================================================================================


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

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

                                   Form 10-QSB

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

                  For the quarterly period ended June 30, 2001

                                       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 01-14271

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

                               USOL Holdings, Inc.
             (Exact name of Registrant as specified in its charter)

              Oregon                                     93-1197477
(State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                      Identification No.)

                             10300 Metric Boulevard
                               Austin, Texas 78758
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (512) 651-3767

                                 Not Applicable
              (Former name, former address and former fiscal year,
                         if changed since last report)

     Indicate  by check mark  whether the  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  periods  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 [ ]

    As of August 10, 2001 the  Registrant  had  10,027,891  shares of its no par
value Common Stock outstanding.

================================================================================




<PAGE>
<TABLE>
<CAPTION>

                                      INDEX

                                                                                                                 Page
                  <S>           <C>         <C>                                                                    <C>

                  PART I                    FINANCIAL INFORMATION

                                Item 1.     Financial Statements--USOL Holdings, Inc.
                                            Condensed Consolidated Balance Sheet as of
                                            June 30, 2001.....................................................      3
                                            Condensed Consolidated Statements of Operations for the
                                            Three and Six Months Ended June 30, 2001 and 2000.................      4
                                            Condensed Consolidated Statements of Cash Flows for the
                                            Six Months Ended June 30, 2001 and 2000...........................      5
                                            Notes to Condensed Consolidated Financial Statements..............      6

                                Item 2.     Management's Discussion and Analysis of Financial
                                            Condition and Results of Operations................................    10
                                            Forward-Looking Statements.........................................    10
                                            General............................................................    10
                                            Overview...........................................................    10
                                            Three Months Ended June 30, 2001 Compared to
                                            Three Months Ended June 30, 2000...................................    10
                                            Six Months Ended June 30, 2001 Compared to
                                            Six Months Ended June 30, 2000.....................................    11
                                            Liquidity and Capital Resources....................................    12

                                Item 3.     Quantitative and Qualitative Disclosures about
                                            Market Risk........................................................    13

                  PART II                   OTHER INFORMATION

                                Item 1.     Legal Proceedings..................................................    14

                                Item 2.     Changes in Securities..............................................    14

                                Item 3.     Defaults Upon Senior Securities....................................    14

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

                                Item 5.     Other Information..................................................    14

                                Item 6.     Exhibits and Reports on Form 8-K...................................    14

                                Signatures......................................................................   15

</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>

                               USOL HOLDINGS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (Unaudited)


                                                                             June 30,
                                                                               2001
                                                                         ----------------
<S>                                                                      <C>

                                     ASSETS

Current assets:
  Cash and cash equivalents......................................        $      1,224,371
  Accounts receivable, net of allowance for doubtful
    accounts of $308,261.........................................               1,144,934
  Notes receivable, related parties..............................                 174,179
  Other current assets...........................................                 308,263
                                                                         ----------------
          Total current assets...................................               2,851,747

Property and equipment, net......................................              26,627,323

GOODWILL AND OTHER INTANGIBLES, net..............................              30,322,711

DEFERRED LOAN COSTS, net.........................................               1,844,297

Other assets.....................................................                 159,184
                                                                         ----------------

          Total assets...........................................        $     61,805,262
                                                                         ================

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable...............................................        $        951,726
  Accrued liabilities............................................               2,584,125
  Current portion of capital lease obligations...................                 581,952
  Preferred dividends payable....................................               1,107,480
  Deferred revenue...............................................                 663,435
  Note payable including accrued interest, related party.........               5,577,778
                                                                         ----------------
          Total current liabilities..............................              11,466,496
                                                                         ----------------

CAPITAL LEASE OBLIGATIONS, less current portion..................                 898,626
                                                                         ----------------

SENIOR CREDIT FACILITY...........................................              12,000,000
                                                                         ----------------

OTHER LONG-TERM LIABILITIES......................................                  53,958
                                                                         ----------------

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST................................................                  20,880
                                                                         ----------------

STOCKHOLDERS' EQUITY:
  Convertible preferred stock, no par value; 5,000,000 shares
     authorized--
    Series A, 1,311,640 shares issued and outstanding; liquidation
       preference of $32,791,000.................................              30,366,061
    Series B, 155,000 shares issued and outstanding;
       liquidation preference of $3,875,000......................               3,588,439
  Common stock, no par value; 50,000,000 shares authorized,
       10,027,891 shares issued and outstanding..................              47,017,193
  Deferred compensation..........................................               (260,738)
  Accumulated deficit............................................            (43,345,653)
                                                                         ---------------
          Total stockholders' equity.............................              37,365,302
                                                                         ----------------
          Total liabilities and stockholders' equity.............        $     61,805,262
                                                                         ================
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

<TABLE>
<CAPTION>

                               USOL HOLDINGS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                                                              Three Months Ended               Six Months Ended
                                                                                   June 30,                        June 30,
                                                                         -----------------------------  ----------------------------
                                                                              2001           2000            2001            2000
                                                                         -------------   -------------  ------------   -------------
<S>                                                                      <C>             <C>            <C>            <C>


Revenue.............................................................     $   3,425,382   $   2,460,587  $  6,689,027   $   4,722,100
                                                                         -------------   -------------  ------------   -------------

expenses:
  Operating.........................................................         1,976,355       2,475,122     3,894,443       4,198,956
  Selling, general and administrative...............................         2,892,499       1,955,450     5,447,713       4,055,044
  Depreciation and amortization.....................................         1,840,657       1,632,349     3,446,637       3,200,277
  Stock compensation expense........................................            91,973         149,020       191,165         351,448
  Write-down of capitalized software costs..........................                --              --            --       1,870,551
                                                                         -------------   -------------  ------------   -------------
          Total operating expenses..................................         6,801,484       6,211,941    12,979,958      13,676,276
                                                                         -------------   -------------  ------------   -------------
          Loss from operations......................................       (3,376,102)     (3,751,354)   (6,290,931)     (8,954,176)
                                                                         ------------    ------------   -----------    -------------

Other INCOME (EXPENSE):
  Interest, net.....................................................         (611,631)        (19,240)   (1,171,126)          25,934
  Other, net........................................................           (8,762)              --      (68,897)              --
  Gain (loss) on disposal of assets.................................             8,850        (56,144)         6,874        (56,144)
                                                                         -------------   ------------   ------------   -------------
                                                                             (611,543)        (75,384)   (1,233,149)        (30,210)
                                                                         ------------    ------------   -----------    -------------
LOSS BEFORE MINORITY INTEREST.......................................       (3,987,645)     (3,826,738)   (7,524,080)     (8,984,386)

MINORITY INTEREST IN LOSS (INCOME) OF SUBSIDIARY....................            81,811        (15,986)        70,326        (28,960)
                                                                         -------------   ------------   ------------   -------------

          Net loss..................................................     $ (3,905,834)   $ (3,842,724)  $(7,453,754)   $ (9,013,346)
                                                                         ============    ============   ===========    =============

PREFERRED STOCK DIVIDENDS...........................................       (1,107,480)     (1,110,000)   (2,215,980)     (2,220,000)
                                                                         ------------    ------------   -----------    -------------

LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS............................     $ (5,013,314)   $ (4,952,724)  $(9,669,734)   $(11,233,346)
                                                                         ============    ============   ===========    =============

PER SHARE AMOUNTS:..................................................
  Basic and diluted loss per common share...........................     $        (.53)  $        (.65) $       (1.07) $      (1.50)
                                                                         =============   =============  =============  =============
  Basic and diluted weighted average common shares..................         9,479,095       7,642,192     9,013,068       7,492,205
                                                                         =============   =============  ============   =============

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

</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

<TABLE>
<CAPTION>

                               USOL HOLDINGS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                                                                Six Months Ended
                                                                                     June 30,
                                                                       ---------------------------------
                                                                              2001             2000
                                                                       ---------------   ---------------

        <S>                                                            <C>               <C>

        Cash flows from operating activities:
          Net loss.................................................    $   (7,453,754)   $   (9,013,346)
          Adjustments to reconcile net loss to net cash used in
           operating activities--
              Depreciation and amortization........................          3,446,637         3,200,277
              Amortization of deferred loan costs..................            258,638                --
              Stock compensation expense...........................            191,165           351,448
              Write-down of capitalized software costs.............                 --         1,870,551
              (Gain) loss on disposal of assets....................            (6,874)            56,144
              Minority interest....................................           (70,326)            28,960
              Changes in assets and liabilities--
                 Accounts receivable...............................             92,320         (275,029)
                 Other assets......................................           (11,717)         (568,454)
                 Accounts payable and accrued liabilities..........          (572,122)       (1,388,587)
                 Deferred revenue and other........................           (64,213)           222,846
                                                                       --------------    ---------------
                      Net cash used in operating activities........        (4,190,246)       (5,515,190)
                                                                       --------------    --------------

        Cash flows from investing activities:
          Purchases of property, equipment and other...............        (2,585,954)       (5,025,478)
          Cash paid for acquisition................................        (4,000,000)                --
          Loans to related parties, net............................                 --          (57,258)
                                                                       ---------------   --------------
                      Net cash used in investing activities........        (6,585,954)       (5,082,736)
                                                                       --------------    --------------

        Cash flows from financing activities:
          Principal payments under capital leases..................          (274,008)         (324,252)
          Proceeds from the exercise of stock options and
            warrants...............................................                 --           877,178
          Borrowings under Senior Credit Facility..................          7,500,000                --
          Deferred loan costs......................................           (30,413)          (21,630)
                                                                       --------------    --------------
                      Net cash provided by financing activities....          7,195,579           531,296
                                                                       ---------------   ---------------
                      Net decrease in cash and cash equivalents....        (3,580,621)      (10,066,630)
        Cash and cash equivalents, beginning of period.............          4,804,992        13,637,511
                                                                       ---------------   ---------------
        Cash and cash equivalents, end of period...................    $     1,224,371   $     3,570,881
                                                                       ===============   ===============

        Supplemental DISCLOSURE OF cash flow information:
            Cash paid for interest.................................    $       143,796   $       368,612
            Deferred compensation..................................                 --           540,000
            Accretion of dividends on preferred stock..............          2,215,980         2,200,000
            Issuance of common stock as payment of preferred
               stock dividends.....................................          2,218,500         3,083,333
            Issuance of common stock for purchase of assets........            618,000                --

</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>


                               USOL HOLDINGS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2001



(1)  Business Organization and Basis of Presentation

     USOL Holdings, Inc. ("Holdings"),  an Oregon corporation,  its wholly owned
subsidiary USOL, Inc. and USOL, Inc.'s 50% owned  subsidiary,  U.S. Austin Cable
Association  I,  Ltd.  (collectively  referred  to herein  as  "USOL"),  provide
integrated  telecommunications services including local telephone, long distance
telephone,  enhanced  calling  features  and cable  television  to  residents of
multifamily  apartment  complexes and  condominiums  ("MDUs") in Texas,  Oregon,
Virginia and  Colorado.  The services are provided to the tenants in  accordance
with  long-term  right of entry (ROE  Agreements)  between USOL and the property
owners   under  which  the   property   owners   receive   royalties   from  the
telecommunication  revenues  generated  from their  properties.  The  agreements
provide  the tenants  with the option to use either USOL or the local  telephone
and long distance carriers for telephone services. Tenants desiring to subscribe
to cable  television  must  utilize  USOL.  USOL  also  owns a 99%  interest  in
TheResidentClub,  Inc.  ("TRC").  See Note 3 regarding the winding down of TRC's
operations.  Holdings,  USOL and TRC are collectively  referred to herein as the
Company.

    The financial  statements  included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and notes normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to such rules and regulations,  although
the Company  believes that the disclosures  included herein are adequate to make
the  information  presented  not  misleading.  A  description  of the  Company's
accounting  policies and other financial  information is included in the audited
financial statements as filed with the Securities and Exchange Commission in the
Company's Annual Report on Form 10-KSB.

    The financial  statements and related notes as of June 30, 2001, and for the
three and six months  ended June 30, 2001 are  unaudited  but, in the opinion of
management,  include  all  adjustments,  consisting  only  of  normal  recurring
adjustments,  which  are  necessary  for a fair  presentation  of the  financial
condition,  results of operations  and cash flows of the Company.  The operating
results  for the three and six months  ended June 30,  2001 are not  necessarily
indicative  of the results that may be expected for the year ended  December 31,
2001.

(2)  Liquidity

    The Company has not generated cash from operations since inception, and both
its  operations and purchases of property and equipment to expand its subscriber
base have  been  funded  primarily  from its  initial  equity  financing,  which
occurred in July 1999. During the last half of 2000, the Company began to borrow
against its senior credit facility (the  "Facility") and has continued to borrow
under the Facility  through June 30, 2001.  Under the Facility,  the Company has
the ability to borrow up to $35 million  until  December  31,  2002,  subject to
certain borrowing base limitations, at which time the Facility will convert to a
five-year  term loan.  The  borrowing  base is  calculated  as a multiple of the
number of the Company's cable and telephone subscribers,  with a total available
borrowing base of approximately  $16.6 million as of June 30, 2001, of which the
Company has borrowed $12 million.

    In order to fund  expected  future cash  resource  needs,  the Company  must
continue to increase its subscriber base and revenues. Accordingly, the Facility
maintains certain operational covenants requiring the Company to meet increasing
quarterly  minimums  related to revenues,  operating cash flow and the number of
MDU units to which the Company has available service.  Management  believes that
the Company will attain the prescribed growth in subscribers,  revenues and cash
flow during each of the  remaining  quarters  of 2001 and through  2002,  either
through  organic  sales  growth or through  acquisitions,  and that it will have
sufficient cash resources available under the Facility to fund operations. While
management  believes  that the  Company  will  attain the  prescribed  growth in
subscribers,  revenue and cash flow,  such  growth is  dependent  on  completing
acquisitions.  Management believes that the Company's  acquisition strategy will
be  successful,  but there can be no assurance  that such  acquisitions  will be
completed  or  completed  on a timely  basis  in  order  to meet the  increasing
quarterly minimums. If such quarterly minimums are not met, the Company would be
in default of its  covenants  under the  Facility and the holder of the Facility
could call the  amount  outstanding  under the  Facility  or prevent  additional
borrowings.  In order to establish an adequate  subscriber base that can provide
sufficient cash from operations to satisfy the quarterly repayment  requirements
of the Facility  beginning in 2003 (see Note 6),  management  believes  that the
Company  must  continue to invest in  long-term  assets  through  December  2002
through organic sales growth and through acquisitions.

                                       6
<PAGE>


    Management is in the process of evaluating the potential  effect of adopting
Statement of Financial  Accounting  Standards  ("SFAS") No. 142,  "Goodwill  and
Other  Intangible  Assets," on January 1, 2002. This recently issued  accounting
standard is more fully  described in Note 10. If management  determines  that an
impairment of the  Company's  goodwill  should be recognized in connection  with
adopting this new standard on January 1, 2002, the Company could be in violation
of the Facility covenants.

(3)  Winding Down of TRC

    TRC was in the business of developing private labeled Internet solutions for
MDU's  and other  residential  markets.  In  August  2000,  TRC  entered  into a
technology  and  services  agreement  (the "IT  Services  Agreement")  with GMAC
Mortgage  Corporation  ("GMACM"),  a sister company of GMAC Commercial  Mortgage
Corporation  which is a  significant  shareholder  of the Company,  to develop a
private labeled  Internet site for GMACM and provide  certain  services over the
period of the IT Services Agreement. TRC received formal notification from GMACM
(TRC's sole  customer)  on April 10,  2001,  that GMACM was  terminating  the IT
Services  Agreement.  As part of the  termination,  TRC  believed  that  certain
amounts  were  owed by GMACM,  but TRC and  GMACM did not agree on the  ultimate
amounts owed. Subsequent to April 10, 2001, TRC and GMACM continued negotiations
that  culminated in an agreement  setting forth the terms of the  termination of
their relationship under the IT Services Agreement. TRC and GMACM entered into a
Confidential  Release and Settlement  Agreement (the "Settlement  Agreement") on
June 6, 2001,  whereby TRC agreed to transfer a significant amount of its assets
to GMACM in exchange for payment of $6.6 million and release of certain  claims.
The assets to be transferred by TRC included substantially all of TRC's hardware
and  software.  Although the  Settlement  Agreement  was entered into on June 6,
2001,  closing  of the  settlement  was  delayed  until  July 13,  2001,  due to
continued  negotiations,  therefore,  the  accompanying  unaudited  consolidated
financial statements do not reflect the effect of the Settlement Agreement.

    On July 13, 2001, TRC received a payment of approximately $6.05 million from
GMACM.  This amount differed from that provided for in the Settlement  Agreement
due to offsets of amounts  paid by GMACM to release  liens on certain TRC assets
and a $300,000 adjustment to reflect amounts previously paid to TRC by GMACM. Of
this amount, approximately $5.6 million has been used to repay the principal and
interest on a loan made to TRC in August 2000 by Newman Financial Services, Inc.
("Newman"),  an entity related to GMAC Commercial Mortgage Corporation (see Note
5). In  connection  with the  closing  of the  settlement  in July  2001,  TRC's
operations  have ceased,  and TRC will record a net gain of  approximately  $5.9
million during the third quarter ending September 30, 2001.

    See further  discussions  of these matters in  Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations included elsewhere in
this Quarterly Report.

(4)  SIMCOM Acquisition

     In May 2001,  the  Company  purchased  substantially  all of the  long-term
assets of Great West Services,  Ltd., d/b/a SIMCOM  ("SIMCOM"),  a subsidiary of
Simpson  Housing  Limited  Partnership,  which  provided  voice,  video and data
services to MDU's in Colorado, Oregon and Texas, for an aggregate purchase price
of  approximately  $4.6  million,  consisting  of $4 million in cash and 600,000
shares of the Company's common stock. The acquired assets included exclusive ROE
Agreements,  as well as other  telecommunications  property and  equipment.  The
purchase price was financed  through a draw on the Company's  Facility (see Note
6). The  acquisition  was accounted for using the purchase  method of accounting
and,  accordingly,  the  operating  results of the acquired  business  have been
included  in  the  accompanying   unaudited  condensed   consolidated  financial
statements  since the date of  acquisition.  The  Company  allocated  the entire
purchase  price  to the  telecommunications  property  and  equipment  that  was
acquired based on a preliminary estimate of fair value which is subject to final
adjustment.

    The following summarized  unaudited pro forma financial  information assumes
that  the  SIMCOM  acquisition  had  occurred  at the  beginning  of the  period
indicated.  The following  unaudited pro forma  information  is not  necessarily
indicative  of the results  that would have  occurred had the  acquisition  been
completed at the  beginning of the periods  indicated,  nor is it  indicative of
future operating results.

                                       7
<PAGE>

<TABLE>
<CAPTION>


                                                       Three Months Ended                      Six Months Ended
                                                            June 30,                               June 30,
                                                 --------------------------------       ------------------------------
                                                     2001               2000               2001                2000
                                                 ---------------- ---------------       ---------------   ------------
<S>                                              <C>              <C>                   <C>               <C>

Revenues..................................       $   3,891,862    $    2,923,983        $  7,662,116      $  5,626,133
Net loss..................................         (4,025,498)       (4,001,604)         (7,630,202)       (9,338,343)
Loss attributable to common shareholder
  per share--basic and diluted............       $       (.52)    $        (.62)        $     (1.03)      $     (1.43)

</TABLE>

(5)  Note Payable to Related Party

    In August 2000,  Newman loaned $5 million to TRC under the TRC Note Payable.
The TRC Note  Payable  matured on August 3, 2001 and bears  interest  at 13% per
annum.  The TRC Note Payable is secured by all of the common stock and assets of
TRC. The TRC Note Payable was paid in full in August 2001 in connection with the
settlement with GMACM (see Note 3).

(6)  Senior Credit Facility

    Beginning in 2003,  the Facility  will be payable in quarterly  installments
starting  at 1% of the  December  31,  2002,  outstanding  balance for the three
months ended March 31, 2003,  increasing  periodically  to 7.75% of the December
31, 2002, outstanding balance for the year ended December 31, 2007.

    The Facility  bears  interest at the  Company's  option at an annual rate of
prime plus 3% or LIBOR plus 4%. The Facility  contains an unused  commitment fee
ranging  from  .625% to  1.375%  depending  on  borrowing  levels  and an annual
administrative fee of $30,000.  See Note 2 regarding various covenants contained
in the Facility.

(7)  Segment Disclosure

    The Company's operations during the quarterly period ended June 30, 2001 are
classified  into  two  reportable  business  segments:   Telecommunications  and
TRC.  The  Company's  two  reportable  business  segments have been
managed separately based on fundamental differences in their operations.

     Telecommunications    consists    principally   of   providing   integrated
telecommunications   services  including  telephone,  long  distance  telephone,
enhanced  call  features  and cable  television  to residents of MDU's in Texas,
Oregon, Virginia and Colorado.

     Prior  to  its  ceasing  operations,   TRC  consisted  principally  of  the
development of a  private-labeled  Internet service portal for GMACM and related
entities (see Note 3).

     The operating results by business segment were as follows:

<TABLE>
<CAPTION>

                                         Three Months Ended                                  Six Months Ended
                                             June 30                                             June 30
                          ------------------------------------------------   ------------------------------------------------
                                Tele-                                              Tele-
                            communications         TRC       Consolidated         Communications    TRC         Consolidated
                          -----------------    ------------  -------------   ------------------- ------------   -------------
<S>                         <C>                <C>            <C>               <C>              <C>              <C>

2001
Revenues.............       $  3,106,653       $   318,729    $  3,425,382      $  5,960,298     $    728,729     $  6,689,027
Segment net loss.....        (3,291,889)         (613,945)     (3,905,834)       (6,295,809)      (1,157,945)      (7,453,754)
Total assets.........         61,401,303           403,959      61,805,262        61,401,303          403,959       61,805,262
Capital expenditures.          6,592,269             3,410       6,595,679         7,290,269           30,410        7,320,679
Depreciation and
  amortization.......          1,828,547            12,110       1,840,657         3,422,527           24,110        3,446,637


</TABLE>


                                       8
<PAGE>

<TABLE>
<CAPTION>

                                         Three Months Ended                                  Six Months Ended
                                             June 30                                             June 30
                          ------------------------------------------------   ------------------------------------------------
                                Tele-                                              Tele-
                            communications         TRC       Consolidated         Communications    TRC         Consolidated
                          ----------------   -----------  ----------------   -------------------  ------------  -------------
<S>                        <C>               <C>              <C>               <C>                <C>
2000
Revenues.............      $   2,459,320     $      1,267     $ 2,460,587       $  4,717,765       $      4,335  $  4,722,100
Segment net loss.....        (2,839,238)      (1,003,486)     (3,842,724)        (7,262,701)        (1,750,645)   (9,013,346)
Total assets.........         59,754,676        3,915,659      63,670,335         59,754,676          3,915,659    63,670,335
Capital expenditures.          1,294,354          489,024       1,783,378          4,076,594            892,740     4,969,334
Depreciation and
  amortization.......          1,544,440           87,909       1,632,349          3,025,995            174,282     3,200,277

</TABLE>


(8)  Loss Per Common Share

     Basic and diluted loss per common share is  calculated  by dividing the net
loss by the weighted  average number of shares  outstanding.  The calculation of
basic and diluted loss per common share does not assume conversion,  exercise or
contingent  issuance of securities  that would have an  anti-dilutive  effect on
earnings per share.  The following  common stock  equivalents were excluded from
the  diluted net loss per share  calculations  as their  effect  would have been
antidilutive:

<TABLE>
<CAPTION>

                                                       Three Months Ended                       Six Months Ended
                                                            June 30,                                June 30,
                                                    ------------------------------        -----------------------------
                                                     2001               2000                2001                2000
                                                    ------------     -------------        -------------    ------------
<S>                                                 <C>              <C>                  <C>              <C>

Preferred stock shares as converted.......           18,333,000       18,500,000           18,333,000       18,500,000
Common stock warrants.....................            3,114,645        3,114,645            3,114,645        3,114,645
Stock options--
  Shares..................................            2,193,502        2,234,667            2,193,502        2,234,667
  Weighted average price..................          $      2.53      $      2.21          $      2.53      $      2.21

</TABLE>


(9)  Warrants

     On April 2, 2001, the Company's board of directors  extended the expiration
date for certain warrants, which were to terminate on July 28, 2001, to July 28,
2002. The warrants represent 804,445 shares of common stock exercisable at $5.50
per share.

(10) Recently Issued Accounting Standards

    On July 23, 2001,  the Financial  Accounting  Standards  Board  released for
issuance SFAS No. 141, "Business  Combinations" and No. 142, "Goodwill and Other
Intangible  Assets."  SFAS  No.  141  requires  that all  business  combinations
subsequent  to June 30,  2001 be  accounted  for  under the  purchase  method of
accounting.  The pooling-of-interests  method is no longer allowed. SFAS No. 142
requires that upon  adoption,  amortization  of goodwill will cease and instead,
the carrying  value of goodwill will be evaluated for  impairment on at least an
annual  basis.  SFAS No. 142 is  effective  for  fiscal  years  beginning  after
December 15, 2001. Management of the Company is in the process of evaluating the
impact of adoption of these standards and is unable to estimate their impact, if
any, at this time.


                                       9
<PAGE>


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

Forward-Looking Statements

     The statements  contained in this Form 10-QSB  ("Quarterly  Report") of the
Company which are not historical in nature are forward-looking statements within
the  meaning of the  Private  Securities  Litigation  Reform Act of 1995.  These
forward-looking  statements  include  statements  in this Item 2.,  Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations,
regarding intent,  belief or current expectations of the Company or its officers
with respect to the development or acquisition of new business.

     Such  forward-looking  statements  involve certain risks and  uncertainties
that could cause actual results to differ  materially from anticipated  results.
These risks and uncertainties  include regulatory  developments,  the ability of
the Company to acquire or build passings on economical terms and conditions, the
risk of insufficient cable and phone penetrations, the ability of the Company to
effectively  manage growth,  general and local market  conditions  including the
presence of competing  companies,  as well as other factors as may be identified
from time to time in the  Company's  filings  with the  Securities  and Exchange
Commission or in the Company's press releases.

General

     The  following  discussion  of the  results  of  operations  and  financial
condition  of the  Company  should  be read in  conjunction  with the  Condensed
Consolidated  Financial Statements and the Notes thereto of the Company included
elsewhere in this Quarterly Report.

Overview

     The  Company  has  two  operating   subsidiaries.   USOL  provides  bundled
telecommunications  services to residents of multi-family communities.  Services
provided include cable television and enhanced local and long-distance telephone
services and high-speed Internet access. As of June 30, 2001, the Company passed
34,310  cable,  16,417  phone and 14,153  Internet  units in Austin,  Dallas/Ft.
Worth,   Denver,   Houston,   Portland,   San  Antonio  and  Washington,   D.C.,
respectively,  compared to 24,521 cable,  12,027  telephone  and 4,197  Internet
units at June 30, 2000.  A passing is an  apartment  unit capable of receiving a
respective  service.  The Company had 20,995  cable,  7,992  telephone and 1,224
Internet  subscribers,  respectively,  as of June 30,  2001  compared  to 16,056
cable, 5,111 phone and 286 Internet subscribers at June 30, 2000.

     USOL also owns a 99% interest in TRC. See Note 3 regarding the winding down
of TRC's operations.

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

     The  Company  reported  a  loss  attributable  to  common  shareholders  of
approximately $5,013,000 for the three months ended June 30, 2001, compared to a
loss of  approximately  $4,953,000  for the same period of the prior  year.  The
increase  in  net  loss  is  attributable  to  increased  selling,  general  and
administrative  expenses  and  interest  expense  in 2001  offset  by  increased
revenues in 2001.

     Revenue increased  approximately $965,000 or 39% for the three months ended
June 30,  2001,  compared to the same period of the prior year.  The increase in
revenue is primarily due to a 41% increase in  subscribers,  which is the result
of the  Company's  expansion  of MDU's to which it provides  service in existing
markets.

     Operating  expense  decreased  approximately  $499,000 or 20% for the three
months ended June 30, 2001,  compared to the same period of the prior year.  The
decrease in operating  expense between periods is primarily due to the wind down
of TRC.  Upon  receiving  notification  of the  termination  of the IT  Services
Agreement  during April 2001, the Company made  operational and staff reductions
resulting in the reduction to operating expenses for the three months ended June
30, 2001. USOL also made expense  reductions  during the fourth quarter of 2000,
which  have  allowed  the  Company  to  increase  revenues  without  significant
operational expense increases. As a result of these measures,  operating expense
was 58% of revenue for the  three-month  period in 2001  compared to 101% in the
same period of the prior year.

     Selling,   general  and  administrative  expense  increased   approximately
$932,000 or 48% for the three months  ended June 30, 2001,  compared to the same
period of the prior year.  The increase in selling,  general and  administrative
expense was primarily the result of increased  sales and marketing  expenses and
increased  call center costs all  associated  with the increases in passings and

                                       10
<PAGE>

subscribers.  The increase is also the result of approximately $276,000 recorded
as a result of a contract  entered  into between the Company and a member of its
management,  which  allows the  employee  to  terminate  his  employment  at his
discretion and receive  severance of  approximately  $276,000 upon his election.
Selling,  general  and  administrative  expense was 84% of revenue for the three
months  ended June 30,  2001  compared  to 79% for the same  period of the prior
year.

     Depreciation and amortization expense increased  approximately  $208,000 or
13% for the three months ended June 30, 2001, compared to the same period of the
prior year.  The increase  resulted  from  increases  in property and  equipment
associated  with new properties to which the Company  provides  service in 2001,
offset by decreased goodwill amortization  resulting from the write-off of TRC's
goodwill  during  the  fourth  quarter of 2000.  Depreciation  and  amortization
expense was 54% of revenue for the three months ended June 30, 2001  compared to
66% for the same period of the prior year.

     The Company had other expense of  approximately  $612,000  during the three
months ended June 30, 2001  compared to  approximately  $75,000  during the same
period of the prior year.  The  increase  in other  expense  between  periods is
primarily the result of interest and fees  associated  with increased  borrowing
from the Facility during 2001 compared to 2000.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

     The Company reported a net loss of $7,454,000 for the six months ended June
30, 2001,  compared to a net loss of $9,013,000 for the same period of the prior
year.  The decrease in net loss is  attributable  to increased  revenues in 2001
combined with a one-time charge recorded in 2000,  offset by increased  selling,
general and administrative expenses and interest expense in 2001.

     Revenue increased approximately  $1,967,000 or 42% for the six months ended
June 30,  2001,  compared to the same period of the prior year.  The increase in
revenue is primarily due to a 41% increase in  subscribers,  which is the result
of the  Company's  expansion  of MDU's to which it provides  service in existing
markets.

     Operating expense decreased approximately $305,000 or 7% for the six months
ended June 30, 2001, compared to the same period of the prior year. The decrease
in operating  expense  between periods is primarily due to the wind down of TRC.
Upon receiving  notification  of the  termination  of the IT Services  Agreement
during April 2001, the Company made operational and staff  reductions  resulting
in the reduction to operating  expense for the three months ended June 30, 2001.
USOL also made expense  reductions during the fourth quarter of 2000, which have
allowed the Company to increase revenues without significant operational expense
increases.  As a result of these measures,  operating expense was 58% of revenue
for the six-month period in 2001 compared to 89% in the same period of the prior
year.

     Selling,   general  and  administrative  expense  increased   approximately
$1,393,000  or 34% for the six months ended June 30, 2001,  compared to the same
period of the prior year.  The increase in selling,  general and  administrative
expense was primarily the result of increased  sales and marketing  expenses and
increased  call center costs all  associated  with the increases in passings and
subscribers.  Selling, general and administrative expense was 81% of revenue for
the six months  ended June 30,  2001  compared to 86% for the same period of the
prior year.

     Depreciation and amortization expense increased  approximately  $246,000 or
8% for the six months  ended June 30,  2001,  compared to the same period of the
prior year.  The increase  resulted  from  increases  in property and  equipment
associated  with new properties to which the Company  provides  service in 2001,
offset by decreased goodwill amortization  resulting from the write-off of TRC's
goodwill  during  the  fourth  quarter of 2000.  Depreciation  and  amortization
expense was 52% of revenue for the three months ended June 30, 2001  compared to
68% for the same period of the prior year.

    Write  down of  long-term  assets for the six  months  ended June 30,  2000,
consists  of  one-time  charge  of   approximately   $1,871,000  for  previously
capitalized  internal  costs  associated  with the  development of the Company's
billing  and  customer  care  system.  On March 31,  2000 the  Company  signed a
five-year agreement with CSG Systems, Inc. to outsource its billing and customer
care operations.

     The Company had other expense of  approximately  $1,233,000  during the six
months ended June 30, 2001  compared to  approximately  $30,000  during the same
period of the prior year.  The  increase  in other  expense  between  periods is
primarily the result of interest and fees  associated  with increased  borrowing
from the Facility during 2001 compared to 2000.


                                       11
<PAGE>


Liquidity and Capital Resources

     At June 30, 2001, the Company had approximately $1,224,000 of cash and cash
equivalents compared to approximately  $4,805,000 at December 31, 2000. Net cash
of approximately  $4,190,000 was used in operating activities for the six months
ended June 30, 2001, which was a result of the Company's net loss for the period
combined with using approximately $556,000 of working capital, offset by noncash
charges related to depreciation, amortization, loss on asset disposals and stock
compensation expense.

     Net cash of  approximately  $6,586,000  was used in  investing  activities,
which was primarily the result of purchases of property and equipment related to
acquiring or building new passings,  capital expenditures for upgrading services
to passings currently served, cash paid for acquisitions.

     Net cash of approximately  $7,196,000 was provided by financing activities,
which primarily  consisted of proceeds from borrowings under the Facility offset
by principal payments under capital leases.

     As has already been more fully  described in this Form 10-QSB,  we have two
separate and distinct businesses with USOL and TRC. A separate discussion on the
liquidity of each business is as follows:

    USOL. USOL had approximately $1,029,000 of cash on hand on June 30, 2001. We
believe that our cash on hand and  available  proceeds from the Facility will be
sufficient  to fund the  activities  of USOL for at  least  the next 12  months.
However,  an  integral  part  of the  USOL  business  plan  is to  grow  through
acquisitions.  Should USOL find acquisition opportunities that are either larger
in magnitude or in number than our business plan  anticipates,  then  additional
funding may be required sooner than planned.

    USOL is dependent on the Facility for its liquidity requirements.  Under the
Facility,  USOL has the ability to borrow up to $35 million  until  December 31,
2002, subject to certain borrowing base limitations,  at which time the Facility
will convert to a five-year  term loan.  The  borrowing  base is calculated as a
multiple  of  USOL's  number of cable and  telephone  subscribers,  with a total
available  borrowing base of approximately $17.5 million as of June 30, 2001, of
which $12 million has been borrowed  against.  In order to fund expected  future
cash  resource  needs,  USOL must continue to increase its  subscriber  base and
revenues.  Accordingly,  the Facility  maintains certain  operational  covenants
requiring  USOL to meet  increasing  quarterly  minimums  related  to  revenues,
operating  cash flow and the  number of MDU  units to which  USOL has  available
service.  We believe that USOL will attain the prescribed growth in subscribers,
revenues  and  cash  flow,  and  that it will  have  sufficient  cash  resources
available under the Facility to fund operations. While we believe that USOL will
attain the prescribed growth in subscribers,  revenue and cash flow, such growth
is dependent on completing  acquisitions.  We believes  that USOL's  acquisition
strategy  will  be  successful,   but  there  can  be  no  assurance  that  such
acquisitions  will be completed  or are  completed on a timely basis in order to
meet the increasing quarterly minimums.  If such quarterly minimums are not met,
USOL would be in default of its  covenants  under the Facility and the holder of
the Facility could call the amount outstanding under the Facility and/or prevent
additional  borrowings.  In order to establish an adequate  subscriber base that
can provide  sufficient cash from operations to satisfy the quarterly  repayment
requirements  of the  Facility  beginning  in 2003 (see Note 6), we believe that
USOL must continue to invest in long-term  assets through  December 2002 through
organic  sales  growth and through  acquisitions.  Based on our  estimates,  the
borrowing base  availability  under the Facility will be adequate to continue to
fund the necessary growth  expenditures.  We are currently  evaluating financing
alternatives  to  determine  what  resources  are  available to continue to fund
growth opportunities beyond 2002.

    USOL maintains various  cancelable and noncancelable  service agreements for
telecommunications  services  with  several LECs and one IXC that commit USOL to
the LECs' and IXCs' services.  These agreements  require minimum monthly charges
ranging  from $340 to $25,000 per month and have terms  ranging from one year to
five years.  USOL also has agreements  with certain cable  providers to purchase
bulk cable signal at some of its properties.  The agreements provide for USOL to
pay fixed  monthly  amounts  regardless of the number of customers it has at the
properties.  At June 30, 2001, the fixed minimum  charges for all  noncancelable
agreements  over  the  life  of the  agreements  was  approximately  $1,395,000.
Additionally,  USOL is planning on upgrading existing head-ends to give USOL the
ability to  provide  digital  cable to  selected  properties  during  2001.  The
anticipated costs of such upgrades are approximately $1,176,000. The Company has
spent  approximately  $477,000 as of June 30, 2001, on such upgrades and expects
to spend the remaining amounts by December 31, 2001.

    TRC. At June 30, 2000, TRC had  approximately  $195,000 of cash on hand. TRC
received formal notification from GMACM (TRC's sole customer) on April 10, 2001,
that  GMACM  was  terminating  the  IT  Services  Agreement.   As  part  of  the
termination,  TRC believed that certain amounts were owed by GMACM,  but TRC and

                                       12
<PAGE>


GMACM did not agree on ultimate amounts owed.  Subsequent to April 10, 2001, TRC
and GMACM continued  negotiations  that culminated in an agreement setting forth
the  terms  of the  termination  of their  relationship  under  the IT  Services
Agreement.  TRC and GMACM entered into the Settlement Agreement on June 6, 2001,
whereby  TRC agreed to transfer a  significant  amount of its assets to GMACM in
exchange for payment of $6.6 million and release of certain  claims.  The assets
to be  transferred  by TRC  include  substantially  all of  TRC's  hardware  and
software.  Although the  Settlement  Agreement was entered into on June 6, 2001,
closing of the  settlement  was delayed  until July 13,  2001,  due to continued
negotiations,  therefore,  the  accompanying  unaudited  consolidated  financial
statements do not reflect the effect of the  Settlement  Agreement.  On July 13,
2001,  TRC received a payment of  approximately  $6.05 million from GMACM.  This
amount  differed  from that  provided  for in the  Settlement  Agreement  due to
offsets of amounts  paid by GMACM to release  liens on certain  TRC assets and a
$300,000  adjustment to reflect amounts previously paid to TRC by GMACM. Of this
amount,  approximately  $5.6  million has been used to repay the  principal  and
interest  on a loan made to TRC in August 2000 by Newman,  an entity  related to
GMAC Commercial Mortgage  Corporation which is a significant  shareholder of the
Company.  In connection  with the closing of the settlement in July 2001,  TRC's
operations have ceased, and TRC will record a gain of approximately $5.9 million
during the third quarter ending September 30, 2001.

Preferred Stock Dividends

    The Series A and Series B Preferred Stock accrete dividends from the date of
issuance at the rate of 12% per year,  payable  quarterly in arrears on the last
day of March,  June,  September and  December.  We have the option of paying the
dividend in cash or in shares of common stock. The Facility prohibits the paying
of such dividends in cash.

Adoption of New Accounting Standards

    In June 1998, the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 133,  "Accounting for Derivative  Instruments and Hedging Activities," which
establishes  accounting  and  reporting  standards for  derivative  instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively referred to as derivatives),  and for hedging activities. SFAS No.
133 is effective  for all fiscal  quarters of all fiscal years  beginning  after
June 15, 2000.  The Company  adopted  SFAS No. 133 during 2001.  The adoption of
SFAS No.  133 did not  have a  significant  impact  on the  Company's  financial
position or results of operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

    Not applicable.





                                       13
<PAGE>


                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     There are no material  existing or pending legal  proceedings  to which the
Company is a party.

Item 2. Changes in Securities

     Not applicable.

Item 3. Defaults Upon Senior Securities

     None.

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

    Not applicable.

Item 5. Other Information

     None.

Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits

         Exhibit
          Number       Description of Exhibit
         -------       ----------------------

         10.12      Letter   Agreement,   dated  July  7,  2001,  to  Amend  the
                    Employment and Non-competition Agreement dated July 21, 1999
                    by and between Robert G. Solomon and USOL Holdings, Inc.

         10.13      Employment  Agreement by and between Jim Livingston and USOL
                    Holdings, Inc. dated July 13, 2001

     (b) Reports

         No  reports on Form 8-K were filed  during the  quarter  for which this
report is filed.






                                       14
<PAGE>



                                   SIGNATURES

     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.

                                            USOL HOLDINGS, INC.


                                            By: /s/ Shane Menking
                                               -----------------------------
                                               Shane Menking, CFO



Dated August 14, 2001









                                       15