<PAGE>   1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                               Washington DC 20549

                                   FORM 10-QSB

(Mark One)

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1998

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

     For the Transition Period from _________________ to__________________.

                         Commission File Number: 0-23589

                               C2I SOLUTIONS, INC.
             (Exact name of registrant as specified in its charter)

                 DELAWARE                                   33-0775687

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


                             6138 NANCY RIDGE DRIVE
                        SAN DIEGO, CALIFORNIA 92121-3223
                                 (619) 812-5800
          (Address and telephone number of principal executive offices)

Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 YES [X]   NO [ ]

The number of shares outstanding of the Registrant's Common Stock, $0.001 par
value, was 3,542,171 as of August 10, 1998.

           Transitional Small Business Disclosure Format (check one):

                                    YES  [ ]  NO  [X]



                                     PAGE 1
<PAGE>   2
                               C2I SOLUTIONS, INC.
                              REPORT ON FORM 10-QSB

                                      INDEX
<TABLE>
<CAPTION>
                                                                            PAGE NO.
                                                                            --------
<S>                                                                         <C>
PART 1.  FINANCIAL INFORMATION

ITEM 1.  Balance Sheets as of June 30, 1998
         (Unaudited) and December 31, 1997 (Unaudited)                         3

         Statements of Operations for the three and six months ended
         June 30, 1998 and 1997 (Unaudited), and for the period
         from Inception through June 30, 1998 (Unaudited)                      4

         Statements of Cash Flows for the six months ended
         June 30, 1998 and 1997 (Unaudited), and for the period
         from Inception through June 30, 1998 (Unaudited)                      5

         Notes to the Financial Statements (Unaudited)                         6

ITEM 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                             8


PART II. OTHER INFORMATION

ITEM 2.  Changes in Securities and Use of Proceeds                             10

ITEM 4.  Submission of Matters to a Vote of Security Holders                   10

ITEM 6.  Exhibits and Reports on Form 8-K                                      11


SIGNATURES                                                                     12
</TABLE>



                                     PAGE 2
<PAGE>   3
                          PART I: FINANCIAL INFORMATION

ITEM 1:  FINANCIAL STATEMENTS

                              C2i Solutions, Inc.
                         (A Development Stage Company)
                                        
                                 Balance Sheets

<TABLE>
<CAPTION>
                                                                          JUNE 30,          DECEMBER 31,
                                                                            1998               1997
                                                                        -----------         -----------
                                                                        (UNAUDITED)           (NOTE)
<S>                                                                     <C>                 <C>        
ASSETS
Current Assets:
   Cash                                                                 $   271,505         $   298,823
   Short-term investments, net                                            3,900,000                  --
   Accounts receivable                                                       92,801                  --
   Prepaid expenses and other                                                32,686              40,702
                                                                        -----------         -----------
Total current assets                                                      4,296,992             339,525
                                                                        -----------         -----------

Property and equipment, net                                                 138,343              64,065
Deferred offering costs                                                          --             259,906
Deferred finance charges, net                                                    --              24,412
Noncurrent prepaid                                                           89,570                  --
Other assets, net                                                             2,714               2,775
                                                                        -----------         -----------
Total assets                                                            $ 4,527,619         $   690,683
                                                                        ===========         ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
   Accounts payable                                                     $   255,610         $   248,942
   Accrued payroll and related                                               22,482              59,276
   Bridge notes payable, net                                                     --             501,698
   Accrued royalty due to former stockholder                                     --               1,345
   Accrued interest payable                                                      --              12,500
   Current portion of capital lease obligations                               5,708               5,326
   Other current liabilities                                                  7,427               2,026
                                                                        -----------         -----------
Total current liabilities                                                   291,227             831,113
                                                                        -----------         -----------

Capital lease obligations,  net of current portion                            9,303              12,251
                                                                        -----------         -----------

Stockholders' Equity (Deficit):
   Preferred Stock - $.001 par value; 1,000,000 shares
      authorized; no shares issued and outstanding                               --                  --
   Common Stock - $.001 par value; 10,000,000 shares authorized;
      3,542,171 and 2,391,338 shares issued and outstanding at
      June 30, 1998 and December 31, 1997,  respectively                      3,542               2,391
   Additional paid-in capital                                             7,475,164           1,910,516
   Warrants to acquire common stock                                         223,100             108,000
   Deficit accumulated during the development stage                      (3,092,885)         (1,850,776)
   Deferred compensation                                                   (281,832)           (322,812)
   Unrealized gain/loss on investment                                      (100,000)                 --
                                                                        -----------         -----------
Total stockholders' equity (deficit)                                      4,227,089            (152,681)
                                                                        -----------         -----------
Total liabilities and stockholders' equity (deficit)                    $ 4,527,619         $   690,683
                                                                        ===========         ===========
</TABLE>


NOTE: The balance sheet at December 31,1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed financial statements.



                                     PAGE 3
<PAGE>   4
                               C2i Solutions, Inc.
                          (A Development Stage Company)

                            Statements of Operations


<TABLE>
<CAPTION>
                                                                                                                     PERIOD FROM
                                                                                                                       INCEPTION
                                                                                                                    (SEPTEMBER 17,
                                            THREE MONTH      THREE MONTH        SIX MONTH            SIX MONTH          1996)
                                            PERIOD ENDED     PERIOD ENDED      PERIOD ENDED        PERIOD ENDED       THROUGH
                                              JUNE 30,         JUNE 30,         JUNE 30,             JUNE 30,          JUNE 30,
                                               1998              1997             1998                 1997              1998
                                           -----------       -----------       -----------         -----------       -----------
                                            (UNAUDITED)      (UNAUDITED)       (UNAUDITED)         (UNAUDITED)       (UNAUDITED)
<S>                                        <C>               <C>               <C>                 <C>               <C>
Revenues:
  Products                                 $    14,215       $     8,125       $    14,215         $    21,954       $    56,263
  Services                                      87,165            14,200           156,244              14,200           203,277
                                           -----------       -----------       -----------         -----------       -----------
Total revenues                                 101,380            22,325           170,459              36,154           259,540
                                           -----------       -----------       -----------         -----------       -----------

Cost of revenues:
  Products:
       Customers                                 9,300             4,825             9,300               4,825            20,151
       Former stockholder                           --             2,100                --              11,352            17,652
  Services                                      42,107             7,738            72,499               7,738            97,190
                                           -----------       -----------       -----------         -----------       -----------
Total cost of revenues                          51,407            14,663            81,799              23,915           134,993
                                           -----------       -----------       -----------         -----------       -----------

Gross profit                                    49,973             7,662            88,660              12,239           124,547
Selling, general and administrative
  expenses                                     719,974         1,275,004         1,268,847           1,335,535         3,130,706
                                           -----------       -----------       -----------         -----------       -----------

Operating loss                                (670,001)       (1,267,342)       (1,180,187)         (1,323,296)       (3,006,159)
Interest expense                                   575                --            18,367                  --            40,066
Interest expense to employees and
  former employees                                  --                --             2,483                  --             5,588
Other expense (income)                            (195)               --           120,353                  --           120,353
Interest income                                (59,370)               --           (79,281)                 --           (79,281)
                                           -----------       -----------       -----------         -----------       -----------

Net loss                                   $  (611,011)      $(1,267,342)      $(1,242,109)        $(1,323,296)      $(3,092,885)
                                           ===========       ===========       ===========         ===========       ===========

Loss per share (basic and diluted)         $     (0.17)          $(1. 09)       $     (0.39)      $     (1.21)
                                           ===========       ===========        ===========       ===========

Shares used in computing loss per share      3,542,171         1,158,297          3,182,162         1,097,040
                                           ===========       ===========        ===========       ===========
</TABLE>



     See accompanying notes.



                                     PAGE 4
<PAGE>   5
                               C2i Solutions, Inc.
                          (A Development Stage Company)

                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                  PERIOD FROM
                                                                                                   INCEPTION
                                                                                                  (SEPTEMBER
                                                          SIX MONTH           SIX MONTH            17, 1996)
                                                         PERIOD ENDED        PERIOD ENDED           THROUGH
                                                           JUNE 30,           JUNE 30,              JUNE 30,
                                                             1998               1997                 1998
                                                         -----------         -----------         -----------
                                                          (UNAUDITED)        (UNAUDITED)         (UNAUDITED)
<S>                                                      <C>                 <C>                 <C>
OPERATING ACTIVITIES
Net loss                                                 $(1,242,109)        $(1,323,296)        $(3,092,885)
Adjustments to reconcile net loss to net
   cash
   used for operating activities:
     Depreciation and amortization                            29,645               4,797              58,419
     Amortization of deferred compensation                    47,390                  --              70,903
     Non-cash compensation and other                         122,942           1,207,828           1,321,312
     expenses
     Changes in operating assets and liabilities:
       Accounts receivable                                   (92,801)              4,277             (92,801)
       Prepaid expenses and other                            (81,554)            (14,739)           (122,256)
       Accounts payable                                        6,668               3,637             255,610
       Accrued payroll and related                           (36,794)                186              22,482
       Accrued interest payable                              (12,500)                 --                  --
       Accrued royalty due to former                          (1,345)              7,152                  --
       stockholder
       Other current liabilities                               5,401                  --               7,427
                                                         -----------         -----------         -----------
Net cash used for operating activities                    (1,255,057)           (110,158)         (1,571,789)
                                                         -----------         -----------         -----------
INVESTING ACTIVITIES
Purchases of property and equipment                         (104,091)            (20,000)           (165,124)
Purchase of short-term investments                        (4,000,000)                 --          (4,000,000)
Other assets                                                      --                (630)             (4,200)
                                                         -----------         -----------         -----------
Net cash used for investing activities                    (4,104,091)            (20,630)         (4,169,324)
                                                         -----------         -----------         -----------
FINANCING ACTIVITIES
Proceeds from initial public offering, net                 5,932,313                  --           5,932,313
Proceeds from issuance of common stock                         2,083             100,000             262,083
Proceeds from issuance of Bridge Notes and warrants               --                  --             600,000
Repayment of Bridge Notes payable                           (600,000)                 --            (600,000)
Repayment of capital lease obligations                        (2,566)                 --              (3,264)
Deferred finance charges                                          --                  --             (26,820)
Deferred offering costs                                           --                  --            (259,906)
Advance from former stockholder                                   --                 586              45,586
Repayment of advance from former stockholder                      --                  --             (34,874)
Collection of capital subscriptions
   receivable from stockholders                                   --              97,500              97,500
                                                         -----------         -----------         -----------
Net cash provided by financing activities                  5,331,830             198,086           6,012,618
                                                         -----------         -----------         -----------

Net increase in cash                                         (27,318)             67,298             271,505
Cash at beginning of period                                  298,823              16,467                  --
                                                         -----------         -----------         -----------
Cash at end of period                                    $   271,505         $    83,765         $   271,505
                                                         ===========         ===========         ===========
SUPPLEMENTAL DISCLOSURES
NON-CASH FINANCING ACTIVITIES:
Capital subscriptions receivable from                    $        --         $   100,000         $   197,500
   stockholders
Equipment acquired under capital lease                            --                  --              18,276
   obligations
OTHER CASH FLOW INFORMATION:
Interest paid                                                 22,566                  --              22,764
Income taxes paid                                              1,824                  --               4,224
</TABLE>


See accompanying notes 



                                     PAGE 5
<PAGE>   6
                               C2i Solutions, Inc.
                          (A Development Stage Company)


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Description of Business


C2i Solutions, Inc. (the "Company") was incorporated in the State of Delaware on
September 30, 1997. The Company was initially organized as a California limited
liability company under the name of Challenge 2000 International, LLC ("LLC") on
September 17, 1996 ("Inception"). From Inception through September 30, 1997, the
Company operated under the name of the LLC. On September 30, 1997, the Company
reorganized as a Delaware corporation and changed its name to C2i Solutions,
Inc. On September 30, 1997, all LLC Owner Units were converted into 2,391,338
shares of the Delaware corporation's common stock and all Owner options were
converted into options to acquire 547,500 shares of common stock. Concurrent
with the formation of the Delaware corporation, the LLC was dissolved. The
accompanying financial statements have been adjusted to give retroactive effect
to the reorganization and capital structure of the Delaware corporation from
Inception.


The Company is a provider of Y2k, EMU, and applications re-engineering services.
Its consulting solutions span a wide variety of platforms, languages, and
services, from client-server to mainframe, from assessment and remediation to
testing and reimplementation. The Company's approach utilizes a mix of hands-on
work by highly experienced technical staff along with "best of breed " tools,
and focused project management. The desired result for the Company's clients is
reduced project cycle time, lower cost and improved productivity.


Basis of Presentation


The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. This basis of accounting contemplates
the recovery of the Company's assets and the satisfaction of its liabilities in
the normal course of conducting business. Since Inception, the Company has been
primarily engaged in organizational activities, including raising capital,
recruiting personnel, and the marketing of its products and services. As of June
30, 1998, the Company has not realized significant revenues and therefore, is
considered to be in the development stage.


The Company's ability to transition from the development stage, and ultimately
to attain profitable operations, is dependent upon its ability to raise
additional capital through debt or equity financing and the successful market
acceptance of its products and services. There can be no assurances that the
Company's products and services or its efforts to raise additional capital will
be successful. The accompanying financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
financial statements should be read in conjunction with the financial statements
and notes thereto, together with management's discussion and analysis of
financial condition and results of operations contained in the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1997. Operating
results for the six month period ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998.


                                     PAGE 6
<PAGE>   7
                               C2i Solutions, Inc.
                          (A Development Stage Company)



2.  CAPITAL TRANSACTIONS

In October 1997, the Board of Directors authorized management of the Company to
file a registration statement with the Securities and Exchange Commission,
permitting the Company to sell up to 1,150,000 shares of common stock and up to
1,150,000 warrants for the purchase of common stock to the public. The Board of
Directors also approved the issuance of underwriter's warrants to purchase up to
100,000 shares of common stock and 100,000 warrants in connection with this
proposed initial public offering.

In February 1998, the Company completed an initial public offering of 1,000,000
shares of Common Stock and 1,150,000 Warrants (which included 150,000 Warrants
pursuant to the underwriter's over-allotment option). In March 1998, the
underwriter exercised its over-allotment option with respect to 150,000 shares
of Common Stock of the Company. The Company received net proceeds of $6,148,150,
which includes $100 the Company received as consideration for the warrant issued
to the underwriter, after deducting an underwriting discount of 10% of the gross
proceeds of the offering and a non-accountable expense allowance of 3% of the
gross proceeds of the offering, ( net of $45,000 previously paid by the Company)
and before deducting expenses of $430,743 related to the offering.

In March 1998, the Company issued 833 shares of its Common Stock to a former
employee of the Company for total cash consideration of $2,083 as a result of
the exercise of stock options.

In January 1998, the Company's Board of Directors and stockholders approved the
1997 Stock Option Plan (the "Option Plan"), which has an initial share reserve
of 82,500 shares of Common Stock. Under the Option Plan, options may be granted
to employees, including officers, consultants, advisors and directors, although
only employees, and directors and officers who are also employees may receive
"incentive stock options" intended to qualify for certain tax treatment. The
exercise price of all nonqualified stock options must equal at least 85% of the
fair market value of Common Stock on the date of grant, and the exercise price
of incentive stock options must be no less than the fair market value on the
date of grant. Options granted under the Option Plan are generally immediately
exercisable, vest over periods ranging from one to four years and must be
exercised within ten years.

In January 1998, the Company granted nonqualified options to purchase an
aggregate of 20,500 shares to two consultants and incentive stock options to
purchase an aggregate of 20,000 shares to two employees under the Option Plan.
Nonqualified options to purchase 20,500 shares vest ratably over four years and
incentive stock options to purchase 20,000 shares vest ratably over three years.
All of these options have exercise prices of $5.50 per share and expire ten
years from the date of grant or earlier in the event of termination of
employment or consulting engagement.

In March 1998, the Company granted incentive stock options to purchase an
aggregate of 80,000 shares to two employees under the Option Plan, subject
to stockholder approval. These options vest ratably over three years, have
exercise prices ranging from $7.38 to $8.00 per share and expire ten years from
the date of grant or earlier in the event of termination of employment.

In June 1988, the Company's stockholders approved an amendment to the Option
Plan to (a) increase by 2,650,000 the maximum number of shares of the Company's
Common Stock reserved for issuance under the Option Plan, (b) increase the limit
on the number of shares issuable on exercise of outstanding options under the
Option Plan to no more than 90% of the outstanding shares of the Company's
Common Stock, and (c) to limit to 100,000 the maximum number of shares for which
options may be granted to any employee in any fiscal year.

In June 1998, the Company granted nonqualified options to purchase 87,500 shares
to a newly appointed director and incentive stock options to purchase an
aggregate of 240,500 shares to nine employees under the Option Plan.
Nonqualified options vest ratably over four years and incentive stock options
vest ratably over three years. All of these options have exercise prices of
$7.50 per share and expire ten years from the date of grant or earlier in the
event of termination of employment or directorship.



                                     PAGE 7
<PAGE>   8
                               C2i Solutions, Inc.
                          (A Development Stage Company)



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

This Form 10-QSB contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Such statements are only predictions and actual events or results may differ
materially. Factors that could cause or contribute to such differences include,
without limitation, those discussed in this Item 2 as well as those discussed in
the Company's Annual Report on Form 10-KSB as filed with the Securities and
Exchange Commission on March 31, 1998.


OVERVIEW


C2i Solutions, Inc. (the "Company") is a provider of Y2k, EMU, and applications
re-engineering services. The Company's consulting solutions span a wide variety
of platforms, languages, and services, from client-server to mainframe, from
assessment and remediation to testing and reimplementation. The Company's
approach utilizes a mix of hands-on work by highly experienced technical staff,
along with "best of breed" tools, and focused project management. The desired
result for the Company's clients is reduced project cycle time, lower cost and
improved productivity.

The following discussion should be read in conjunction with the attached
financial statements and notes thereto.


Results of Operations for the three and six month periods ended June 30, 1998
and 1997


Total revenues for the three months ended June 30, 1998 were $101,380, an
increase of 354% over the comparable quarter of the prior year, in which
revenues totaled $22,325. For the three months ended June 30, 1998 service
revenues accounted for 86% of total revenues and product sales represented 14%.
Total revenues for the three months ended June 30, 1997 consisted of service
revenues of 64% and revenues from product sales of 36%.

Total revenues for the six months ended June 30, 1998 were $170,459, of which
92% represented service revenues, with the balance representing product sales.
Total revenues for the six months ended June 30, 1997 totaled $36,154, of which
39% was service revenues and 61% was revenue from product sales. Two customers
accounted for 100% of the Company's total revenues ( 62% and 38 %) for the six
month period ended June 30, 1998, while 100% of the Company's revenues resulted
from three customers (44%, 42% and 14%) for the six month period ended June 30,
1997.

Cost of revenues were 51% ($51,407) of total revenues for the second quarter of
fiscal 1998 and 48% ($81,799) of total revenues for the six months ended June
30, 1998. These costs consisted primarily of personnel related costs of
providing consulting services and the cost of products sold. Cost of revenues
were 66% ($14,663) of total revenues and 66% ($23,915) of total revenues,
respectively, for the comparable prior year periods in 1997, representing the
cost of products sold, including third party royalties relating to licensed
technology. Gross margin percentage for the second quarter of fiscal 1998 was
49%, compared to the prior year second quarter gross margin percentage of 34%,
which reflects a more favorable mix of services revenues relative to products
revenues during 1998.

The Company incurred selling, general and administrative expenses for the three
month period ending June 30, 1998 totaling $719,974, compared with $1,275,004
for the three month period ending June 30, 1997. This difference was
attributable to a $1,200,000 decrease in 1998 in other compensation related to a
non-cash charge from the sales of equity securities in 1997 to key employees at
less than deemed value.This decrease was partially offset by increased personnel
and related expenses due to a greater number of 



                                     PAGE 8
<PAGE>   9
                               C2i Solutions, Inc.
                          (A Development Stage Company)



employees, increased facilities expenses in connection with the relocation to
larger offices, the establishment of regional offices, expansion of the
operations, increased travel and marketing expenses incurred in connection with
the overall scale-up of the Company's operations and business development
efforts, and higher legal, accounting and other general and administrative
expenses associated with becoming a public company.

The Company's selling, general and administrative expenses for the six month
period ending June 30, 1998 totaled $1,268,847, a decrease of 5% over the
comparable prior year period total of $1,335,535. This difference was
attributable to a $1,200,000 decrease in 1998 in other compensation related to a
non-cash charge from the sales of equity securities in 1997 to key employees at
less than deemed value. This decrease was partially offset by increased
personnel and related expenses due to a greater number of employees, increased
facilities expenses, expansion of the operations, increased travel and marketing
expenses incurred in connection with the overall scale-up of the Company's
operations and business development efforts, and higher legal, accounting and
other general and administrative expenses associated with being a public
company.

Interest income was $59,370 and $79,281, respectively, for the three and six
months ended June 30, 1998, compared with $0 for the three and six months ended
June 30, 1997. This increase reflects interest earned from the short-term
investment of the net proceeds from the Company's initial public offering, which
closed on February 27, 1998. This interest income was offset by interest expense
of $575 and $20,850 respectively, for the three and six months ended June 30,
1998 related to capital lease obligations and the debt financing incurred in
October 1997.

 Liquidity and Capital Resources

From Inception through February 1998, the Company financed its operations
primarily through the proceeds from the issuance of Common Stock and a bridge
financing completed in October 1997, resulting in an aggregate of approximately
$958,000 from the sale and issuance of debt and equity securities, including
warrants. In February 1998, the Company completed an initial public offering of
its common stock and warrants to acquire common stock. This offering provided
the Company with net proceeds of approximately $5,932,313, including proceeds
from the exercise of the underwriter's overallotment option received in March
1998. Funds from these sources have been and are expected to continue to be used
as working capital to fund expansion of the Company's infrastructure and
internal operations, including purchases of capital equipment and the hiring of
additional personnel.


The Company's operating activities used net cash of $1,255,057 and $110,158
during the six month periods ended June 30, 1998 and 1997, respectively. This
increase in cash used for operating activities in 1998 compared to 1997 results
primarily from the larger net loss for the 1998 period, as a result of the
Company's continued expansion of its operations, as well as an increase in
accounts receivable and prepaid expenses.

The Company's investing activities used cash of $4,104,091 and $20,630 during
the six months ended June 30, 1998 and 1997, respectively. This increase in cash
used for investing activities in 1998 compared to 1997 results from the purchase
of $4,000,000 of short-term investments with the excess net proceeds from the
Company's initial public offering and an increase of $84,091 in purchases of
property and equipment for the 1998 period, compared to the same period in 1997.

The Company's financing activities provided net cash of $5,331,830 and $198,086
during the six month periods ended June 30, 1998 and 1997, respectively. This
increase in cash provided by financing activities in 1998 compared to 1997
results from an increase in the net proceeds from the sale of common stock
totaling $5,934,396 during 1998 (of which $5,932,313 related to the Company's
initial public offering) compared with net proceeds of $100,000 and collection
of a capital subscription receivable of $97,500 during the same period of 1997.
The net cash increase during the six month period ended June 30, 1998 



                                     PAGE 9
<PAGE>   10

was partially offset by cash used to repay the bridge notes ($600,000) and
capital lease obligations ($2,566) in 1998.

As of June 30, 1998, the Company had cash and short-term investments of
$4,171,505 and working capital of $4,005,765 compared with cash of $298,823 and
working capital deficit of ($491,588) at December 31, 1997. Based on
management's current operating plan and anticipated personnel increases, the
Company believes that its existing resources will be sufficient to fund
operations through the balance of fiscal 1998. However, the Company expects to
continue to experience operating losses and to use cash in operations through at
least the end of 1998.

The Company's ability to achieve sustained profitability will be dependent upon
a number of factors, including its ability to generate future revenues. Although
the Company is aggressively pursuing business development opportunities, which
it hopes will produce future revenues, there can be no assurance that the
Company will be able to successfully negotiate any additional contracts, or that
any such current or future contracts will provide the Company with expected
benefits.


                           PART II: OTHER INFORMATION

ITEM 2:    CHANGES IN SECURITIES AND USE OF PROCEEDS

Pursuant to the Company's Registration Statement on Form SB-2 (No. 333-39425),
declared effective by the Commission on February 13, 1998, the Company completed
its initial public offering in February 1998, and the overallotment in March
1998, resulting in aggregate net proceeds to the Company of $5,672,407, after
deducting underwriting discounts and commissions and the offering expenses
payable by the Company.

Proceeds of the initial public offering were used to repay the Bridge Notes and
accrued interest thereon, totaling $621,412, $17,920 of which was paid to a
former executive officer of the Company. The Company also used $46,283 to
purchase machinery, equipment and other capital additions, $1,862 to repay
capital leases and accrued interest, $442,009 to pay employees' and officers'
salaries and related payroll taxes, $73,473 for occupancy cost, $34,212 for
advertising and promotion, $35,761 for recruiting, $151,980 for costs related to
the company's initial public offering, $253,816 for other general corporate
purposes, and $4,000,000 was used to purchase short-term investments. The
remaining $271,505 in proceeds from the initial public offering will be used for
working capital.

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

The Annual Meeting of Stockholders was held on June 26, 1998. At the meeting the
following directors were elected:

<TABLE>
<CAPTION>
DIRECTOR                                         Number of Common Shares Voted
                                            --------------------------------------
                                               For              Withhold Authority
                                            ---------           ------------------
<S>                                         <C>                        <C>    
Hal H. Beretz                               3,234,771                  289,750

Henry F. Frigon                             3,234,771                  289,750
</TABLE>

The directors continuing in office until 1999 or 2000 are John Anthony Whalen,
Jr., Kim P. Goh and David Tendler.



                                    PAGE 10
<PAGE>   11
                               C2i Solutions, Inc.
                          (A Development Stage Company)



In addition, the stockholders approved a proposal to (a) increase the number of
shares of the Company's Common Stock reserved for issuance under the Company's
1997 Stock Option Plan (the "Option Plan") by 2,650,000 shares, (b) increase the
limit on the number of shares issuable on exercise of outstanding options and
options later granted under the Option Plan to no more than 90% of the Company's
outstanding Common Stock, and (c) limit to 100,000 the maximum number of shares
for which options may be granted to any employee in any fiscal year, with the
following number of votes for, against, abstaining, and broker non-votes:

<TABLE>
<CAPTION>
PROPOSAL                                          Number of Common Shares Voted
                                     -------------------------------------------------
                                                                              Broker
                                        For        Against       Abstain     Non-Votes
                                     ---------     -------       -------     --------
<S>                                  <C>           <C>           <C>         <C>    
An amendment to the Option Plan      2,418,042     321,929       37,250      747,300
</TABLE>



ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K:

         (a)      Exhibits:

                  See Exhibit Index.

         (b)      Reports on Form 8-K:

                  No Reports on Form 8-K were filed during the quarter ended
                  June 30, 1998.

Items 1, 3 and 5 are not applicable and have been omitted.


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER               DESCRIPTION OF DOCUMENT
------               -----------------------
<S>            <C>                
10.11          Letter agreement dated May 1998 by and between the Company and
               Henry F. Frigon

27.1           Financial Data Schedule
</TABLE>



                                    PAGE 11
<PAGE>   12
                               C2i Solutions, Inc.
                          (A Development Stage Company)


SIGNATURE


Pursuant to the requirements 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.




                                       C2I SOLUTIONS, INC.



Dated:  August 10, 1998                By: /s/   John Anthony Whalen, Jr
                                           -------------------------------------
                                           John Anthony Whalen, Jr.,  President
                                           and Chief Executive Officer

Dated:  August 10, 1998                By:  /s/   Diane E. Hessler
                                            ------------------------------------
                                            Diane E. Hessler
                                            Chief Financial Officer (Principal
                                            Financial and Accounting Officer)



                                    PAGE 12