<PAGE>   1


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



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

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

                                 FORM 10-QSB/A

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
                                                          or
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

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

                         Commission File Number 0-8164

                               MSI HOLDINGS, INC.
 (herein referred to as "Registrant", "Company", "MSHI", "we", "us", and "our")
               (Exact name of registrant as specified in charter)


                 UTAH                                         87-0280886

(State of incorporation or organization)                (IRS Employer I.D. No.)

    501 WALLER STREET AUSTIN, TEXAS                             78702

(Address of principal executive offices)                      (Zip Code)

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

        Securities registered pursuant to section 12(b) of the Act: NONE

          Securities registered pursuant to section 12(g) of the Act:
                         COMMON STOCK, PAR VALUE $.10

Check whether the Issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such report(s), and (2) has
been subject to such filing requirements for the past 90 days.
(1) Yes [X] NO [ ]         (2) Yes [X] No [ ]

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-QSB or any amendment to
this Form 10-QSB. [ ]


As of June 30, 1999 the Registrant had 22,650,212 shares of common stock issued
and outstanding.

Transitional Small Business Disclosure Format (check one): Yes (X) NO ( )


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


<PAGE>   2

                               MSI HOLDINGS, INC.

                                 FORM 10-QSB/A
                      FOR THE QUARTER ENDED JUNE 30, 1999

                                     INDEX

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

<S>                        <C>                                                  <C>
         Item 1.           Consolidated Financial Statements (unaudited)          3

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


PART II - OTHER INFORMATION

         Item 1.           Legal Proceedings                                      12

         Item 2.           Changes in Securities and Use of Proceeds              12

         Item 3.           Defaults on Senior Securities                          12

         Item 4.           Submission of Matters to a Vote of Security Holders    12

         Item 5.           Other Matters                                          12

         Item 6.           Exhibits and Reports on Form 8-K                       12

SIGNATURE PAGE                                                                    13
</TABLE>


                                       2
<PAGE>   3



                         PART 1. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

MSI HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)

<TABLE>
<CAPTION>
ASSETS                                                                                             June 30,
  Current assets                                                                                     1999
                                                                                                 ------------
                                                                                                  (restated)
<S>                                                                                              <C>
      Cash                                                                                       $    385,132
      Accounts receivable - trade                                                                     403,169
      Inventory                                                                                        14,742
      Other receivables - advances                                                                     78,377
      Other current assets                                                                             57,516
                                                                                                 ------------
            Total current assets                                                                      938,936
 Property, plant, and equipment, net                                                                2,047,785
                                                                                                 ------------
 TOTAL ASSETS                                                                                    $  2,986,721
                                                                                                 ============

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities
      Accounts payable - trade                                                                   $    309,748
      Other accrued expenses                                                                          141,442
      Current maturities of notes payable                                                             196,728
      Current portion of obligations under capital leases                                             118,736
                                                                                                 ------------
      Total current liabilities                                                                       766,654

 Long-term liabilities
      Notes payable                                                                                    42,224
      Obligations under capital leases                                                                667,447
      Deferred rent                                                                                   202,419
                                                                                                 ------------
            Total long-term liabilities                                                               912,090
  Commitments and contingencies                                                                            --
                                                                                                 ------------
      Total liabilities                                                                             1,678,744
                                                                                                 ------------

 Stockholders' equity
      Preferred stock; 10,000,000 shares authorized:
           Convertible preferred stock Series B; $5.30 stated value; 490,000 authorized,
           5 shares issued  and outstanding                                                                27
           Convertible preferred stock Series D; $10.60 stated value; 279,657 authorized,
           19,005 shares issued and outstanding                                                       201,453
           Convertible preferred stock Series E; $30.00 stated value; 157,500 authorized,
           16,005 shares issued and outstanding                                                       480,150
      Common stock at $.10 par value; 50,000,000 authorized, 22,650,212
            shares (excluding 200,250 shares held in treasury) issued and outstanding               2,265,021
      Additional paid-in capital                                                                   22,501,695
      Accumulated deficit                                                                         (24,140,369)
                                                                                                 ------------
            Total stockholders' equity                                                              1,307,977
                                                                                                 ------------
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                      $  2,986,721
                                                                                                 ============
</TABLE>


The accompanying notes are an integral part of these financial statements


                                       3
<PAGE>   4
MSI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       Three months ended
                                                                            June 30,
                                                                   1999                 1998
                                                               ------------         ------------
<S>                                                            <C>                  <C>
Revenues:                                                       (restated)
     Hardware, software and peripherals                        $    120,287         $    503,632
     Networks, LAN/WAN                                               58,990               23,898
     Service, support and integration                               260,789               74,099
     Broadband Internet services                                      9,077                   --
                                                               ------------         ------------
                                                                    449,143              601,629
                                                               ------------         ------------

 Cost of Goods Sold:
     Hardware, software and peripherals                             185,912              419,204
     Networks, LAN/WAN                                              194,482               17,207
     Service, support and integration                                81,386               64,735
     Broadband Internet services                                     45,666                   --
                                                               ------------         ------------
                                                                    507,446              501,146
                                                               ------------         ------------
 Gross margin                                                       (58,303)             100,483
                                                               ------------         ------------

 Selling, General and Administrative Expenses:

     Salaries and benefits                                          696,214              668,933
     Professional fees and consultants                              414,497              295,442
     Occupancy                                                       94,560               89,679
     Depreciation and amortization                                   97,586               52,991
     Vehicle expense                                                  7,229               34,610
     Other Expense                                                  100,176               99,375
                                                               ------------         ------------
     Total Selling, General and Administrative Expenses           1,410,262            1,241,030
     Interest expense, net                                           48,556              391,636
                                                               ------------         ------------

 Net Loss                                                      $ (1,517,121)        $ (1,532,183)
                                                               ============         ============

 Preferred stock dividends and discounts                           (669,013)          (4,005,641)
                                                               ------------         ------------

 Net loss to Common stockholders                               $ (2,186,134)        $ (5,537,824)
                                                               ============         ============

 Basic and diluted net loss per share                          $      (0.12)        $      (0.48)
                                                               ============         ============

 Basic and diluted weighted average shares outstanding           18,453,956           11,507,002
                                                               ============         ============
</TABLE>




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


                                       4
<PAGE>   5



MSI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                    Three months ended
                                                                                         June 30,
                                                                                 1999                 1998
                                                                              -----------         -----------
Cash flows from operating activities:                                          (restated)
<S>                                                                           <C>                 <C>
   Net loss                                                                   $(1,517,121)        $(1,532,183)
       Adjustments to reconcile net loss to net cash used in operating
 activities:
         Depreciation and amortization expense                                     97,586              52,991
         Amortization of debt discount                                                 --             371,000
         Amortization of deferred rent                                             10,135                  --
      Common stock and options issued for compensation                                 --             109,500
     Changes in operating assets and liabilities:
        Accounts receivable - trade                                               172,062            (154,314)
        Inventory                                                                 (14,742)             99,451
        Other receivables - advances                                                1,322             (91,140)
        Accounts payable - trade                                               (1,463,463)           (110,797)
        Other accrued expenses                                                     (2,043)             37,037
                                                                              -----------         -----------
 Net cash used in operating activities                                         (2,716,264)         (1,218,455)
                                                                              -----------         -----------

 Cash flows from investing activities:
        Purchase of property, plant, and equipment                               (117,716)           (193,071)
        Proceeds from sales leaseback transaction                                 127,685                  --
                                                                              -----------         -----------
 Net cash used in investing activities                                              9,969            (193,071)
                                                                              -----------         -----------

 Cash flows from financing activities:
    Payments on bank line of credit                                              (200,000)           (158,966)
    Payments on notes payable                                                     (49,973)           (170,900)
    Payments on obligations under capital leases                                  (13,481)            (22,404)
    Proceeds - private placement of preferred stock                               526,800           1,746,094
    Proceeds - issuance of restricted common stock                              2,819,610                  --
                                                                              -----------         -----------
 Net cash provided by financing activities                                      3,082,956           1,393,824
                                                                              -----------         -----------

 NET CHANGE IN CASH                                                               376,661             (17,702)
 CASH AT BEGINNING OF PERIOD                                                        8,471              25,786
                                                                              ===========         ===========
 CASH AT END OF PERIOD                                                        $   385,132         $     8,084
                                                                              ===========         ===========
</TABLE>



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


                                       5
<PAGE>   6



MSI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                           Three months ended
                                                                                                June 30,
                                                                                          1999             1998
                                                                                       ----------       ----------
<S>                                                                                     <C>             <C>
Supplemental disclosure:                                                               (restated)
  Cash paid during the year for:
         Interest                                                                       $ 44,491        $   20,636

 Supplemental schedule of non-cash investing and financing activities: Preferred
      stock issued for :
           Placement agent fees                                                         $     --        $  100,350
      Stock options or warrants issued for:
           Placement agent fees                                                               --           539,619
      Common stock issued for:
           Preferred stock dividends                                                      69,013            66,743
      Discount on preferred stock issued                                                 600,000         3,938,898
</TABLE>



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


                                       6
<PAGE>   7
MSI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
JUNE 30, 1999 (UNAUDITED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION:

The accompanying unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principals and the rules of the
Securities and Exchange Commission (the SEC), and should be read in conjunction
with the audited financial statements and notes thereto contained in the
Company's latest annual Report filed with the SEC on Form 10-KSB. In the opinion
of management all adjustments, consisting of normal recurring adjustments,
necessary for the fair presentation of financial position and results of
operations for the interim periods presented have been reflected herein. The
results of operation are not necessarily indicative of the results to be
expected for the full year. Notes to the financial statements which would
substantially duplicate the disclosure contained in the audited financial
statements for the year ended March 31, 1999, as reported in the Form 10-KSB as
amended have been omitted.

GOING CONCERN:

As shown in the accompanying consolidated financial statements, the Company has
incurred a net loss of $1,517,121 for the three months ended June 30, 1999. The
ability of the Company to continue as a going concern is dependent on the
Company obtaining additional financing to fund operations and capital
improvements.

At March 31, 1999, the Company had completed arrangements with a private
investment group for the private placement of up to 1.5 million shares of the
Company's Common Stock to raise approximately $4.5 million in capital. From
April through July 15, 1999, the Company received approximately $3.2 million in
this private placement. The Company received $526,800 in net proceeds from the
private placement of 20,000 shares of the Company's Series E Preferred Stock,
$30 stated value (the "Series E Preferred") during the three months ended June
30, 1999. These funds have been used to retire debt, decrease past due accounts
payable and pay operating expenses. In addition, management closed a substantial
contract with GTE during the year ended March 31, 1999. In the first quarter of
fiscal year 2000, the Company established an affiliation with Southwestern Bell
as a Digital Subscriber Line ("xDSL") service reseller which will foster its
ability to provide state-of-the-art connectivity services.

The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.

COMPREHENSIVE INCOME:

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

NOTE 2 - BANK LINE OF CREDIT

The Company had a secured line of credit agreement with a bank which was paid in
full at April 30, 1999 and was not renewed.

NOTE 3 - NOTES PAYABLE

The Company was out of compliance with debt covenants on certain notes payable
as of June 30, 1999. Amounts outstanding related to these notes have been
classified as current liabilities.

NOTE 4 - STOCKHOLDERS' EQUITY

During the three months ended June 30, 1999, the Company received gross proceeds
of $600,000 from the Private Placement of 20,000 shares of Series E, 6%
Cumulative Convertible Non-Voting Preferred Stock, Stated value $30.00 per
share. The Company paid $73,200 in cash for payment of commission fees of the
Private Placement. Each share of Preferred E stock is initially convertible into
ten shares of the Company's Common Stock.



                                       7

<PAGE>   8
At the time of issuance the Series E Preferred Stock was convertible to Common
Stock at an amount that was "in-the-money". This beneficial conversion feature
was limited to the proceeds of the offering and was accounted for as an increase
to additional paid in capital and an in-substance dividend to the related
preferred stockholders. The beneficial conversion feature resulted in the
recognition of a discount of $600,000 in the quarter ended June 30, 1999, which
is equivalent to the gross proceeds of the offering.

During the quarter ended June 30, 1999, 399,995 shares of Series B, 177,335
shares of Series D, and 130,247 shares of Series E Preferred Stock were
collectively converted to 7,075,770 shares of Common Stock.

During the quarter ended June 30, 1999, the Company issued 944,033 shares of
common stock in a private placement resulting in net proceeds of $2,819,610. The
Company paid $115,000 in cash and issued 15,000 shares of common stock for
payment of commission fees of the private placement.

During the quarter ended June 30, 1999, 12,057 shares of common stock were
issued as preferred stock dividends and were recorded as a reduction of retained
earnings in the amount of $69,013.

NOTE 5 - RESTATEMENT OF EARNINGS

The Company has restated earnings for the period ended June 30, 1999 primarily
to effect for the limitation of dividend recognition related to the beneficial
conversion features on the convertible preferred stock issuances. Previously,
the Company did not limit the recognition of a discount and the related dividend
to the proceeds raised in the issuance. The following table shows the restated
results of operations for the period compared to previously reported results:

<TABLE>
<CAPTION>

                                                              As Restated         Previously Reported
                                                             --------------      -----------------------

<S>                                                     <C>                   <C>
    Net loss                                            $      (1,517,121)    $             (1,799,857)
    Preferred stock dividends and discounts                      (669,013)                     (69,013)
    Net loss applicable to common stockholders                 (2,186,134)                  (1,868,870)
    Basic and diluted net loss per share                            (0.12)                       (0.09)
</TABLE>

NOTE 6 - CONTINGENCIES AND LEGAL MATTERS

During the year ended March 31, 1999, the Company incurred a business obligation
with a consulting firm whose principal is an officer of the Company, and an
individual, who is a Director of the Company. The consulting firm also has a
financial arrangement with another Director of the Company. The consulting firm
is claiming compensation of 250,000 shares of the Company's common stock for
services allegedly performed. The Company disputes the validity of the claim. As
of September 28, 1999, no compromise of this claim has been reached.

NOTE 7 - SUBSEQUENT EVENTS

Subsequent to June 30, 1999, an additional 8,000 shares of the Company's Series
E Preferred Stock were converted into 80,000 shares of the Company's Common
Stock.

On July 28, 1999, the Company was sued by its former President seeking more than
$50,000, excluding costs and attorneys' fees. A settlement was reached during
mediation on September 20, 1999. Formal settlement documents are being prepared
for execution by the parties to the lawsuit. The terms of settlement are
confidential, but there is no material adverse effect on the Company's results
of operations or financial condition from the settlement terms.

On August 9, 1999, the stockholders approved an amendment to the 1998 Stock
Option Plan to increase the number of common shares reserved for future issuance
from 1,500,000 to 4,500,000 shares.

On August 9, 1999, the stockholders approved the Non-Employee Directors Stock
Option Plan. The Plan provides for the grant of nonqualified options, as defined
by the Internal Revenue Code, to directors who are not employees of the Company.



                                       8

<PAGE>   9



In September 1999, we received $1,250,000 in bridge loans from three accredited
individuals. These promissory notes bear interest of 8 1/4% per annum and mature
in March 2000 or upon consummation of a secondary public offering, whichever is
sooner. In connection with these loans, stock warrants were issued to purchase
an aggregate of 125,000 shares of our common stock with an exercise price of
$0.10 per share. The shares of common stock into which these warrants are
exercisable as "restricted" securities and are subject to the provisions of Rule
144 under the Securities Act.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

This quarterly report on Form 10-QSB contains forward-looking statements, which
reflect the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or those anticipated. Words used in this report such as
"believe", "anticipate", "expect", "may", "will" and similar expressions are
intended to identify forward-looking statements but are not the exclusive means
of identifying such statements. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. The Company does not undertake any
obligation to update or revise these forward-looking statements to reflect any
future events or circumstances. Readers are urged to carefully review and
consider the various disclosures made by the Company in this report, including
those under the section entitled "OTHER FACTORS THAT MAY AFFECT OPERATING
RESULTS," which consist primarily of a brief discussion of certain risks which
are in their entirety forward-looking statements, and those included in the
Company's other reports previously filed with the commission, including the
disclosures in the "RISK FACTORS" section appearing in the Form 10-KSB, as
amended, for the fiscal year ended March 31, 1999.

The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with (i) the financial
statements and accompanying notes appearing in this Quarterly Report, and
(ii)the Company's financial statements and accompanying notes appearing in the
Company's Form 10-KSB, as amended, for the fiscal year ended March 31, 1999, as
filed with the Commission.

RESULTS OF OPERATIONS

    Quarter Ended June 30, 1999, compared with the Quarter Ended June 30, 1998:

                                Comparison Table

<TABLE>
<CAPTION>

                                                       HARDWARE
                                                       SOFTWARE                        SERVICE,
                                        BROADBAND        AND           NETWORKS       SUPPORT AND
                                        INTERNET      PERIPHERALS      LAN/WAN        INTEGRATION       TOTAL
                                      ------------    ------------    ------------    ------------   ------------

<S>                                   <C>             <C>             <C>             <C>            <C>
QUARTER ENDED JUNE 30, 1999

Revenues                              $      9,077    $    120,287    $     58,990    $    260,789   $    449,143

Cost of goods sold                          45,666         185,912         194,482          81,386        507,446

Gross profit (loss)($)                     (36,589)        (65,625)       (135,492)        179,403        (58,303)

Gross profit (loss)(%)                     (403.10)          (54.6)         (229.7)           68.8          (13.0)

QUARTER ENDED JUNE 30, 1998

Revenues                              $         --    $    503,632    $     23,898    $     74,099   $    601,629

Cost of goods sold                              --         419,204          17,207          64,735        501,146

Gross profit (loss)($)                          --          84,428           6,691           9,364        100,483

Gross profit (loss)(%)                          --            16.8            28.0            12.6           16.7

INCREASE/(DECREASE)


Revenues                              $      9,077    $   (383,345)   $     35,092    $    186,690   $   (152,486)

Cost of goods sold                          45,666        (233,292)        177,275          16,651          6,300

Gross profit (loss)($)                     (36,589)       (150,053)       (142,183)        170,039       (158,786)

Gross profit (loss)(%)                      (403.1)          (71.4)         (257.7)           56.2          (29.7)
</TABLE>



                                       9

<PAGE>   10
         Total revenues for the quarter ended June 30, 1999, decreased $152,486,
or 25.3%, from the total revenues recorded for the same period in the prior
year. This was caused by a decrease of $383,345 in hardware, software and
peripherals revenue, which was partially offset by increases in revenues from
network LAN/ WAN and service, support and integration, and the addition of
broadband Internet services. The revenue from broadband Internet services was
$9,077 and only represents revenues from the initiation of the service in late
June 1999 through the end of the quarter. The decrease in hardware, software and
peripherals reflects a reduction in large one-time sales to governmental
agencies. This is a direct result of our shift in focus from hardware, software
and peripherals to broadband Internet services. The increase of $35,092 in
network LAN/ WAN revenues was due to normal fluctuations in installation
projects that were in place during each period. The $186,690 increase in
service, support and integration revenues is due to increased activity on our
service contract with Siemens Nixdorf.

         Cost of goods sold for the quarter ended June 30, 1999, increased
$6,300, or 1.3%, from the same period in the prior year. The total cost of goods
sold includes $45,666 related to broadband Internet services that were not
offered in 1998. The cost of goods sold related to network LAN/ WAN increased
$177,275, and the cost of goods sold related to service, support, and
integration increased $16,651. There was a decrease of $233,292 in cost of goods
sold for hardware, software and peripherals due to the corresponding reduction
in revenues.

         The gross margin for the quarter ended June 30, 1999, was ($58,303), or
(13.0%) of total revenue, compared to a gross margin of $100,483, or 16.7% of
total revenue, for the same period in the prior year. The gross margin for
hardware, software and peripherals for the quarter ended June 30, 1999, was
(54.6%), compared to a gross margin of 16.8% in the quarter ended June 30, 1998.
This 71.4% decrease is the result of fixed costs and decreasing revenue. In
addition, profits are decreasing due to price declines, competitive bidding and
other industry conditions. The gross margin for network LAN/WAN was (229.7%) for
the quarter ended June 30, 1999, compared to a gross margin of 28.0% for the
same period in the prior year. The decrease in margin of 257.7% is the result of
fixed costs and increased salaries related to network LAN/WAN installations. The
gross margin for service, support and integration was 68.8% for the quarter
ended June 30, 1999, compared to a gross margin of 12.6% for the quarter ended
June 30, 1998. The increase is a result of increased revenues and lower fixed
costs associated with service contracts.

         Selling, general and administrative expenses, excluding interest
expense, for the quarter ended June 30, 1999, were $1,410,262 or 314.0% of
revenue, compared with $1,241,030, or 206.3% of revenue for the quarter ended
June 30, 1998. This is an increase of $169,232, or 13.6%. Increases in salaries
and benefits account for $27,281. Staff additions include technical, sales and
accounting staff and project management personnel. Additional personnel were
required to enable the Company to enter the broadband Internet services market.
Depreciation and amortization expense increased $44,595. This increase was due
to the first full quarter of depreciation expense being recorded on equipment
acquired for the build-out of data center at our Austin, Texas facility.
Increases in professional fees and consultants were $119,055.

         Interest expense for the quarter ended June 30, 1999, was $48,556,
which was 10.8% of revenues. Interest expense for the quarter ended June 30,
1998, was $391,636, which was 65.1% of revenues. Interest expense decreased
$343,080 from 1998 to 1999, which was due to a discount charge in 1998 to
interest for senior convertible debt issued for cash.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has a critical need for additional working capital to meet
obligations under lease agreements with GTE relating to the GTE POP located in
our primary facility in Austin, Texas. Management believes that its relationship
with GTE has the potential to substantially increase revenue if sufficient
working capital is obtained.

         As of June 30, 1999, MSI had working capital of $172,282. This was an
increase of $1,922,218 from the working capital deficit of $1,749,936 on March
31, 1999. Accounts payable and accrued expenses decreased as a result of the
private placement of our Series E preferred stock and the common stock private
placement during the quarter. In addition, accounts receivable decreased
$172,061 during the quarter ended June 30, 1999. As of June 30, 1999, we were
more than 30 days past due on approximately $170,000 of accounts payable trade.

         We used $2,716,264 and $1,218,455 in our operating activities for the
three month period ended June 30, 1999 and June 30, 1998, respectively. This was
mainly the result of losses of $1,517,121 and $1,532,183 for the three month
period ended June 30, 1999 and June 30, 1998, respectively. We provided $9,969
and used $193,071 in investing activities for the three month period ended June
30, 1999 and June 30, 1998, respectively. Our financing activities for the three
month period ended June 30, 1999 and June 30, 1998, provided $3,082,956 and
$1,393,824, respectively, from the private placement of our securities.

                                       10

<PAGE>   11



         Subsequent to March 31, 1999, we paid our loans with Compass Bank, N.A.
in full and eliminated the borrowing under our fully secured line of credit. Net
stockholders' deficit as of March 31, 1999, was $521,313 and net stockholders'
equity was $1,307,977 as of June 30, 1999. During the year ended March 31, 1999,
we completed three phases of the Series D preferred stock private placement and
the Series E preferred stock private placement. Receipt of these funds enabled
us to purchase property, plant, and equipment, retire debt, decrease past due
accounts payable and pay for operating expenses.

         In September 1999, we received $1,250,000 in bridge loans from three
accredited individuals. These promissory notes bear interest of 8 1/4% per annum
and mature in March 2000 or upon the consummation of a secondary public
offering, whichever is sooner. In connection with these loans, we also issued
warrants to purchase an aggregate of 125,000 shares of our common stock with an
exercise price of $0.10 per share. The shares of common stock into which these
warrants are exercisable are "restricted" securities and are subject to the
provisions of Rule 144 under the Securities Act.

         Management is consulting with investment bankers and plans a private
placement or secondary public offering in the near future.

         The auditors' reports relating to our audited balance sheets as of
March 31, 1999 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended each contain an
explanatory paragraph as to our ability to continue as a going concern. Such
going concern explanation relates only to our financial statements covered by
the auditors' report.

         We believe that funds generated from operations and the net proceeds of
a proposed offering will be sufficient to finance our current and anticipated
operations for at least 12 months after a proposed offering. Our long-term
capital requirements beyond this proposed period will depend on numerous
factors, including, but not limited to, the following:

         o   The rate of market acceptance of our products and services

         o   The ability to expand our customer base

         o   The level of expenditures for sales and marketing and other factors

         If the funds from a proposed offering and our revenues are insufficient
to fund the activities in the short or long term, we would need to raise
additional funds by incurring debt or through public or private offerings of our
stock. We may not be able to do either on terms favorable to us, if at all.



                                       11

<PAGE>   12
                           PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         On July 28, 1999, the Company was sued by its former President and
Chief Technology Officer seeking more than $50,000, excluding costs and
attorneys' fees. A settlement was reached during mediation on September 20,
1999. Formal settlement documents are being prepared for execution by the
parties to the lawsuit. The terms of settlement are confidential, but there is
no material adverse effect on the Company's results of operations or financial
condition from the settlement terms.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

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

ITEM 3. DEFAULT UPON SENIOR SECURITIES

         None

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

         None

ITEM 5. OTHER INFORMATION


         On April 20, 1999, Jose Chavez, President & CEO, Mitchell Kettrick,
Secretary, and Jaime Munoz, Vice-President of Operations, respectively, were
terminated.

         Robert Gibbs joined the company as President and Chief Executive
Officer in June 1999. In July 1999, Roger M. Lane, Chief Operating Officer, was
terminated from the Company. In addition, Patricia Hrabina, Vice President of
Human Resources, Cliff Luckey, Vice President of Technology & Solutions, and
Robert Frank, Executive Vice President of New Business Development were hired
subsequent to June 30, 1999.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         The Registrant filed no Reports on Form 8-K during the quarter covered
by this Report on Form 10-QSB.



                                       12

<PAGE>   13




                                   SIGNATURES

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

                                             MSI HOLDINGS, INC.

    Date: November 12, 1999                  By:  /s/ Robert Gibbs
                                                  ------------------------------
                                                  Robert Gibbs, President and
                                                  Chief Executive Officer


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


<TABLE>
<CAPTION>

         Signature                           Title                               Date
         ---------                           -----                               ----

<S>                                        <C>                             <C>
/s/ Stephen J. Metzger
-------------------------                   Director                        November 12, 1999
     Stephen J. Metzger

/s/ Davinder Sethi
-------------------------                   Director                        November 12, 1999
     Davinder Sethi

/s/ Ernesto Chavarria
-------------------------                   Director                        November 12, 1999
     Ernesto Chavarria

/s/ Blandina Cardenas
-------------------------                   Director                        November 12, 1999
     Blandina Cardenas

/s/ Daniel Dornier
-------------------------                   Director                        November 12, 1999
     Daniel Dornier

/s/ Humbert Powell, III
-------------------------                   Director                        November 12, 1999
    Humbert Powell, III

/s/ Robert Gibbs                            President and
-------------------------                   Chief Executive Officer         November 12, 1999
     Robert Gibbs

/s/ Douglas W. Banister
-------------------------                   Chief Financial Officer         November 12, 1999
    Douglas W. Banister

/s/ Stephen Hoelscher                       Secretary, Controller           November 12, 1999
-------------------------
    Stephen Hoelscher
</TABLE>



                                       13

<PAGE>   14


                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>

EXHIBIT
NUMBER         DESCRIPTION
-------        -----------
<S>            <C>

  27           Financial Data Schedule
</TABLE>