<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     June 30, 1998
                                               --------------------

                     Commission File Number           0-8164
                                               --------------------

              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        (IRS 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:

<TABLE>
<CAPTION>
     Title of each class      Name of each exchange on which registered
     -------------------      -----------------------------------------

<S>                           <C>
          None                                  N/A
</TABLE>

Securities registered pursuant to section 12(g) of the Act:

<TABLE>
<CAPTION>
     Title of each class      Name of each exchange on which registered
     -------------------      -----------------------------------------

<S>                           <C>
       Common Stock,                            None
     Par Value  $.10
</TABLE>

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 June 30, 1998: 11,506,846


<PAGE>   2

                          Part I: Financial Information


ITEM 1: FINANCIAL STATEMENTS

Index to Financial Statements

<TABLE>
<CAPTION>
                                                                   Page
                                                                   ----

<S>                                                                  <C>
Consolidated Balance Sheets (restated)                               3

Consolidated Statements of Operation (restated)                      4

Consolidated Statements of Stockholders' Equity (restated)           5

Consolidated Statements of Cash Flows (restated)                     6

Notes to Consolidated Financial Statement (restated)                 8
</TABLE>


<PAGE>   3
                           MICRO-MEDIA SOLUTIONS, INC.
                            FINANCIAL STATEMENTS AND
                          INDEPENDENT AUDITOR'S REPORT

                    THREE MONTHS ENDED JUNE 30, 1998 AND 1997
                     AND YEARS ENDED MARCH 31, 1998 AND 1997



<PAGE>   4



                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors of Micro-Media Solutions, Inc.,


We have audited the accompanying consolidated balance sheets of Micro-Media
Solutions, Inc. and Subsidiary (the "Company") as of June 30, 1998 and March 31,
1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for the three months ended June 30, 1998 and year ended
March 31, 1998. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.

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

In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Micro-Media
Solutions, Inc. and Subsidiary as of June 30, 1998 and March 31, 1998, and the
results of their operations and cash flows for the periods then ended in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has a working capital deficit at
March 31, 1998, and has suffered losses from operations for the three months
ended June 30, 1998 and the years ended March 31, 1998 and 1997, which raise
substantial doubt about its ability to continue as a going concern. Management's
plan regarding these matters is presented in Note 1 of these consolidated
financial statements.



/s/ Brown, Graham & Company, P.C.

Georgetown, Texas
October 14, 1998

<PAGE>   5



                              SALAZAR & ASSOCIATES
                          CERTIFIED PUBLIC ACCOUNTANTS

JOSE SALAZAR, CPA                                               FRANCES ORTIZ-
                                                                SALAZAR, CPA


                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors of Mountain States Resources Corporation

We have audited the accompanying consolidated statements of operations,
stockholders equity and cash flows of Mountain States Resources Corporation and
subsidiary (the "Company") for the year ended March 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial statements
based on our audit.

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

In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Mountain State Resources Corporation for the year ended March 31,
1997, in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 10 to
the consolidated financial statements, the Company has suffered losses from
operations and has a working capital deficiency, which raises substantial doubt
about its ability to continue as a going concern. Management's plan regarding
these matters is presented in Note 10 of these financial statements.

As more fully described in Note 11 and 12, subsequent to the issuance of the
Company's March 31, 1997 financial statements and our report thereon dated June
22, 1997, we became aware that those financial statements did not reflect
certain adjustments as described in Notes 11 and 12. In our original report we
expressed an unqualified opinion on the March 31, 1997, financial statements as
described in paragraph three above, and our opinion on the revised statements,
as expressed herein, remains unqualified.

/s/ Salazar and Associates

Salazar and Associates,
Austin, Texas
June 22, 1997, except as to the fifth paragraph above and Notes 11 and 12, which
are as of June 10, 1998

                                        2

<PAGE>   6



MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
Consolidated Balance Sheets (Restated)
June 30, 1998 and March 31, 1998

<TABLE>
<CAPTION>

                                              June 30, 1998    March 31, 1998
                                              -------------    --------------
<S>                                            <C>              <C>        
ASSETS
Current Assets
     Cash and Cash Equivalents                 $     8,084      $    25,786
     Accounts Receivable - Trade                   332,738          150,851
     Inventory                                     185,572          285,023
     Short-Term Investment (Note 4)              1,350,000        1,350,000
     Other Receivables - Advances (Note 2)         178,101           86,961
                                               -----------      -----------

           Total Current Assets                  2,054,495        1,898,621

Property, Plant, and Equipment,
  net (Note 3)                                     940,911          800,831
                                               -----------      -----------

TOTAL ASSETS                                   $ 2,995,406      $ 2,699,452
                                               ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
     Accounts Payable - Trade                  $   189,238      $   300,035
     Other Accrued Expenses                        100,647          169,336
     Bank Line of Credit (Note 4)                1,070,000        1,228,966
     Current Maturities of Notes
       payable (Note 5)                            112,596          151,267
     Current Portion of Obligations Under
       Capital Leases (Note 6)                      45,517           41,097
     Other Notes Payable (Note 14)                 200,000          200,000
                                               -----------      -----------

           Total Current Liabilities             1,717,998        2,090,701
                                               -----------      -----------

Long-Term Liabilities
     Notes Payable (Note 5)                        235,293          367,522
     Obligations under Capital
         Leases (Note 6)                           122,736          149,560
                                               -----------      -----------

           Total Long-Term Notes                   358,029          517,082
                                               -----------      -----------

Commitments and Contingencies
     (Notes 8, 10 & 14)                                 --               --
                                               -----------      -----------

           Total liabilities                     2,076,027        2,607,783
                                               -----------      -----------

Stockholders' Equity (Note 11)
     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; 198,807 shares
       authorized, issued & outstanding          2,107,354               --
     Common stock at $.10 par value;
       50,000,000 authorized, 11,518,571
       and 11,506,846 shares issued and
       outstanding, respectively                 1,151,857        1,150,685
     Additional Paid-in Capital                  2,397,982        2,666,099
     Accumulated Deficit                        (8,384,818)      (7,372,119)
                                               -----------      -----------
           Total Stockholders' Deficit             919,379           91,669
                                               -----------      -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $ 2,995,406      $ 2,699,452
                                               ===========      ===========
</TABLE>


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

                                        3

<PAGE>   7


MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
Consolidated Statements of Operation (Restated)
Three Months Ended June 30, 1998 and 1997, and Years Ended March 31, 1998 and
1997

<TABLE>
<CAPTION>

                                                           June 30                           March 31
                                                ------------------------------     ----------------------------- 
                                                                   Unaudited
                                                    1998              1997            1998            1997
                                                -------------    -------------     ------------    ------------- 
<S>                                             <C>              <C>               <C>             <C>          
Revenues:
    Hardware, software and peripherals          $     503,632    $     818,634     $  1,350,869    $   1,440,725
    Service, support and integration                   74,099          293,147          704,241          457,572
    Networks, LAN/WAN                                  23,898          118,003          685,711        2,767,452
                                                -------------    -------------     ------------    ------------- 
    Net revenue                                       601,629        1,229,784        2,740,821        4,665,749
                                                -------------    -------------     ------------    ------------- 
Cost of goods sold:
    Hardware, software and peripherals                419,204          402,204        1,406,612        1,109,354
    Service, support and integration                   64,735          190,546          656,625          283,724
    Networks, LAN/WAN                                  17,207           80,325          997,397        1,605,157
                                                -------------    -------------     ------------    ------------- 
    Total cost of goods sold                          501,146          673,075        3,060,634        2,998,235
                                                -------------    -------------     ------------    ------------- 
Gross margin (deficit)                                100,483          556,709         (319,813)       1,667,514
                                                -------------    -------------     ------------    ------------- 
Selling, general and administrative expenses:
       Salaries and benefits                          553,207          307,069        1,825,590        1,202,791
       Professional fees and consultants              185,942           51,990          357,174           42,251
       Occupancy                                       89,679           56,658          212,843          185,516
       Depreciation                                    52,991           29,746          178,892          139,443
       Vehicle expense                                 34,610           35,370          126,131          158,765
       Other expense                                  109,375           57,293          379,059          316,820
       Interest expense                                20,636           22,130          294,198          100,064
       Provision for uncollectible
        accounts                                         --              1,284           73,252            4,249
                                                -------------    -------------     ------------    ------------- 
    Total selling, general and
       administrative expenses                      1,046,440          561,540        3,447,137        2,149,899
                                                -------------    -------------     ------------    ------------- 
Net loss                                             (945,957)          (4,831)      (3,766,950)        (482,385)

Plus preferred stock dividends                        (66,743)            --         (3,471,170)            --
                                                -------------    -------------     ------------    ------------- 
Net loss available to common stockholders       $  (1,012,700)   $      (4,831)    $ (7,238,120)   $    (482,385)
                                                =============    =============     ============    ============= 

Basic and diluted net loss per share            $       (0.09)   $       (0.00)    $      (0.66)   $       (0.05)
                                                =============    =============     ============    ============= 

Basic and diluted weighted average
    shares outstanding                             11,507,002       10,764,733       10,998,874       10,026,400
                                                =============    =============     ============    ============= 
</TABLE>

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

                                       4
<PAGE>   8

                   MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (RESTATED)
                      THREE MONTHS ENDED JUNE 30, 1998, AND
                   FOR THE YEARS ENDED MARCH 31, 1998 AND 1997

<TABLE>
<CAPTION>

                                            Series B                      Series C                    Series D         Common Stock
                                   -------------------------     -------------------------   ------------------------- ------------
                                     Shares         Amount         Shares         Amount       Shares       Amount        Shares
                                   ----------     ----------     ----------     ----------   ----------   ----------   ------------
<S>                               <C>            <C>            <C>            <C>           <C>         <C>          <C>
Balance March 31, 1996                      0     $        0              0     $        0   $        0            0    9,784,733
Common stock
 issued for services                        0              0              0              0            0            0      480,000
Common stock options
 exercised                                  0              0              0              0            0            0      500,000
Net loss                                    0              0              0              0            0            0            0
                                   ----------     ----------     ----------     ----------   ----------   ----------   ----------

Balance March 31, 1997                      0              0              0              0            0            0   10,764,733
Common stock issued:
  Interest                                  0              0              0              0            0            0       10,286
  Compensation                              0              0              0              0            0            0      414,900
  Preferred stock dividend                  0              0              0              0            0            0       23,742
Preferred stock issued:
  Private Placement                   420,000      2,226,000         99,057      1,050,004            0            0            0
  Senior Debt                          70,000        371,000              0              0            0            0            0
Preferred stock dividend
  discount                                  0              0              0              0            0            0            0
Stock option for:
  Compensation                              0              0              0              0            0            0            0
  Placement agents                          0              0              0              0            0            0            0
Cash received for
  uncertificated stock                      0              0              0              0            0            0      293,185
Common stock-uncertificated
  issued for note receivable                0              0              0              0            0            0            0
Note receivable offset against
 common stock subscribed                    0              0              0              0            0            0            0
Net loss                                    0              0              0              0            0            0            0
                                   ----------     ----------     ----------     ----------   ----------   ----------   ----------

Balance March 31, 1998                490,000      2,597,000         99,057      1,050,004            0            0   11,506,846

Preferred stock issued:
 Private Placement                          0              0              0              0      198,807    2,107,354            0
Common stock issued:
 Compensation                               0              0              0              0            0            0        1,500
 Preferred
 Preferred stock dividend                   0              0              0              0            0            0       10,225
 Stock options for 
   placement agents                                                             
Net loss
                                   ----------     ----------     ----------     ----------   ----------   ----------   ----------

Balance June 30, 1998                 490,000     $2,597,000         99,057     $1,050,004      198,807   $2,107,354   11,518,571
                                   ==========     ==========     ==========     ==========   ==========   ==========   ==========
</TABLE>



<TABLE>
<CAPTION>
                                                       Common Stock
                                                  ----------------------    Additional
                                 Common Stock           Subscribed        (Discount on)    Accum-
                                --------------    ----------------------    Paid - In      ulated
                                    Amount          Shares      Amount       Capital       Deficit      Total
                                --------------    ----------  ----------  -------------  -----------  ----------
<S>                             <C>               <C>         <C>         <C>            <C>          <C>
Balance March 31, 1996             $  978,473              0  $        0  $  (1,046,058) $   348,386  $  280,801
Common stock
 issued for services                   48,000              0           0              0            0      48,000
Common stock options
 exercised                             50,000              0           0              0            0      50,000
Net loss                                    0              0           0              0     (482,385)   (482,385)
                                   ----------     ----------  ----------  -------------  -----------  ----------

Balance March 31, 1997              1,076,473              0           0     (1,046,058)    (133,999)   (103,584)
Common stock issued:
  Interest                              1,029              0           0          4,114            0       5,143
  Compensation                         41,490              0           0        250,367            0     291,857
  Preferred stock dividend              2,374              0           0         56,294      (58,668)          0
Preferred stock issued:
  Private Placement                         0              0           0       (841,547)           0   2,434,457
  Senior Debt                               0              0           0              0            0     371,000
Preferred stock dividend
  discount                                  0              0           0      3,412,502   (3,412,502)          0
Stock option for:
  Compensation                              0              0           0         93,750            0      93,750
  Placement agents                          0              0           0        253,547            0     253,547
Cash received for
  uncertificated stock                 29,319              0           0        483,130            0     512,449
Common stock-uncertificated
  issued for note receivable                0        543,000     407,250              0            0     407,250
Note receivable offset against
 common stock subscribed                    0       (543,000)   (407,250)             0            0    (407,250)
Net loss                                    0              0           0              0   (3,766,950) (3,766,950)
                                   ----------     ----------  ----------  -------------  -----------  ----------

Balance March 31, 1998              1,150,685              0           0      2,666,099   (7,372,119)     91,669

Preferred stock issued:
 Private Placement                          0              0           0       (874,033)           0   1,233,321
Common stock issued:
 Compensation                             150              0           0          7,853            0       8,003
 Preferred
 Preferred stock dividend               1,022              0           0         65,720      (66,742)          0
 Stock options for 
   placement agents                                                             532,343                  532,343
Net loss                                                                                    (945,957)   (945,957)
                                   ----------     ----------  ----------  -------------  -----------  ----------
Balance June 30, 1998              $1,151,857              0  $        0  $   2,397,982  $(8,384,818) $  919,379
                                   ==========     ==========  ==========  =============  ===========  ==========
</TABLE>

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


                                       5

<PAGE>   9

MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND YEAR ENDED MARCH 31, 1998 

<TABLE>
<CAPTION>

                                                                     June 30,              March 31,
                                                                       1998                  1998
                                                                 -----------------      --------------
<S>                                                            <C>                      <C>            
Cash flows from operating activities:
    Net loss                                                    $        (945,957)      $   (3,766,950)
    Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation expense                                              52,991              178,892
         Stock issued for compensation                                      8,002              291,857
         Stock options issued for compensation                                  -               93,750
         Stock issued for interest                                              -                5,143
         Change in trade receivables                                     (181,887)             832,062
         Change in inventory                                               55,430              (19,569)
         Change in accounts payable                                      (110,798)            (577,325)
         Change in accrued expenses                                       (68,689)              57,775
                                                                -----------------       --------------
  Net cash provided by (used by) operating
        activities                                                     (1,190,908)          (2,904,365)
                                                                -----------------       --------------
Cash flows from investment activities:
    Purchase of property & equipment                                     (149,050)            (195,685)
    Purchase of short term investment                                           -           (1,350,000)
    Additional notes receivable                                                 -             (142,265)
    Proceeds from notes receivables                                             -              477,645
    Proceeds from other receivables                                             -              162,793
    Additional other receivables                                          (91,140)            (121,341)
                                                                -----------------       --------------
    Net cash used by investing activities                                (240,190)          (1,168,853)

Cash flows from financing activities:
    Proceeds from line of credit (net)                                          -              504,076
    Proceeds from other notes payable                                           -              200,000
    Payments on long-term debt                                           (329,866)            (162,153)
    Payments on capital lease obligations                                 (22,401)             (32,485)
    Proceeds from private placement                                     1,765,664            2,688,004
    Proceeds from issuance of common stock                                      -              512,450
    Proceeds from senior convertible debt and other 
     capital transactions                                                       -              371,000
                                                                -----------------       --------------
    Net cash provided by financing activities                           1,413,397            4,080,892
                                                                -----------------       --------------
    Net increase in cash                                                  (17,701)               7,674

Cash at beginning of period                                                25,785               18,112
                                                                -----------------       --------------
Cash at end of period                                           $           8,084       $       25,786
                                                                =================       ==============
</TABLE>


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

                                        6

<PAGE>   10


MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND YEAR ENDED MARCH 31, 1998

<TABLE>
<CAPTION>

                                                   June 30,      March 31,
                                                    1998            1998
                                                 ----------     ----------
<S>                                              <C>            <C>       
Supplemental disclosure:
    Cash paid during the year for:
      Interest                                   $   35,789     $  232,578
                                                 ==========     ==========

Supplemental schedule of non-cash investing
    financing activities:
      Preferred stock issued for placement
        agent fees                               $     --       $  156,000
      Stock options:
        Compensation                                   --           93,750
      Common stock issued for:
        Compensation                                  8,002        291,857
        Interest on debt                               --            5,143
        Preferred stock dividends                    66,743         58,668
      Common stock subscribed for
        note receivable                                --          407,250
      Debt converted to preferred stock                --          371,000
      Inventory received for other notes               --           84,394
        receivable
      Discount on preferred stock issued for           --        3,412,502
        dividend
      Inventory converted to equipment               44,021           --
                                                 ==========     ==========
</TABLE>


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

                                        7

<PAGE>   11


MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) 
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED 
MARCH 31, 1998 AND 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS AND ORGANIZATION:

Micro-Media Solutions, Inc. (formerly 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), ("MSI"). Subsequent to June 30, 1998, MSI
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 $1,478,300 and $3,920,497 for three months ended June 30,
1998, and the year ended March 31, 1998, respectively. As of March 31, 1998, the
Company's current liabilities exceeded its current assets by $192,080 and the
Company owed accounts payable with dates due in excess of thirty (30) days in
the approximates amount of $170,000. These factors create 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's obtaining
additional financing to fund the expenses related to operations and capital
improvements.

In May 1998, the Company received $2 million in phase III of a private placement
agreement, (see Note 10), which has been used to retire debt, decrease past due
accounts payable and for operating expenses. In addition, the Company is
continuing discussions with private investment groups for a private placement of
a newly created series of preferred stock with net proceeds to the Company of
approximately $2.6 million, and plans a public offering in the year ending 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 three months ended June 30, 1998
and 1997, and years ended March 31, 1998 and 1997, 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 uncollectible. As of June 30, 1998 and March 31, 1998, management
believes all accounts are collectible; and therefore, no allowance has been
recorded.

                                        8

<PAGE>   12

MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) 
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

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.

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:

<TABLE>
<CAPTION>
                                                         Useful
                                                         Lives
                                                         -----
<S>                                                      <C>
    Vehicles                                                5
    Furniture and fixtures                                  5
    Equipment                                               5
    Leasehold improvements                                 20
</TABLE>

REVENUE AND COST RECOGNITION:

Revenue from sales of hardware, software and peripherals is recognized upon
shipment to the customer. 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. As of June 30, 1998 and March 31, 1998, there were no
contracts in progress.

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.


                                        9

<PAGE>   13

MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

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 June 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.

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 June 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.


                                       10

<PAGE>   14


MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) 
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997

NOTE 2 - OTHER RECEIVABLES

Other receivables include employee advances for travel and lodging for out of
town projects in the amount of $30,000 as well as $65,000 of cost paid by the
Company to the third parties in satisfaction of obligations of Argus Management,
Inc. Also included is a deposit to Exceptional Services in the amount of
$64,082, lease prepayment of $14,940, and accrued interest receivable of $4,079.

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

A summary of the Company's investment in property, plant and equipment at June
30, 1998, and March 31, 1998, is as follows (see Note 6):

<TABLE>
<CAPTION>

                                                    June 30         March 31
                                                   ---------       ---------
<S>                                              <C>             <C>        
  Equipment, Furniture and Fixtures              $   802,714     $   613,184
  Transportation Equipment                           253,204         253,204
  Leasehold Improvements                             311,331         307,790
                                                   ---------       ---------
                                                   1,367,249       1,174,178
  Less Accumulated Depreciation                      426,338         373,347
                                                   ---------       ---------
       Net Property, Plant and Equipment         $   940,911     $   800,831
                                                   =========       =========
</TABLE>

Depreciation charged against income for the three months ended June 30, 1998 and
1997, was $52,991 and $29,746, respectively. Depreciation charged against income
for the years ended March 31, 1998 and 1997, was $178,892 and 139,443,
respectively.

NOTE 4 - BANK LINE OF CREDIT

The Company was in default on a secured line of credit agreement with Bank One
Texas, N.A. providing for borrowings of up to $725,000 based on the amount of
the Company's eligible receivables. As of March 31, 1998, the Company owed
$208,966 plus accrued interest at 18% in the amount of $19,219 secured by
accounts receivable. This amount was paid in full in April 1998 and was not
renewed. Under the agreement, the Company was subject to covenants including
certain financial ratios.

The Company has a secured line of credit agreement maturing February 5, 1999,
with Compass Bank for $1,350,000 secured by two certificates of deposit
aggregating $1,350,000 held in the Company's name by Compass Bank and payable in
monthly installments of interest only. The balance at June 30, 1998 and March
31, 1998, was $1,070,000 and $1,020,000, respectively, plus accrued interest at
7.25% and 8% per annum in the amount of $3,573 and $4,893, respectively. There
are no additional loan covenants associated with this line of credit.

NOTE 5 - NOTES PAYABLE

Long-term notes payable consists of the following amounts at June 30, 1998 and
March 31, 1998:

<TABLE>
<CAPTION>

                                                                                                   June 30              March 31
                                                                                                   -------              --------
<S>                                                                                              <C>                  <C>
Austin Community Development Corporation, $100,000 equipment loan dated May 29,
1996, secured by equipment and accounts receivable. Loan requires interest
payments at 9% for the first six months, principal and interest payments
thereafter of $2,224 beginning in February 1997. Loan will mature
over a 60 month period ending January 2002.                                                         $ 77,062           $ 81,327

Austin Community Development Corporation, $100,000 working capital loan dated
June 14, 1995, secured by equipment and accounts receivable. Loan is due in 48
monthly principal installments of $2,083 along with interest of 9%
beginning in July 1996. Loan will mature in June 2000.                                                52,330             56,497
</TABLE>

                                       11

<PAGE>   15

MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED MARCH 31, 1998 AND
1997

NOTE 5 - NOTES PAYABLE - CONTINUED

<TABLE>
<S>                                                                                              <C>                  <C>
Neighborhood Commercial Management Program, $75,000 loan from City of Austin
dated June 8, 1995, secured by second lien on equipment and accounts receivable.
Loan is due in 60 monthly installments of principal and interest of $1,347
beginning January 1996. Interest rate of 0% until December 1995, thereafter 3%
rate to maturity. Loan will mature over a 60
month period ending December 2000.                                                                   39,375              43,104

Neighborhood Commercial Management Program, $250,000 loan from City of Austin
dated August 12, 1996, secured by second lien on equipment and accounts
receivable. Loan is due in 60 monthly installments of principal and interest of
$4,492 beginning January 1997. Interest rate of 0% until December 1996,
thereafter 3% rate to maturity. Loan will mature over a 60
month period ending December 2001.                                                                  179,122             191,194

Bank One Texas, N.A., $200,000 loan dated June 26, 1996, secured by a first lien
on equipment and leasehold improvements, loan is due in 60 monthly installments
of $3,333 along with interest equal to the Bank One Texas, N.A., base rate plus
2%, loan was paid in full during quarter ended June 30, 1998                                           -                146,667
                                                                                                    -------             -------
                                                                                                    347,889             518,789
Less current portion                                                                               (112,596)           (151,267)
                                                                                                    -------             -------
                                                                                                  $ 235,293           $ 367,522
                                                                                                    =======             =======
</TABLE>

Following are maturities of long-term debt for each of the next five years:

<TABLE>
<CAPTION>

  Period ended:                                                                                     June 30             March 31
                                                                                                   ---------            --------
<S>                                                                                               <C>                   <C>      
     1999                                                                                         $ 112,596             $ 151,267
     2000                                                                                           114,061               153,067
     2001                                                                                            85,074               134,348
     2002                                                                                            33,932                80,107
  Thereafter                                                                                          2,226                     -
                                                                                                  =========             =========
</TABLE>

Certain officers of the Company have personally guaranteed all notes.

NOTE 6 - OBLIGATIONS UNDER CAPITAL LEASES

The Company is lessee of transportation and telephone equipment under capital
leases expiring in various years through September 2001. The asset and
liabilities under capital leases are recorded at the lower of the present value
of the minimum lease payments or the fair value of the assets. The assets are
depreciated over the lower of their related lease terms or their estimated
productive lives. Depreciation of assets under capital leases is included in
depreciation expense (see Note 3).

Following is a summary of property held under capital leases:

<TABLE>
<CAPTION>

                                                                                                    June 30            March 31
                                                                                                    -------            --------
<S>                                                                                                <C>               <C>      
  Transportation Equipment                                                                         $ 234,456         $ 218,055
  Communication Equipment                                                                             56,014            56,014
</TABLE>

                                       12

<PAGE>   16

MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997

NOTE 6 - OBLIGATIONS UNDER CAPITAL LEASES - CONTINUED

Minimum future lease payments under capital leases as of June 30, 1998 and March
31, 1998, for each of the next five years and in the aggregate are:
Period ended:

<TABLE>
<CAPTION>

                                                                                      June 30           March 31
                                                                                     ---------          ---------
<S>                                                                                  <C>                <C>      
  1999                                                                               $  61,924          $  68,077
  2000                                                                                  60,343             60,343
  2001                                                                                  87,600             74,985
                                                                                     ---------          ---------
  Total minimum lease payments                                                         209,867            203,405
  Less: Amount representing interest                                                   (41,614)           (12,748)
                                                                                     ---------          ---------
                                                                                       168,253            190,657
      Less current portion                                                             (45,517)           (41,097)
                                                                                     ---------          ---------
      Long-term obligations under capital leases                                     $ 122,736          $ 149,560
                                                                                     =========          =========
</TABLE>

NOTE 7 - FEDERAL INCOME TAXES

A reconciliation of income tax at the statutory rate to the Company's effective
rate is as follows:

<TABLE>
<CAPTION>

                                                                                      June 30          March 31
                                                                                   -----------       -----------
<S>                                                                                <C>               <C>         
  Computed at the expected statutory rate                                          $  (322,000)      $(1,281,000)
  Non-deductible items                                                                   3,000            40,000
  Valuation allowance                                                                  319,000         1,241,000
                                                                                   -----------       -----------
     Income tax                                                                    $      -          $      -
                                                                                   ===========       ===========

Deferred tax assets are as follows:
  Deferred tax asset                                                               $ 1,394,000       $ 1,285,000
  Valuation allowance                                                               (1,394,000)       (1,285,000)
                                                                                   -----------       -----------
                                                                                   $      -          $      -
                                                                                   ===========       ===========
</TABLE>

The Company has available at March 31, 1998, $3,782,000 of unused operating loss
carryforwards that may be applied against future taxable income and that expire
in various years through 2013.

NOTE 8 - RELATED PARTY TRANSACTIONS

The Company had notes receivable from certain related parties at March 31,1997,
in the amount of $419,774. These related parties are owned and controlled by
majority stockholders of the Company. During the year ended March 31, 1998, the
Company loaned an additional $142,265 to these related entities and received
payments in the amount of $562,039. At June 30, 1998 and March 31, 1998, the
Company did not have any notes receivables or payables to related parties. The
Company did not have sales or purchases with the related parties for the three
months ended June 30, 1998 or 1997 or the years ended March 31, 1998 or 1997.

NOTE 9 - COMMITMENTS

The Company leases its principal general offices and warehouse facilities. The
leases expire at May 31, 2008. Future minimum lease payments are as follows:

<TABLE>
<CAPTION>

YEAR ENDED JUNE 30,
<S>                                             <C>        
       1999                                     $   133,296
       2000                                         142,464
       2001                                         149,340
       2002                                         168,480
       2003                                         179,010
       2004                                         189,540
       2005                                         200,070
       2006                                         210,600
       2007                                         221,070
       2008                                         231,660
       2009                                          40,365
                                               ------------
                  TOTAL                        $  1,865,895
                                               ============
</TABLE>

The total rental obligation under the above contract for the quarters ended June
30, 1998 and 1997, was $32,364 and $27,495, respectively and for the years ended
March 31, 1998 and 1997 was $109,980 and $82,255, respectively.

                                       13

<PAGE>   17


MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997

NOTE 10 - 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.
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 $0.57 per share at the grant date of the
options resulting in $226,800 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 statements.
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 $0.57
per share at the grant date resulting in $26,747 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 $1.81 to
$3.05 per share at the grant date resulting in $532,343 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 D preferred stock can be converted to common stock. Therefore, a
discount in the amount of $4,781,739 at June 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 $4,781,739 will be recorded if and when
the preferred stock is converted or the HUB status changes.


                                       14

<PAGE>   18

MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS
ENDED MARCH 31, 1998 AND 1997

NOTE 10 - STOCKHOLDERS' EQUITY - CONTINUED

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:

<TABLE>
<CAPTION>

                                   Shares           Amount
                                   ------           ------
<S>                               <C>             <C>
      June 30, 1998                10,224         $ 66,743
      March 31, 1998               23,742           58,668
</TABLE>

NOTE 11 - STOCK OPTIONS AND WARRANTS

A summary of the status of the Company's stock options as of June 30, 1998 and
March 31, 1998, is presented below:

<TABLE>
<CAPTION>

                                                                 June 30            March 31
                                                                ---------          ---------

<S>                                                             <C>              <C>      
Options outstanding at beginning of period                        622,170               -
Options granted                                                   250,850            622,710

Options exercised                                                    -                  -
Options canceled                                                     -                  -
Less: options not exercisable at end of period                    473,020            222,710
                                                                ---------          ---------

Options outstanding and
  exercisable                                                     400,000            400,000
                                                                =========          =========

Weighted Average Exercise Price per Share                       $    1.50          $    1.50
                                                                =========          =========
</TABLE>

The following table summarizes the information about the stock options as of
June 30, 1998, and March 31, 1998:

<TABLE>
<CAPTION>

                                                          JUNE 30, 1998
     ----------------------------------------------------------------------------------------------------------------------------
                                                    Weighted               Weighted                                  Weighted
                           Number                   Average                Average               Number              Average
      Range of            Outstand-                Remaining               Exercise            Exercisable           Exercise
      Exercise             ing at                  Contractual              Price                   At                 Price
        Price              June 30                     Life             (Total Shares)           June 30           (Exer. Shares)
     -------------     -------------            ---------------      -----------------      --------------      -----------------
<S>                    <C>                     <C>                 <C>                     <C>                <C>
     $   1.50                50,000  (1)               5 years       $           1.50                   -       $           1.50
         2.25                25,000  (1)               5 years                   2.25                   -                   2.25
         1.50               100,000  (1)               5 years                   1.50                   -                   1.50
         1.50               400,000  (2)               5 years                   1.50             400,000                   1.50
         4.00                47,170  (2)               6 years                   4.00                   -                   4.00
         1.59               250,850  (2)               5 years                   1.59                   -                   1.59
     -------------     -------------            ---------------      -----------------      --------------      -----------------
     $   4.00               873,020                    5 years       $           1.68             400,000       $           1.50
     =============     =============            ===============      =================      ==============      =================
</TABLE>


(1) Options to employees for past services. 
(2) Options granted for placement agent fees (Note 10).


                                       15
<PAGE>   19

MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (RESTATED) THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED
MARCH 31, 1998 AND 1997

NOTE 11 - STOCK OPTIONS AND WARRANTS - CONTINUED

<TABLE>
<CAPTION>

                                                     MARCH 31, 1998
     ---------------------------------------------------------------------------------------------------------------------------
                                                   Weighted              Weighted                                   Weighted
                          Number                   Average               Average               Number               Average
       Range of          Outstand-                Remaining              Exercise            Exercisable            Exercise
       Exercise           ing at                  Contractual              Price                 At                   Price
         Price            March 31                    Life             (Total Shares)          March 31           (Exer. Shares)
     -------------     -------------            ---------------      -----------------      --------------      -----------------
<S>                           <C>     <C>               <C>          <C>                   <C>                 <C>              
     $        1.50            50,000  (1)               5 years      $            1.50                   -      $            1.50
              2.25            25,000  (1)               2 years                   2.25                   -                   2.25
              1.50           100,000  (1)               5 years                   1.50                   -                   1.50
              1.50           400,000  (2)               5 years                   1.50             400,000                   1.50
              4.50            47,170  (2)               6 years                   4.00                   -                   4.00
     -------------     -------------            ---------------      -----------------      --------------      -----------------
              1.50-
     $        4.00           622,170                    5 years      $            1.72             400,000      $            1.50
     =============     =============            ===============      =================      ==============      =================
</TABLE>

(1) Options issued to employees for past services. 
(2) Options granted for placement agency fees (Note 10).

Stock options to employees for the year ended March 31, 1998, have been recorded
as compensation as applied under APB No. 25 in the amount of $93,750.

SFAS No. 123 requires the Company to provide pro forma information regarding net
income (loss) applicable to common stockholders and income (loss) per share as
if compensation cost for the Company's stock options granted to employees had
been determined in accordance with the fair value based method prescribed in
that Statement.

The Company estimated the fair value of each stock option at the grant date by
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants as follows:

<TABLE>
<CAPTION>

                                                                       March 31
                                                                       --------
<S>                                                               <C>
         Dividend yield                                                      0%
         Expected volatility                                             16.46%
         Risk-free interest rate                                          8.54%
         Expected lives                                                 5 Years

Net (loss) applicable to common stockholders:
         As reported                                                $(7,238,120)
                                                                    ===========
         Pro forma                                                  $(7,142,870)
                                                                    ===========
Net (loss) per share:
         As reported                                                $      (.66)
                                                                    ===========
         Pro forma                                                  $      (.65)
                                                                    ===========
</TABLE>

At March 31, 1998 and June 30, 1998, the Company had warrants outstanding to
acquire 2,940,000 shares of common stock. All of the warrants were eligible to
be exercised at year end. The following table summarizes the information about
the warrants:

<TABLE>
<CAPTION>

                                               Number
                                             Outstanding
    Exercise              Mar. 31            Expiration
     Price              and June 30             Date
    --------            -----------          -----------
<S>                    <C>                  <C>      
     $1.50                 120,000           1/31/2000
     $1.50               2,400,000           1/31/2000
     $0.795                300,000           1/31/2000
     $0.795                120,000           1/31/2000
                         ---------
                         2,940,000
                         =========
</TABLE>

                                       16

<PAGE>   20



MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) 
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED 
MARCH 31, 1998 AND 1997

NOTE 11 - STOCK OPTIONS AND WARRANTS - CONTINUED

In addition, all of the warrant contracts prohibit exercise of the warrants if
the HUB status of the Company is compromised upon such exercise.

NOTE 12 - EARNINGS PER SHARE

The following data details the amounts used in computing earnings per share
(EPS) and the effect on income and the weighted average number of shares of
dilutive potential common stock.

<TABLE>
<CAPTION>

                                                           June 30,            March 31,
                                                             1998                1998
                                                             ----                ----
<S>                                                     <C>                  <C>         
Loss from continuing operations                         $   (945,957)        $(3,766,950)
Less: Preferred dividends                                    (66,743)         (3,471,170)
                                                          ----------           ---------
Loss available to common shareholders
  used in basic EPS                                     $ (1,012,700)        $(7,238,120)
                                                          ==========           =========

Weighted average number of common shares
  used in basic EPS                                       11,507,002          10,998,874

Effect of dilutive securities:
   Stock options                                                -                     -
   Warrants                                                     -                     -
                                                          ----------          ----------
Weighted number of common shares and
 dilutive potential common stock used
 in diluted EPS                                           11,507,002          10,998,874
                                                          ==========          ==========
</TABLE>

In addition, options on 873,020 shares of common stock and warrants on 2,940,000
shares of common stock were not included in computing diluted EPS for the three
months ended June 30, 1998, because their effects were antidilutive. Options on
622,170 shares of common stock and warrants on 2,940,000 shares of common stock
were not included in computing diluted EPS for the year ended March 31, 1998,
because their effects were antidilutive.

NOTE 13 - 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.

A lawsuit was filed by Manpower, Inc. to preserve its claims for certain
delinquent obligations that were reduced to approximately $38,000 which is
included in accounts payable at March 31, 1998. The full amount of the principal
and interest was paid on April 29, 1998, and a Notice of Dismissal was filed on
May 8, 1998.

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.

                                       17

<PAGE>   21


MICRO-MEDIA SOLUTIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
THREE MONTHS ENDED JUNE 30, 1998 AND 1997, AND YEARS ENDED MARCH 31, 1998 AND
1997

NOTE 13 - CONTINGENCY - CONTINUED

Bank One, Texas, NA filed a lawsuit against the Company for the collection of
approximately $355,633 of principal plus interest $29,289 as well as attorney
fees and court costs $10,000. The bank was paid in full in April 1998. The bank
then executed a Notice of Nonsuit to dismiss with prejudice the lawsuit on April
29, 1998.

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 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.


                                       18

<PAGE>   22

Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS

THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SECTION AND OTHER PARTS OF THIS PROSPECTUS 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 AND IN "RISK FACTORS" AND "BUSINESS."

Overview

Micro-Media Solutions, Inc. ("MSI"), 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 maintains certification as a
minority-owned business enterprise and status as a Historically Underutilized
Business ("HUB"). On June 23, 1997, the then shareholders of MSI entered into an
agreement and plan of reorganization (the "Combination Agreement") with Mountain
States Resources Corporation (now known as MSI Holdings, Inc.), whereby the
Company acquired all of the issued and outstanding stock of MSI in exchange for
9,310,000 shares of the Common Stock of the Company (the "Combination"). The
Combination was accounted for as a recapitalization.

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, software sales and the
delivery of technical services, including installing and maintaining networks
system. The technical service sales of the Company typically yield a higher
gross 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 sales to intensifying sales of technical services. See Management's
Discussion and Analysis of Financial Conditions and Results of Operations
-Results of Operations.


<PAGE>   23

Recent Developments

On July 27, 1998, MSI entered into a renewable 10 year sublease with GTE
Intelligent Network Services, Inc. ("GTE") under which MSI 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 entered
into a 3 year subscription to GTE's Internet Advantage version 5.1 Connection
Service granting MSI 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 is included in the Connection Service. The Connection Service was upgraded
to GTE's Internet Advantage version 6.0 on September 29, 1998. MSI will lease
connections to the POP for access to the GTE Internet network to other
businesses. MSI 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 is able to eliminate the local loop, the
weakest component in localized Internet connections. MSI will have the capacity
to support over four thousand collocation rack spaces. These rack spaces will be
used to host the net servers for MSI 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 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, and MSI 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.


<PAGE>   24

Results of Operations

Three Months Ended June 30, 1998 Compared with the Three Months Ended 
June 30, 1997

Revenues for the quarter ended June 30, 1998 of $601,629 decreased $627,555 or
(51.1%) from the $1,229,184 recorded in the quarter ended June 30, 1997. This
reduction in 1998 occurred as a result of management's attention being focused
on seeking a stable source for financing the Company's expansion, conversion to
a publicly traded company, development of longer term service contracts,
expansion of the technical staff to service the expanded service contracts and
identification of appropriate investors for the Company.

Cost of goods sold for the quarter ended June 30, 1998 declined $171,929 or
(25.5%) from the quarter ended June 30, 1997. Cost of goods sold for 1998 of
$501,146 or 83.3% of net revenue is extraordinarily high, resulting in a gross
margin of $100,483 or 16.7% of revenues for the quarter. The gross margin for
the quarter ended June 30, 1997 was $556,709 or 45.3% of revenues. Gross margin
percentages experienced in 1997 more closely represent the margins management is
working to attain.

Selling, General and Administrative Expenses the quarter ended June 30, 1998 of
$1,046,440 represents 173.9% of Revenues. The 1998 figure represents an
increase over the quarter ended June 30, 1997 of $484,900 or 86.4%.
Approximately $246,000 of the increase represents the increase in staff salaries
and benefits. Staff additions include service technicians, sales staff,
accounting staff and middle management to enable the Company to work on larger
service contracts. Other increases include professional fees, which increased
approximately $133,952 due to additional legal, accounting and other consulting
fees associated with the Combination and reporting requirements attendant to
being a publicly traded company. The majority of the remaining increase in
expenses is attributable to training for expansion, marketing cost associated
with new service contracts, and other expenses associated with the start up of
new service contracts.

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 elsewhere in this Prospectus through an additional
private placement and a possible $20 million debt 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 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 is in the process of consummating a private placement of a
newly created series of preferred stock with net proceeds to the Company of
approximately $2.6 million (the "Proposed Private Placement"). In the event the
Proposed Private Placement is not consummated in the near future, the Company
will experience significant cash flow and working capital restraints sufficient
to create a likelihood that the Company will not continue as a going concern.


<PAGE>   25



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.

Potential Loss of Hub Status

MSI is currently qualified in Texas as a "Historically Underutilized Business"
("HUB"). As long as MSI maintains its status as a HUB, it will continue to
receive favorable treatment by certain governmental entities in their granting
of contracts. The Company generated revenues of approximately $414,000 and
$919,000 during the years ended March 31,1998 and 1997, respectively, from HUB
related contracts, or 15% and 20% of its gross revenues, respectively. MSI will
graduate from its HUB status upon the happening of any of the following events:
(i) less than 51% of the Company's voting stock is owned by minorities; (ii)
such minority owners are not active participants in the day-to-day operations
and management of the business; (iii) the four year average of gross revenues of
MSI exceeds certain levels based on the MSI's Standard Industrial Classification
Code ("SIC Code"); or (iv) the four year average of total employment levels of
MSI exceeds the Small Business Administration established levels for businesses
with a similar four-digit SIC Code. Under the current SIC Code applicable to
MSI, MSI must not exceed 500 employees, it currently has 79 employees. The
current SIC Code classification does not impose a revenue ceiling, however, some
SIC Code classifications under which MSI operated placed a three year or a four
year average of gross revenue limitation. The potential loss of HUB status may
also be contingent upon the SIC Code under which MSI operates in the future.
Future changes in operations may require the MSI to change its SIC Code, which
could alter the employee ceiling and impose revenue restrictions as low as $5
million per year, averaged over periods as short as three years. There can be no
assurance that MSI will continue to qualify for HUB status. Further, there is no
assurance that HUB-type programs will not be eliminated by the state or federal
governments. If MSI's HUB status is lost, the Company anticipates a significant
loss of revenues.

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


<PAGE>   26
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 $634,800, $206,747,
and $1,022,821 respectively.

For the three months ended June 30, 1998 and 1997, the Company's total assets
were $2,995,406 and $3,480,777, respectively, with liabilities of $2,076,027 and
$3,5789,192, respectively. Current assets of $2,054,495 and $2,287,975 represent
119.6% and 79.9% of current liabilities of $1,717,998 and $2,962,498.
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 $2,076,027 at June 30,1998 consist of $1,070,000 of a fully
secured credit line, $647,998 of current liabilities and $358,029 of long-term
liabilities.

The Company, subsequent to the end of 1998, paid its Bank One Texas, NA loans in
full and substantially reduced the borrowings under its fully secured line of
credit (see Notes 4, 5 and 13 to the consolidated financial statements). Net
shareholders equity (deficit) as of June 30, 1998 and 1997 was $919,379 and
($108,415), respectively. During the year ended March 31, 1998, the Company
completed Private Placement Phase I and Private Placement Phase II (See Note 10
to the consolidated financial statements). Subsequent to June 30, 1998, the
Company finalized funding of Private Placement Phase III with additional
proceeds totaling $857,010. Receipt of these funds enabled the Company to reduce
its outstanding debt and pay off the past due accounts payable.

During the three months ended June 30, 1998, working capital increased
$1,011,020 from the prior year and the balances of its accounts payables and
accrued expenses were reduced as a result of the application of the proceeds
from the completion of Private Placement Phase I, Private Placement Phase II and
Private Placement Phase III. At June 30, 1998, the Company had a working capital
of $336,497 compared to a working capital deficit of ($674,523) at June 30,
1997. At June 30, 1998 the Company's accounts payable decreased by $1,198,413 or
86.4% a compared to June 30, 1997.

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.


<PAGE>   27

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 13, 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 10,
Stockholders' Equity, in the Notes to Consolidated Financial Statements in Part
I

<PAGE>   28

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

INDEX

(A) EXHIBITS

3.1     ARTICLE OF AMENDMENT

4.1     CERTIFICATE OF DESIGNATION FOR SERIES B PREFERRED SHARES

4.2     FIRST AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES B PREFERRED
        STOCK

4.3     CERTIFICATE OF DESIGNATION FOR SERIES C PREFERRED SHARES

4.4     CERTIFICATE OF DESIGNATION FOR SERIES D PREFERRED SHARES

4.5     FIRST AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D PREFERRED
        STOCK

4.6     SECOND AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D
        PREFERRED STOCK

4.7     THIRD AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D PREFERRED
        STOCK

4.8     CERTIFICATE OF DESIGNATION FOR SERIES E PREFERRED SHARES

10.1    LEASE AGREEMENT FOR FACILITIES

10.2    SUBLEASE DATED JULY 27, 1998 BETWEEN GTE INTELLIGENT NETWORK SERVICES,
        INC AND MSI

10.3    MSI PURCHASE ORDER DATED MAY 29,1998 FOR GTE INTERNETWORKING'S INTERNET
        ADVANTAGE VERSION 5.1 (QUOTE NUMBER 38561.9719.1)

10.4    MSI PURCHASE ORDER DATED SEPTEMBER 30, 1998 FOR GTE INTERNETWORKING'S
        INTERNET ADVANTAGE VERSION 6.0 (QUOTE NUMBER 76512.9719.1)

10.5    MASTER AGREEMENT for INTERNETWORKING SERVICES DATED MAY 29, 1998 BETWEEN
        GTE INTERNETWORKING AND MSI

10.6    QUOTATION FOR GTE INTERNETWORKING DIALINX SERVICE DATRE OCTOBER 29, 1998
        BETWEEN GTE INTERNETWORKING AND MSI


<PAGE>   29

10.7    BASIC AGREEMENT BETWEEN SIEMENS NIXDORF INFORMATION SYSTEMS, INC. AND
        MSI

10.8    ADDENDUM TO LEASE AGREEMENT ON 501 WALLER AUSTIN, TEXAS DATED JUNE 6,
        1998 BETWEEN WBH, LTD AND MSI

10.9    VALUE ADDED RESELLER'S AGREEMENT BETWEEN MSI AND HEWLETT-PACKARD, INC.
        DATED JUNE 1, 1995

10.10   PLACEMENT AGREEMENT DATED NOVEMBER 11, 1997, BY AND BETWEEN EQUITY
        SERVICES, LTD AND MSHI.

10.11   PLACEMENT AGREEMENT DATED JANUARY 31, 1998 BY AND BETWEEN EQUITY
        SERVICES, LTD AND MSHI.

10.12   PLACEMENT AGREEMENT DATED APRIL 30, 1998 BY AND BETWEEN EQUITY SERVICES,
        LTD AND MSHI.

10.13   FIRST AMENDMENT TO THE PLACEMENT AGREEMENT DATED APRIL 30, 1998, BY AND
        BETWEEN EQUITY SERVICES, LTD AND MSHI.

10.14   PLACEMENT AGREEMENT DATED OCTOBER 13, 1998, BY AND BETWEEN EQUITY
        SERVICES, LTD AND MSHI.

(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


<PAGE>   30



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  11/6/1998           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.

<TABLE>
<CAPTION>
Signature                      Capacity                    Date
<S>                      <C>                           <C>
/s/ Jose G Chavez                                      11/6/1998
Jose G. Chavez           Chairman of the Board of
                          Directors and President

/s/ Mitchell Kettrick                                  11/6/1998
Mitchell Kettrick        Vice-President and Director


/s/ David Hill                                         11/6/1998
David Hill                  Chief Financial Officer


/s/ Ernesto Chavarria                                  11/6/1998
Ernesto Chavarria            Director
</TABLE>


<PAGE>   31
                               INDEX TO EXHIBITS


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

<S>           <C>
3.1           ARTICLE OF AMENDMENT

4.1           CERTIFICATE OF DESIGNATION FOR SERIES B PREFERRED SHARES

4.2           FIRST AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES B
              PREFERRED STOCK

4.3           CERTIFICATE OF DESIGNATION FOR SERIES C PREFERRED SHARES

4.4           CERTIFICATE OF DESIGNATION FOR SERIES D PREFERRED SHARES

4.5           FIRST AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D
              PREFERRED STOCK

4.6           SECOND AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D
              PREFERRED STOCK

4.7           THIRD AMENDMENT TO THE CERTIFICATE OF DESIGNATION FOR SERIES D
              PREFERRED STOCK

4.8           CERTIFICATE OF DESIGNATION FOR SERIES E PREFERRED SHARES

10.1          LEASE AGREEMENT FOR FACILITIES

10.2          SUBLEASE DATED JULY 27, 1998 BETWEEN GTE INTELLIGENT NETWORK
              SERVICES, INC AND MSI

10.3          MSI PURCHASE ORDER DATED MAY 29,1998 FOR GTE INTERNETWORKING'S
              INTERNET ADVANTAGE VERSION 5.1 (QUOTE NUMBER 38561.9719.1)

10.4          MSI PURCHASE ORDER DATED SEPTEMBER 30, 1998 FOR GTE
              INTERNETWORKING'S INTERNET ADVANTAGE VERSION 6.0 (QUOTE NUMBER
              76512.9719.1)

10.5          MASTER AGREEMENT for INTERNETWORKING SERVICES DATED MAY 29, 1998
              BETWEEN GTE INTERNETWORKING AND MSI

10.6          QUOTATION FOR GTE INTERNETWORKING DIALINX SERVICE DATRE OCTOBER
              29, 1998 BETWEEN GTE INTERNETWORKING AND MSI
</TABLE>


<PAGE>   32

<TABLE>
<S>           <C>
10.7          BASIC AGREEMENT BETWEEN SIEMENS NIXDORF INFORMATION SYSTEMS, INC.
              AND MSI

10.8          ADDENDUM TO LEASE AGREEMENT ON 501 WALLER AUSTIN, TEXAS DATED JUNE
              6, 1998 BETWEEN WBH, LTD AND MSI

10.9          VALUE ADDED RESELLER'S AGREEMENT BETWEEN MSI AND HEWLETT-PACKARD,
              INC. DATED JUNE 1, 1995

10.10         PLACEMENT AGREEMENT DATED NOVEMBER 11, 1997, BY AND BETWEEN EQUITY
              SERVICES, LTD AND MSHI.

10.11         PLACEMENT AGREEMENT DATED JANUARY 31, 1998 BY AND BETWEEN EQUITY
              SERVICES, LTD AND MSHI.

10.12         PLACEMENT AGREEMENT DATED APRIL 30, 1998 BY AND BETWEEN EQUITY
              SERVICES, LTD AND MSHI.

10.13         FIRST AMENDMENT TO THE PLACEMENT AGREEMENT DATED APRIL 30, 1998,
              BY AND BETWEEN EQUITY SERVICES, LTD AND MSHI.

10.14         PLACEMENT AGREEMENT DATED OCTOBER 13, 1998, BY AND BETWEEN EQUITY
              SERVICES, LTD AND MSHI.
</TABLE>