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                                  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 September 30, 2000

                                       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 November 17, 2000 the Registrant had 7,925,494  shares of its no par value
Common Stock outstanding.

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<PAGE>

<TABLE>
<CAPTION>

                                      INDEX



PART I                    FINANCIAL INFORMATION
                                                                                  Page
                                                                                  ----
<S>                                                                                 <C>
     Item 1. Financial Statements--USOL Holdings, Inc.
             Report of Independent Public Accountants..........................      3
             Condensed Consolidated Balance Sheets as of
             September 30, 2000 and December 31, 1999..........................      4
             Condensed Consolidated Statements of Operations for the
             Three and Nine Months Ended September 30, 2000 and 1999...........      5
             Condensed Consolidated Statements of Cash Flows for the
             Nine Months Ended September 30, 2000 and 1999.....................      6
             Notes to Condensed Consolidated Financial Statements..............      7

             Financial Statements--U.S. OnLine Communications, Inc.
             Condensed Consolidated Statement of Operations for the Six
             Months Ended June 30, 1999........................................     12
             Condensed Consolidated Statement of Cash Flows for the Six
             Months Ended June 30, 1999........................................     13
             Notes to Condensed Consolidated Financial Statements..............     14

     Item 2. Management's Discussion and Analysis of Financial
             Condition and Results of Operations...............................     15
             Forward-Looking Statements........................................     15
             General...........................................................     15
             Overview..........................................................     15
             Three Months Ended September 30, 2000 Compared to
             Three Months Ended September 30, 1999.............................     15
             Nine Months Ended September 30, 2000 Compared to
             Nine Months Ended September 30, 1999..............................     16
             Liquidity and Capital Resources...................................     17

     Item 3. Quantitative and Qualitative Disclosures about
             Market Risk.......................................................     18

PART II                   OTHER INFORMATION

     Item 1. Legal Proceedings.................................................     19

     Item 2. Changes in Securities.............................................     19

     Item 3. Defaults Upon Senior Securities...................................     19

     Item 4. Submission of Matters to a Vote of Security Holders...............     19

     Item 5. Other Information.................................................     19

     Item 6. Exhibits and Reports on Form 8-K..................................     19

     Signatures................................................................     20

</TABLE>

                                       2

<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders
USOL Holdings, Inc.

We have reviewed the accompanying  condensed  consolidated balance sheet of USOL
Holdings, Inc. (an Oregon corporation) as of September 30, 2000, and the related
condensed  consolidated   statements  of  operations  and  cash  flows  for  the
three-month  and nine-month  periods ended  September 30, 2000 and 1999. We have
also reviewed the condensed consolidated statements of operations and cash flows
of  the  Company's  predecessor  (U.S.  Online  Communications,  Inc.)  for  the
six-month  period  ended  June 30,  1999.  These  financial  statements  are the
responsibility of the Company's management.

We  conducted  our  reviews in  accordance  with  standards  established  by the
American  Institute  of  Certified  Public  Accountants.  A  review  of  interim
financial  information consists principally of applying analytical procedures to
financial  data and making  inquiries of persons  responsible  for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards  generally accepted in the United States, the
objective  of which is the  expression  of an opinion  regarding  the  financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be  made  to the  financial  statements  referred  to  above  for  them to be in
conformity with accounting principles generally accepted in the United States.

We have  previously  audited,  in accordance with auditing  standards  generally
accepted in the United States, the consolidated  balance sheet of the Company as
of December 31, 1999 (not  presented  herein) and, in our report dated  February
11, 2000, we expressed an unqualified opinion on that statement. In our opinion,
the information set forth in the  accompanying  condensed  consolidated  balance
sheet as of December 31, 1999 is fairly  stated,  in all material  respects,  in
relation to the consolidated balance sheet from which it has been derived.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  As discussed in Note 1, the Company
has  incurred  significant   operating  losses  and  negative  cash  flows  from
operations,  and  management  believes that the Company may not be in compliance
with certain  covenants  contained in the Senior Credit Facility during the next
12-month  period unless such covenants are amended.  If a  noncompliance  is not
waived or the  covenants  are not favorably  amended,  the Company's  ability to
borrow under the facility could be limited or the amount  outstanding  under the
facility  could be called.  As a result of these  matters,  the  Company  may be
unable to continue  as a going  concern.  Management's  plans to deal with these
conditions are also described in Note 1. The accompanying  financial  statements
do not include any  adjustments  that might be  necessary  should the Company be
unable to continue as a going concern.

Arthur Andersen LLP




Austin, Texas
November 15, 2000

                                       3
<PAGE>

<TABLE>
<CAPTION>

                                         USOL HOLDINGS, INC.

                                CONDENSED CONSOLIDATED BALANCE SHEETS

                              September 30, 2000 and December 31, 1999

                                                                           September 30,      December 31,
                                ASSETS                                   -----------------  -----------------
                                                                               2000               1999
                                                                            (Unaudited)

<S>                                                                      <C>                <C>
Current assets:
  Cash and cash equivalents......................................        $      6,065,310   $     13,637,511
  Accounts receivable, net of allowance for doubtful
    accounts of $294,457 and $146,721 at September 30, 2000
    and December 31, 1999, respectively..........................               1,006,609            535,262
  Notes receivable, related parties..............................                 166,098            102,742
  Supply inventory...............................................               1,184,513            818,837
  Other current assets...........................................                 783,975            221,609
                                                                         ----------------   ----------------
          Total current assets...................................               9,206,505         15,315,961

Property and equipment, net......................................              19,960,446         16,458,736

GOODWILL AND OTHER INTANGIBLES, net..............................              35,058,608         35,159,285

DEFERRED LOAN COSTS, net.........................................               1,804,747          1,780,903

Other assets.....................................................                 649,887          4,210,588
                                                                         ----------------   ----------------

          Total assets...........................................        $     66,680,193   $     72,925,473
                                                                         ================   ================

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable...............................................        $        757,669   $      1,369,636
  Accrued liabilities............................................               1,536,224          2,416,239
  Current portion of capital lease obligations...................                 535,396            601,784
  Preferred dividends payable....................................               1,110,000          1,973,333
  Deferred revenue...............................................                 687,144            419,262
  Note payable including accrued interest, related party.........               5,084,861                 --
  Related-party payable..........................................                      --            294,857
                                                                         ----------------   ----------------
          Total current liabilities..............................               9,711,294          7,075,111
                                                                         ----------------   ----------------

CAPITAL LEASE OBLIGATIONS, less current portion..................               1,353,258          1,749,818
                                                                         ----------------   ----------------

SENIOR CREDIT FACILITY, including accrued interest...............               2,002,917                 --
                                                                         ----------------   ----------------

OTHER LONG-TERM LIABILITIES......................................                  66,140             48,666
                                                                         ----------------   ----------------

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST................................................                  89,346             58,504
                                                                         ----------------   ----------------

STOCKHOLDERS' EQUITY:
  Convertible preferred stock, no par value; 5,000,000 shares
     authorized--
    Series A, 1,325,000 shares issued and outstanding;
       liquidation preference of $33,125,000.....................              30,675,361         30,675,361
    Series B, 155,000 shares issued and outstanding;
       liquidation preference of $3,875,000......................               3,588,439          3,588,439
  Common stock, no par value; 50,000,000 shares authorized,
       7,925,494 and 6,892,668 shares issued and outstanding
       at September 30, 2000 and December 31, 1999, respectively.              42,749,393         36,735,911
  Deferred compensation..........................................                (645,365)          (344,201)
  Accumulated deficit............................................             (22,910,590)        (6,662,136)
                                                                         ----------------   ----------------
          Total stockholders' equity.............................              53,457,238         63,993,374
                                                                         ----------------   ----------------
          Total liabilities and stockholders' equity.............        $     66,680,193   $     72,925,473
                                                                         ================   ================

</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

<TABLE>
<CAPTION>

                                         USOL HOLDINGS, INC.

                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                             (Unaudited)

                                 For the Three and Nine Months Ended
                                     September 30, 2000 and 1999
                                              (Note 2)

                                                        Three Months Ended               Nine Months Ended
                                                           September 30,                   September 30,
                                                   -----------------------------  -------------------------------
                                                        2000           1999             2000             1999
                                                   -------------   -------------  ---------------   -------------
<S>                                                <C>             <C>            <C>               <C>
Revenue........................................    $   2,705,243   $   1,550,249  $     7,427,343   $   1,550,249
                                                   -------------   -------------  ---------------   -------------

expenses:
  Operating....................................        2,344,817       1,286,995        6,543,773       1,286,995
  Selling, general and administrative..........        2,296,107       1,347,581        6,351,151       1,347,581
  Depreciation and amortization................        1,679,013         567,191        4,879,290         567,191
  Stock compensation expense...................           79,611              --          431,059         849,575
  Write-down of capitalized software costs.....               --              --        1,870,551              --
                                                   -------------   -------------  ---------------   -------------
          Total operating expenses.............        6,399,548       3,201,767       20,075,824       4,051,342
                                                   -------------   -------------  ---------------   -------------
          Loss from operations.................       (3,694,305)     (1,651,518)     (12,648,481)     (2,501,093)
                                                   -------------   -------------  ---------------   -------------

Other INCOME (EXPENSE):
  Interest, net................................         (169,557)         71,941         (143,623)         71,941
  Loss on disposal of assets...................          (25,713)             --          (81,857)             --
                                                   -------------   -------------  ---------------   -------------
                                                        (195,270)         71,941         (225,480)         71,941
                                                   -------------   -------------  ---------------   -------------
LOSS BEFORE MINORITY INTEREST..................       (3,889,575)     (1,579,577)     (12,873,961)     (2,429,152)

MINORITY INTEREST IN INCOME OF
 SUBSIDIARY....................................          (15,534)        (11,309)         (44,493)        (11,309)
                                                   -------------   -------------  ---------------   -------------

          Net loss.............................    $  (3,905,109)  $  (1,590,886) $   (12,918,454)  $  (2,440,461)
                                                   =============   =============  ===============   =============

PREFERRED STOCK DIVIDENDS......................       (1,110,000)       (863,333)      (3,330,000)       (863,333)
                                                   -------------   -------------  ---------------   -------------

LOSS ATTRIBUTABLE TO COMMON
  SHAREHOLDERS.................................    $  (5,015,109)  $  (2,454,219) $   (16,248,454)  $  (3,303,794)
                                                   =============   =============  ===============   =============

PER SHARE AMOUNTS:.............................
  Basic and diluted loss per common share......    $        (.64)  $        (.96) $        (2.16)   $       (1.83)
                                                   =============   =============  ==============    =============
  Basic and diluted weighted average
    common shares..............................        7,819,637       2,547,283        7,523,931       1,809,752
                                                   =============   =============  ===============   =============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

<TABLE>
<CAPTION>

                                        USOL HOLDINGS, INC.

                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (Unaudited)

                                      For the Nine Months Ended
                                     September 30, 2000 and 1999
                                              (Note 2)

                                                                              2000             1999
                                                                       --------------    -------------
<S>     <C>                                                            <C>               <C>
        Cash flows from operating activities:
          Net loss.................................................    $  (12,918,454)   $  (2,440,461)
          Adjustments to reconcile net loss to net cash used in
            operating activities--
              Depreciation and amortization........................         4,879,290          567,191
              Stock compensation expense...........................           431,059          849,575
              Write-down of capitalized software costs.............         1,870,551               --
              Loss on disposal of assets...........................            81,857               --
              Minority interest....................................            44,493           11,309
              Changes in assets and liabilities--
                 Accounts receivable...............................          (471,347)        (157,760)
                 Other assets......................................          (904,342)         (36,837)
                 Accounts payable and accrued liabilities..........        (1,699,059)         714,421
                 Deferred revenue and other........................           285,356           46,944
                                                                       --------------    -------------
                      Net cash used in operating activities........        (8,400,596)        (445,618)
                                                                       --------------    -------------

        Cash flows from investing activities:

          Purchases of property, equipment and other...............        (6,497,069)      (1,285,338)
          Loans to related parties, net............................           (57,258)        (100,000)
          Cash paid for acquisitions, net of cash acquired.........                --      (11,657,306)
                                                                       --------------    -------------
                      Net cash used in investing activities........        (6,554,327)     (13,042,644)
                                                                       --------------    -------------

        Cash flows from financing activities:

          Principal payments under capital leases..................          (462,948)      (2,160,715)
          Proceeds from the exercise of stock options and
            warrants...............................................         1,087,923               --
          Proceeds from Note Payable, related party................         5,000,000               --
          Borrowings under Senior Credit Facility..................         2,000,000               --
          Deferred loan costs......................................          (242,253)      (1,333,440)
          Proceeds from sale of preferred stock, net of cash
            offering costs of $2,590,000...........................                --       34,410,000
          Proceeds from the sale of common stock...................                --            1,425
                                                                       --------------    -------------
                      Net cash provided by financing activities....         7,382,722       30,917,270
                                                                       --------------    -------------
                      Net decrease in cash and cash equivalents....        (7,572,201)      17,429,008
        Cash and cash equivalents, beginning of period.............        13,637,511               --
                                                                       --------------    -------------
        Cash and cash equivalents, end of period...................    $    6,065,310    $  17,429,008
                                                                       ==============    =============

        Supplemental DISCLOSURE OF cash flow information:

            Cash paid for interest.................................    $      539,041    $     909,646
            Deferred compensation..................................           540,000          325,000
            Accretion of dividends on preferred stock..............         3,330,000          863,333
            Issuance of common stock as payment of preferred
               stock dividends.....................................         4,193,333               --

</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>


                               USOL HOLDINGS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 2000

(1)  Unaudited Condensed Financial Statements

     The  financial  statements  included  herein  have  been  prepared  by USOL
Holdings,  Inc. (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 generally accepted
accounting  principles 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 September 30, 2000,  and
for the three and nine months ended September 30, 2000 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 nine months ended September 30, 2000 are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31, 2000.

     The Company has incurred  significant  operating  losses and negative  cash
flows from  operations  and  management  believes that the Company may not be in
compliance with certain covenants contained in the Senior Credit Facility during
the next 12-month  period unless such covenants are amended.  If a noncompliance
is not waived or the covenants are not favorably amended,  the Company's ability
to borrow under the facility  could be limited or the amount  outstanding  under
the facility could be called.  The Company was not in compliance with one of the
covenants  as of September  30, 2000,  but the facility was amended to bring the
Company back into compliance as of that date.  Management has been in discussion
with the facility's managing agent and fully anticipates that the covenants will
be favorably amended. However, there is no assurance that such covenants will be
favorably amended.

     In addition,  one of the  Company's  subsidiaries,  TheResidentsClub,  Inc.
("TRC"),  must obtain additional  financing in order to continue its development
activities and fund its operations during the next 12-month period.  There is no
assurance  that such  financing  will be obtained,  but management has engaged a
firm to raise private  equity.  If such financing is not obtained,  the carrying
value of TRC may be impaired.

     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.

(2)  Business Organization and Basis of Presentation

     USOL Holdings,  Inc. (formerly FirstLink  Communications,  Inc.), an Oregon
corporation,  its wholly owned  subsidiary  USOL, Inc.  ("USOL"),  and USOL's 50
percent  owned  subsidiary,  U.S.  Austin  Cable  Association  I, Ltd.  ("USAC")
(collectively   referred  to  herein  as  the  "Company"),   provide  integrated
telecommunications  services including local telephone, long distance telephone,
enhanced calling  features,  cable television and high-speed  Internet access to
residents of  multi-family  apartment  complexes  and  condominiums  ("MDUs") in
Texas, Oregon,  Virginia and Colorado.  The services are provided to the tenants
in accordance with long-term  operating  agreements  between the Company 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  the  Company or the local
telephone and long distance carriers for telephone services and Internet access.
Tenants  desiring to subscribe to cable  television  are  generally  required to
subscribe to the Company's services.

     USOL, Inc. also owns TRC, a business that develops Internet  platforms that
provide a range of  private-labeled  online  solutions for MDU  communities  and
other residential markets.

                                       7
<PAGE>


     On December 15, 1999, the  shareholders of FirstLink  Communications,  Inc.
("FirstLink")  approved  a  merger  (the  "Merger")  with  USOL  Holdings,  Inc.
("Holdings"),  a Delaware  corporation,  in a  stock-for-stock  transaction with
FirstLink as the legal survivor.  Concurrent with the Merger,  FirstLink changed
its name to USOL Holdings, Inc. The Merger was completed on December 22, 1999.

     The Merger was accounted for as a reverse merger under the purchase  method
of accounting.  Accordingly,  the legal form of the transaction has been ignored
and Holdings has been treated as the accounting acquirer. The excess of purchase
price over the fair market value of FirstLink's  net assets has been recorded as
goodwill and is being  amortized  over a 10-year  period.  The purchase price of
$32,051,611 was allocated as follows:


<PAGE>


Current assets..........       $   2,466,584
Fixed assets............           1,558,060
Current liabilities.....            (802,968)
Capital leases..........            (177,277)
Other liabilities.......             (50,700)
Goodwill................          29,057,912
                               -------------
                               $  32,051,611
                               =============

     The purchase price  allocation  for the Merger is  preliminary  and further
refinements  may be  made  in  accordance  with  generally  accepted  accounting
principles.

     Holdings was formed on May 12, 1999 for the purpose of  acquiring  entities
providing  telecommunications,  cable  television,  Internet  access  and  other
services  to  residents  of  MDUs.  On July  21,  1999,  Holdings,  through  its
subsidiary USOL, Inc.  ("USOL"),  purchased  substantially all of the assets and
certain liabilities of U.S. OnLine Communications, Inc. ("US OnLine"). US OnLine
provided  telecommunications  and cable television services to residents of MDUs
in Texas,  Virginia  and  Colorado.  Pursuant to the asset  purchase  agreement,
Holdings  exchanged 750,000 shares of Holdings' common stock valued at $2.00 per
share,  warrants to purchase  1,500,000  shares of Holdings'  common stock at an
exercise price of $5.50 per share,  and $845,000 of cash. The Company valued the
warrants,  using the Black-Scholes  pricing model, at approximately  $1,324,800.
The Black-Scholes  valuation was based on the warrant terms using Holdings' then
current   stock   price  of  $2.00  per  share  and  a   volatility   percentage
representative  of a  public  company  operating  in this  industry.  The  total
purchase  price was  $3,669,800.  The  acquisition  was  accounted for under the
purchase method of accounting with the purchase price allocated as follows:

Current assets..........       $   2,357,577
Fixed assets............          13,648,334
Other assets............           1,029,117
Current liabilities.....         (16,823,702)
Minority interest.......            (236,413)
Goodwill................           3,694,887
                               -------------
                               $   3,669,800
                               =============

     Also on July 21,  1999,  Holdings  through its  subsidiary  TRC,  purchased
certain assets and contract  rights from GMAC  Commercial  Mortgage  Corporation
("GMACC").  Pursuant to the asset  purchase  agreement,  the  purchase  price of
$2,843,800  consisted of cash of  $2,500,000  and a warrant to purchase  325,000
shares of  Holdings'  common  stock at an  exercise  price of $2.00  per  share.
Holdings'  valued  this  warrant,  using the  Black-Scholes  pricing  model,  at
approximately  $343,800.  The  Black-Scholes  valuation was based on the warrant
terms  using  Holdings'  then  current  stock  price of $2.00  per  share  and a
volatility  percentage  representative  of a public  company  operating  in this
industry.  The  acquisition  was  accounted  for as a  purchase  with the entire
purchase price being recorded as goodwill.

                                       8

<PAGE>

<TABLE>
<CAPTION>

     The table below reflects the unaudited  combined  results of US OnLine (the
Company's  accounting  predecessor),  FirstLink  and USOL  Holdings for the nine
months ended September 30, 1999:

                                                                                      USOL
                                                                                    Holdings
                                                                                      (Post
                                                  US OnLine         FirstLink       US Online
                                              (Preacquisition)1    (Premerger)2   Acquisition)3     Combined
                                              ----------------     -----------    ------------      --------
<S>                                              <C>                <C>             <C>           <C>

Revenues..................................       $  2,831,079       $ 1,024,329     $ 1,550,249   $  5,405,657
Loss from operations......................         (1,650,765)       (1,222,932)     (2,501,093)    (5,374,790)
Loss before minority interest.............         (3,451,406)       (1,178,393)     (2,429,152)    (7,058,951)
Net loss..................................         (3,448,992)       (1,178,393)     (2,440,461)    (7,067,846)

<FN>

1.   January 1, 1999 through June 30, 1999
2.   January 1, 1999 through September 30, 1999
3.   May 12, 1999 through September 30, 1999

</FN>
</TABLE>

     Financial  statements  for the six months ended June 30, 1999 for US OnLine
are included elsewhere in this Form 10-QSB.

(3)  GMAC Agreement

     In August  2000,  TRC entered  into a  four-year  services  and  technology
agreement (the "GMAC Agreement") with GMAC Mortgage Corp.  ("GMACM").  Under the
terms of the GMAC Agreement, TRC has agreed to provide the following services to
GMACM.

1.       Development of one or more GMAC-labeled web sites.
2.       Dial-up Internet access for unlimited users priced at a "cost plus"
         basis.
3.       Creation of GMAC-labeled content, if requested.
4.       Broadband Internet access if mutually agreed upon.

     Additionally,  TRC has the exclusive  right to market into MDU  communities
certain products  jointly  developed by TRC and GMACM intended to facilitate the
transition from apartment living to home ownership.  TRC would use such products
to aid its efforts in obtaining non-GMACM customers.

     The GMAC Agreement  requires  certain  milestones to be achieved within one
year after execution.  Included in the milestones is a documentation period (the
"Documentation Period") to agree on specific services, processes and timeframes;
a deadline for TRC to enter into an agreement with an Internet Service Provider;
a Pilot  Testing  Period;  and a minimum  number of End Users (as defined in the
GMAC  Agreement) be attained by the end of one year. If the  milestones  are not
achieved, or if GMACM deems during the Pilot Testing Period that the web site is
not commercially  viable,  GMACM may terminate the GMAC Agreement by reimbursing
TRC for  its  costs  including  approved  capital  expenditures  and  reasonable
out-of-pocket expenses incurred in connection with the GMAC Agreement.  However,
if GMACM terminates the GMAC Agreement under the Pilot Testing provision,  GMACM
would have to pay TRC $2,000,000,  plus $500,000 per month, from the date of the
GMAC Agreement  through the  termination  date. The GMAC Agreement also provides
GMACM an early  termination  right after three years by giving 180 days  written
notice.

     If the  aforementioned  milestones  are  achieved,  GMACM would commit to a
minimum number of guaranteed End Users to TRC over a four-year period.

     The GMAC  Agreement  also calls for TRC to grant GMACM 16 million  warrants
(the "GMACM  Warrants")  to acquire  shares of TRC's  common stock at a weighted
average  price of $4.03 per share over the life of the GMAC  Agreement  based on
achieving  specific  numbers  of End  Users.  The GMAC  Agreement  calls for one
million  warrants  to be  issued  upon  execution  of the GMAC  Agreement  at an
exercise  price of $.50 per share.  The GMACM Warrants will be recorded at their
estimated  fair market value based on the estimated fair market value of the TRC
common stock on the dates of grant.

                                       9

<PAGE>

     Until the  Documentation  Period is complete,  it is possible  that certain
terms of the GMAC Agreement could change.

     As  further  discussed  in  MD&A,  the  costs  to  TRC  of  performing  its
obligations under the GMAC Agreement are significant and will require additional
substantial  capital  resources.  There is no assurance  that the GMAC Agreement
will not be  terminated by GMAC in  accordance  with its terms;  that TRC or the
Company can raise  sufficient  capital on acceptable  terms; or that the Company
will ultimately realize profitable activities under the GMAC Agreement.

     As of September 30, 2000, TRC had 51,200,000  shares of common stock issued
and outstanding, all owned by the Company or management.

(4)  Note Payable Related Party

     In August 2000, Newman Financial  Services,  Inc. ("NFS"),  a subsidiary of
GMACC,  loaned $5 million to TRC under a secured  promissory note agreement (the
"Note  Payable").  The Note Payable matures on August 3, 2001 and bears interest
at 13% per annum payable  semi-annually on February 3rd and August 3rd. The Note
Payable  is secured  by all of the  common  stock and assets of TRC.  GMACC is a
significant shareholder of the Company.

(5)  Senior Credit Facility

     The Company has a senior credit facility (the  "Facility")  with a group of
lenders that provides for  borrowings  of up to $35 million.  Under terms of the
Facility,  the Company may borrow funds for a two-year period commencing January
1, 2000 and ending December 31, 2001, at which time the Facility will convert to
a five-year term loan. The Facility bears interest at the Company's option at an
annual rate of prime plus 2.75% or LIBOR plus 3.75% subject to certain discounts
based on leverage ratios.  The Facility is secured by all assets of the Company,
excluding TRC. At September 30, 2000, the Company had drawn $2 million under the
Facility.  At September 30, 2000, the Company was in technical default under the
Facility related to a financial covenant.  The Facility was subsequently amended
to bring the Company back into compliance.

(6)  Write-down of Capitalized Software Costs

     On March 31,  2000,  the  Company  signed a  five-year  agreement  with CSG
Systems,  Inc. to outsource its billing and customer  care system.  As a result,
the Company wrote off $1,870,551 of previously  capitalized software development
costs  associated  with the  in-house  build of the  Company's  next  generation
billing and customer care system, which will not be utilized.

(7)  Segment Disclosure

     The  Company's  operations  are  classified  into two  reportable  business
segments:  USOL and TRC. The  Company's  two  reportable  business  segments are
managed separately based on fundamental differences in their operations.

     USOL provides  integrated  telecommunications  services including local and
long-distance  telephone,   enhanced  calling  features,  cable  television  and
high-speed Internet access to residents of multi-family  apartment complexes and
condominiums in Texas, Oregon, Virginia and Colorado.

     TRC develops  Internet  platforms  that provide a range of private  labeled
online solutions for MDU communities and other residential markets.

                                       10
<PAGE>


     The operating results by business segment were as follows for the three and
nine months ended September 30, 2000:




<TABLE>
<CAPTION>

                                             Three Months Ended                                   Nine Months Ended
                                                September 30                                         September 30
                              ------------------------------------------------     -------------------------------------------------
                                 USOL, Inc.         TRC           Consolidated        USOL, Inc.         TRC          Consolidated
                              ---------------  -------------     -------------     ---------------  -------------     --------------
<S>                           <C>              <C>               <C>               <C>              <C>               <C>
Revenues...............       $    2,703,942   $      1,301      $ 2,705,243       $    7,421,707   $      5,636      $  7,427,343
Segment net loss.......           (2,759,106)    (1,146,003)      (3,905,109)         (10,021,806)    (2,896,648)      (12,918,454)
Total assets...........           60,308,730      6,371,463       66,680,193           60,308,730      6,371,463        66,680,193
Capital expenditures...            1,256,097        271,638        1,527,735            5,332,691      1,164,378         6,497,069
Depreciation and
  amortization.........            1,569,076        109,937        1,679,013            4,595,071        284,219         4,879,290
</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
diluted  net loss per share  calculations,  as their net effect  would have been
antidilutive:

<TABLE>
<CAPTION>

                                                     Three Months Ended                  Nine Months Ended
                                                        September 30,                      September 30,
                                                 ---------------------------        ---------------------------
                                                    2000              1999             2000             1999
                                                 ----------        ---------        ----------       ----------
<S>                                              <C>               <C>              <C>              <C>
Preferred stock shares as converted....          18,500,000        18,500,000       18,500,000       18,500,000
Common stock warrants..................           3,104,644         2,084,000        3,104,644        2,084,000
Stock options--
  Shares...............................           2,236,002        1,536,000         2,236,002        1,536,000
  Weighted average price...............               $2.58            $2.29             $2.58            $2.29

</TABLE>


                                       11
<PAGE>





                        U.S. ONLINE COMMUNICATIONS, INC.

                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)

                            For the Six Months Ended
                                  June 30, 1999

                                    (Note 2)

REVENUES...............................        $  2,831,079
                                               ------------

OPERATING EXPENSES:
   Operating...........................           2,100,739
   Selling, general and administrative.           1,554,807
   Depreciation and amortization.......             826,298
                                             --------------

         Total expenses................           4,481,844
                                               ------------

LOSS FROM OPERATIONS...................          (1,650,765)
                                               ------------

OTHER:

   Interest expense....................          (1,722,942)
   Other expense, net..................             (77,699)
                                               ------------

         Total other...................          (1,800,641)
                                               ------------

LOSS BEFORE MINORITY
  INTEREST.............................          (3,451,406)

MINORITY INTEREST IN
  LOSS OF SUBSIDIARY...................               2,414
                                               ------------

         Net loss......................        $ (3,448,992)
                                               ============


     See accompanying notes to condensed consolidated financial statements.

                                       12
<PAGE>

<TABLE>
<CAPTION>

                        U.S. ONLINE COMMUNICATIONS, INC.

                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)

                            For the Six Months Ended
                                  June 30, 1999

                                    (Note 2)

<S>                                                                                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss.........................................................................     $  (3,448,992)
   Adjustments to reconcile net loss to net cash used in operating activities-
    Depreciation and amortization...................................................         1,411,538
    Minority interest...............................................................            (2,414)
    Accretion of deferred compensation..............................................            51,563
    Changes in operating assets and liabilities-
      Restricted cash...............................................................           352,071
      Accounts receivable, net......................................................           164,585
      Other current assets..........................................................           (60,229)
      Accounts payable and accrued expenses.........................................           876,327
      Deferred revenue..............................................................           (25,966)
                                                                                         -------------

              Net cash used in operating activities.................................          (681,517)
                                                                                         -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment..............................................          (443,515)
                                                                                         -------------

              Net cash used in investing activities.................................          (443,515)
                                                                                         -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on long-term debt.......................................................          (145,100)
   Proceeds from short-term notes payable...........................................         1,475,000
                                                                                         -------------

              Net cash provided by financing activities.............................         1,329,900
                                                                                         -------------

INCREASE IN CASH AND CASH EQUIVALENTS...............................................           204,868

CASH AND CASH EQUIVALENTS, beginning of period......................................         1,007,988
                                                                                         -------------

CASH AND CASH EQUIVALENTS, end of period............................................     $   1,212,856
                                                                                         =============

</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       13
<PAGE>


                        U.S. ONLINE COMMUNICATIONS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1999

(1)  Unaudited Condensed Financial Statements

     The financial  statements included herein have been prepared by U.S. OnLine
Communications,  Inc. ("US OnLine") pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial  statements prepared in accordance with generally
accepted  accounting  principles have been condensed or omitted pursuant to such
rules and regulations, although US OnLine believes that the disclosures included
herein  are  adequate  to make  the  information  presented  not  misleading.  A
description of US OnLine's accounting  policies and other financial  information
is included in the audited financial statements as filed with the Securities and
Exchange Commission in USOL Holdings,  Inc.'s ("Holdings") Annual Report on Form
10-KSB.

     The financial  statements and related notes as of June 30, 1999 and for the
six months ended June 30, 1999 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 US OnLine.

(2)  Business Organization and Basis of Presentation

    US OnLine and its 50% owned subsidiary, U.S.-Austin Cable Associates I, Ltd.
("USAC") (collectively  referred to herein as "US OnLine"),  provided integrated
telecommunications  services including local telephone, long distance telephone,
enhanced  calling  features and cable  television  to  residents of  multifamily
apartment  complexes  and  condominiums  in Texas,  Virginia and  Colorado.  The
services  were provided to the tenants in accordance  with  long-term  operating
agreements  between US OnLine and the  property  owners under which the property
owners received  royalties from the  telecommunication  revenues  generated from
their  properties.  The  agreements  provided the tenants with the option to use
either US OnLine or the local telephone and long-distance carriers for telephone
services.  Tenants who subscribed to cable  television had to utilize US OnLine.
In July  1999,  the  Company  sold  substantially  all its  assets  and  certain
liabilities.  As such, US OnLine is no longer  providing the services  described
above.

    US OnLine was  incorporated  March 5, 1998, by the management of U.S. OnLine
Communications L.L.C. (the "LLC") for the purpose of acquiring substantially all
of the assets and certain of the  liabilities of the LLC. This  transaction  was
consummated  on July 21, 1998.  US OnLine  issued  800,000  shares of its common
stock and a $3  million  note to  acquire  certain  assets  and  liabilities  of
approximately $17,166,000 and $17,985,000,  respectively, of the LLC. The assets
acquired included the 50 percent interest held by the LLC in USAC. In accordance
with generally accepted accounting principles,  US OnLine recorded the purchased
assets and liabilities at the LLC's  historical cost since US OnLine and the LLC
were entities under common control.

                                       14
<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 and US
OnLine, the Company's predecessor, included elsewhere in this Quarterly Report.

Overview

     The  Company  has  two  operating   subsidiaries.   USOL  provides  bundled
telecommunications   services  to  residents  of   multi-family   apartment  and
condominium  complexes.  Services provided include cable television and enhanced
local and long-distance telephone services and high-speed Internet access. As of
September 30, 2000,  the Company  passed  24,711  cable,  12,117 phone and 4,549
Internet units in Austin,  Dallas/Ft.  Worth,  Denver,  Houston,  Portland,  San
Antonio  and  Washington,  D.C.  compared  to 15,043  cable and 7,173  telephone
passings at  September  30,  1999.  A passing is an  apartment  unit  capable of
receiving a respective  service.  The Company had 16,391 cable,  5,402 telephone
and 310 Internet subscribers, respectively, as of September 30, 2000 compared to
9,883 cable and 2,773 phone  subscribers at September 30, 1999.  Through TRC, we
develop  Internet  platforms  to  provide  a range  of  private  labeled  online
solutions  for MDU  communities  and other  residential  markets.  To date,  TRC
revenues have been nominal.

     For  purposes  of  management's  discussion  and  analysis  of  results  of
operations, the nine months ended September 30, 1999 results are the combination
of the six months ended June 30, 1999 of the Company's  predecessor,  US OnLine,
and the three months ended  September 30, 1999 of the Company.  The three months
ended September 30, 1999 are those of the Company.

Three Months Ended  September 30, 2000 Compared to Three Months Ended  September
30, 1999

     The  Company  reported  a  loss  attributable  to  common  shareholders  of
$5,015,109  for the three months ended  September 30, 2000 compared to a loss of
$2,454,219  for the same period of the prior year.  The  increase in net loss is
attributable to increased  depreciation  and  amortization  expenses  (primarily
amortization   of  goodwill)  as  well  as   increased   selling,   general  and
administrative expenses.

     Revenue  increased  $1,154,994 or 75% for the three months ended  September
30, 2000 compared to the same period of the prior year.  The increase in revenue
is due to an increase in operational passings,  which is primarily the result of
the Company  operating in two additional  markets (Portland and Houston) in 2000
compared to 1999. The revenue from these two markets represent approximately 71%
of the above mentioned increase.

     Operating  expense  increased  $1,057,822 or 82% for the three months ended
September 30, 2000  compared to the same period of the prior year.  The increase
in operating expense between periods is primarily due to the addition of two new
markets between periods, as well as increases in cable programming, leased local
telephony circuits,  wholesale  long-distance minutes and call center costs, all
associated  with the increase in revenue.  Operating  expense was 87% of revenue
for the  three-month  period in 2000  compared  to 83% in the same period of the
prior year.


                                       15

<PAGE>

     Selling,  general and administrative  expense increased $948,526 or 70% for
the three months  ended  September  30, 2000  compared to the same period of the
prior year.  The  increase in selling,  general and  administrative  expense was
primarily the result of increases in payroll costs,  travel expense,  royalties,
costs  associated with TRC, and increases in other costs directly related to the
Company's public status in 2000 such as legal,  accounting,  investor  relations
and  insurance.  TRC  accounted for  approximately  $209,000 or 22% of the above
mentioned  increase.  Selling,  general  and  administrative  expense was 85% of
revenue for the three months ended  September  30, 2000  compared to 87% for the
same period of the prior year.

     Depreciation and amortization  expense increased $1,111,822 or 196% for the
three months ended  September  30, 2000 compared to the same period of the prior
year. The increase in depreciation and amortization  expense resulted  primarily
from goodwill  amortization in 2000 that was not incurred in 1999.  Depreciation
and amortization expense was 62% of revenue for the three months ended September
30, 2000 compared to 37% for the same period of the prior year.

     The Company had other  expense of $195,270  during the three  months  ended
September 30, 2000 compared to other income of $71,941 during the same period of
the prior year. The increase in other expense  between  periods is primarily the
result of fees  associated  with its Senior Credit  Facility as well as interest
expense on the Note  Payable  during 2000  compared to higher cash  balances and
resulting interest income in 1999.

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

     The Company reported a loss attributable to shareholders of $16,248,454 for
the nine months ended  September 30, 2000  compared to a loss of $6,752,786  for
the same period of the prior year.  The  increase in loss is  attributable  to a
one-time  write-down  of  capitalized  software  costs  in 2000  of  $1,870,551,
increased  depreciation and  amortization  expenses  (primarily  amortization of
goodwill),  increased selling, general and administrative expenses and preferred
stock dividends.

     Revenue increased $3,046,015 or 70% for the nine months ended September 30,
2000  compared to the same period of the prior year.  The increase in revenue is
due to an increase in operational passings, which is primarily the result of the
Company  operating  in two  additional  markets  (Portland  and Houston) in 2000
compared to 1999.

     Operating  expense  increased  $3,156,039  or 93% for the nine months ended
September 30, 2000  compared to the same period of the prior year.  The increase
in operating expense between periods is primarily due to the addition of two new
markets between periods, as well as increases in cable programming, leased local
telephony circuits,  wholesale  long-distance minutes and call center costs, all
associated  with the increase in revenue.  Operating  expense was 88% of revenue
for the  nine-month  period in 2000  compared  to 79% in the same  period of the
prior year.

     Selling,  general and administrative  expense increased  $3,448,763 or 119%
for the nine months ended  September 30, 2000 compared to the same period of the
prior year.  The  increase in selling,  general and  administrative  expense was
primarily the result of increases in payroll costs, travel expenses,  royalties,
costs  associated with TRC, and increases in other costs directly related to the
Company's public status in 2000 such as legal,  accounting,  investor  relations
and insurance.  TRC accounted for  approximately  $1,635,000 or 47% of the above
mentioned  increase.  Selling,  general  and  administrative  expense was 86% of
revenue for the nine months  ended  September  30, 2000  compared to 73% for the
same period of the prior year.

     Depreciation and amortization  expense increased $3,485,801 or 250% for the
nine months ended  September  30, 2000  compared to the same period of the prior
year. The increase in depreciation and amortization  expense resulted  primarily
from goodwill  amortization in 2000 that was not incurred in 1999.  Depreciation
and amortization  expense was 66% of revenue for the nine months ended September
30, 2000 compared to 32% for the same period of the prior year.

     The Company  had other  expense of  $225,480  during the nine months  ended
September 30, 2000  compared to  $1,728,700  during the same period of the prior
year. The reduction in other expense  between periods is primarily the result of
the Company having certain  interest  bearing debt instruments in 1999 that were
not outstanding in 2000.

                                       16
<PAGE>


Liquidity and Capital Resources

     At  September  30,  2000,  the  Company  had  $6,065,310  of cash  and cash
equivalents compared to $13,637,511 at December 31, 1999. Net cash of $8,400,596
was used in operating  activities for the nine months ended  September 30, 2000,
which was a result of the Company's net loss for the period  combined with using
approximately  $2,789,000 of working capital,  offset by noncash charges related
to depreciation,  amortization,  the write-down of certain capitalized  software
costs and stock compensation expense. TRC accounted for approximately $2,700,000
of the cash used in operating activities.

     Net  cash  of  $6,554,327  was  used in  investing  activities,  which  was
primarily the result of purchases of property and equipment related to acquiring
or building new passings.  Of this amount,  TRC used  approximately  $1,164,000,
primarily for web site and data base development.

     Net  cash  of  $7,382,722  was  provided  by  financing  activities,  which
primarily  consisted of proceeds  from the Note  Payable,  borrowings  under the
Facility, and proceeds from the exercise of stock options and warrants offset by
principal payments under capital leases.

     As more fully described elsewhere 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  $3,845,000 of cash on hand at September 30,
2000. We believe that our cash on hand and available proceeds from the Facility,
if available (see discussion below), should be sufficient to fund the activities
of USOL for the next 12 months.  However,  an integral part of the USOL business
plan is to grow through acquisitions.  Should we 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.  The
Facility allows us to borrow up to $35 million for a two-year period  commencing
January 1, 2000 and ending December 31, 2001, at which time it will convert to a
five-year term loan. The Facility bears interest at our option at an annual rate
of prime plus 2.75% or LIBOR plus 3.75%.  The  Facility is secured by all of the
assets of the Company,  excluding TRC. As of September 30, 2000, we had borrowed
$2 million under the Facility.

     We are  dependent  upon the Facility for our  liquidity  requirements.  Our
ability to borrow under the Facility  will be dependent  upon USOL's  ability to
meet the quarterly  financial covenants set forth therein or, in the event(s) of
noncompliance,  obtain waivers or amendments from the lenders.  At September 30,
2000,  USOL was in technical  default under the Facility  related to a financial
covenant.  The  Facility  was  subsequently  amended  to bring  USOL  back  into
compliance.  No  assurance  can be  given  that  USOL  will be able to  maintain
compliance  with the  financial  covenants of the Facility or, in the event of a
default,  that the lenders  will agree to waive the default.  Additionally,  the
amount that can be borrowed  under the  Facility is based on the number of cable
and telephone  subscribers we have. As of September 30, 2000, we had the ability
to borrow up to approximately $11.1 million.  Accordingly,  in order to increase
the amount  that can be borrowed  under the  Facility,  we must  continue to add
subscribers. Unless alternative financing sources are obtained, the inability to
borrow under the Facility or having insufficient borrowing capacity would have a
material adverse effect on USOL.

     As  described  above,  our  ability to borrow  under the  Facility  ends on
December  31,  2001.  Accordingly,  we will  have to find  additional  financing
sources by that date.  Alternatives  include amending the Facility to extend the
time frame under which monies can be borrowed,  obtaining a new credit facility,
and public or private equity offerings.  We have currently  retained BNP Paribas
to advise and assist us in raising  the next round of  financing  for USOL.  BNP
Paribas is one of the Facility lenders and is also a shareholder of the Company.
The retention of BNP Paribas  supersedes the engagement letter previously signed
with Newman & Associates.

    As discussed  above,  management  believes  that the  Facility  provides for
sufficient borrowing capacity to fund USOL's operations,  as currently foreseen,
for the  next 12  months.  However,  the  ability  to  access  the  Facility  is
contingent upon meeting the financial  covenants.  At this time, it is uncertain
as to whether the Company will be in compliance  with such covenants  during the
next 12-month  period.  The Company has been advised by its  independent  public
accountants  that if  this  contingency  has  not  been  resolved  prior  to the
completion of their audit of the  Company's  financial  statements  for the year
ending December 31, 2000, their auditors'  report on those financial  statements
will be modified for this contingency.

     USOL maintains various cancelable and noncancelable  service agreements for
telecommunications  services with several LECs and one IXC that commit us 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.  We also have  agreements  with certain cable  providers to purchase


                                       17

<PAGE>

bulk cable signal at some of our  properties.  The agreements  provide for us to
pay fixed monthly  amounts  regardless of the number of customers we have at the
properties.  As of  September  30,  2000,  the  fixed  minimum  charges  for all
noncancelable agreements over the life of the agreements was $2,054,004.

     USOL is  currently  upgrading  its  headends  in order to expand  its cable
channel line-ups on existing properties. The cost of such upgrades,  expected to
be completed by March 31, 2001, is approximately $550,000.

    TRC.  As more  fully  described  in the  Notes  to the  Company's  Condensed
Consolidated  Financial  Statements included elsewhere in this Quarterly Report,
in August 2000 TRC received  $5,000,000 under a note payable agreement with NFS.
After  making a  required  repayment  under  the  Facility  to USOL and  funding
operations,  TRC had  approximately  $2,220,000 of cash on hand at September 30,
2000.

    The costs to TRC of performing its obligations  under the GMAC Agreement are
significant  and  will  require   additional   substantial   capital  resources.
Management believes that approximately $10-$15 million will be required over the
next 15 to 18 months in order to execute the TRC  business  plan.  Additionally,
inherent in the above mentioned TRC funding requirements, is the assumption that
TRC will be able to lease  approximately  $4 million in  equipment  and software
required to establish two colocation  facilities.  The colocation facilities are
required to establish  the network  necessary to executive its business plan and
fulfill its obligations under the GMAC Agreement. TRC will likely have to find a
guarantor(s) to successfully lease the colocation equipment. No assurance can be
given  that TRC will be able to lease  the  above  mentioned  equipment.  If TRC
cannot lease the colocation equipment,  it would delay TRC's ability to roll out
its products and services as well as support End Users under the GMAC Agreement.
Further,  if such colocation  equipment cannot be leased,  the amount of funding
TRC will require over the next 15 to 18 months may also increase.

    Accordingly,  TRC has engaged Newman & Associates, a subsidiary of GMACC, to
raise private equity to fund its business plan requirements. No assurance can be
given that TRC will be  successful in raising  sufficient  capital on acceptable
terms. If TRC does not obtain the necessary capital in a timely manner, it would
have a material adverse effect on TRC.  Management believes that current cash on
hand  will be  sufficient  to fund  TRC  operations  for only up to four or five
months.

Year 2000

    The  "Year  2000"  issue is a  general  term used to  describe  the  various
problems  that may have  resulted  from the  improper  processing  of dates  and
date-sensitive  calculations  by computers and other  machinery as the Year 2000
was  approached  and reached.  These  problems  arise from hardware and software
unable to distinguish  dates in the "2000's" from dates in the "1900's" and from
other sources, such as the use of special codes and conventions in software that
make use of a date field.  We did not  experience  any  significant  hardware or
software failures as a result of the Year 2000 date change.

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 December  1999,  the  Securities  and  Exchange  Commission  issued Staff
Accounting  Bulletin  No. 101 ("SAB  101"),  Revenue  Recognition  in  Financial
Statements.  SAB 101 provides guidance on applying generally accepted accounting
principles to revenue  recognition issues in financial  statements.  The Company
adopted SAB 101 as required in the first  quarter of 2000.  The  adoption of SAB
101 did not have a material impact on the Company's results of operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     Not applicable.


                                       18
<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

     None.

Item 5. Other Information

     None.

Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits

                                            EXHIBIT NO.          DESCRIPTION
                                            -----------          -----------

                                                  27           - Financial Data
                                                               Schedule

     (b) Reports

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


                                       19



                                   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/ Robert G. Solomon
                                                         -----------------------
                                                         Robert G. Solomon, CEO

Dated November 17, 2000