  1999,  3SiH owns 69% of the
outstanding common stock of KEWi.

The accounts of KEWi are consolidated  into the 3SiH financial  statements.  All
intercompany balances and transactions have been eliminated. A minority interest
is presented in the 3SiH financial  statements for the 31% interest not owned by
3SiH (See Note I).

Through its proprietary software,  KEWi can provide automated help desk products
and services to large customers as well as individual computer users.

Through  June 30, 1999,  there has been $8,000 of license fee revenue  generated
from the sale of KEWi software services.

Development Stage
After the sale of substantially all of its assets, 3SiH may become a development
stage company if  significant  revenues are not generated from the KEWi software
services.
--------------------------------------------------------------------------------

                                      -12-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------

Note B - Summary of Significant Accounting Policies

Prior Period Adjustments
The  accompanying  financial  statements for the year ended June 30, 1998,  have
been  restated  to correct an error in not  recording  all  accounts  payable at
year-end.  The effect of the  restatement  was to decrease  net earnings for the
year ended June 30, 1998, by $232,058 ($.00 per share).  The 1998 current income
tax effect of this correction was offset by an increase in the 1998 deferred tax
valuation allowance.

Comparability of Financial Statements
Labor costs  under the USPS  agreement  in the June 30, 1998 and 1997  financial
statements of $3.8 million and $1.4 million respectively, have been reclassified
to cost of  revenues  in order to make  them  comparable  to the 1999  financial
statements. There is no effect on net loss.

Comprehensive Income
Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  130,  "Reporting
Comprehensive  Income"  was  adopted by the  Company for the year ended June 30,
1999.  The  primary  objective  of this  statement  is to report and  disclose a
measure of all changes in equity of an entity that result from  transactions and
other economic  events of the period other than  transactions  with owners.  The
adoption of the new standard had no effect on the financial  statements of 3SiH.
The Company currently has no components of other comprehensive income.

Business Segments
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about
Segments of an Enterprise  and Related  Information"  was adopted by the Company
during the year ended June 30, 1999.  This statement  establishes  standards for
additional disclosure about operating segments.  More specifically,  it requires
financial  information to be disclosed for segments whose operating  results are
reviewed  by the  chief  operating  decision-maker  for  decisions  on  resource
allocation.  It also requires related  disclosures  about products and services,
geographic  areas and major  customers.  The adoption of the new standard had no
effect on the financial  statements  of 3SiH.  Since the sale of all its oil and
gas properties in May 1997, the Company operated in only one business segment as
a systems  integrator.  Revenues are all  attributed  to  operations  within the
United States.  Long-lived assets are all located within the United States.  See
Note O for information on major customers.

Use of Estimates
The  preparation  of the  Company's  financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts  reported in these financial  statements
and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents
For purposes of the statements of cash flows,  the Company  considers all highly
liquid debt instruments with an original  maturity of three months or less to be
cash equivalents.

                                      -13-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note B - Summary of Significant Accounting Policies (continued)

Inventory
Inventory was stated at lower of cost  (weighted  average  method) or market and
consisted of computer system components and service parts.

Depreciation and Amortization
Depreciation  and  amortization  have been  provided  in amounts  sufficient  to
allocate the costs of  depreciable  assets to  operations  over their  estimated
useful lives of five to seven years using the  straight-line  method.  Equipment
acquired  under capital  leases is amortized on a  straight-line  basis over the
lease period.  Amortization of capitalized  software  development costs has been
provided over a period of two years.

Depreciation and amortization expense is as follows:

                                  Equipment           Software
                                 And Capital        Development
                                   Leases              Costs         Goodwill
                                   ------              -----         --------
         Period ended
         ------------
          6 mo. 6/30/97         $    48,421     $            -   $      2,604
         12 mo. 6/30/98         $   130,248     $            -   $     31,250
         12 mo. 6/30/99         $   112,800     $       89,400   $     26,042

Revenue Recognition
The Company's revenue recognition policies are in compliance with all applicable
accounting  regulations,   including  American  Institute  of  Certified  Public
Accountants  ("AICPA")  Statement of Position  ("SOP") 97-2,  "Software  Revenue
Recognition". This statement provided criteria to be met in order for revenue to
be recognized.  The criteria include delivery,  determinability of the amount of
revenue,  and  probability of  collection.  The KEWi software is licensed to the
user on a monthly  subscription  basis.  Revenue  is  recognized  monthly as the
service is provided.

Advertising Costs
Advertising costs are charged to operations as incurred.  Advertising expense is
as follows:

         Period ended
         ------------
          6 mo. 6/30/97                   $  20,000
         12 mo. 6/30/98                   $  58,000
         12 mo. 6/30/99                   $  38,000


                                      -14-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------

Note B - Summary of Significant Accounting Policies (continued)

(Loss) Earnings Per Share
Basic (loss) earnings per share (EPS) is computed by dividing  income  available
to  common  stockholders  by  the  weighted-average   number  of  common  shares
outstanding for the year.  Diluted EPS, if any, reflects the potential  dilution
that could occur if dilutive  securities were exercised or converted into common
stock that then shared in the earnings.

Net loss per share for the years ended June 30, 1999 and 1998,  was  computed on
the basis of the weighted average number of common shares  outstanding  only, as
shares subject to warrants and stock options would have an anti-dilutive effect.

Treasury  shares  reacquired by the Company during the year ended June 30, 1998,
reduce  outstanding  common  shares.  For the period  ended June 30,  1997,  the
weighted  average  number  of  shares  is  based  on 300  shares  of  3Si  being
outstanding for five months and 39,248,424 shares of Tyrex being outstanding for
one month.

Fair Value of Financial Instruments
Estimated fair values of the Company's  financial  instruments (all of which are
held for non-trading purposes) are as follows:
                                       1999                        1998
                                      ------                      ------
                               Carrying       Fair         Carrying       Fair
                                Amount        Value         Amount        Value
                            ------------------------   ------------------------

Cash and cash equivalents   $ 1,372,293  $ 1,372,293   $    13,843  $    13,843

Revolving line of credit           --           --      (2,858,337)  (2,858,337)

Capital lease obligations          --           --         (66,288)     (66,288)

The carrying amount  approximates fair value of cash and cash  equivalents.  The
fair value of debt is based on current  rates at which the Company  could borrow
funds with similar remaining  maturities.  The carrying amounts approximate fair
value.

Statements  of  Financial   Accounting  Standards  ("SFAS")  No.  133  and  137,
"Accounting  for  Derivative  Instruments  and Hedging  Activities"  will become
effective  during the year ended June 30, 2001.  These  statements  require that
entities  recognize  all  derivatives  as either  assets or  liabilities  in the
balance  sheet and measure  those  instruments  at fair value  provided  certain
conditions  are met.  The new  standards  are  expected to have no effect on the
financial   statements  of  3SiH.  The  Company   currently  has  no  derivative
instruments and does not expect to engage in hedging activities.

                                      -15-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
--------------------------------------------------------------------------------
                                  June 30, 1999

Note B - Summary of Significant Accounting Policies (continued)

Computer Software Costs Developed For Internal Use Only
Expenditures  related to the Company's  acquisition and  implementation of a new
information  management  software have been  capitalized as computer  systems in
accordance with the American Institute of Certified Public Accountants ("AICPA")
Statement  of  Position  ("SOP")  98-1,  "Accounting  for the Costs of  Computer
Software  Developed or Obtained for Internal  Use".  Capitalized  costs  include
$187,514 paid to outside consultants and $35,301 of internal costs. The software
was never  placed in  service,  and a loss of  $222,815  is reported in the year
ended June 30, 1999 (See Note P).

Computer Software Costs Developed For Sale to Customers
The Company capitalizes certain software  development and implementation  costs.
Development  and  implementation  costs are expensed as research costs until the
Company has determined that the software has achieved technological feasibility,
will result in probable future economic  benefits,  and management has committed
to funding  the  project.  Thereafter,  the costs to develop  the  software  are
capitalized  and  amortized  using the  straight-line  method over the remaining
estimated useful lives (See Note K).

--------------------------------------------------------------------------------
Note C - Business Combinations

On May 28, 1997, Tyrex acquired 3Si in a reverse merger. Tyrex issued 28,333,333
of its $.01 par value  common  shares to the three owners of 3Si for 100% of the
outstanding  stock of 3Si.  These  shares were issued  based on the value of the
outstanding  shares  of  Tyrex  on May 28,  1997.  The  fair  value  of  Tyrex's
outstanding shares was determined to be $2,728,773. The excess of the net assets
of Tyrex  over the value of the  shares was  allocated  to  Tyrex's  oil and gas
properties.

The following  summarized pro forma (unaudited)  information assumes the May 30,
1997,  Tyrex oil and gas  disposition  (See Note N) had  occurred  on January 1,
1997.
                                                                    1997
                                                         ---------------

Net revenues                                             $     9,976,536
                                                         ===============

(Loss) from continuing operations                        $      (275,198)
Earnings from discontinued operations                           436,915
                                                         --------------
Net earnings                                             $       161,717
                                                         ===============

Earnings per share
   Primary
       (Loss) from continuing operations                 $          (.01)
       Earnings from discontinued operations                         .01
                                                         ---------------
       Net earnings                                      $             -
                                                         ===============

                                      -16-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note C - Business Combinations (continued)

The preceding  amounts  reflect  adjustments for revaluation of the basis of the
oil and gas properties sold.

3Si  executed a License  and  Royalty  Agreement  effective  August 1, 1993 with
former stockholders of 3Si. Under the terms of the agreement,  3Si was obligated
to  pay  1.5%  of  the  gross  revenues  as a  royalty  expense  to  the  former
stockholders  through  July  1999.  As part of the  merger  in May  1997,  Tyrex
satisfied this royalty agreement with a payment of $625,000. The buy out of this
agreement  was  recorded  as  goodwill  and  was  being   amortized   using  the
straight-line  method over twenty years,  until April 30, 1999. Upon the sale of
substantially  all  assets of 3SiH  effective  May 1,  1999  (See  Note A),  the
remaining  $565,104  balance of goodwill  (which was associated with the systems
integrator  business)  was written off and grouped with other  income  (expense)
(See Note P).

--------------------------------------------------------------------------------
Note D - Accounts Receivable

The detail of accounts receivable is as follows:
                                                   1999                  1998
                                          -------------        --------------

Trade receivables                         $     437,221        $    6,197,390
Allowance for doubtful accounts                       -               (55,000)
                                          -------------        --------------

Net                                       $     437,221        $    6,142,390
                                          =============        ==============

--------------------------------------------------------------------------------
Note E - Revolving Line of Credit

As of  September  30,  1997,  the Company  obtained a  revolving  line of credit
facility with a financial  institution.  The revolving line of credit was at the
prime rate of  interest  and  permitted  the  Company to borrow up to $5 million
based on 85% of the Company's eligible accounts receivable balance and inventory
computed under the terms of the  agreement.  This line of credit was paid off as
of June 1999.

The weighted  average  interest  rate for the years ended June 30, 1999 and 1998
was 10.28% and 9.82% respectively.

The weighted average interest rate for the period January 1, 1997, through April
7, 1997, was 11.57%.  The weighted average interest rate for a bank note payable
from April 8, 1997, through June 30, 1997, was 11.50%.

--------------------------------------------------------------------------------

                                      -17-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note F - Accrued Liabilities

3SiH entered into commitments for monthly lease and training payments related to
a new  information  management  software  system (See Note B). The  software was
never  placed in  service.  The future  commitments  through  September  2000 of
$95,108 have been  reported as an accrued  liability as of June 30, 1999,  and a
loss recorded.

The detail of accrued liabilities is as follows:
                                                     1999                1998
                                             ------------         -----------

Legal settlement (Note G)                    $    224,688         $         -
Compensation                                      103,323             148,759
Loss on software lease commitments                 95,108                   -
Other                                               4,726              54,997
                                             ------------         -----------

Total                                        $    427,845         $   203,756
                                             ============         ===========
--------------------------------------------------------------------------------

Note G - Commitments and Contingencies

Leases
The Company had  operating  leases for office  space in  Englewood  and Colorado
Springs,  Colorado  and  Albuquerque,  New Mexico  until May 1,  1999.  The rent
expense is net of sublease income for the Englewood office.
                                      Net Rent              Sublease
          Period ended                Expense               Income
          ------------                -------               ------

          6 mo. 6/30/97           $     53,000          $    23,500
         12 mo. 6/30/98           $    114,000          $    87,000
         12 mo. 6/30/99           $     98,000          $    63,500

During  December 1995,  3Si acquired  $120,332 of furniture and fixtures under a
capital lease. Accumulated amortization was $62,172 at June 30, 1998.


                                      -18-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note G - Commitments and Contingencies (continued)

Leases (continued)
The capital  lease was assumed by the purchaser of  substantially  all assets of
3SiH (See Note A). 3SiH has a  contingent  liability  for the $45,363 of minimum
lease  payments  through  October  2000  should the  purchaser  fail to make the
required lease payments. Management currently believes the Company will incur no
liability  for these  payments;  however,  the  ultimate  outcome of this matter
cannot be determined at this time.

                                                    1999                 1998
                                            ------------          -----------
Capital lease obligations:
       Current                              $          -          $    25,340
       Long-term                                       -               40,948
                                            ------------          -----------
       Total                                $          -          $    66,288
                                            ============          ===========

Self-Insured Medical Program
3SiH  adopted  a  self-insured  medical  program  for its  employees  and  their
dependents. The Company was liable for annual medical expenses up to $35,000 for
each individual.  The Plan was discontinued  upon the sale of substantially  all
assets  of the  Company  (See  Note  A).  No  significant  future  liability  is
anticipated.

Sales Tax
A vendor has billed 3SiH for $56,000 of sales tax. The underlying transaction is
exempt  from sales tax,  and  management  believes  the matter  will be resolved
without any liability to the Company.

Litigation
During the year ended June 30, 1998,  the Company  entered into a Federal Master
Assignment  Agreement  with a leasing  company to effect a  government  lease of
certain  equipment.  Under  the  terms  of  the  assignment  agreement,  if  the
government  terminated  the lease for any  reason  other than  "Termination  for
Convenience or Non-appropriation", 3SiH would be liable for the present value of
the  discounted  cash flows then owed under the  lease.  On July 31,  1998,  the
lessee terminated the lease for convenience.

The leasing  company filed suit against 3SiH to recover the present value of the
discounted cash flows. A settlement was reached in September 1999. 3SiH paid the
plaintiffs  $75,000 and issued 1,100,000  shares of its restricted  common stock
(valued at $154,688) to the  plaintiffs.  The  $224,688  combined  amount of the
settlement (which is net of the $5,000 value of inventory  recovered) is accrued
as a loss at June 30, 1999.

                                      -19-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note G - Commitments and Contingencies (continued)

Litigation (continued)
As of  June  30,  1999,  accounts  payable  balances  owed  to two  vendors  are
approximately  $650,000  and  $2,200,000.  The  Company  has  made  semi-monthly
payments through  September 28, 1999,  totaling $90,000 on the $650,000 balance.
This vendor has not taken any legal action to pursue collection.  The vendor who
is owed  approximately  $2,200,000  has filed  suit to  attempt  to  attach  the
Company's  assets for the  collection of that  liability.  3SiH does not believe
that  this  amount is due at this time so long as 3SiH is  current  on  interest
payments  as called for in the  parties'  written  agreement.  Counsel  for 3SiH
believes that it is too early to express an opinion as to whether the court will
find the liability due at this time.

 (See Note F also related to loss on future commitments. See Note I also related
to commitment for additional ownership interest in KEWi.)

--------------------------------------------------------------------------------
Note H - Profit Sharing Plan

3Si established a 401(k)  profit-sharing plan during the year ended December 31,
1995. Company contributions are at the discretion of the Board of Directors. For
the years ended June 30, 1999 and 1998,  and the period ended June 30, 1997,  no
Company contributions were made to the plan.

--------------------------------------------------------------------------------
Note I - Minority Interest

3SiH owns a 69% interest in KEWi.net, Inc. (See Note A) summarized as follows:

                                                           1999           1998
                                                    -----------     ----------
Net proceeds from sale of stock in KEWi
  subsidiary attributable to minority interest      $   208,741     $        -
(Loss) attributable to minority interest                (58,809)             -
                                                    -----------     ----------

Net minority interest balance                       $   149,932     $        -
                                                    ===========     ==========

Net proceeds from the sale of stock in the KEWi  subsidiary  were $535,000.  Net
proceeds,  in excess of 3SiH's  carrying value of the interest sold, of $326,259
are  accounted  for as additional  paid in capital in the  consolidated  balance
sheet.

3SiH  has  agreed  to give an  additional  5%  ownership  interest  in KEWi to a
consulting  firm if KEWi sales and earnings in the years ended March 2000,  2001
or 2002 meet  certain  goals.  If  additional  ownership  interests  in the KEWi
subsidiary are subsequently  issued,  they will be accounted for as an operating
expense and additional minority interest.
--------------------------------------------------------------------------------

                                      -20-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note J - Stock Options and Warrants

Tyrex Stock Option Plan
Tyrex Oil Company had a previous  option  plan for prior  Tyrex  employees  (the
"Tyrex Plan"). Changes in the status of options outstanding under the Tyrex Plan
for year ended June 30,  1998,  and the period  from May 29,  1997,  to June 30,
1997, were as follows:

Beginning of period, May 29, 1997                      469,000
Granted                                                      -
Terminated                                                   -
                                                   -----------

End of period, June 30, 1997                           469,000
Granted                                                      -
Terminated                                                   -
Exercised                                             (469,000)
                                                   -----------

End of period, June 30, 1998                                 -
                                                   ===========

Option price                                       $       .14
                                                   ===========

3SiH Stock Option Plan
On June 18, 1998, the 3SiH stockholders approved the Company's 1998 Stock Option
Plan (the "1998 Plan").  Under the terms of the 1998 Plan, the Company may grant
options for  employees  and  directors of the Company to acquire up to 5,000,000
shares of 3SiH's common  stock.  No options were granted prior to June 30, 1998.
The options vested over a period of four years except  1,345,000  shares,  which
vested immediately upon grant to two officers of 3SiH.

Upon the sale of  substantially  all assets of the Company  (See Note A), a) the
exercise  period  for  terminated   employees  became  one  year  from  date  of
termination, and b) the options held by terminated employees became 100% vested.

                                           # Shares                Exercise
                                        Under Option                Price*

End of period, June 30, 1998                           -          $         -
Granted                                        1,910,100                 .125
Forfeited                                       (647,600)                .125
Exercised                                              -                    -
                                        ----------------          -----------

End of period, June 30, 1999
  (all exercisable)                            1,262,500          $      .125
                                        ================          ===========

Option price                            $  .10 - $  .133

* weighted average

                                      -21-

<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note J - Stock Options and Warrants (continued)

3SiH Stock Option Plan (continued)
The  Company  continues  to  account  for  stock-based  compensation  using  the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". Compensation cost for stock options,
if any, is measured as the excess of the quoted  market  price of the  Company's
stock at the date of grant over the amount an  employee  must pay to acquire the
stock. Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for   Stock-Based   Compensation,"   established   accounting   and   disclosure
requirements  using a  fair-value-based  method of  accounting  for  stock-based
employee  compensation  plans.  The Company has elected to remain on its current
method  of  accounting  as  described  above,  and has  adopted  the  disclosure
requirements of SFAS No. 123.

Compensation  cost charged to operations was $52,726 for the year ended June 30,
1999.  No  additional  compensation  cost was recorded  related to the change in
terms for the options upon the sale of substantially all assets of the Company.

Had  compensation  cost been  determined on the basis of fair value  pursuant to
SFAS No. 123, net loss would have increased as follows:

                                              1999          1998           1997
                                      ------------    ----------     ----------
Net (loss)
      As reported                     $ (3,197,545)   $  (62,918)    $  (74,405)
                                      ============    ==========     ==========

      Pro forma                       $ (3,246,683)   $  (62,918)    $  (74,405)
                                      ============    ==========     ==========

Basic and diluted (loss) per share
      As reported                     $       (.09)   $        -     $     (.01)
                                      ============    ==========     ==========

      Pro forma                       $       (.10)   $        -     $     (.01)
                                      ============    ==========     ==========

The weighted  average fair value of options  granted  during the year ended June
30, 1999, is $.149.

The  fair  value  of  each  option  granted  is  estimated  on the  date  of the
modification  of the plan terms using the Black  Scholes  model.  The  following
assumptions were made in estimating fair value:

Assumption

Dividend yield                            0%
Risk-free interest rate                   6%
Expected life                         1 year
Expected volatility                   94.09%

                                      -22-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note J - Stock Options and Warrants (continued)

Warrants
On May 28,  1997,  Tyrex  granted  warrants  to purchase  750,000  shares of the
Company's  common  stock at a price of $.30 per  share.  These  warrants  became
exercisable 90 days after May 28, 1997, and are effective until August 27, 1999.

On October  22,  1997,  the Company  granted  warrants to purchase up to 350,000
shares  of the  Company's  common  stock  at a price of $.16  per  share.  These
warrants  became  exercisable 90 days after October 22, 1997, and were effective
until June 30,  1999.  The Company also  extended the exercise  date on warrants
previously issued to purchase up to 400,000 shares of the Company's common stock
at $.225 per share from December 31, 1998, to December 31, 1999.

No compensation expense has been recognized related to warrants, and no warrants
have been exercised through June 30, 1999.

--------------------------------------------------------------------------------

Note K - Research and Development/Software Development Costs

During the year ended June 30, 1998, 3SiH conducted  research and development on
its first two  proprietary  software  products - a contact  management data base
program  and  automated  help  desk  services.  Both  programs  operate  via the
Internet.  During the year ended June 30,  1999,  KEWi  conducted  research  and
development on an upgraded version of its automated help desk services  software
and a new paging software system.

The contact management database program was deemed not to be commercially viable
and capitalized  costs were written off as a loss during the year ended June 30,
1999 (See Note P).

                                      -23-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note K - Research and Development/Software Development Costs (continued)

As of June 30, 1999, the automated help desk services  software was deemed to be
impaired and written down to its fair value. Fair value, which was determined by
reference  to the present  value of the  estimated  future cash  inflows of such
asset,  exceeded  their carrying  value by $57,400.  An impairment  loss of that
amount  (included in other  expenses) has been charged to operations in the year
ended June 30, 1999.
                                             Development             Research
           Period ended                    Costs Capitalized      Costs Expensed
           ------------                    -----------------      --------------

            6 mo. 6/30/97                   $          -          $         -
           12 mo. 6/30/98                        239,082               70,000
           12 mo. 6/30/99                         10,827               13,000
                                            ------------          -----------
                                                 249,909          $    83,000
                                                                  ===========
           Contact management
           database loss
           12 mo. 6/30/99                        (60,282)
                                            ------------
                                                 189,627

           Amortization
           12 mo. 6/30/99                        (89,400)
                                            ------------
           Net cost before impairment            100,227
           Impairment                            (57,400)
                                            ------------
           Net book value                   $     42,827
                                            ============

Because the Company has only recently commenced  marketing its KEWi product,  it
is reasonably  possible that  estimates of future  anticipated  revenues and the
estimated  economic life of the software  products  might not be achieved.  As a
result, the carrying amount of the capitalized software development costs may be
reduced  materially  in the  near-term  if the  Company  does  not  achieve  its
anticipated revenues.

--------------------------------------------------------------------------------
Note L - Income Taxes

The  Company  provides  for income  taxes under the  provisions  of SFAS No. 109
"Accounting  for Income  Taxes".  SFAS No. 109  requires an asset and  liability
based  approach in accounting for income taxes.  Deferred  income tax assets and
liabilities  are  recorded to reflect the tax  consequences  on future  years of
temporary  differences of revenue and expense items for financial  statement and
income tax purposes.  Valuation  allowances  are provided  against  deferred tax
assets which are not likely to be realized.

The 1997 merger of Tyrex (now, 3SiH) and 3Si was accomplished through a tax-free
reorganization. The 1999 distribution of assets to KEWi was also accomplished in
a tax-free transaction.

                                      -24-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note L - Income Taxes (continued)

Prior to the merger,  3Si was organized as an S Corporation.  Net operating loss
carryforwards are available at June 30, 1999, expiring as follows:
                                             3SiH                 KEWi
                                             ----                 ----

                  2012             $      111,000         $          -
                  2013                    509,000                    -
                  2014                  1,886,000              109,000
                                   --------------         ------------

                                   $    2,506,000         $    109,000
                                   ==============         ============

The Company used $979,000 of Tyrex net operating loss  carryforwards  during the
year ended June 30, 1997. No other Tyrex loss  carryforward  from prior years is
available.

The  Company's  deferred  tax  assets  and  liabilities  are  comprised  of  the
following:
<TABLE>
<CAPTION>
                                                              1999           1998
                                                         -----------    -----------
<S>                                                      <C>            <C>
Current:
     Deferral of tax deductions for compensation
          and bad debt ...............................   $      --      $    33,000
     Tax benefit of net operating loss carryforward ..          --          225,000
                                                         -----------    -----------

                                                                --          258,000
Valuation allowance ..................................          --          (87,000)
                                                         -----------    -----------
     Net current .....................................          --          171,000

Non-current:
     Tax benefit on net operating loss carryforward ..       976,000           --
     Deferral of tax deduction for goodwill ..........       209,000           --
     Acceleration of tax deductions for software costs       (16,000)      (102,000)
     Other ...........................................       154,000           --
                                                         -----------    -----------
                                                           1,323,000       (102,000)
                                                         -----------    -----------

Valuation allowance ..................................     1,323,000           --
                                                         -----------    -----------
     Net non-current .................................          --         (102,000)
                                                         -----------    -----------

Net deferred tax assets ..............................   $      --      $    69,000
                                                         ===========    ===========
</TABLE>


                                      -25-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note L - Income Taxes (continued)

The Company may not have sufficient taxable income in future years to obtain the
benefits  of  the  net  operating  loss  carryforward  and  reversal  of  timing
differences. Valuation allowances of $1,323,000 and $87,000 are provided at June
30, 1999 and 1998  respectively,  for the benefits  which the Company may not be
able to use.

The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
                                                 1999           1998          1997
                                            -----------    -----------    -----------
<S>                                         <C>            <C>            <C>
Current expense .........................   $      --      $    15,000    $      --
Deferred expense (credit) ...............        69,000        (69,000)          --
                                            -----------    -----------    -----------
       Income tax expense (benefit) .....   $    69,000    $   (54,000)   $      --
                                            ===========    ===========    ===========
</TABLE>

Reconciliation of income taxes to Federal statutory rates is as follows:
<TABLE>
<CAPTION>
                                                 1999           1998          1997
                                            -----------    -----------    -----------
<S>                                         <C>            <C>            <C>
Income taxes (benefit) at statutory rates   $(1,064,000)   $   (40,000)   $   (25,000)
Non-deductible expenses .................          --           11,000           --
Minimum tax .............................          --           15,000           --
State taxes and other ...................      (111,000)        (4,000)        (3,000)
Valuation allowance .....................     1,244,000        (36,000)        28,000
                                            -----------    -----------    -----------

       Income tax expense (benefit) .....   $    69,000    $   (54,000)   $      --
                                            ===========    ===========    ===========
</TABLE>
--------------------------------------------------------------------------------

Note M - Related Party Transactions

Amounts due from 3SiH  stockholders  were  $162,395 and $79,882 at June 30, 1999
and 1998, respectively.  This June 30, 1998, amount is included in other current
assets.  Due to the  uncollateralized  nature of these receivables and the going
concern consideration (See Note Q), the $162,395 June 30, 1999, balance has been
fully reserved and recorded as an expense.

Amounts due to two officers of Tyrex under a severance  pay agreement of $89,198
at June 30, 1997, were paid in January 1998.

The May 30, 1997,  sale of the oil and gas  properties  was made,  in part, to a
related party; 10% of the interest in these properties was sold to an officer of
the  corporation.  The terms of the sale to the  officer did not differ from the
terms of the sale to unrelated third parties.
--------------------------------------------------------------------------------
                                      -26-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note N - Discontinued Operations

On May 30, 1997, Tyrex sold all of its oil and gas properties for $1,803,257 and
discontinued all of its oil and gas operating activities.

Tyrex  incurred costs of $116,633 to provide  severance pay for three  employees
associated  with the oil and gas  operations.  This  amount was  recorded  as an
accrued  liability  at June 30,  1997,  and was  included  in the  direct  costs
associated with the disposition of the oil and gas properties.  The Company paid
all of this accrued severance by January 1998.

There was no tax effect from the sale of the oil and gas properties as Tyrex had
sufficient  net operating loss  carryforwards  to offset any taxable gain on the
sale.

The gain from discontinued operations consisted of the following:
     Gain on sale of oil and gas properties                      $      536,700
     Direct cost associated with disposition of oil and gas
        properties, including severance package and merger
        costs incurred by Tyrex.                                       (335,907)

     Gain on sale of discontinued operations                     $      200,793
                                                                 ==============

The  sale of  substantially  all  assets  effective  as of May 1,  1999,  is not
considered the discontinuation of a business segment.

--------------------------------------------------------------------------------
Note O - Major Customers and Concentrations of Credit Risk

With the sale of  substantially  all of its assets  effective  as of May 1, 1999
(See Note A),  3SiH also sold its systems  integration  business  including  its
agreement to provide  information  systems  support to the U.S.  Postal  Service
(USPS),  which was a major customer.  Net revenues (in thousands) are summarized
as follows:

                                             1999         1998          1997
                                                                    (6 mos.)
                                       ----------    ---------    ----------

Product sales                          $   10,741    $  20,817    $    6,985
USPS agreement                              4,810        5,550         1,970
KEWi license fees                               8            -             -
Other consulting and service revenue          919        3,018         1,022
                                       ----------    ---------    ----------

Net revenues                           $   16,478    $  29,385    $    9,977
                                       ==========    =========    ==========

Financial  instruments,  which  potentially  subject the Company to credit risk,
consist primarily of cash, cash equivalents, and trade receivables.

                                      -27-

<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note O - Major Customers and Concentrations of Credit Risk (continued)

At June 30, 1999,  the Company's  bank balances were  approximately  $980,000 in
excess of the amount insured by the Federal Deposit Insurance Corporation.

Generally,  the Company does not require collateral or other security to support
customer  receivables.  At June 30, 1999, one customer owed approximately 52% of
trade  receivables.  At June 30, 1998, three customers owed approximately 58% of
trade receivables.

--------------------------------------------------------------------------------
Note P - Loss on Disposition of Assets

Net (loss) gain on disposition of assets are as follows:
<TABLE>
<CAPTION>
                                                       1999        1998        1997
                                                    ---------    --------    -------
<S>                                                 <C>          <C>         <C>
Gain on assignment of government contracts
   (Note A) .....................................   $ 500,000    $    --     $   --
Gain on sale of substantially all assets (Note A)     276,334         --         --
Capitalized internal software costs not placed
   into service (Note B) ........................    (222,815)        --         --
Capitalized software development costs deemed
   not commercially viable (Note K) .............     (60,282)        --         --
Goodwill charged against earnings (Note C) ......    (565,104)        --         --
Other ...........................................        --          9,835       --
                                                    ---------    ---------   --------

Net (loss) gain on disposition of assets ........   $ (71,867)   $   9,835   $   --
                                                    =========    =========   ========
</TABLE>

--------------------------------------------------------------------------------
Note Q - Going Concern

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  At June 30, 1999, current liabilities
exceed current  assets by  $1,908,685.  Also at June 30, 1999, the Company has a
deficit in stockholders' equity of $1,944,715.  The Company has sold its systems
integration  business as of May 1, 1999. Its remaining business is the licensing
of its software products.  Through June 30, 1999, there has been nominal license
fee revenue  generated  from its software  products.  A vendor has filed suit to
attempt  to attach  the  Company's  assets for the  collection  of a  $2,200,000
liability  (See  Note G).  These  factors  raise  substantial  doubt  about  the
Company's  ability to continue as a going concern.  The financial  statements do
not include any adjustments relating to the recoverability and classification of
recorded assets, or the amounts and  classification of liabilities that might be
necessary in the event the Company cannot continue in existence.

                                      -28-
<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note Q - Going Concern (continued)

Management  is seeking to attract  sponsors or investors to fund its  continuing
software sales and development operations.  The Company intends to make payments
to vendors as the contingent  payments from the sale of substantially all of its
assets are  received  (See Note A).  There is  currently  no assurance as to the
amount of the contingent payments, and to whether there will be sufficient funds
to pay all creditors.

--------------------------------------------------------------------------------

Note R - Operations of Portion of Business Sold

Effective as of May 1, 1999,  3SiH sold its systems  integration  business.  The
Company's  continuing  business is the licensing of its software  products.  The
following are the summarized pro forma (unaudited)  results of operations of the
sold systems integration business for the year ended June 30, 1999:

                                                       UNAUDITED

Net revenues                                  $     16,445,000
Cost of revenues                                    14,590,000
                                              ----------------

      Gross profit                                   1,855,000
Selling and administrative expenses                  3,937,000

      (Loss) from operations                        (2,082,000)
Other income expense                                  (454,000)

      Net (loss) before taxes                       (2,536,000)
Income taxes                                           (69,000)

Net (loss)                                    $     (2,605,000)
                                              ================

Basic and diluted (loss) per share            $           (.08)
                                              ================

--------------------------------------------------------------------------------

                                      -29-

<PAGE>
                               3Si Holdings, Inc.
                          Notes to Financial Statements
                                  June 30, 1999
--------------------------------------------------------------------------------
Note S - Fourth Quarter Results

Aggregate  year-end  adjustments,  which increased the net loss by $1.7 million,
were  recorded  in the  quarter  ended June 30,  1999.  These  adjustments  were
attributable to prior quarters.

In addition,  unusual or infrequent  items  recognized in the quarter ended June
30, 1999, are as follows:

      Gain on sale of substantially all assets       $       276,334
                                                     ===============

      Legal settlement expense                       $      (224,688)
                                                     ===============

--------------------------------------------------------------------------------




                                      -30-

<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
                                  Year Ended        Year Ended        Six Months       Year Ended        Year Ended
                                   June 30,          June 30,         Ended June      December 31,      December 31,
                                     1999              1998           30, 1997            1996             1995
-------------------------------------------------------------------------------------------------------------------
<S>                           <C>               <C>               <C>               <C>              <C>
Net sales                     $   16,478,328    $   29,384,507    $    9,976,536    $   19,007,245   $    21,774,221
                              ======================================================================================

Earnings (loss) from
operations                    $   (2,679,396)   $      (21,444)   $     (190,063)   $        3,590   $      (109,477)
                              ======================================================================================

Net earnings (loss) from
continuing operations         $   (3,197,545)   $      (62,918)   $     (275,198)   $     (195,315)  $      (177,977)
Discontinued operations                    -                 -           200,793                 -                 -
                              --------------------------------------------------------------------------------------

Net earnings (loss)           $   (3,197,545)   $      (62,918)   $      (74,405)   $     (195,315)  $      (177,977)
                              ======================================================================================

Earnings (loss) per common share:
   From continuing operations $         (.09)   $            -    $         (.04)   $         (651)  $          (593)
   From discontinued operations            -                 -               .03                 -                 -
                               -------------------------------------------------------------------------------------
   Net earnings (loss)        $         (.09)   $            -    $         (.01)   $         (651)  $          (593)
                              ======================================================================================

Dividends per share           $            -    $            -    $          133    $          319   $           715
                              ======================================================================================

At end of period:
Total assets                  $    1,934,416    $    8,176,572    $    7,263,823    $    5,349,586   $     5,221,723
Long-term obligations                      -           142,948            64,502            76,060            99,496
Working capital (deficit)         (1,908,685)         (429,276)        1,767,402          (168,223)          166,922
Stockholders' equity (deficit)    (1,944,715)          858,345         2,708,572           142,966           433,893
</TABLE>

Operations Included

On May 28, 1997,  Tyrex (now 3SiH) acquired 100% of the common stock of 3Si in a
reverse  triangular  merger accounted for as a purchase.  Under the terms of the
merger,  3Si is a wholly owned  subsidiary of 3SiH.  The merger is accounted for
financial  statement  purposes as a purchase  of Tyrex by 3Si,  since the merger
resulted  in 72% of the  subsequently  outstanding  common  stock of Tyrex being
issued to the 3Si stockholders.  The financial  information for the period ended
June 30,  1997,  contains  the results of  operations  of 3Si for the six months
ended June 30, 1997,  and the results of  operations  for Tyrex from the date of
acquisition (May 28, 1997) through June 30, 1997. The financial  information for
the years prior to January 1, 1997,  include the results of  operations  for 3Si
only.

Going Concern

The selected  financial  data has been  prepared  assuming that the Company will
continue  as a going  concern.  At June 30,  1999,  current  liabilities  exceed
current assets by  $1,908,685.  Also at June 30, 1999, the Company has a deficit
in  stockholders'  equity  of  $1,944,715.  The  Company  has sold  its  systems
integration  business as of May 1, 1999. Its remaining business is the licensing
of its software products.  Through June 30, 1999, there has been nominal license
fee revenue  generated  from its software  products.  A vendor has filed suit to
attempt  to attach  the  Company's  assets for the  collection  of a  $2,200,000
liability.  These factors raise substantial doubt about the Company's ability to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustments  relating  to the  recoverability  and  classification  of  recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.

Earnings Per Share

Net loss per share for the years ended June 30, 1999 and 1998,  was  computed on
the basis of the weighted average number of common shares  outstanding  only, as
shares subject to warrants and stock options would have an anti-dilutive effect.
For the period ended June 30, 1997,  the  weighted  average  number of shares is
based on 300 shares of 3Si being  outstanding  for five  months  and  39,248,424
shares of Tyrex being  outstanding  for one month.  For the years ended December
31, 1996 and 1995, the weighted average number of shares outstanding is 300.

                                       31
<PAGE>
Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

Financial Condition

As of June 30, 1999, the Company had a working capital deficit of  approximately
$1.9 million,  and had negative  working capital from operations of $2.4 million
for the year then ended.

As of  June  30,  1999,  accounts  payable  balances  owed  to two  vendors  are
approximately  $650,000  and  $2,200,000.  The  Company  has  made  semi-monthly
payments through  September 28, 1999,  totaling $90,000 on the $650,000 balance.
This vendor has not taken any legal action to pursue collection.  The vendor who
is owed  approximately  $2,200,000  has filed  suit to  attempt  to  attach  the
Company's  assets for the  collection of that  liability.  3SiH does not believe
that  this  amount is due at this time so long as 3SiH is  current  on  interest
payments  as called for in the  parties'  written  agreement.  Counsel  for 3SiH
believes that it is too early to express an opinion as to whether the court will
find the liability due at this time.

The Company has sold its computer  selling and consulting  business as of May 1,
1999. Its remaining  business,  KEWi.net  (Internet-based  customer support) has
generated nominal revenue though June 30, 1999. The Kewi.net subsidiary received
a net capital  infusion of $535,000 during FY1999.  The continuing  operation of
KEWi.net will require significant amounts of working capital.

The Company intends to use proceeds from the earn-out agreement  associated with
the May 1, 1999, sale to pay its major creditors.  3SiH was paid $802,167 of the
purchase  price  at  June  30,  1999.  3SiH  will  also be able to earn up to an
additional  $2,200,000 over a three-year period based upon the contingencies set
forth in the agreement.  The agreement provides for contingent  payments to 3SiH
of $325,000  when key contracts  are renewed.  The  agreement  also provides for
contingent  payments to 3SiH of 75% of the profits in excess of contract renewal
payments  from the sold  business for the first year,  and 50% of the profits in
excess of contract  renewal payments for the second and third years. In no event
will the  purchase  price of the assets  sold plus  contingent  payments  exceed
$3,000,000.  Contract  renewal  payments of $302,167 were included in the amount
received at June 30,  1999.  Profits  from the sold  business  have not exceeded
$302,167 through September 28, 1999, and no additional  contingent  payments are
due to 3SiH at September 28, 1999. There is currently no assurance as to when or
if any contingent payments will be received.

3SiH is seeking to attract sponsors or investors to fund its continuing KEWi.net
operations.  There is no assurance  that the Company will be able to raise these
additional funds.

The Company currently has no line of credit facility in place.


Results of Operations

Status of Proprietary Software Development
During the FY1998,  3SiH completed its research and development on its first two
proprietary  software  products - a contact  management  database program and an
Internet-based customer support system (KEWi.net). Both programs operate via the
Internet.  The  Company  completed  technological  feasibility  of  the  contact
management database program in November 1997, and the KEWi.net system in January
1998. 3SiH incurred  approximately  $70,000 of research expense, and $239,000 of
software development costs in FY1998.

KEWi.net  was  introduced  into the  marketplace  in  June,  1998.  The  contact
management  database  program was deemed not to be  commercially  viable at that
time.

3SiH  completed  technological  feasibility  on  its  two-way  paging  (wireless
messaging)  software in April 1999,  and is working on its  development  through
June 30,  1999.  The  Company  is in the  research  stage for an  upgrade of its
KEWi.net software.  3SiH incurred  approximately $13,000 of research expense and
$11,000 of software development costs in FY1999.


Year Ended June 30, 1999 Compared to Year Ended June 30, 1998

Overview
The  accompanying  financial  information  for the year ended June 30, 1998, has
been  restated  to correct an error in not  recording  all  accounts  payable at
year-end.  The effect of the  restatement  was to decrease  net earnings for the
year ended June 30, 1998, by $232,058 ($.00 per share).

During FY1999 3SiH exited out of the computer  selling and consulting  business.
The Company sold its field services  division just prior to FY1999.  The Company
assigned its government sales contract  effective  January 1, 1999, and sold the
balance of its computer  selling and consulting  business as of May 1, 1999. Its
remaining business is the KEWi.net system.

The current year loss is due to the decline in sales (as the Company  exited out
of the  computer  selling  and  consulting  business)  combined  with  declining
margins. The Company incurred a net loss of $3,197,545 in FY1999 compared to net
loss of $62,918 in FY1998.

                                       32
<PAGE>
Comparative Analysis
Net sales decreased  approximately $12.9 million, or 44% from the previous year.
This change is primarily the result of 3SiH exiting out of the computer  selling
and consulting business. The Company sold its field services division just prior
to FY1999.  The Company assigned its government sales contract effective January
1, 1999, and sold the balance of its computer selling and consulting business as
of May 1, 1999.  Product sales decreased  approximately  $10.1 million.  Revenue
from  consulting  and  services  (excluding  the United  States  Postal  Service
("USPS") sub-contract) decreased  approximately $2.1 million.  Revenues from the
"USPS"  sub-contract  (which  was  part  of the  May 1,  1999,  sale)  decreased
approximately $700,000.  Software sales for 3SiH's remaining business (KEWi.net)
are approximately $8,000 in FY1999.

Cost of goods sold in total decreased approximately $9.6 million or 39% from the
prior year. 3SiH's gross profit percent on product sales dropped dramatically in
FY1999.  The gross  profit on product  sales  dropped  to 4.9% in FY 1999.  This
decrease is attributed to declining margins on commercial sales due primarily to
stiff  competition  and  extremely  low  margins on sales  under its  government
contract.  The direct  costs of  consulting  and Internet  security  assessments
approximately equaled the revenues due in part to customer  dissatisfaction with
these services.

Selling and administrative expenses decreased approximately $700,000 or 13% from
the  previous  year.  This  decrease  is due to $1.4  million in  reductions  in
compensation  costs as 3SiH exited out of the  computer  selling and  consulting
business.  Other selling and  administrative  costs increased as the Company was
unable to start  reducing  these costs until  after the May 1, 1999,  sale.  Bad
debts,   depreciation,   amortization,   and  lease  costs  associated  with  an
unsuccessful conversion of the internal accounting system all increased from the
prior year.

Interest  expense  increased  as a  result  of  increased  use of the  Company's
revolving line of credit to finance its working capital needs.

At June 30, 1999, the Company had three employees, all associated with KEWi.net.



Results of Operations

Year Ended June 30, 1998 Compared to Year Ended June 30, 1997 (unaudited)

Overview
FY1998  was the  first  full year of  operations  of 3SiH  (formerly,  Tyrex Oil
Company)  subsequent  to the May 28,  1997,  merger of Tyrex and 3Si,  Inc.  The
Company realized a net loss of $62,918 for FY1998, versus a net loss of $297,816
for FY1997. The Company's decreased loss for FY1998 is attributable primarily to
the significant  increase in sales between the two years.  The Company  realized
sales of  approximately  $29.4  million in FY1998  versus  $20.3  million in the
comparable period the year before.

Additionally,  the loss incurred in FY1997 is attributable  primarily due to the
Company's  investment in its Internet security startup business,  which began in
earnest in July 1996. The Internet security division lost approximately $324,000
in FY1997.  The Company reduced its Internet security workforce in May 1998, due
to the continuing losses, which the Internet security division produced. For the
FY1998,  the Internet  security  division had incurred  losses of  approximately
$235,000.  The  services,  which had been  performed  by the  separate  Internet
security division,  are now being performed by various  consultants  employed by
the Company or subcontracted when necessary.

The Company also sold its field services division at June 30, 1998. The division
had produced losses of  approximately  $133,000 in the FY1998.  The Company sold
the field services division to a reputable Denver  organization  specializing in
the field services  business for $12,500,  and recognized a gain on the sale for
FY1998.



Comparative Analysis
Sales increased  approximately $9.1 million, or 45% from the previous year. This
change  is  primarily  the  result  of  increased  product  sales  and the  USPS
sub-contract.  Product  sales  increased  approximately  $5.3 million due to the
Company's  implementation  of its solution  selling  methodology  and use of its
recently developed contact management  software within its sales force. The USPS
sub-contract  sales  for the year  increased  approximately  $2.2  million.  The
balance of the increase was in the Company's  services sector  predominantly  in
its integration services in relation to its product sales.

Gross margin on hardware sales  decreased from 13.4% in FY1997 to 9.3% in FY1998
reflecting continuing competitive pressures on hardware sales.

                                       33
<PAGE>
Comparative Analysis (continued)
At June 30, 1998, the Company had 123 employees, including 77 servicing the USPS
sub-contract  in Raleigh,  NC versus  having had 128 with 57 servicing  the USPS
sub-contract at June 30, 1997.



Six Months  Ended June 30,  1997  Compared  to Six  Months  Ended June 30,  1996
(unaudited)

Overview
The  statements of  operations  and cash flows for the six months ended June 30,
1997,  include  the  results  of  operations  and cash flows for 3Si for the six
months ended June 30, 1997, and the 33 days from May 28, 1997,  (the date of the
acquisition)  to  June  30,  1997,  for  Tyrex.  Due to the  nature  of  Tyrex's
operations during the 33 days ended June 30, 1997, (i.e. completing the sales of
its oil and gas properties and  discontinuing  its oil and gas  operations)  the
results of Tyrex's operations are disclosed as "discontinued operations".

Tyrex  realized a gain on its final  disposition  of oil and gas  properties  of
$536,700  in this 33 day  period.  Included  in Tyrex's  gain from  discontinued
operations for this 33 day period were costs  attributable to the acquisition of
approximately  $190,000  and  severance  costs  relating  to  Tyrex's  remaining
employees of approximately  $117,000 including accrued payroll taxes. As of June
30, 1997, Tyrex had three full-time  employees.  No discontinued  operations are
included in the December 31, 1996 and 1995 financial  statements,  which reflect
only the operations of 3Si.

3Si realized a net loss from  continuing  operations of $275,198  during the six
months  ended  June 30,  1997.  This  loss is  attributable  primarily  to 3Si's
continued  investment  in its  Internet  security  startup  business and reduced
hardware sales.  The Internet  security  division lost $150,180 during the first
six months of 1997 attributable to its startup nature whereby revenues generated
by the Internet security division did not yet cover expenses.



Comparative Analysis
Sales were  approximately  $10.0  million  during the six months  ended June 30,
1997.  Total  sales  were  up from  the  same  period  in the  previous  year by
approximately  $1.3 million or 14.4%. This change is primarily the result of the
USPS  sub-contract,  which did not  begin  until May  1996;  and,  a decline  in
hardware sales between periods.  The USPS  sub-contract  sales for the first six
months  of  1997  and  1996  were   approximately   $2.0  million  and  $400,000
respectively,  accounting  for an increase of  approximately  $1.6 million.  The
decline in  hardware  sales,  which was  approximately  $300,000,  was  directly
attributable  to the three 3Si  co-owners'  attention  in merger  and  financing
activities.  The co-owners' involvement was diverted from usual sales activities
causing the lower  hardware sales during the first six months of 1997 versus the
first six months of 1996.

At June 30, 1997, the Company had 128 employees, including 57 servicing the USPS
sub-contract  in Raleigh,  NC and three in Wyoming versus having had 84 in total
at June 30, 1996, including 29 servicing the USPS sub-contract.


                                       34
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
         -----------------------
<TABLE>
<CAPTION>
                           Summary Compensation Table
                                                                                          Long-Term
                                                                                         Compensation
                                                               Annual Compensation          Awards
                                        --------------------------------------------------------------

                                                                  Other Annual      SAR   Options
 Name and Principal Position     Year    Salary ($)    Bonus ($) Compensation(1)    (#)     (#) (2)
------------------------------------------------------------------------------------------------------
<S>                              <C>    <C>             <C>          <C>            <C>       <C>
Frank W. Backes                  1999   $  110,000      ---          ---            ---       ---
President and Chief Executive    1998      110,000      ---          ---            ---       ---
Officer                          1997       37,500      ---          ---            ---    13,200

Frederick J. Slack               1999   $  110,000      ---          ---            ---       ---
Executive Vice President,        1998      110,000      ---          ---            ---       ---
                                 1997       37,500      ---          ---            ---    13,200

Felipe L. Valdez                 1999   $   91,667      ---          ---            ---       ---
Secretary                        1998      110,000      ---          ---            ---       ---
                                 1997       37,500      ---          ---            ---    13,200
<FN>
(1)  Perquisites and other personal  benefits or property did not, in aggregate,
     exceed $50,000 or 10% of the total compensation.

(2)  3Si was a  subchapter  S  corporation  prior to its  acquisition  by Tyrex.
     Amounts  indicated  are  distributions  to the three  officers of 3Si named
     above, made to them in their capacities as shareholders.
</FN>
</TABLE>
     Employment Agreements. Separate employment agreements have been signed with
each of the officers,  Frank W. Backes and  Frederick J. Slack.  Pursuant to the
agreements,  the Company compensated each of the individuals  $110,000 in fiscal
1999. The  individuals  are eligible for increases in their annual  compensation
subject to the profitability of the Company.  The agreements expire May 31, 2000
unless  terminated for cause by 3Si or early  termination by the individual with
90 days' written notice. Mr. Felipe L. Valdez since, May 1999, has been employed
by  Technology  Integration  Group.  He  remains  a  director,  and a  principal
shareholder of the company.

Advances  to  officer/stockholders  of  $162,395  that were fully  reserved  and
recorded as an expense as of June 30, 1999 are not considered compensation.

     Option/SAR  Grants Table.  There were no stock options  granted to officers
during the fiscal year ended June 30, 1999.
<PAGE>
ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  -----------------------------------------------
                  AND MANAGEMENT
                  --------------

         The  following  table sets forth the  ownership of common stock by each
officer  and  director of the Company and by all  officers  and  directors  as a
group.
<TABLE>
<CAPTION>

              Name and Address              Shares Beneficially   Percent
                                                   Owned(1)
     --------------------------------          --------------- ---------------
<S>                                            <C>             <C>
     Frank W. Backes                             9,387,777        27.7%
     6886 S. Yosemite Street
     Englewood, CO 80112
     --------------------------------          --------------- ---------------
     Frederick J. Slack                          9,387,777        27.7%
     6886 S. Yosemite Street
     Englewood, CO 80112
     --------------------------------          --------------- ---------------
     Felipe L. Valdez                            9,387,779        27.7%
     6886 S. Yosemite Street
     Englewood, CO 80112
     --------------------------------          --------------- ---------------
     Tom N. Richardson                             188,721     Less than 1.0%
     777 N. Overland Trail, #101
     Casper, WY 82601
     --------------------------------          --------------- ---------------
     Doris K. Backus                                53,570     Less than 1.0%
     777 N. Overland Trail, #101
     Casper, WY 82601
     --------------------------------          --------------- ---------------
     Directors and executive officers as a      28,405,624 (s)    83.5%
         group (including those named above)

<FN>
(1)               Beneficial  ownership results in each case from the possession
                  of sole or shared voting and investment  power with respect to
                  the shares.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------

         Amounts due from 3Si  Holdings,  Inc.  stockholders  were  $162,395 and
$79,882 at June 30,  1999 and 1998,  respectively.  This June 30, 1998 amount is
included in other current assets.  Due to the  uncollateralized  nature of these
receivables  and the going concern  consideration,  the June 30, 1999 balance of
$162,395 has been fully reserved and recorded as an expense.

         Other than as set forth  herein,  no  officer,  director  or  principal
shareholder  of 3Si has or  proposes  to have any  direct or  indirect  material
interest by security  holdings,  contracts or otherwise in the Company or in any
assets  proposed to be acquired by the Company or in any purchase,  the value of
which will be affected by the operations of the Company.