UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-QSB/A

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934

 FOR THE FISCAL QUARTER ENDED   SEPTEMBER 30, 1998

 Commission File Number          0-8146

MSI HOLDINGS, INC. f/k/a MICRO-MEDIA SOLUTIONS, INC.
 (Exact name of registrant as specified in charter)

 UTAH                                      87-0280886
State or other jurisdiction of     (I.R.S. Employer I.D. No.)
Incorporation or organization

501 Waller St., Austin, Texas 78702
(Address of principal executive offices)

Issuer's telephone number, including area code  (512) 476-6925

Securities registered pursuant to section 12(b) of the Act:
Title of each class   Name of each exchange on which registered
        None                         N/A

Securities registered pursuant to section 12(g) of the Act:
Title of each class   Name of each exchange on which registered
Common Stock,                        None
Par Value  $.10
        
Check whether the Issuer (1) filed all reports required to be filed 
by section 13 or 15(d) of the Exchange Act during the past 12 
months (or for such shorter period that the registrant was required 
to file such report(s), and (2) has been subject to such filing 
requirements for the past 90 days.  
(1)  Yes  (  ) No  (X)    (2)  Yes (X)  No  (  )

Number of shares of common stock outstanding at September 30, 1998: 
12,032,221.














Part I: Financial Information Item 1: 
Consolidated Financial Statements


Index to Consolidated Financial Statements         Page


Consolidated Balance Sheets                         3
        

Consolidated Statements of Operation                5


Consolidated Statements of Cash Flows               6
        

Consolidated Statements of Stockholders' Equity     9


Notes to Consolidated Financial Statements         11





































MSI HOLDINGS, INC. AND SUBSIDIARIES 
Consolidated Balance Sheets  
                          
                                    September 30         March 31
                                        1998               1998
                                    (unaudited)          (audited)

                                                 ASSETS          
Current Assets
 Cash and Cash Equivalents         $     7,748        $    25,786
 Accounts Receivable - Trade           774,834            150,851
 Inventory                             397,832            285,023
 Short-Term Investment - restricted  1,350,000          1,350,000
 Other Receivables - Advances          174,530             86,961
                                     ---------          ---------
  Total Current Assets               2,704,944          1,898,621
           
Property, Plant, and Equipment 
 (at cost) net                       1,175,967            800,831
                                     ---------          ---------
TOTAL ASSETS                       $ 3,880,911        $ 2,699,452
                                     =========          =========
































The accompanying notes are an integral part of these financial statements.


MSI HOLDINGS, INC. AND SUBSIDIARIES 
Consolidated Balance Sheets - continued  
                          
                                    September 30         March 31
                                        1998               1998
                                    (unaudited)          (audited)

                              LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities
 Accounts Payable - Trade          $   841,414        $   300,035
 Bank Line of Credit                 1,230,000          1,228,966
 Other Accrued Expenses                109,701            169,336
 Current Maturities of
  Long-term Debt                       112,596            151,267
 Current Portion of Obligations
  Under Capital Leases                  94,005             41,097
 Other Notes Payable                   200,000            200,000
                                     ---------          ---------
  Total Current Liabilities          2,587,716          2,090,701
                                     ---------          ---------
Long Term Notes
 Notes Payable                         206,493            367,522
 Obligations under Capital 
  Leases For Equipment                 302,780            149,560
                                     ---------          ---------
  Total Long Term Notes                509,273            517,082
                                     ---------          ---------

Total Liabilities                    3,096,989          2,607,783
                                     ---------          ---------
Stockholders Equity
 Preferred stock Series B; $5.30
  stated value; 490,000 shares
  authorized, issued & outstanding   2,597,000          2,597,000
 Preferred stock Series C; $10.60
  stated value; 99,057 shares
  authorized, issued & outstanding   1,050,004          1,050,004
 Preferred stock Series D; $10.60
  stated value; 279,656 shares 
  authorized, issued & outstanding   2,964,364                  -
 Common stock at $.10 par value;     
  50,000,000 authorized; 12,032,221 
  and 11,518,571 shares issued 
  and outstanding, respectively      1,203,222          1,150,685 
 Additional paid-in capital          3,370,114          2,666,099
 Accumulated Deficit               (10,400,782)        (7,372,119)
                                     ---------          ---------
  Total Stockholders Equity            783,922             91,669
                                     ---------          ---------
TOTAL LIABILITIES AND 
 STOCKHOLDERS EQUITY               $ 3,880,911        $ 2,699,452
                                     =========          =========


The accompanying notes are an integral part of these financial statements.

MSI HOLDINGS, INC. AND SUBSIDIARIES 
Consolidated Statements of Operation - (UNAUDITED)
                
                                     For the Six Months    For the Three Months
                                     Ended September 30     Ended September 30 
                                      1998        1997        1998       1997  

Revenues:
 Hardware, Software & Peripherals $1,182,196  $1,138,797  $  678,564 $  320,163
 Service, Support & Integration      238,967     514,617     164,868    221,470
 Network Installation                174,746     365,821     150,848    247,818
                                   ---------   ---------   ---------  ---------
Net revenues                       1,595,909   2,019,235     994,280    789,451
                                   ---------   ---------   ---------  ---------
Cost of Goods Sold                
 Hardware, Software & Peripherals  1,137,451     681,063     718,247    278,859
 Service, Support & Integration       91,118     334,502      26,383    143,956
 Network Installation                163,926     254,114     146,719    173,779
                                   ---------   ---------   ---------  ---------
Total cost of goods sold           1,392,495   1,269,679     891,349    596,594
                                   ---------   ---------   ---------  ---------
Gross Margin                         203,414     749,556     102,931    192,857

Selling, General & Administrative           
 Salaries & benefits               1,410,430     728,321     741,497    421,252
 Professional fees and consultants   411,340     164,059     225,398    112,069
 Occupancy                           198,211      88,500     108,532     31,842
 Depreciation                        106,991      99,440      54,000     69,694
 Vehicle expense                      74,432      78,851      39,822     43,481
 Other expense                       307,358     294,216     207,983    236,923
 Interest expense, net                29,393      36,507       8,757     14,377
 Provision for uncollectible               -       1,284           -          -
                                   ---------   ---------   ---------  ---------
Total selling, general and
 Administrative expenses           2,538,155   1,491,178   1,385,989    929,638
                                   ---------   ---------   ---------  ---------
Net Loss                          (2,334,741) (  741,622) (1,283,058) ( 736,781)

Plus preferred stock dividends    (  693,922)          -  (   92,679)         -
                                   ---------   ---------   ---------  ---------
Net Loss available to 
 common stockholders              (3,028,663) (  741,622) (1,375,737) ( 736,781)
                                   =========   =========   =========   ========
Basic and diluted 
       net loss per share          $   (0.26)  $   (0.07)  $   (0.12)  $  (0.07)
                                   =========   =========   =========   ========
Basic and diluted weighted 
  average number of shares 
  Outstanding                     11,638,166  10,764,733  11,753,571 10,764,733
                                  ==========  ==========  ========== ==========





The accompanying notes are an integral part of these financial statements.

MSI HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity 
For the Year Ended March 31, 1998 (Audited) and
For the Six Months Ended September 30, 1998 (unaudited)
(page 1 of 3)
                                    Preferred Stock 
                      Series B          Series C          Series D
                  Shares    Amount   Shares   Amount   Shares   Amount  
Balance
March 31, 1997         -          -       -          -       -          -
Common stock issued:
 Interest              -          -       -          -       -          -
 Compensation          -          -       -          -       -          -
 Preferred 
  stock dividend       -          -       -          -       -          -
Preferred stock 
 issued:
 Private 
  Placement       420,000  2,226,000 99,057  1,050,004       -          -
 Senior Debt       70,000    371,000      -          -       -          -
Preferred stock 
 dividend discount      -          -      -          -       -          -
Stock option for:
 compensation           -          -      -          -       -          -
 Placement agent        -          -      -          -       -          -
Cash received 
 for uncertificated 
 stock                  -          -      -          -       -          -
Common stock-
 Uncertificated
 Issued for note
 Receivable             -          -      -          -       -          -
Note receivable 
 Offset against
 Common stock
 Subscribed             -          -      -          -       -          -
Net loss                -          -      -          -       -          -
                  -------  --------- ------  --------- -------  ---------
Balance
March 31, 1998    490,000 $2,597,000 99,057 $1,050,004 
Preferred stock 
  issued:
  Private 
   Placement            -          -      -          - 279,657 $2,964,364
Common stock issued for:
 Rule 144 Stock
 Compensation           -          -      -          -       -          -
 Preferred 
  stock dividend        -          -      -          -       -          -
 Class A Warrants
Stock options for
 Placement agents       -          -      -          -       -          -
Net loss                -          -      -          -       -          -
Balance           -------  --------- ------  --------- -------  ---------
September 30,1998 490,000 $2,597,000 99,057 $1,050,004 279,657  2,964,364
                  =======  ========= ======  ========= =======  =========
The accompanying notes are an integral part of these financial Statements.
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity - continued
For the Year Ended March 31, 1998 (Audited), and
For the Six Months Ended September 30, 1998 (Unaudited)
(page 2 of 3)
                                                Common Stock
                             Common Stock        Subscribed     
                          Shares     Amount    Shares   Amount   
Balance
March 31, 1997        10,764,733 $1,076,473         -          -  
Common stock issued:
 Interest                 10,286      1,029         -          -  
 Compensation            414,900     41,490         -          -  
 Preferred 
  stock dividend          23,742      2,374         -          -  
Preferred stock 
 issued:
 Private 
  Placement       
 Senior Debt                   -          -         -          -
Preferred stock 
 dividend discount             -          -         -          -  
Stock option for:
 compensation                  -          -         -          -  
 Placement agent               -          -         -          -  
Cash received 
 for uncertificated 
 stock                   293,185    29,319          -          -  
Common stock-
 Uncertificated
 Issued for note
 Receivable                    -          -  543,000    407,250  
Note receivable 
 Offset against
 Common stock
 Subscribed                    -          - (543,000)  (407,250)  
Net loss                       -          -        -          -  
                      ----------  ---------  -------    ------- 
Balance
March 31, 1998        11,506,846  1,150,685        -          -
Preferred stock 
  issued:
  Private 
   Placement                   -          -        -          -
Common stock issued for:
 Rule 144 stock           50,000      5,000        -          -
 Compensation             31,000      3,100        -          -
 Preferred 
  stock dividend          24,375      2,437        -          -
 Class A Warrants        420,000     42,000        -          -
Stock options for  
 Placement agents              -          -        -          -
Net loss                       -          -        -          - 
Balance               ----------  ---------  -------    ------- 
September 30,1998     12,032,221  1,203,222        -          -
                      ==========  =========  =======    ======= 
The accompanying notes are an integral part of these financial Statements.
MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity - continued
For the Year Ended March 31, 1998 (Audited), and
For the Six Months Ended September 30, 1998 (Unaudited)
(page 3 of 3)
                        Additional     
                      (Discount on)    Accumulated       
                     Paid-in Capital     Deficit         Total
Balance
March 31, 1997       $(1,046,058)     $(  133,999)   $(  103,584)
Common stock issued:
 Interest                  4,114                -          5,143  
 Compensation            250,367                -        291,857  
 Preferred 
  stock dividend          56,294       (   58,668)             -  
Preferred stock 
 issued:
 Private 
  Placement           (  975,641)               -      2,300,363
 Senior Debt                   -                -        371,000
Preferred stock 
 dividend discount     3,412,502       (3,412,502)             -  
Stock option for:
 compensation             93,750                -         93,750  
 Placement agent         387,641                -        387,641  
Cash received 
 for uncertificated 
 stock                   483,130                -        512,449  
Common stock-
 Uncertificated       
 Issued for note
 Receivable                    -                -        407,250  
Note receivable 
 Offset against
 Common stock
 Subscribed                    -                -     (  407,250)  
Net loss                       -       (3,766,950)    (3,766,950)   
                      ----------        ---------      --------- 
Balance
March 31, 1998         2,666,099       (7,372,119)        91,669   
Preferred stock 
  issued:
  Private 
   Placement          (  978,337)               -      1,986,027 
Common stock issued for:
 Rule 144 stock          582,500       (  534,500)        53,000
 Compensation            163,087                -        166,187
 Preferred 
  stock dividend         156,985       (  159,422)             -
 Class A Warrants        291,900                         333,900       
Stock options for  
 Placement agents        487,880                         487,880
Net loss                       -       (2,334,741)    (2,334,741)  
Balance                ---------        ---------      ---------   
September 30,1998      3,370,114      (10,400,782)       783,922
                       =========        =========      ========= 
The accompanying notes are an integral part of these financial Statements.
MSI HOLDINGS, INC. AND SUBSIDIARIES 
Consolidated Statements of Stockholders' Equity 
For the Year Ended March 31, 1998 (Audited) and
For the Six Months Ended September 30, 1998 (unaudited)

                                        September 30,       March 31,
                                            1998              1998 
Cash Flows from Operating 
 Activities:
Net (Loss)                            $(2,334,741)      $(3,766,950)
Adjustments to reconcile net income
  to net cash, provided by operating 
  activities:
 Depreciation expense                     106,991           178,892
 Stock issued for compensation            178,900           291,857
 Stock options issued for compensation          -            93,750
 Stock issued for interest                      -             5,143
 Change in accounts receivable         (  623,983)          832,062
 Change in inventory                   (  112,809)       (   19,569)
 Change in accounts payable               541,379        (  577,325)
 Change in accrued expenses            (   72,348)           57,775
Net Cash Provided by (used by)          ---------         ---------
 Operating Activities                  (2,316,611)       (2,904,365)
                                        ---------         ---------
Cash Flows from Investment Activities:
 Investment in property & equipment    (  227,565)       (  195,685)
 Purchase of short-term investment                       (1,350,000)
 Additional notes receivables                            (  142,265)
 Proceeds from notes receivables                            477,645
 Proceeds from other receivables                            162,793
 Additional other receivables          (   87,569)       (  121,341)
Net Cash provided by (Used by)          ---------         ---------
 Investing Activities                  (  315,134)       (1,168,853)
                                        ---------         ---------
Cash Flows from Financing Activities:
 Proceeds from Line of Credit               1,034           504,076
 Proceeds from other notes payable                          200,000
 Change in long term debt              (  199,700)       (  162,153)
 Payments in capital lease obligations (   48,434)       (   32,485)
 Proceeds from Private Placement        2,473,907         2,688,004
 Proceeds from issuance of common stock    53,000           512,450 
 Proceeds from exercise of warrants       333,900                 -
 Proceeds from Senior Convertible Debt          -           371,000
Net Cash Provided by (Used by)          ---------         ---------
 Financing Activities                   2,613,707         4,080,892
                                        ---------         ---------
Net Increase in Cash                   (   18,038)            7,674

Cash at Beginning of Period                25,786            18,112
                                        ---------         ---------
Cash at End of Period                 $     7,748       $    25,786
                                       ==========        ==========



The accompanying notes are an integral part of these financial Statements.

MSI HOLDINGS, INC. AND SUBSIDIARIES 
Consolidated Statements of Stockholders' Equity - continued
For the Year Ended March 31, 1998 (Audited) and
For the Six Months Ended September 30, 1998 (unaudited)

                                        September 30,       March 31,
                                            1998              1998 

Supplemental disclosures:
 Cash paid for interest            $       44,546       $   232,578

Supplemental schedule of non-cash investing and financing activities:
Preferred stock issued for: 
  Placement agent fees             $           --       $   156,000
Stock options:
 Compensation                                  --            93,750
 Placement agent fees                     487,880                --
Common stock issued for: 
 Compensation                             178,900           291,857
 Interest on debt                              --             5,143
 Preferred stock dividends                159,422            58,668
Common stock subscribed for
  Note receivable                              --           407,250
Debt converted to preferred stock              --           371,000
Inventory received for notes                   --            84,394
Inventory converted to equipment           44,021                --
Discount on preferred stock               543,500         3,412,502
Capital lease obligations                 254,562                --



























The accompanying notes are an integral part of these financial Statements.

MSI HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation:
The accompanying unaudited interim financial statements have been prepared in 
accordance with generally accepted accounting principals and the rules of the 
Securities and Exchange Commission (the SEC), and should be read in conjunction 
with the audited financial statements and notes thereto contained in the 
Company's latest annual Report filed with the SEC on Form 10-KSB/A on November 
12, 1998 and the latest quarterly report filed with the SEC on form 10QSB/A on 
November 12, 1998.  In the opinion of management, all adjustments consisting of 
normal recurring adjustments, necessary for the fair presentation of financial 
position and the results of operations for the interim periods presented have 
been reflected here in. The results of operation are not necessarily indicative 
of the results to be expected for the full year. Notes to the financial 
statements which would substantially duplicate the disclosure contained in the 
audited financial statements for the year ended March 31, 1998 and the three 
months ended June 30, 1998, as reported in the Form 10-KSB/A and Form 10QSB/A 
have been omitted.

Nature of Business and Organization:
MSI Holdings, Inc., (the Company),(formerly known as Micro-Media Solutions, 
Inc., and Mountain States Resources Corporation, ("MSRC")), was organized under 
the laws of the State of Utah on April 15, 1969.  MSRC began operations April 
15, 1969, as a mining, mineral extraction and oil and gas exploration company.  
MSRC discontinued its operations on 1993 and became a development stage company 
as described in the Statement of Financial Accounting Standards No.7, 
"Accounting and Reporting by Development Stage Enterprises".  On June 23, 1997, 
MSRC entered into an agreement and plan of reorganization with the shareholders 
of Micro-Media Solutions, Inc. (a Texas Corporation), ("MSI-Texas"), in which 
MSRC acquired 100% of the common stock of MSI-Texas.  As part of the 
reorganization, MSRC changed its name to Micro-Media Solutions, Inc.,(a Utah 
Corporation), ("MSHI").  On October 14, 1998, MSHI changed its name to MSI 
Holdings, Inc.  The transaction was accounted for as a recapitalization.

MSI-Texas is an Austin, Texas, based technology corporation formed to provide 
Computer hardware, software programming, system support, maintenance, media 
duplication, and kitting to the public and private sectors.  In addition, MSI-
Texas is certified by the State of Texas as a Historically Underutilized 
Business (HUB).

MSI-Texas is a business solutions technology integrator with infrastructure 
design and implementation services. In addition, MSI-Texas' computer networking
services includes  system integration and local wide-area networks.

Going concern:
As shown in the accompanying consolidated financial statements, the Company has 
incurred net losses of $2,334,741 for six months ended September 30, 1998.  
This factor creates a substantial doubt about the Company's ability to continue 
as a going concern.  The ability of the Company to continue as a going concern 
is dependent on the Company obtaining additional financing to fund the expenses 
related to operations and capital improvements.


MSI HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (unaudited)

In May through July 1998, the Company received approximately $2.9 million in 
completion of phase III of a private placement agreement, which has been used 
to retire debt, decrease past due accounts payable and for operating expenses. 
In addition, the Company has completed arrangements with a private investment 
group for a private placement of a newly created series of preferred stock 
(Series E),with net proceeds to the Company of approximately $2.7 million to 
take place in November and December 1998. In November 1998, approximately 1.3 
million was received on the Series E placement with the balance to be received 
in December 1998. The closing of the Series E private placement will enable MSI 
to have sufficient funds to meet the Company's working capital and capital 
expenditures needs. MSI is also  negotiating with an investment bank for an 
additional private offering before the fiscal year end of March 31, 1999.  
Management has identified and closed substantial contracts during the year 
ended March 31, 1999, and believes it can produce the level of revenue 
necessary to return the Company to a positive earnings trend.  The financial 
statements do not include any adjustments that might be necessary if the 
Company is unable to continue  as a going concern.

Principles of Consolidation:
The consolidated financial statements for the six months ended September 30, 
1998 and 1997 and as of March 31, 1998, include the accounts and transactions 
of the Company and MSI-Texas.  All significant inter-company accounts and 
transactions have been eliminated in the accompanying consolidated financial 
statements.  The Company, however, did not have any material asset or liability 
accounts or account balances. With the exception of the Company's equity 
accounts and a deficit retained earnings, the significant account balances 
belong to MSI-Texas.

Cash and Cash Equivalents:
Cash equivalents consist primarily of funds invested in short-term interest-
bearing accounts. The Company considers all highly liquid investments purchased
with initial maturities of three months or less to be cash equivalents. 

Accounts Receivable:
The Company follows the allowance method of expensing accounts receivable when 
considered uncollectable.  As of September 30, 1998 and March 31, 1998, 
management believes all accounts are collectible; and therefore, no allowance 
has been recorded. Included in other expenses is a $35,000 recovery of a 
previously written-off bad debt. 

Inventory:
Inventory is valued at lower of cost, using the FIFO method(first-in/first-out)
or market. Inventory consists principally of hardware and software needed for 
maintaining and building network technology for customers.









MSI HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (unaudited)

Property, Plant, and Equipment:
Property and equipment are stated at cost. For financial statement purposes, 
depreciation is computed using the straight-line method over the estimated 
useful lives of the related assets.  Amortization of leasehold improvements is 
computed using the straight-line method over the shorter of the term of the 
related lease or the useful life of the leasehold improvements.  Accelerated 
depreciation methods are used for tax purposes. Depreciation and amortization 
are calculated over the following useful lives stated in years:

                                                         Useful
                                                         Lives
	Vehicles                                                5
	Furniture and fixtures                                  5
	Equipment                                               5
	Leasehold improvements                                 20

Revenue and cost recognition:
Hardware and peripherals sales consist of computers and related electronic 
equipment. Software sales consist of the resale of prepackaged 
software and operating systems from Microsoft and other vendors to the end 
user. Revenue is recognized when persuasive evidence of an arrangement exist, 
delivery has occurred, the customer fee is fixed and collectibility is 
probable. Most hardware, software and peripherals sales are made without the 
right of return. Product returns, which are minimal, are recorded as a 
reduction of sales upon receipts of the product.  Service, support and 
integration sales are recognized upon completion of the service and is not 
subject to warranty.

Revenue from fixed priced contracts is recognized on the percentage-of-
completion method of accounting, measured by the cost-to-cost method.  This 
method is used because management considers total costs incurred to be the best 
available measure of progress on contracts.

Contract costs include all direct costs and those indirect costs related to 
contract performance. Changes in job performance, job conditions, and estimated
profitability and final contract settlements may result in revisions to costs 
and revenue and are recognized in the period in which the revisions are 
determined.

The asset, "Costs and Estimated Earnings in Excess of Billings Uncompleted 
Contracts", represents revenue earned in excess of amounts billed.  The 
liability "Billings in Excess of Costs and Estimated Earnings on Uncompleted 
Contracts" represents billings in excess of amounts earned.

Revenue and contract costs from fixed priced contracts are included in the 
various categories of revenue and cost of goods sold in the accompanying 
financial statements.  







MSI HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (unaudited)

Federal Income Tax:
The Company uses the liability method of accounting for income taxes as 
prescribed by the Financial Accounting Standard Board Statement No. 109.  
Deferred tax liabilities and assets are determined based on differences between 
the financial statement and tax basis of assets and liabilities using enacted 
tax rates expected to be in effect for the year in which the differences are 
expected to reverse.  The net change in deferred tax assets and liabilities is 
reflected in the statement of operations.

New Accounting Pronouncements:
The Company accounts for stock options and warrants issued to employees in 
accordance with APB 25, "Accounting for Stock Issued to Employees". The Company
follows FASB Statement 123, "Accounting for Stock-Based Compensation" ("SFAS No
123")  for financial statement disclosure purposes and issuance of options and 
warrants to non-employees for services rendered.

In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived 
Assets and for Long-Lived Assets to be Disposed Of", management reviews long-
lived assets and intangible assets for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be fully 
recoverable. As part of this assessment, management prepares an analysis of the 
undiscounted cash flows for each product that has significant long-lived or 
intangible asset values associated with it.  This analysis for the asset values 
as of September 30, 1998 and March 31, 1998, indicated there was no impairment 
to the carrying value of these assets.

SFAS No. 130, "Reporting Comprehensive Income", effective for fiscal years 
beginning after December 15, 1997, establishes standards for reporting and 
display of comprehensive income and its components in a full set of general 
purpose financial statements.  This statement requires that all items that are 
required to be recognized under accounting standards as components of 
comprehensive income be reported in a financial statement that is displayed 
with the same prominence as other financial statements.  The Company has 
addressed the requirements of SFAS No. 130 and there is no material impact on 
the financial statements.

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related 
Information", effective for fiscal years beginning after December 15, 1997, 
establishes standards for reporting information about operating segments in 
annual financial statements and interim financial reports issued to 
shareholders.  Generally, certain financial information is required to be 
reported on the basis that is used internally for evaluating performance or an 
allocation of resources to operating segments.  The Company has adopted the 
requirements of SFAS No. 131 and there is no material impact on the financial 
statements.








MSI HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (unaudited)

Use of Estimates and Certain Concentrations:
Management of the Company has made a number of estimates and assumptions 
relating to the valuation and reporting of assets and liabilities and the 
disclosure of contingent assets and liabilities to prepare these consolidated 
financial statements in conformity with generally accepted accounting 
principles.  Although actual results could differ from those estimates, 
management believes its estimates are reasonable.  Certain components, 
subassemblies and software included in the Company's computer systems are 
obtained from sole suppliers or a limited number of suppliers.  The Company 
relies, to a certain extent, upon the ability of its suppliers' to enhance 
existing products in a timely and cost-effective manner, to develop new 
products to meet changing customer needs and to respond to emerging standards 
and other technological developments in the computer industry.  The Company's 
reliance on a limited number of suppliers involves several risks, including the
possibility of shortages and/or increases in costs of components and 
subassemblies, and the risk of reduced control over delivery schedules.

Financial Instruments:
Cash equivalents include highly liquid short-term investments with original 
maturities of three months or less, readily convertible to known amounts of 
cash.  The amounts reported as cash equivalents, receivables, other assets, 
accounts payable and accrued expenses and debt are considered by the Company to 
be reasonable approximations of their fair values, based on market information 
available to management as of September 30, 1998 and March 31, 998. The use of 
different market assumptions and estimation methodologies could have a material 
effect on the estimated fair value amounts.  The reported fair values do not 
take into consideration potential taxes or other expenses that would be 
incurred in an actual settlement.

Financial instruments that potentially subject the Company to concentration of 
credit risk consist principally of cash and cash equivalents and trade accounts 
receivable.  A concentration of credit risk may exist with respect to trade 
receivables, as many of the Company's customers are in the computer and 
telecommunications industries. The Company has a large number of customers on 
which it performs ongoing credit evaluations and generally does not require 
collateral from its customers. Historically, the Company has not experienced 
significant losses related to receivables from individual customers or groups 
of customers in any particular industry or geographic area.

NOTE 2 - STOCKHOLDERS' EQUITY

In October 1997, the Company completed  a  Private  Placement  Agreement,  (the 
"Agreement")  with a  group of accredited investors.  The Agreement provides 
for three "Phases" of financing. 

Phase I of the Agreement was funded in November 1997. The Company received 
$2,120,000 in exchange for 400,000 shares of series B preferred stock (5% 
cumulative, convertible, non-voting, stated value $5.30) ,(the "Series B 
Stock").  Each share of preferred stock is initially convertible into 10 shares 
of the Company's common stock subject to adjustment and six warrants, (the 
"Warrants") for the purchase of six shares of common stock at $1.50 per share.  


MSI HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (unaudited)

The Company paid $302,000 and issued 20,000 shares of series B preferred stock 
for placement agent fees in Phase I.  Also options to purchase 400,000 shares 
of common stock at $1.50 per share were issued as a part of the agreement. The 
common stock had a fair value of $0.92 per share at the grant date of the 
options resulting in $367,350 in placement agent fees.  The Agreement states 
that conversion of the preferred stock will not occur to the extent that the 
HUB status of the Company is compromised. An additional 4,348,738 shares could 
be converted before the HUB status would be lost.

The series B preferred stock can be converted to common stock. Therefore, a 
discount in the amount of $6,151,978 has been realized. The discount is the 
difference in the intrinsic value of the common stock and warrants less the net 
proceeds from the series B preferred stock.  The discount is accreted from the 
date of issuance of the preferred stock to the date the stock can be converted. 
Due to the limitation on the number of shares of stock that can be issued to 
retain the HUB status, $3,412,502 has been recorded as dividends and as an 
increase in additional paid-in capital in the accompanying financial statement. 
The unrecognized portion of the discount in the amount of $2,796,524 will be 
recorded if and when the preferred stock is converted or the HUB status changes.

Phase II of the Agreement was funded in February 1998. The Company received 
$1,000,004 in exchange for 94,340 shares of series C preferred stock (6% 
cumulative, convertible, non-voting, stated value, $10.60), (the "Series C 
Stock).  Each share of preferred stock is initially convertible into 10 shares 
of the Company's common stock, subject to adjustment. The Company paid $130,000 
and issued 4,717 shares of series C preferred stock for placement agent fees.  
Also options to purchase 47,170 shares of common stock at $4.00 per share were 
issued as a part of the agreement.  The common stock had a fair value of $0.43 
per share at the grant date resulting in $20,291 in placement agent fees.  The 
Agreement states that conversion of the preferred stock will not occur to the 
extent that the HUB status of the Company is compromised.

The series C preferred stock can be converted to common stock. Therefore, a 
discount in the amount of $615,851 has been realized.  The discount is the 
difference in the intrinsic value of the common stock less the net proceeds 
from the series C preferred stock. Due to the limitation on the number of 
shares of stock that can be issued to retain the HUB status, the unrecognized 
discount in the amount of $615,851 will be recorded if and when the preferred 
stock is converted or the HUB status changes.

Phase III of the Agreement was funded in May through July 1998.  The Company 
received $2,923,204 in exchange for 266,340 shares of series D preferred stock 
(6% cumulative, convertible, non-voting, stated value, $10.60), (the "Series D 
Stock").  Each share of preferred stock is initially convertible into 10 shares 
of the Company's common stock, subject to adjustment. The Company paid $349,318
and issued 13,317 shares of series D preferred stock for placement agent fees.  
Also options to purchase 250,850 shares of common stock at $1.59 per share were 
issued as a part of the agreement.  The common stock had a fair value of $1.65 
to $2.86 per share at the grant date resulting in $487,880 in placement agent 
fees.  The Agreement states that conversion of the preferred stock will not 
occur to the extent that the HUB status of the Company is compromised.


MSI HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (unaudited)

During the six months ended September 30, 1998 the Company received $53,000 for 
5,000 shares of Series D preferred stock at 10.60 per share.  Due to the Series 
D preferred stock being over subscribed, the company converted the 5,000 
preferred shares to 50,000 shares of Rule 144 common stock. The discount on the
50,000 shares in the amount of 534,500 has been included as a dividend in the 
accompanying financial statements.

The Series D preferred stock can be converted to common stock.  Therefore, a 
discount in the amount of $4,843,296 at September 30, 1998 has been realized.  
The discount is the difference in the intrinsic value of the common stock less 
the net proceeds from the series D preferred stock.  Due to the limitation on 
the number of shares of stock that can be issued to retain the HUB status, the 
unrecognized discount in the amount of $4,43,296 will be recorded if and when 
the preferred stock is converted or the HUB status changes.

Senior convertible debt in the amount of $371,000 was issued for cash in 
November 1997.  This debt was converted to 70,000 shares of series B preferred 
stock (5% cumulative convertible, non-voting, stated value, $5.30), in February
1998.  Accrued interest in the amount of $5,143 was paid with the issuance of 
10,286 shares of common stock. The discount on this issue of series B preferred 
stock is included in the total series B discount detailed above.

Preferred stock dividends were paid with the issuance of common stock valued at 
the previous thirty day average closing bid price per share of common stock as 
follows:                SHARES       AMOUNT
                        ------      --------
March 31, 1998          23,742      $ 58,668
June 30, 1998           10,224      $ 66,743        
September 30, 1998      14,151      $ 92,679

NOTE 3 - CONTINGENCY

On December 18, 1997, Argus Management, Inc filed Plaintiff's Original Petition 
in the 216th District Court of Kerr County, Texas. Argus claims the Company and 
Mr. Jose G. Chavez, as joint obligors, defaulted on their obligation to Argus 
pursuant to two promissory notes for $100,000 each, both dated June 2, 1997.  
Argus is seeking a judgment for $200,000, together with interest on the notes 
at the rate of 20% per annum from June 2, 1997, through the date the notes are 
satisfied. As of March 31, 1998, $65,000 had been disbursed to third parties in 
satisfaction of obligations of Argus Management, Inc. The $65,000 has been 
recorded in other receivables in the accompanying financial statements.

On February 6, 1998, the Company filed Plaintiff's Original Petition in the 
above-referenced case.  The Company asserts breach of contract, fraud, 
defamation, usury, and civil conspiracy claims against Argus Management, Inc.  
The Company strongly disagrees with Argus' contentions and denies liability to 
Argus under the notes and plans to oppose vigorously Argus' claims and recover 
the amounts disbursed to third parties.





MSI HOLDINGS, INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (unaudited)

On January 22, 1998, the Company filed a lawsuit against Bits Technical 
Corporation for damages attributable to a breach of commitment.  This matter is 
still pending.  On August 17, 1998, Bits Technical Corporation ("BTC") filed a 
counterclaim against the Company in connection with the above case.  In the 
counterclaim, BTC asserts the Company fraudulently induced BTC to promise to 
loan money to the Company.  In particular, BTC claims the Company promised 
certain contracts and business opportunities to BTC that the Company was 
unwilling or unable to deliver.

On November 20, 1996, MCA Communications, Inc. ("MCA") filed a lawsuit against 
the Company in County Court at Law No. 2 in Harris County, Texas.  MCA claims 
the Company owes $12,485 for certain goods and services that MCA claims to have 
provided to MSI-Texas in connection with various projects for the Texas 
Department of Health.  MCA also seeks interest, costs, and attorneys' fees.  On 
January 6, 1997, the Company filed its answer and denied the above-referenced 
claim in its entirety.






































Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS 

THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
OPERATIONS SECTION CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND 
UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE 
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE 
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW.

Overview
========
Micro-Media Solutions, Inc. ("MSI-Texas"), the operating subsidiary of MSHI was 
created in 1993 in Austin, Texas, to provide computer hardware, software 
programming, system installation and support, maintenance, and media 
duplication to the public and private sectors.  MSI-Texas maintains 
certification as a minority-owned business enterprise and status as a 
Historically Underutilized Business ("HUB"). 

Among the principal costs to market and sell the Company's products are 
advertising and promotion costs, salaries and commissions, and general and 
administrative expenses.  MSHI's operating results  may be subject to 
fluctuations on a quarterly and an annual basis as a result of various factors, 
including, but not limited to, fluctuating market pricing for computer and 
semiconductor memory products, industry competition, seasonal government 
purchasing cycles, and working capital restrictions on manufacturing and 
production.  Therefore, the operating results for any particular period are not 
necessarily indicative of the results that may occur in any future period. 

The Company's revenues consist of hardware sales, prepackaged software sales 
and the delivery of technical services, including installing and maintaining 
network systems. The technical service sales of the Company typically yield a 
higher margin than the hardware and software sales of the Company.  This is 
due, in part, to  the intense competition in the hardware and software sales 
sector from Original Equipment Manufactures ("OEM's") and distributors.  As a 
result, the Company, is attempting to strategically reposition itself from 
emphasizing hardware and software sales to intensifying sales of technical 
services.  See Management's Discussion and Analysis of Financial Conditions and
Results of Operations - Results of Operations.



















Recent Developments
===================
On July 27, 1998, MSI-Texas entered into a renewable 10 year sublease with GTE 
Intelligent Network Services, Inc ("GTE") under which MSI-TEXAS agreed to lease 
a portion of their east Austin facilities to GTE for installation of GTE's Point
of Presence ("POP") equipment (the "Sublease").  On May 29, 1998, MSI-TEXAS 
entered into a 3 year subscription to GTE's Internet Advantage version 5.1 
Connection Service granting MSI-TEXAS access to GTE's POP (the "Connection 
Service")(the Sublease and Connection Service are collectively referred to as 
the "GTE Agreement").  GTE's establishment, management and monitoring of 
multiple domains on behalf of MSI-TEXAS is included in the Connection Service.  
The Connection Service was upgraded to GTE's Internet Advantage version 6.0 on 
September 29, 1998.  MSI-TEXAS will lease connections to the POP for access to 
the GTE Internet network to other businesses.  MSI-TEXAS will target companies 
that need direct, high-speed access to the Internet through turn-key collocation
services for high volume (known as bandwidth) Internet web applications.  
Collocation is a service that provides a high speed, high bandwidth connection 
to the Internet backbone using various backup systems to increase the 
connection's fault tolerance.  By connecting directly to Internet via the POP, 
MSI-TEXAS is able to eliminate the local loop, the weakest component in 
localized Internet connections.  MSI-TEXAS will have the capacity to support 
over four thousand collocation rack spaces at its Austin, Texas facilities.  
These rack spaces will be used to host the network servers for MSI-TEXAS clients
and provide those clients with direct access to the Internet.  When fully 
implemented, these collocation services are expected to significantly increase 
MSHI's revenues over the term of the Connection Service.  The GTE Agreements 
provide the potential for MSHI to increase revenue by selling Internet access to
various high Internet demand entities for such activities as commerce and 
academics.  It is anticipated that the requisite hardware will be operational in
January 1999. 
  
In July 1998, MSI-TEXAS began providing systems integration, warehousing, 
systems configuration and other fulfillment  services for Siemens-Nixdorf 
Information Systems, Inc ("Siemens-Nixdorf") for  Point of Sale ("POS") systems 
and Automated Teller Machines for Siemens-Nixdorf's customers such as Sears-
Roebuck, and Bealls department stores (the "Siemens-Nixdorf Agreement").  This 
agreement provides that Siemens-Nixdorf will store its inventory at MSI-TEXAS, 
and will charge Siemens-Nixdorf for various systems integration services.  This 
arrangement provides MSHI with a revenue stream without a significant working 
capital commitment.

MSHI formed TeleVista, Inc., a wholly owned subsidiary ("TVI") in September of 
1998 to run the electronic commerce business for the on-line sale of hardware 
and software over the Internet through the use of a secure server. Secure 
servers allow for the accelerated receipt of funds through credit card payments 
for hardware and software purchases made through their web sites operated by 
it. TVI had no operations at September 30, 1998.










Results of Operations
=====================
Three Months Ended September 30, 1998 Compared with September 30, 1997
======================================================================
Revenues for the quarter ended September 30, 1998 of $994,280 increased $204,829
or 25.9% from the $789,451 recorded in the quarter ended September 30, 1997. 
This increase is a combination of an increase of $358,401 in Hardware, Software 
& Peripherals (HSP) revenues  and decreases of $56,602 in Service, Support & 
Integration (SSI) revenues and $96,970 in Network Installation (NI) revenues. 

The increase in HSP revenues of $358,401 is attributed to a hardware order for 
the State of Texas of $413,314 that was fulfilled in the quarter ending 
September 30, 1998. Other changes in HSP revenue reflect normal fluctuations in 
sales of HSP products. 

The decrease in SSI revenues of $56,602 relates to a reduction in the scope of 
work on a contract for the City of Austin. The decrease in revenues on this 
contract was approximately $42,000 from the amount recorded in the quarter ended
September 30, 1997 compared to the September 30, 1998 quarter. Other decreases 
in SSI revenues relate to normal fluctuations in service requests from customers
that occur throughout the year.

The decrease in NI revenues of $96,970 relates to specific significant school 
district network installation contracts that were in place during each quarter. 
During  the quarter ended September 30, 1997 MSI-TEXAS was performing on a 
contract for Hereford ISD. During the quarter ended September 30, 1998, MSI-
TEXAS began installation of a network system under a contract with San Felipe 
Del Rio CISD.

Cost of goods sold, (COGS), for the quarter ended September 30, 1998 increased 
$294,755 or 49.4% to $891,349 compared to the quarter ended September 30, 1997 
representing 89.7% of revenue resulting in a margin of 10.3%. Cost of Goods Sold
for the quarter ended September 30, 1997 was $596,594 or 75.6% of revenue 
resulting in a margin of 24.4%. The decrease in margins is a combination of an 
increase in COGS for HSP in the amount of $439,388 and decreases in COGS for SSI
in the amount of $117,573 and NI in the amount of $27,060.

COGS as a percentage of revenues for HSP was 105.8% for the quarter ended 
September 30, 1998 resulting in a negative margin of (5.8%) compared to a margin
of 12.9% for the quarter ended September 30, 1997. The decrease in margins is 
due to market pressure to lower prices on HSP products from the Company's 
competitors and customers including the result of the competitive bidding 
process required for sales to public entities. Contributing to the negative 
margins for 1998 were sales made below cost as a result of poor estimating of 
cost by the Company. Procedures are now in place to insure profitable margins on
HSP sales.

COGS as a percentage of revenues for SSI was 16.0% for the quarter ended 
September 30, 1998 resulting in a margin of 84.0% compared to a margin of 35.0% 
for the quarter ended September 30, 1997. The increase in margins is a result of
MSI-TEXAS obtaining an SSI contract with Siemens Nixdorf for system integration.
This contract requires that Siemens Nixdorf supply all hardware and software 
products to be integrated into the systems. Additional increases in margins are 
a result of a contract to install Texas State Lottery vending machines in retail
businesses. This contract requires the lottery contractor to supply all 
hardware cost. 

COGS as a percentage of revenues for NI was 97.3% for the quarter ended 
September 30, 1998 resulting in a margin of 2.7% compared to a margin of 29.9% 
for the quarter ended September 30, 1997. The decrease in margins relate to 
specific significant school district network installation contracts that were in
place during each quarter. During the quarter ending September 30, 1998 MSI-
TEXAS received a contract of approximately $700,000 with San Felipe Del Rio CISD
(Del Rio) for network system installation. The margin on this contract was less 
due to competitive bidding required by public entities. Additional contracts 
with Del Rio were received, subsequent to September 30, 1998, that allow the 
opportunity for increased overall margins. Aggregate contracts and purchase 
orders with Del Rio are now in excess of $1 million.

Selling, General and Administrative Expenses for the quarter ended September 30,
1998 of $1,385,989 represents 139.40% of Revenues.  The 1998 amount represents 
an increase over the quarter ended September 30, 1997 of $456,351 or 49.1%. 
Approximately $320,000 of the increase represents the increase in staff salaries
and benefits. Staff additions include technical staff, sales staff, accounting 
staff and middle management. These increases are needed as the Company prepares 
to offer collocation services at its Austin, Texas facility and will also enable
the Company to work on larger service contracts. Increases in professional fees 
of $113,000 is largely attributable the reporting requirements associated with 
being a public company. Occupancy expense increased approximately $77,000 due to
facility expansion and increased staffing. 

Six Months Ended September 30, 1998 Compared with September 30, 1997
====================================================================
Revenues for the six months ended September 30, 1998 of $1,595,909 decreased 
$423,326 or (20.96%) from the $2,019,235 recorded in the six months ended 
September 30, 1997. This decrease is a combination of an increase of $43,399 in 
HSP revenues and decreases of $275,650 in SSI revenues and $191,075 in NI 
revenues. 

The nominal increase of $43,399 in HSP revenues reflects normal fluctuations in 
sale of HSP products.

The $275,650 decrease in SSI revenues relates to a reduction in the scope of 
work on two contracts. Revenues on a contract for the installation and servicing
of lottery machines decreased approximately $300,000 from the six months ended 
September 30, 1997 compared to the September 30, 1998 period. Other decreases in
revenues were on a contract for the City of Austin of approximately $56,000 from
the six months ended September 30, 1997 compared to September 30, 1998 period. 
Increases in SSI revenues of approximately $77,000 are attributed to new 
contracts received from Siemens Nixdorf and the State of Texas lottery 
contractor.

The $191,075 decrease in NI revenues relates to specific significant school 
district network installation contracts that were in place during each period. 
During the six months ended September 30, 1997 MSI-TEXAS was performing on a 
contract for Hereford ISD which started in April 1997. During the six months 
ended September 30, 1998, MSI-TEXAS began the installation of a network system 
under a contract with San Felipe Del Rio CISD. This contract was executed in 
July 1998 with installation beginning in August 1998.





Cost of goods sold for the six months ended September 30, 1998 increased 
$122,816 or 9.7% to $1,392,495 compared to the six months ended September 30, 
1997 representing 87.25% of revenue resulting in a margin of 12.75%. Cost of 
goods sold for the six months ended September 30, 1997 was $1,269,679 or 62.88% 
of revenue resulting in a margin of 37.12%. The decrease in margins is a 
combination of an increase in COGS for HSP in the amount of $456,388 and 
decreases in COGS for SSI in the amount of $243,384 and in NI in the amount of 
$90,188.

COGS as a percentage of revenues for HSP was 96.2% for the six months ended 
September 30, 1998 resulting in a margin of 3.8% compared to a margin of 40.2% 
for the six months ended September 30, 1997. The decreasing margins are due to 
market pressure to lower prices on HSP products from the Company's competitors 
and customers including the result of the competitive bidding process required 
for sales to public entities. Contributing to the lower margins for 1998 were 
sales made below cost as a result of poor estimating of cost by MSI-TEXAS. 
Procedures are now in place to insure profitable margins on HSP sales.

COGS as a percentage of revenues for SSI was 38.1% for the six months ended 
September 30, 1998 resulting in a margin of 61.9% compared to a margin of 35.0% 
for the six months ended September 30, 1997. The increase in margins is a result
of MSI-TEXAS obtaining an SSI contract with Siemens Nixdorf for system 
integration. This contract requires that Siemens Nixdorf supply all hardware and
software products to be integrated into the systems. Additional decreases in 
COGS are a result of a contract to install Texas State Lottery vending machines 
in retail businesses. This contract requires the lottery contractor to supply 
all hardware cost. 

COGS as a percentage of revenues for NI was 93.8% for the six months ended 
September 30, 1998 resulting in a margin of 6.2% compared to a margin of 30.5% 
for the six months ended September 30, 1997. The decrease in margins relate to 
specific significant school district network installation contracts that were in
place during each quarter. During the quarter ending September 30, 1998 MSI-
TEXAS received a contract of approximately $700,000 with San Felipe Del Rio CISD
for network system installation. The margin on this contract was less due to 
competitive bidding required by public entities. Additional contracts with Del 
Rio were received, subsequent to September 30, 1998, that allow the opportunity 
for increased overall margins. Aggregate contracts and purchase orders with Del 
Rio are now in excess of $1 million.

Selling, General and Administrative Expenses for the six months ended September 
30, 1998 of $2,538,155 represents 159.04% of Revenues.  The 1998 amount 
represents an increase over the six months ended September 30, 1997 of 
$1,046,977 or 70.21%. Approximately $682,000 of the increase represents the 
increase in staff salaries and benefits. Staff additions include technical 
staff, sales staff, accounting staff and middle management. These increases are 
needed as the Company prepares to offer collocation services at its Austin, 
Texas facility and will also enable the Company to work on larger service 
contracts. Increases in professional fees of $247,000 is largely attributable to
the reporting requirements associated with being a public company. Occupancy 
expense increased approximately $110,000 due to facility expansion and increased
staffing. 





Going Concern Issues
====================
The Company's significant historical losses raise a doubt as to the Company's 
ability to continue as a going concern.  The Company plans to address the going 
concern issues described in the notes to the financial statements through an 
additional private placement of series E preferred stock and a possible $20 
million private placement issue.  However, there can be no assurance that the 
Company will be able to secure such additional capital. Subsequent to March 31, 
1998, the Company received $2.9 million dollars in proceeds from Private 
Placement Phase III (as defined) that have been used to retire debt, decrease 
past due accounts payable and for operating expenses.  As a result, the 
Company's current ratio has improved and its cash position has increased. The 
Company has completed arrangements with a private investment group for a private
placement of a newly created series E of preferred stock with net proceeds to 
the Company of approximately $2.7 million to take place in November and December
1998. Approximately 1.3 million was received in November 1998 on the Series E 
private placement with the balance to be received in December 1998. The closing 
of the Series E private placement should enable the Company to have sufficient 
funds to meet the Company's working capital and capital expenditures needs for 
the next twelve months. 

Management believes that its contracts with GTE and Siemens Nixdorf  have the 
possibility of producing revenues of approximately $3 million in 1999.  The 
Company's ability to fulfill its obligations under the Switching Agreement is 
contingent upon the successful consummation of the Proposed Private Placement 
and obtaining the working capital contemplated by the debt issue described in 
the preceding paragraph. If the Proposed Private Placement is not consummated, 
the Company will scale back its expansion plans until such time that additional 
funds for expansion are available. Management believes that the Company can 
become profitable without the proceeds from the Proposed Private Placement by 
utilizing the portion of the proceeds from the Series E private placement that 
has been set aside for funding the expansion of its Austin facility for the GTE 
and Siemens Nixdorf contracts. 

Liquidity and Capital Resources
===============================
On November 18, 1997, the Company received $2,120,000 upon completion of a 
private placement whereby 400,000 of Series B Preferred were sold to 
Entrepreneurial Investors, Ltd. ("EIL") for $5.30 per share ("Private Placement
Phase I").  The Company also issued 20,000 shares of Series B Preferred to 
Equity Services, Ltd. ("ESL") as a commission for the completion of Private 
Placement Phase I. The Company received $371,000 in October 1997 from two 
individuals pursuant to two senior convertible notes (the "Notes"), which are 
secured by an aggregate of 1,050,000 shares of Common Stock of the Company. The 
Notes were subsequently converted into an aggregate of 70,000 shares of Series B
Preferred.  On February 4, 1998, the Company received $1,000,000 completing a 
second private placement whereby 94,340 shares of Series C Preferred were sold 
to EIL for a purchase price of $10.60 per share ("Private Placement Phase II"). 
As commission for the completion of Private Placement Phase II, the Company 
issued 4,717 shares of Series C Preferred to ESL.  By July, 1998, the Company 
received $2,964,364 completing a third private placement, whereby 279,657 shares
of Series D Preferred were sold to fourteen investors for a purchase price of 
$10.60 per share ("Private Placement Phase III").  The expenses for Private 
Placement Phase I, Private Placement Phase II, and Private Placement Phase III, 
including broker fees, commissions and legal and accounting expenses totaled 
$408,000, $180,000, and $490,457, respectively.

For the six months ended September 30, 1998 and the year ended March 31,1998, 
the Company's total assets were $3,880,911 and $2,699,452 respectively, with 
liabilities of $3,096,989 and $2,607,783, respectively. Current assets of 
$2,704,944 and $1,898,621 represent 104.5% and 90.8% of current liabilities of 
$2,587,716 and $2,090,701.  Improvements in the Company's cash position are a 
result of the collection of accounts receivable and funds from increases in 
shareholders equity resulting from the previously consummated private placements
more particularly described above. Reductions in accounts receivable between 
1998 and 1997 are a direct reflection of the reduced level of sales experienced 
in 1998.  The Company's liabilities of $3,096,989 at September 30,1998 consist 
of $1,230,000 of a fully secured credit line, $1,357,716 of current liabilities 
and $509,273 of long-term liabilities.

The Company, subsequent to the end of March 31, 1998, paid its Bank One Texas, 
NA loans in full and substantially reduced the borrowings under its fully 
secured line of credit. Net shareholders equity as of September 30, 1998 and 
March 31, 1998 was $783,922 and $91,669, respectively.  During the year ended 
March 31, 1998, and the six months ended September 30, 1998, the Company 
completed Private Placement Phase I, Private Placement Phase II and Private 
Placement Phase III.  Receipt of these funds enabled the Company to reduce its 
outstanding debt and pay off the past due accounts payable.

Subsequent to September 30, 1998, the Company made arrangements for an 
additional private placement of $3,000,000. The Company will issue 100,000 
shares of Series E preferred stock, at a stated value of $30 per share. 

During the six months ended September 30, 1998, working capital increased 
$309,308 from March 31, 1998. The balances of its accounts payables, accrued 
expenses and accounts receivables were increased as a result increased sales and
the resulting increase in related accounts.  At September 30, 1998, the Company 
had a working capital of $117,228 compared to a working capital deficit of 
($192,080) at March 31, 1998. The Company was current on all significant 
accounts payable at September 30, 1998. As of March 31, 1998 the Company was 
more than 30 days past due on $170,000 or 57% of its accounts payable. The 
Company's account receivables at September 30, 1998 include approximately 
$443,000 from the State of Texas for a sale of computer hardware in September 
1998. This amount was subsequently collected. 

The Company has a critical need for additional working capital to meet 
contractual obligations under the GTE Agreements. Management believes that the 
GTE Agreements with Siemens Nixdorf Agreements have the potential to increase 
revenue levels, provided that sufficient working capital is obtained.  See 
Management's Discussion and Analysis of Financial Conditions and Results of 
Operations and Going Concern Issues.













Year 2000 Issues
================
As with other companies, the Company has initiated a program to study the impact
on its computer system in order to be Year 2000 compliant.  This study involved 
identifying any modifications or replacements of certain hardware and software 
maintained by the Company.  The study has been completed.  The company has 
identified the computer systems that will require either modification, upgrade 
or replacement.  Implementation of the Company's Year 2000 plan should be 
completed by March 31, 1999.  The Company anticipates that in-house personnel 
will be primarily responsible for completing these tasks and that the costs will
be insignificant.  As such, the Company believes that the planned modifications,
upgrades and replacements of existing systems will be completed in a timely 
fashion to assure Year 2000 compliance, and any related cost will not have a 
material impact on the Company's results of operations, cash flows, or financial
conditions in future periods.  The Company has budgeted for $25,000 to address 
these expenses.  In addition, the Company is also taking actions to assure that 
its customers and vendors are taking steps to remedy their Year 2000 issues. The
Company is not incurring any unique risks in connection with Year 2000 issues.  
It is however subject to the risk that information and financial resources may 
be temporarily unavailable.  This societal risk may temporarily disrupt cash 
flows worldwide.  The Company believes that by becoming, and assisting its 
clients and vendors to become, Year 2000 compliant it is likely to circumvent 
that threat.  The Company expects to be Year 2000 compliant March 31, 1999.  If 
compliance is not achieved by that date, the Company will reallocate resources, 
as necessary, to ensure compliance within six months, thereafter.

Inflation
=========
Management does not believe that inflation will have a material impact on the 
Company's pricing of goods or services since the Company, generally, has the 
ability to adjust prices to meet the current market conditions. 


                          PART II: Other Information


ITEM 1: LEGAL PROCEEDINGS
=========================
For a discussion of Legal Proceedings, refer to Note 3, Contingencies, in the  
Notes to Consolidated Financial Statements in Part I 


ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
=================================================
For a discussion of Changes in Securities and Use of Proceeds, refer to Note 2, 
Stockholders' Equity, in the Notes to Consolidated Financial Statements 
in Part I 

ITEM 3: DEFAULT UPON SENIOR SECURITIES
======================================
NONE

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
===========================================================
NONE


Item 5. OTHER INFORMATION
=========================
A shareholder who wishes to make a proposal at the 1999 Annual Meeting of 
Shareholders without complying with the requirements of the SEC's Rule 14a-8 
(and therefore without including the proposal in the Company's proxy materials) 
should notify the Company's Secretary, at the Company's principal executive 
offices, of that proposal by July 1, 1999.  If a shareholder fails to give 
notice by that date, then the persons named as proxies in the proxy cards 
solicited by the Company's Board of Directors for that meeting will be entitled 
to vote the proxy cards held by them regarding that proposal, if properly raised
at the meeting, as directed by the Company's management.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
========================================
(B) REPORTS ON FORM 8-K

16.1  FORM 8-K/A, FILED SEPTEMBER 25, 1998 

16.2  FORM 8-K, FILED SEPTEMBER 17, 1998

16.3  FORM 8-K, FILED SEPTEMBER 17, 199





































SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the 
Securities Exchange Act of 1934, the Registrant has duly caused 
this Report to be signed on its behalf by the undersigned, 
thereunto duly authorized.





Date  12/11/1998           By:  /s/  Jose G Chavez
                                     Jose G. Chavez, President


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of this Registrant
and in the capacities and on the dates indicated.

Signature                          Capacity                  Date

/s/ Jose G Chavez                                         12/11/1998
    Jose G. Chavez           Chairman of the Board of        
                              Directors and President

/s/ Mitchell Kettrick                                     12/11/1998
    Mitchell Kettrick        Vice-President and Director     


/s/ David Hill                                            12/11/1998
    David Hill               Chief Financial Officer


/s/ Ernesto Chavarria                                     12/11/1998
    Ernesto Chavarria        Director