<PAGE>   1
                                  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 (X) NO ( ) (2) YES (X) NO ( )

       NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT SEPTEMBER 30, 1998:
                                   12,032,221


<PAGE>   2

                               MSI HOLDINGS, INC.

                                  FORM 10-QSB/A
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                PAGE
<S>           <C>                                                                                <C>
PART I - FINANCIAL INFORMATION

         Item 1.           Consolidated Financial Statements (Unaudited)                          3

         Item 2.           Management's Discussion and Analysis of Financial
                           Condition and Results of Operations                                    9


PART II - OTHER INFORMATION

         Item 1.           Legal Proceedings                                                     14

         Item 2.           Changes in Securities and Use of Proceeds                             14

         Item 3.           Defaults upon Senior Securities                                       14

         Item 4.           Submission of Matters to a Vote of Security Holders                   14

         Item 5.           Other Matters                                                         15

         Item 6.           Exhibits and Reports on Form 8-K                                      15


SIGNATURE PAGE                                                                                   16
</TABLE>



                                       2
<PAGE>   3


                         PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                               MSI HOLDINGS, INC.
                     Consolidated Balance Sheet (unaudited)


<TABLE>
<CAPTION>
                                                                                               September 30,
                                                                                                   1998
                                                                                               ------------
                                                                                                (restated)

<S>                                                                                            <C>
ASSETS
Current Assets
     Cash                                                                                      $      7,748
     Accounts receivable - trade                                                                    774,834
     Inventory                                                                                      397,832
     Short-term investment - restricted                                                           1,350,000
     Other receivables - advances
                                                                                                    174,530
                                                                                               ------------
Total current assets                                                                              2,704,944
                                                                                               ------------

Property, plant, and equipment - net
                                                                                                  1,175,967
                                                                                               ------------

Total assets                                                                                   $  3,880,911
                                                                                               ============

LIABILITIES AND STOCKHOLDERS' EQUITY (Deficit)
Current Liabilities
     Accounts payable - trade                                                                  $    841,414
     Bank line of credit                                                                          1,230,000
     Other accrued expenses                                                                         109,701
     Current maturities of notes payable                                                            250,284
     Current portion of obligations under capital leases                                             94,005
     Other notes payable                                                                            200,000
                                                                                               ------------
Total current liabilities                                                                         2,725,404
                                                                                               ------------

Long-term liabilities
     Notes payable                                                                                   68,805
     Obligations under capital leases                                                               302,780
     Deferred rent                                                                                  145,620
                                                                                               ------------
Total long-term liabilities                                                                         517,205
                                                                                               ------------
Total liabilities                                                                                 3,242,609
                                                                                               ------------

Stockholders' Equity
  Preferred stock; 10,000,000 shares authorized:
     Convertible preferred stock Series B; $5.30 stated value;490,000
        shares authorized, issued & outstanding                                                   2,597,000
     Convertible preferred stock Series C; $10.60 stated value; 99,057 shares
        authorized, issued & outstanding                                                          1,050,004
     Convertible 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 and 12,032,221 shares
        issued and outstanding                                                                    1,203,222
     Additional paid-in capital                                                                   6,294,410
     Accumulated deficit                                                                        (13,470,698)
                                                                                               ------------
Total stockholders' equity
                                                                                                    638,302
                                                                                               ------------

Total liabilities and stockholders' equity                                                     $  3,880,911
                                                                                               ============
</TABLE>


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



                                       3
<PAGE>   4

                               MSI HOLDINGS, INC.
                Consolidated Statements of Operation (Unaudited)



<TABLE>
<CAPTION>
                                                               Three Months Ended                    Six Months Ended
                                                                  September 30,                        September 30,
                                                             1998               1997               1998               1997
                                                         ------------       ------------       ------------       ------------
                                                          (restated)                           (restated)

<S>                                                      <C>                <C>                <C>                <C>
Revenues:
 Hardware, software, and peripherals                     $    678,564       $    320,163       $  1,182,196       $  1,138,797
 Service, support, and integration                            164,868            221,470            238,967            514,617
 Networks, LAN/WAN                                            150,848            247,818            174,746            365,821
                                                         ------------       ------------       ------------       ------------
                                                              994,280            789,451          1,595,909          2,019,235
                                                         ------------       ------------       ------------       ------------

Cost of Goods Sold:
 Hardware, software, and peripherals                          718,247            278,859          1,137,451            681,063
 Service, support, and integration                             26,383            143,956             91,118            334,502
 Networks, LAN/WAN                                            146,719            173,779            163,926            254,114
                                                         ------------       ------------       ------------       ------------
                                                              891,349            596,594          1,392,495          1,269,679
                                                         ------------       ------------       ------------       ------------

Gross Margin                                                  102,931            192,857            203,414            749,556
                                                         ------------       ------------       ------------       ------------

Selling, general, and administrative expenses:
 Salaries and benefits                                        891,962            421,252          1,560,895            728,321
 Professional fees and consultants                            225,398            112,069            520,840            164,059
 Occupancy                                                    108,532             31,842            198,211             88,500
 Depreciation and amortization                                 54,000             69,694            106,991             99,440
 Vehicle expense                                               39,822             43,481             74,432             78,851
 Other expense                                                207,983            236,923            307,358            294,216
 Provision for uncollectible                                     --                 --                 --                1,284
                                                         ------------       ------------       ------------       ------------
                                                            1,527,697            915,261          2,768,727          1,454,671
 Interest expense, net                                          8,757             14,377            400,393             36,507
                                                         ------------       ------------       ------------       ------------
                                                            1,536,454            929,638          3,169,120          1,491,178
                                                         ------------       ------------       ------------       ------------

Net Loss                                                   (1,433,523)          (736,781)        (2,965,706)          (741,622)

Preferred stock dividends and discounts                      (949,654)              --           (4,955,295)              --
                                                         ------------       ------------       ------------       ------------

Net Loss available to common stockholders                $ (2,383,177)      $   (736,781)      $ (7,921,001)      $   (741,622)
                                                         ============       ============       ============       ============

Basic and diluted net loss per share                     $      (0.20)      $      (0.07)      $      (0.68)      $      (0.07)
                                                         ============       ============       ============       ============

Basic and diluted weighted average number of shares
outstanding                                                11,753,571         10,764,733         11,638,166         10,764,733
                                                         ============       ============       ============       ============
</TABLE>



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



                                       4
<PAGE>   5

                               MSI HOLDINGS, INC.
                Consolidated Statements of Cash Flows (Unaudited)



<TABLE>
<CAPTION>
                                                                                       Six Months Ended
                                                                                         September 30,
                                                                                     1998              1997
                                                                                 ------------       ------------
                                                                                  (restated)
<S>                                                                              <C>                <C>
Cash flows from operating  activities:

Net loss                                                                         $ (2,965,706)      $   (741,622)
Adjustments to reconcile net loss to net cash used in operating activities:
 Depreciation and amortization expense                                                106,991             99,440
 Amortization of debt discount                                                        371,000               --
 Common stock and options issued for compensation                                     412,871               --
Changes in operating assets and liabilities:
 Accounts receivable - trade                                                         (610,716)            (9,125)
 Other receivables - advances                                                         (87,569)              --
 Inventory                                                                           (112,809)          (261,250)
 Accounts payable - trade                                                             541,379            664,735
 Other accrued expenses                                                               (59,635)           452,315
                                                                                 ------------       ------------

Net cash provided by (used in) operating activities                                (2,404,194)           204,493
                                                                                 ------------       ------------

Cash flows from investing activities:
 Purchase of property, plant, and equipment                                          (227,565)           (35,438)
 Additional other receivables                                                            --               (3,413)
                                                                                 ------------       ------------

Net cash used in investing activities                                                (227,565)           (38,851)
                                                                                 ------------       ------------

Cash flows from financing activities:
 Net draws on bank line of credit                                                       1,034            (16,034)
 Payments on notes payable                                                           (199,700)           (91,014)
 Payments on obligations under capital leases                                         (48,434)           (20,089)
 Proceeds - private placement of preferred stock                                    2,473,921               --
 Proceeds - issuance of common stock                                                   53,000               --
 Proceeds - exercise of warrants                                                      333,900               --
                                                                                 ------------       ------------
Net cash provided by (used in) financing activities                                 2,613,721           (127,137)
                                                                                 ------------       ------------

Net decrease in cash                                                                  (18,038)            38,505

Cash at beginning of period                                                            25,786             18,112
                                                                                 ------------       ------------

Cash at end of period                                                            $      7,748       $     56,617
                                                                                 ============       ============
</TABLE>



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




                                       5
<PAGE>   6

                               MSI HOLDINGS, INC.
           Consolidated Statements of Cash Flows Continued (Unaudited)


<TABLE>
<CAPTION>
                                                                                                           Six Months Ended
                                                                                                             September 30,
                                                                                                        1998              1997
                                                                                                      -----------       --------
                                                                                                      (restated)
<S>                                                                                                   <C>               <C>
Supplemental disclosure:
 Cash paid during the period for:
      Interest                                                                                        $    29,393       $ 54,594
                                                                                                      ===========       ========

Supplemental schedule of non-cash investing and financing activities:
 Preferred stock issued for:
      Placement agent fees                                                                            $   141,160       $    --
 Stock options or warrants issued for:
      Placement agent fees                                                                              1,061,723            --
 Common stock issued for:
      Employee compensation                                                                               152,906            --
      Preferred stock dividends                                                                           159,422            --
 Discount on preferred stock issued                                                                     4,795,873            --
 Purchase of equipment with long-term leases                                                              254,562            --
</TABLE>



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



                                       6
<PAGE>   7

                               MSI HOLDINGS, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (restated)
                         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. 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 herein. 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, as reported in the Form 10-KSB as
amended have been omitted.

Nature of Business and Organization:

On September 21, 1998, Micro-Media Solutions, Inc. changed its name to MSI
Holdings, Inc.

The Company 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.

Going concern:

As shown in the accompanying consolidated financial statements, the Company has
incurred net losses of $2,965,706 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.

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 the Company to
have sufficient funds to meet the Company's working capital and capital
expenditures needs. The Company 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.

Comprehensive Income:

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income. The Company adopted SFAS No. 130 during 1998.
There was no impact to the Company as a result of the adoption of SFAS No. 130,
as there were no differences between net loss and comprehensive loss for the
periods presented.

NOTE 2. BANK LINE OF CREDIT

The Company has a secured line of credit agreement with Compass Bank for
$1,350,000 payable in monthly installments of interest only. The line is secured
by two certificates of deposit aggregating $1,350,000 held in the Company's name
by Compass Bank. The balance of the borrowing as of September 30, 1998, was
$1,230,000 and the note matures February 5, 1999.



                                       7
<PAGE>   8

NOTE 3. NOTES PAYABLE

The Company was out of compliance with debt covenants on certain notes payable
as of September 30, 1998. Amounts outstanding related to these notes have been
classified as current liabilities.

NOTE 4. STOCKHOLDERS' EQUITY

During the three months ended June 30, 1998, the Company received gross proceeds
of $2,007,004 from the Private Placement of 189,340 shares of Series D, 6%
Cumulative Convertible Non-Voting Preferred Stock, Stated value $10.60 per
share. The Company paid $260,910 in cash and issued 9,467 shares of the Series D
Preferred Stock as agreed for payment of commission fees of the Private
Placement. Each share of Preferred D stock is initially convertible into ten
shares of the Company's Common Stock. Also, options to purchase 255,850 shares
of Common Stock at $1.59 per share were issued as a part of the agreement. The
stock options had a fair value of $1,061,723.

At the time of issuance the Series D Preferred Stock was convertible to Common
Stock at an amount that was "in-the-money". This beneficial conversion feature
was limited to the proceeds of the offering and was accounted for as an increase
to additional paid-in capital and an in-substance dividend to the related
preferred stockholders. The beneficial conversion feature resulted in the
recognition of a discount of $2,107,354 in the quarter ended June 30, 1998,
which is composed of the gross proceeds of the offering and the stated value of
the Series D Preferred Stock issued for placement agent fees.

In addition, the $1,831,544 discount which was deferred in fiscal year 1998
related to the Series B and C Preferred Stock was recognized in the quarter
ended June 30, 1998, as a result of the Company's election to not renew its' HUB
status.

During the three months ended September 30, 1998, the Company received gross
proceeds of $816,165 from the Private Placement of 77,000 additional shares of
Series D, 6% Cumulative Convertible Non-Voting Preferred Stock, Stated value
$10.60 per share. The Company paid $88,373 in cash and issued 3,850 shares of
the Series D Preferred Stock as agreed for payment of commission fees of the
Private Placement. Each share of Preferred D stock is initially convertible into
ten shares of the Company's Common Stock.

At the time of issuance the Series D Preferred Stock was convertible to Common
Stock at an amount that was "in-the-money". This beneficial conversion feature
was limited to the proceeds of the offering and was accounted for as an increase
to additional paid-in capital and an in-substance dividend to the related
preferred stockholders. The beneficial conversion feature resulted in the
recognition of a discount of $856,975 in the quarter ended September 30, 1998,
which is composed of the gross proceeds of the offering and the stated value of
the Series D Preferred Stock issued for placement agent fees.

During the quarter 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.

Stock options granted to employees during the quarter ended June 30, 1998 were
recorded as compensation expense in the amount of $109,500 to the extent the
exercise price was less than the market price of the stock on the grant date, in
accordance with APB No. 25.

Stock options granted to non-employees during the quarter ended September 30,
1998 were recorded as professional fees in the amount of $150,465 at the fair
value of the options at the grant date as determined using the Black-Scholes
option pricing model.

During the quarter ended June 30, 1998, 11,724 shares of common stock were
issued as preferred stock dividends and were recorded as a reduction of retained
earnings in the amount of $66,743.

During the quarter ended September 30, 1998, 12,651 shares of common stock were
issued as preferred stock dividends and were recorded as a reduction of retained
earnings in the amount of $92,679.

The Company issued 31,000 shares of common stock to employees during the quarter
ended September 30, 1998, which was recorded as compensation expense in the
amount of $152,906.



                                       8
<PAGE>   9

During the quarter ended September 30, 1998, Class A warrants were exercised for
420,000 shares of common stock at $.795 per share in the amount of $333,900.

NOTE 5. RESTATEMENT OF EARNINGS

The Company has restated earnings for the period ended September 30, 1998
primarily to effect for the limitation of dividend recognition related to the
beneficial conversion features on the convertible preferred stock issuances.
Previously, the Company did not limit the recognition of a discount and the
related dividend to the proceeds raised in the issuance. The following table
shows the restated results of operations for the period compared to previously
reported results:

<TABLE>
<CAPTION>
                                                                                                        Previously
                                                                            As Restated                  Reported
                                                                           ------------                ------------

<S>                                                                        <C>                         <C>
                Net loss                                                   $ (2,965,706)               $ (2,334,741)
                Preferred stock dividends and discounts                      (4,955,295)                   (693,922)
                Net loss applicable to common stockholders                   (7,921,001)                 (3,028,663)
                Basic and diluted net loss per share                              (0.68)                      (0.26)
</TABLE>

NOTE 6. CONTINGENCIES AND LEGAL MATTERS

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.

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 $12,485.40 for certain goods and services that MCA claims to have
provided to MSI 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 OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

This quarterly report on Form 10-QSB contains forward-looking statements, which
reflect the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or those anticipated. Words used in this report such as
"believe", "anticipate", "expect", "may", "will" and similar expressions are
intended to identify forward-looking statements but are not the exclusive means
of identifying such statements. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. The Company does not undertake any
obligation to update or revise these forward-looking statements to reflect any
future events or circumstances. Readers are urged to



                                       9
<PAGE>   10

carefully review and consider the various disclosures made by the Company in
this report, including those under the section entitled "OTHER FACTORS THAT MAY
AFFECT OPERATING RESULTS," which consist primarily of a brief discussion of
certain risks which are in their entirety forward-looking statements, and those
included in the Company's other reports previously filed with the commission,
including the disclosures in the "RISK FACTORS" section appearing in the Form
10-KSB, as amended, for the fiscal year ended March 31, 1998.

The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with (i) the financial
statements and accompanying notes appearing in this Quarterly Report, and
(ii)the Company's financial statements and accompanying notes appearing in the
Company's Form 10-KSB, as amended, for the fiscal year ended March 31, 1998, as
filed with the Commission.

OVERVIEW

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.

Recent Developments

On July 27, 1998, the Company entered into a renewable 10 year sublease with GTE
Intelligent Network Services, Inc ("GTE") under which the Company 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, the
Company entered into a 3 year subscription to GTE's Internet Advantage version
5.1 Connection Service granting the Company 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 the Company is included in the Connection Service. The
Connection Service was upgraded to GTE's Internet Advantage version 6.0 on
September 29, 1998. The Company will lease connections to the POP for access to
the GTE Internet network to other businesses. The Company will target companies
that need direct, high-speed access to the Internet through turn-key co-location
services for high volume (known as bandwidth) Internet web applications.
Co-location 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,
the Company is able to eliminate the local loop, the weakest component in
localized Internet connections. The Company will have the capacity to support
over four thousand co-location rack spaces at its Austin, Texas facilities.
These rack spaces will be used to host the network servers for the Company
clients and provide those clients with direct access to the Internet. When fully
implemented, these co-location services are expected to significantly increase
the Company revenues over the term of the Connection Service. The GTE Agreements
provide the potential for the Company 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, the Company 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 the Company
site, and the Company will charge Siemens-Nixdorf for various systems
integration services. This arrangement provides the Company with a revenue
stream without a significant working capital commitment.

The Company 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.



                                       10
<PAGE>   11

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 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,
and Peripherals (HSP) revenues and decreases of $56,602 in Service, Support, and
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 the Company was performing on a
contract for Hereford ISD. During the quarter ended September 30, 1998, the
Company 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 89.6% of revenue resulting in a margin of 10.4%. 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
the Company 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 relates to
specific significant school district network installation contracts that were in
place during each quarter. During the quarter ending September 30, 1998 the
Company 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 $1,527,697 represents 153.6% of Revenues. The 1998 amount represents an
increase over the quarter ended September 30, 1997 of $612,436 or 67.0%.
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 co-location 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.



                                       11
<PAGE>   12

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 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 the Company was performing on a
contract for Hereford ISD which started in April 1997. During the six months
ended September 30, 1998, the Company 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 relates 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 $2,768,727 represents 173.5% of Revenues. The 1998 amount represents
an increase over the six months ended September 30, 1997 of $1,314,056 or 90.3%.
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 co-location services at its Austin, Texas facility and will also enable
the Company to work on larger service contracts. Increases in professional fees
of $457,000 are 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.



                                       12
<PAGE>   13

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

By July, 1998, the Company received $2,964,364 completing a 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 III, including broker fees, commissions and
legal and accounting expenses totaled $490,478.

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 $3,242,609 and $2,753,403, respectively. Current assets of
$2,704,944 and $1,898,621 represent 99.2% and 90.8% of current liabilities of
$2,725,404 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 $3,242,609 at September 30,1998 consist of
$1,230,000 of a fully secured credit line, $1,495,284 of current liabilities and
$517,205 of long-term liabilities.

The Company's shareholders equity as of September 30, 1998 and March 31, 1998
was $638,302 and ($53,951), 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
$171,620 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 ($20,460) 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 20% 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.



                                       13
<PAGE>   14

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.

OTHER FACTORS THAT MAY AFFECT OPERATING RESULTS

The Company's operating results may fluctuate due to a number of factors,
including, but not limited to, the ability of the Company to develop and expand
relationships with new and existing clients, the ability to accurately estimate
costs for fixed-fee contracts, the increased level of competition in the market,
the ability to retain and hire experienced and qualified personnel. In addition,
all of the above factors are difficult for the Company to forecast, and any one
of which may materially adversely affect the Company's business and operating
results for one quarter or a series of quarters.

                           PART II - OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

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.

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 $12,485.40 for certain goods and services that MCA claims to have
provided to MSI 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: CHANGES IN SECURITIES AND USE OF PROCEEDS

For a discussion of Changes in Securities and Use of Proceeds, refer to Note 4,
Stockholders' Equity, in the Notes to Consolidated Financial Statements in Part
I, Item 1.

ITEM 3: DEFAULT UPON SENIOR SECURITIES

NONE

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE



                                       14
<PAGE>   15

ITEM 5. OTHER MATTERS

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

         (A) EXHIBITS

              27.1 FINANCIAL DATA SCHEDULE

         (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, 1998



                                       15
<PAGE>   16


                                   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.

                               MSI HOLDINGS, INC.

           Date: October 13, 1999          By: /s/ Robert Gibbs
                                               ---------------------------------
                                                   Robert Gibbs, President and
                                                   Chief Executive Officer


         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.

<TABLE>
<CAPTION>
         Signature                                                                      Title                  Date
         ---------                                                                      -----                  ----

<S>                                                                            <C>                       <C>
/s/ Steve Metzger                                                               Director                  October 13, 1999
-------------------------------
     Steve Metzger

/s/ Davinder Sethi                                                              Director                  October 13, 1999
-------------------------------
     Davinder Sethi

/s/ Ernesto Chavarria                                                           Director                  October 13, 1999
-------------------------------
     Ernesto Chavarria

/s/ Blandina Cardenas                                                           Director                  October 13, 1999
-------------------------------
     Blandina Cardenas

/s/ Daniel Dornier                                                              Director                  October 13, 1999
-------------------------------
     Daniel Dornier

/s/ Humbert Powell                                                              Director                  October 13, 1999
-------------------------------
    Humbert Powell

/s/ Robert Gibbs                                                                President and
-------------------------------                                                 Chief Executive Officer   October 13, 1999
     Robert Gibbs

/s/ Doug Banister                                                               Chief Financial Officer   October 13, 1999
-------------------------------
     Doug Banister

/s/ Stephen Hoelscher                                                           Secretary, Controller
-------------------------------                                                 Chief Accounting Officer  October 13, 1999
    Stephen Hoelscher
</TABLE>



                                       16

<PAGE>   17


                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                             DESCRIPTION
-------                             -----------

<S>                          <C>
  27                          Financial Data Schedule
</TABLE>