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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 March 31, 2002

                                       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 May 10, 2002 the Registrant had 20,206,260 shares of its no par value
Common Stock outstanding.

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<PAGE>

<TABLE>
<CAPTION>

                                                   INDEX

                                                                                                 Page
                                                                                                 ----
<S>            <C>         <C>                                                                    <C>
PART I
                           FINANCIAL INFORMATION

               Item 1.     Financial Statements
                           Condensed Consolidated Balance Sheet as of
                           March 31,                                                               3
                           2002....................................................
                           Condensed Consolidated Statements of Operations for the
                           Three Months Ended March 31, 2002 and 2001........................      4
                           Condensed Consolidated Statements of Cash Flows for the
                           Three Months Ended March 31, 2002 and 2001........................      5
                           Notes to Condensed Consolidated Financial Statements..............      6

               Item 2.     Management's Discussion and Analysis of Financial
                           Condition and Results of Operations................................    12
                           Forward-Looking Statements.........................................    12
                           General............................................................    12
                           Overview...........................................................    12
                           Three Months Ended March 31, 2002 Compared to
                           Three Months Ended March 31, 2001..................................    13
                           Liquidity and Capital Resources....................................    13
                           Preferred Stock Dividends..........................................    15
                           Adoption of New Accounting Standards...............................    15

               Item 3.     Quantitative and Qualitative Disclosures about
                           Market Risk........................................................    16

PART II                    OTHER INFORMATION

               Item 1.     Legal Proceedings..................................................    17

               Item 2.     Changes in Securities..............................................    17

               Item 3.     Defaults Upon Senior Securities....................................    17

               Item 4.     Submission of Matters to a Vote of Security Holders................    17

               Item 5.     Other Information..................................................    17

               Item 6.     Exhibits and Reports on Form 8-K...................................    17

               Signatures......................................................................   18

</TABLE>


                                       2

<PAGE>

<TABLE>
<CAPTION>

                               USOL HOLDINGS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (Unaudited)


                                                                             March 31,
                                ASSETS                                         2002
                                                                         -----------------
<S>                                                                      <C>
Current assets:
  Cash and cash equivalents......................................        $      1,147,505
  Restricted cash................................................               2,377,979
  Accounts receivable, net of allowance for doubtful
    accounts of $211,882.........................................                 863,076
  Other current assets...........................................                 592,955
  Assets held for sale...........................................               1,849,900
                                                                         ----------------
          Total current assets...................................               6,831,415

Property and equipment, net......................................              25,814,763

GOODWILL.........................................................              14,867,645

DEFERRED LOAN COSTS, net.........................................               1,571,559

Other assets.....................................................                 640,565
                                                                         ----------------

          Total assets...........................................        $     49,725,947
                                                                         ================


                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable...............................................        $        498,680
  Accrued liabilities............................................               2,718,067
  Current portion of capital lease obligations...................                 629,850
  Deferred revenue...............................................                 657,776
  Senior Credit Facility.........................................              14,850,254
                                                                         ----------------
          Total current liabilities..............................              19,354,627
                                                                         ----------------

CAPITAL LEASE OBLIGATIONS, less current portion..................                 415,326
                                                                         ----------------

OTHER LONG-TERM LIABILITIES......................................                  27,459
                                                                         ----------------

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST................................................                  79,553

STOCKHOLDERS' EQUITY:
  Convertible preferred stock, no par value; 5,000,000 shares
     authorized--
    Series A, 1,306,400 shares issued and outstanding;
       liquidation preference of $32,660,000.....................              17,086,095
    Series B, 155,000 shares issued and outstanding;
       liquidation preference of $3,875,000......................               2,027,208
  Common stock, no par value; 50,000,000 shares authorized,
       20,206,260 shares issued and outstanding..................              53,752,695
  Deferred compensation..........................................                 (27,805)
  Accumulated deficit............................................             (42,989,211)
                                                                         ----------------
          Total stockholders' equity.............................              29,884,982
                                                                         ----------------
          Total liabilities and stockholders' equity.............        $     49,725,947
                                                                         ================
</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
                                                                                    March 31,
                                                                         -----------------------------
                                                                              2002           2001
                                                                         -------------   -------------
<S>                                                                      <C>             <C>
REVENUE.............................................................     $   3,658,471   $   3,263,645
                                                                         -------------   -------------

EXPENSES:
  Operating.........................................................         1,845,763       1,918,088
  Selling, general and administrative...............................         2,769,732       2,555,214
  Depreciation and amortization.....................................           796,994       1,605,980
  Stock compensation expense........................................            20,854          99,192
                                                                         -------------   -------------
      Total operating expenses......................................         5,433,343       6,178,474
                                                                         -------------   -------------
      Loss from operations..........................................        (1,774,872)     (2,914,829)
                                                                         -------------   -------------

OTHER INCOME (EXPENSE):
  Interest, net.....................................................          (402,188)       (559,495)
  Other, net........................................................           (48,167)        (60,135)
  Gain (loss) on disposal of assets.................................               149          (1,976)
                                                                         -------------   -------------
                                                                              (450,206)       (621,606)
                                                                         -------------   -------------

      Loss before minority interest.................................        (2,225,078)     (3,536,435)

MINORITY INTEREST IN INCOME OF SUBSIDIARY...........................          (268,921)        (11,485)
                                                                         -------------   -------------

      Loss before cumulative effect of change in accounting
         principle..................................................        (2,503,999)     (3,547,920)
                                                                         -------------   -------------

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (Note 4)........        (3,093,111)             --
                                                                         -------------   -------------

      Net loss......................................................     $  (5,587,110)  $  (3,547,920)
                                                                         =============   =============

PREFERRED STOCK DIVIDENDS (see Note 5)..............................          (429,043)     (1,108,500)
                                                                         -------------   -------------

LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS............................     $  (6,016,153)  $  (4,656,420)
                                                                         =============   =============

PER SHARE AMOUNTS:..................................................
  Basic and diluted loss per common share...........................     $       (0.30)  $       (0.54)
                                                                         =============   =============
  Basic and diluted weighted average common shares..................        20,196,106       8,568,412
                                                                         =============   =============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       4

<PAGE>

<TABLE>
<CAPTION>


                               USOL HOLDINGS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                                                                                Three Months Ended
                                                                                                      March 31,
                                                                                         --------------------------------
                                                                                                2002              2001
                                                                                         ---------------  ---------------
<S>     <C>                                                                              <C>              <C>
        CASH FLOWS FROM OPERATING ACTIVITIES:
          Net loss..................................................................     $   (5,587,110)  $   (3,547,920)
          Adjustments to reconcile net loss to net cash used in
            operating activities--
              Depreciation and amortization.........................................            796,994        1,605,980
              Amortization of deferred loan costs...................................            103,624          128,663
              Stock compensation expense............................................             20,854           99,192
              (Gain) loss on disposal of assets.....................................               (149)           1,976
              Minority interest.....................................................            268,921           11,485
              Cumulative effect of change in accounting principle...................          3,093,111               --
              Changes in assets and liabilities--
                 Restricted cash....................................................         (2,377,979)              --
                 Accounts receivable................................................            280,977           83,241
                 Other assets.......................................................           (172,580)          65,320
                 Accounts payable and accrued liabilities...........................         (1,067,778)      (1,766,305)
                 Deferred revenue and other.........................................           (137,285)         (41,821)
                                                                                         --------------   --------------
                      Net cash used in operating activities.........................         (4,778,397)      (3,360,189)
                                                                                         --------------   --------------

        CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchases of property, equipment and other................................         (1,592,279)        (725,037)
          Proceeds from sales of assets.............................................          6,724,055               --
          Distribution to minority interest partner of USAC.........................           (231,564)              --
                                                                                         --------------   --------------
                      Net cash provided by (used in) investing activities...........          4,900,212         (725,037)
                                                                                         --------------   --------------

        CASH FLOWS FROM FINANCING ACTIVITIES:
          Principal payments under capital leases...................................           (148,999)        (135,398)
          Borrowings under Senior Credit Facility...................................          3,500,000        2,500,000
          Repayment of Senior Credit Facility.......................................         (4,346,075)              --
          Deferred loan costs.......................................................                 --          (30,000)
                                                                                         --------------   --------------
                      Net cash (used in) provided by financing activities...........           (995,074)       2,334,602
                                                                                         --------------   --------------
                      Net decrease in cash and cash equivalents.....................           (873,259)      (1,750,624)
        CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..............................          2,020,764        4,804,992
                                                                                         --------------   --------------
        CASH AND CASH EQUIVALENTS, END OF PERIOD....................................     $    1,147,505   $    3,054,368
                                                                                         ==============   ==============

        SUPPLEMENTAL DISLOSURE OF CASH FLOW INFORMATION:
            Cash paid for interest..................................................     $      514,458   $      328,095
            Dividends on preferred stock............................................            429,043        1,108,500
            Issuance of common stock as payment of preferred stock dividends........          1,099,980        1,110,000

</TABLE>


     See accompanying notes to condensed consolidated financial statements.


                                              5

<PAGE>


                               USOL HOLDINGS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2002



(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.  ("USAC")  (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  multi-family  apartment  complexes  and  condominiums  ("MDUs") in
Texas, Virginia,  Colorado and the Pacific Northwest.  The services are provided
to the tenants in accordance  with  long-term  right-of-entry  agreements  ("ROE
Agreements")  between USOL or its  partners and the property  owners under which
the  property  owners  receive  royalties  from the  telecommunication  revenues
generated from their  properties.  Tenants have 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
100% interest in TheResidentClub, Inc. ("TRC"). See Note 6 regarding the winding
down of TRC's operations  during 2001.  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 for the three months ended March
31,  2002  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
months ended March 31, 2002 are not  necessarily  indicative of the results that
may be expected for the year ending December 31, 2002.

(2)  Going Concern and Liquidity

     The Company has suffered  recurring  losses from  operations and net losses
since inception,  and it has not generated cash from operations since inception.
The Company's  operations  and its purchases of property and equipment to expand
its  subscriber  base have been funded  primarily from the Company's last 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
it has continued to borrow under the Facility  through March 31, 2002. Under the
Facility, the Company has the ability to borrow up to $25 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 borrowing base of approximately $16.6 million as of March 31, 2002,
of which the Company has  borrowed  approximately  $14.8  million.  The Company,
however,  did not have access to the remaining  available  borrowing  base as of
March 31,  2002,  as it was not in  compliance  with  certain  covenants  in the
Facility as of that date.  The holders of the  Facility  must waive the covenant
violations  in order for the Company to have access to the  remaining  available
borrowing base. In May 2002, the holders of the Facility  temporarily waived the
covenant  violations in order to allow the Company to borrow  additional  funds.
There can be no  assurance,  however,  that the holders will continue to provide
access to the Facility in order to fund  operations  with similar future waivers
or amendments,  or that the holders will not call the amount outstanding because
of the existing covenant violations.

                                       6

<PAGE>


     In addition to existing covenant violations,  based on current projections,
the Company is not expected to meet its minimum  revenue and operating cash flow
covenants during the remaining  quarters of 2002. If such quarterly minimums are
not met, the Company would continue to be in default of its covenants  under the
Facility and the holders of the Facility could call the amount outstanding under
the  Facility  and  prevent  additional  borrowings.  The  Company is  currently
dependent  upon  such  borrowings  to fund  operations  and to fund the  capital
expenditure  cost of increasing its passings  base,  which is needed to increase
subscribers  and revenues.  Management is currently  working with the holders of
the  Facility to amend the  covenants to resolve  both  existing  and  projected
covenant  violations.  The process has been delayed as a result of the Company's
current  negotiations  for a possible  acquisition  of a company that would also
require bank  approval and  amendment to the  Facility.  The Company  expects to
obtain a waiver and amend the covenants as part of the required approval of this
transaction;  however,  if the  Company is not  successful  in  completing  this
acquisition,  then management  expects to separately  proceed with obtaining the
necessary  waiver and  amendment to the  Facility.  There is no  assurance  that
management  will be able to obtain the waiver and amendment.  Management is also
continuing  to market the Company's  services in order to attain the  prescribed
growth  in   subscribers,   revenues  and  cash  flow,  and  they  are  pursuing
acquisitions.  There is no assurance,  however,  that the Company can adequately
market its services or complete  acquisitions  necessary to meet the existing or
revised covenants.  In addition,  the Company's ability to complete acquisitions
is  dependent  on its  ability  to  borrow  under the  Facility.  As a result of
existing and projected  covenant  violations,  the amount  outstanding under the
Facility as of March 31, 2002 has been classified as a current  liability in the
accompanying condensed consolidated balance sheet.

     The matters  discussed  above raise  substantial  doubt about the Company's
ability to continue as a going  concern.  The condensed  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

(3)  Sale of Assets to Grande

     On August 31,  2001,  the  Company  entered  into an  agreement  (the "Sale
Agreement")  with  Grande  Communications,  Inc.  ("Grande")  to sell all of the
Company's ROE  Agreements and certain  property and equipment  located in Austin
and San  Antonio,  Texas.  The Sale  Agreement  includes the  assignment  of ROE
Agreements  on 48 MDU  communities,  representing  13,057  apartment  units  and
property and equipment with a net book value of  approximately  $4.6 million and
associated  intangibles of approximately $10.9 million.  Grande is a Texas-based
broadband  service  provider  that  offers  retail  telecommunication   services
including  local  and  long-distance  telephone,   advanced  digital  video  and
high-speed  Internet  access over a single  "deep-fiber"  network to residential
customers  and  small  and  medium  enterprises.  Under  the  terms  of the Sale
Agreement, the Company will receive cash proceeds of approximately $13.4 million
or $1,024 per  apartment  unit.  The  proceeds  will be received as part of four
separate closings,  the first three which occurred during December 2001, January
2002 and March 2002, respectively,  with the remaining closing to occur no later
than  September  30, 2002.  Total  proceeds  received as part of the first three
closings  were  approximately  $4.8  million,  $4.3  million  and $2.4  million,
respectively.  As part of  obtaining  approval  of the Sale  Agreement  from the
holders of the Credit Facility, the holders have required the Company to pay the
Facility  the net proceeds  received  from  Grande.  As of March 31,  2002,  the
Company has made  payments  against the Facility of  approximately  $9.1 million
from the proceeds received from the first and second closings. The third closing
occurred  March 29,  2002,  and the $2.4  million in  proceeds  were paid to the
holders of the Facility subsequent to quarter end on April 1, 2002. Accordingly,
the  Company  has  reflected  the  $2.4  million  as  restricted   cash  on  the
accompanying condensed consolidated balance sheet.

     Upon entering into the Sale  Agreement,  the Company  reclassified  amounts
associated with these assets,  including  related  goodwill,  to assets held for
sale.  The Company  also  reviewed the  recoverability  of the net book value of
these  assets  based on the cash  proceeds to be received  according to the Sale
Agreement. Based on this analysis and accruing for expenses of $808,000 that the
Company will incur and are necessary to effect this sale, the Company determined
the net book  value of these  assets was in excess of the sales  price,  and the
Company  recorded a write down of  approximately  $2.9  million.  The  following
provides a summary of assets held for sale.


                                       7

<PAGE>

<TABLE>
<CAPTION>


                                                            Assets
                                               ---------------------------------
                                                Property and                          Accrued       Write Down on
                                                 Equipment          Goodwill        Liabilities         Assets
                                               ---------------   ---------------   ------------     --------------
<S>                                            <C>               <C>               <C>              <C>
August 31, 2001 net book value of assets
  held for sale before write down              $  4,586,126      $ 10,936,471      $         --     $         --
Fiscal year 2001 write down                      (1,103,240)       (1,041,731)         (808,000)      (2,952,971)
Assets sold and liabilities paid                 (1,355,800)       (3,447,871)          140,607               --
                                               ------------      ------------      ------------
Assets held for sale and accrued
  liabilities, December 31, 2001                  2,127,086         6,446,869          (667,333)              --
Assets sold and liabilities paid                 (1,589,489)       (5,134,566)          394,333               --
                                               ------------      ------------      ------------
Assets held for sale and accrued
  liabilities, March 31, 2002                  $    537,597      $  1,312,303      $   (273,000)    $         --
                                               ============      ============      ============

</TABLE>


(4)  Goodwill

     In June 2001, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting Standards ("SASB") No. 142, "Goodwill and Other Intangible
Assets." On January 1, 2002,  the Company  adopted SFAS No. 142,  which required
that goodwill and other intangible assets with indefinite useful lives no longer
be amortized,  but rather tested annually for  impairment.  The adoption of SFAS
No. 142 on January 1, 2002 resulted in a write down of goodwill of approximately
$3.1  million,  which has been  recorded as a  cumulative  effect of a change in
accounting  principle in the accompanying  condensed  consolidated  statement of
operations for the three months ended March 31, 2002

     The  Company's  goodwill  as of  January  1, 2002 is  attributable  to five
reporting units, which comprise  substantially all of the Company's consolidated
results of operations  and  financial  condition.  As of December 31, 2001,  the
carrying value of goodwill was $17,960,756.  The Company  recorded  amortization
expense of goodwill of $897,438  during the first quarter of 2001. Upon adoption
of SFAS No. 142, the Company ceased  amortization of goodwill on January 1, 2002
resulting in a decrease in amortization  expense of  approximately  $562,000 for
the three months ended March 31, 2002.

     The  following  table  reconciles  net loss for the quarter ended March 31,
2001 to its amounts adjusted to exclude goodwill amortization expense:

                                                  Three Months Ended
                                                    March 31, 2001
                                                  ------------------

Reported net loss                                    $ (3,547,920)
Deduct: goodwill amortization                             897,438
                                                     ------------
Adjusted net loss                                    $ (2,650,482)
                                                     ============

Basis and diluted loss per common share:
  Reported net loss                                     $(.54)
  Deduct: Goodwill amortization                           .10
                                                        -----
  Adjusted net loss                                     $(.44)
                                                        =====


     Prior to January 1, 2002, the Company tested goodwill for impairment  based
on the recoverability of carrying value using undiscounted  future cash flows in
accordance  with SFAS No. 121,  "Accounting  for the  Impairment  of  Long-Lived
Assets and for Long-Lived  Assets to be Disposed Of." The new criteria  provided
in SFAS No. 142  require  the testing of  impairment  based on fair  value.  For
initial  application of SFAS No. 142, the Company  performed a detailed analysis
of the fair value of goodwill as of January 1, 2002.

                                       8

<PAGE>


     The fair value of goodwill was determined  based upon the market value of a
recent  transaction  entered into by the Company,  which is discussed in Note 3.
The  aggregate  fair  value  exceeded  the  carrying  value for the  Dallas  and
Washington,  D.C.  reporting  units; the Houston,  Denver and Pacific  Northwest
reporting  units had a fair value less than the  carrying  value of the goodwill
related to those reporting units.  Accordingly,  a cumulative effect of a change
in accounting  principle of  approximately  $3.1 million was recorded during the
three months ended March 31, 2002.  The Company will test the carrying  value of
its goodwill annually,  or more frequently if events or changes in circumstances
indicate potential impairment.

(5)  Preferred Stock Restructuring

     On November 20, 2001, the Board of Directors  approved the restructuring of
the  Company's   Series  A  and  Series  B  convertible   preferred  stock.  The
restructuring  included amending certain dividend provisions of the Series A and
Series B convertible  preferred  stock in exchange for the issuance of 5,000,000
shares of the Company's common stock.  After receiving  shareholder  approval on
December 27, 2001, the amendment and exchanges of shares was declared  effective
on December 31, 2001. The amended convertible preferred stock provisions contain
terms that are  substantially  consistent with prior preferred stock  provisions
with the exception of a revision to the prior dividend rate of 12.0%,  which was
revised so that: no dividends are paid through  December 31, 2003;  beginning on
January 1, 2004 through  December 31, 2004  dividends  will be paid at a rate of
2.0%;  beginning on January 1, 2005 through  December 31, 2005 dividends will be
paid at a rate of 4.0%; and,  beginning on January 1, 2006 and beyond the stated
dividend rate will be 6.0%.

     As a result of this  restructuring,  the Company determined the fair market
value for the newly issued common stock and amended convertible  preferred stock
based on the average daily closing price of common stock on the Nasdaq  exchange
for  the  10-day  period   immediately   prior  to  the   announcement  of  this
restructuring and using comparative fair values of similar convertible preferred
securities  of public  companies,  respectively.  The combined fair value of the
newly issued common stock and amended convertible preferred stock was determined
to be $22.6 million, resulting in a discount of approximately $11.6 million from
the value of the preferred stock prior to the amendment of its terms. Based upon
the fair values recorded,  the amended convertible preferred stock will yield an
effective  dividend  rate of  9.0%  on the  carrying  value  of the  convertible
preferred stock.

     The  accompanying  condensed  consolidated  statement of operations for the
three months ended March 31, 2001,  reflects the preferred stock dividend at the
12% rate in effect  during that  period.  For the three  months  ended March 31,
2002,  the preferred  stock  dividend is reflected at the 9% effective  dividend
rate  discussed  above,  and the dividend  has been  recorded as a charge to the
accumulated  deficit with a corresponding  increase to the carrying value of the
Series A and Series B convertible  preferred stock. The Company will continue to
increase the carrying  value of its Series A and Series B convertible  preferred
stock until January 1, 2006,  at which time the stated  dividend rate will yield
the 9% effective dividend rate.

(6)  Winding Down of TRC

     TRC was in the business of developing  private labeled  Internet  solutions
for MDUs 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  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  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, at which time TRC received a payment of approximately $6.1 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


                                       9


<PAGE>


previously paid to TRC by GMACM. Of this amount,  approximately $5.6 million was
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.  In connection with the closing of the settlement in July
2001, TRC's operations have ceased, and TRC recorded a net gain of approximately
$5.9 million during the third quarter of fiscal 2001.

(7)  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. The weighted average interest rate for the three months ended March 31,
2002 and 2001 was 7.1% and 17.7%, respectively.  Including debt issue costs, the
Facility has a weighted average effective interest rate of 10.1% and 24% for the
three  months  ended March 31,  2002 and 2001,  respectively.  Interest  expense
incurred for the three  months  ended March 31, 2002 and 2001 was  approximately
$402,000  and  $559,000,   respectively.   The  Facility  is  collateralized  by
substantially all assets of the Company.

     The amount  outstanding  under the  Facility  as of March 31, 2002 has been
classified  as a current  liability  as the Company was not in  compliance  with
certain quarterly minimum financial  covenants,  including revenue and cash flow
restrictions. See further discussion of this matter in Note 2.

(8)  Segment Disclosure

     The Company's  operations  during 2002 were  classified into two reportable
business  segments:  Telecommunications  and TRC. The Company's  two  reportable
business  segments were managed  separately based on fundamental  differences in
their operations.

     Telecommunications    consists    principally   of   providing   integrated
telecommunications   services  including  local  and  long-distance   telephone,
enhanced  call  features  and cable  television  to  residents of MDUs 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 6).

     The operating results by business segment were as follows:

<TABLE>
<CAPTION>



                                                         Three Months Ended
                                                              March 31
                                          -------------------------------------------------
                                                Tele-
                                           communications         TRC         Consolidated
                                          -----------------  --------------   -------------
<S>                                          <C>              <C>            <C>
2002
Revenues............................         $  3,658,000     $        --    $  3,658,000
Segment net loss....................           (5,587,000)             --      (5,587,000)
Total assets........................           49,726,000              --      49,726,000
Capital expenditures................            1,592,000              --       1,592,000
Depreciation and amortization.......              797,000              --         797,000

2001
Revenues............................         $  2,854,000     $   410,000    $  3,264,000
Segment net loss....................           (3,004,000)       (544,000)     (3,548,000)
Total assets........................           52,280,000         773,000      59,053,000
Capital expenditures................              698,000          27,000         725,000
Depreciation and amortization.......            1,594,000          12,000       1,606,000

</TABLE>


                                       10

<PAGE>

(9)  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 MDUs 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  ROE
Agreements,  as well as other  telecommunications  property and  equipment.  The
purchase price was financed through a draw on the Facility.  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 in May 2001. The Company allocated the entire purchase price
to the  telecommunications  property and equipment that was acquired based on an
estimate of fair value which is subject to final adjustment.

     The following summarized unaudited pro forma financial  information assumes
that the SIMCOM  acquisition  happened 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 period indicated:

                                                    Pro Forma
                                                   Three Months
                                                      Ended
                                                  March 31, 2001
                                                  --------------

 Revenues.................................         $  3,770,254
  Net loss.................................          (3,604,704)
Loss attributable to common shareholders per
  share--
  Basic and diluted.......................         $      (0.51)

(10) 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
anti-dilutive:

                                                       Three Months Ended
                                                            March 31,
                                                 -------------------------------
                                                     2002               2001
                                                 -----------         -----------

Preferred stock shares as converted.......        18,267,500          18,458,000
Common stock warrants --
   Shares.................................         2,987,145           3,114,645
   Weighted average price.................       $      4.92         $      4.98
Stock options--
  Shares..................................         1,725,836           2,228,502
  Weighted average price..................       $      1.97         $      2.52



                                       11



<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 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

     Our  primary  objective  is to become the leading  provider  of  technology
solutions, principally bundled telecommunications and ancillary services, to the
largest MDU owners in the United States. We plan on accomplishing this objective
by: 1) creating  competitive bundled service offerings for USOL branded services
to be offered to residents of MDUs or 2) partnering with "cutting-edge"  service
providers who would  contract with USOL to market their services to residents of
MDUs.  In order to allow  residents  to obtain  these  services,  MDU owners are
required to enter into exclusive ROE Agreements  with the Company or in the case
of 2) above, the relevant service provider.

     We currently have ROE Agreements with 148 active  residential  developments
in seven  major  markets in the United  States,  including  properties  owned or
managed by many of the  leading  real  estate  companies  in the  United  States
including Equity Residential Properties Trust, Trammell Crow Residential, Gables
Residential  Trust,  Lincoln Property  Combined  Company and Walden  Residential
Properties,  Inc. among others.  Contract terms range from five to 20 years with
an average  remaining term of approximately 10 years. At March 31, 2002, we also
serviced 46 properties on behalf of other service providers.

     The table below summarizes active operational  passings and subscriber base
at March 31, 2002, for USOL's 136 properties:

<TABLE>
<CAPTION>


                                              Passings                                     Subscribers
                              ----------------------------------------------------------------------------------------
          Market               CATV      Telephone   Internet    Total       CATV      Telephone    Internet    Total
----------------------------  -------    ---------   --------   -------    --------    ---------    --------    ------

<S>                           <C>         <C>        <C>        <C>        <C>         <C>          <C>         <C>
Austin                          1,835          --        633      2,468         709          --          92        801
Dallas/Ft. Worth               10,510       4,961      7,205     22,676       5,709       2,137         668      8,514
Denver                          2,414       1,808      1,942      6,164       1,444         782         244      2,470
Houston                        11,872          --      7,256     19,128       5,567          --         413      5,980
Pacific Northwest               9,343       4,199      2,921     16,463       4,812       1,883         325      7,020
San Antonio                     1,898         945      1,701      4,544       1,138         326          62      1,526
Washington, D.C. Area             624         624        624      1,872         453         297          40        790
                              -------     -------     ------     ------      ------     -------       -----    -------
Totals                         38,496      12,537     22,282     73,315      19,832       5,425       1,844     27,101
                              =======     =======     ======     ======      ======     =======       =====    =======
</TABLE>


                                       12


<PAGE>



     The  passings  and  subscribers  above  located in Austin  and San  Antonio
represent residential developments that Grande has agreed to purchase as part of
the Sale  Agreement,  but Grande and the Company have not yet closed on the sale
of the properties.

Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001

     The  Company  reported  a  loss  attributable  to  common  shareholders  of
approximately  $6,016,000 for the three months ended March 31, 2002, compared to
a loss to common shareholders of approximately $4,656,000 for the same period of
the prior  year.  The  increase  in net loss is  primarily  attributable  to the
cumulative  effect of a change  in  accounting  principle  that  resulted  in an
approximately $3,100,000 write down of goodwill for the three months ended March
31,  2002.  See Note 4 in the  notes  to the  condensed  consolidated  financial
statements included elsewhere in this quarterly report for a complete discussion
of this write down. This write down was offset by an approximately  $1.1 million
reduction  in the loss  from  operations,  which  was the  result  of  increased
revenues and decreased operating expenses.

     Revenue increased  approximately $395,000 or 12% for the three months ended
March 31, 2002,  compared to the same period of the prior year.  The increase in
revenue  is  primarily  due to a 16%  increase  in  subscribers  for  all of the
Company's  services  between  quarters,  which is the  result  of the  Company's
expansion  of MDUs to  which it  provides  service  in  existing  markets.  This
increase was offset by approximately $410,000 in revenues recorded by TRC during
the  three-months  ended March 31,  2001.  With the wind down of TRC during 2001
(see  Note 6 in the notes to the  condensed  consolidated  financial  statements
included elsewhere in this quarterly  report),  no revenues were recorded during
2002.

     Operating  expense  decreased  approximately  $72,000  or 4% for the  three
months ended March 31, 2002,  compared to the same period of the prior year. The
decrease in operating  expense  between  periods is primarily due to the Company
leveraging  its  existing  operating  infrastructure  to service  its  increased
subscriber base without  requiring  operating  expense  increases.  As a result,
operating expense decreased to 51% of revenue for the three-month period in 2002
compared to 59% of revenue in the same period of the prior year.

     Selling,   general  and  administrative  expense  increased   approximately
$215,000 or 8% for the three months  ended March 31, 2002,  compared to the same
period of the prior year.  The increase in selling,  general and  administrative
expense was primarily the result of increases in marketing expenses required for
the  Company's  increased  passing and  subscriber  base.  Selling,  general and
administrative  expenses  decreased to 76% of revenue for the three-month period
in 2002 compared to 78% of revenue in the same period of the prior year.

     Depreciation and amortization expense decreased  approximately  $809,000 or
50% for the three months  ended March 31,  2002,  compared to the same period of
the prior year.  The decrease  resulted  primarily from the adoption of SFAS No.
142,  "Goodwill and Other Intangible  Assets," which eliminates the amortization
of goodwill.  See Note 4 in the notes to the  condensed  consolidated  financial
statements included elsewhere in this quarterly report for a complete discussion
of the impact of SFAS 142.  Depreciation  and  amortization  expense  was 22% of
revenue for the three months ended March 31, 2002 compared to 49% of revenue for
the same period of the prior year.

     The Company had interest expense, net of approximately  $402,000 during the
three months ended March 31, 2002 compared to approximately  $559,000 during the
same period of the prior year.  The decrease  between  periods is primarily  the
result  of the  repayment  of  approximately  $4,300,000  to the  Facility  from
proceeds  received as a result of the Company's  Sale Agreement with Grande (see
Note 3 in the notes to the condensed  consolidated financial statements included
elsewhere in this quarterly report),  which resulted in a lower outstanding debt
balance  and  reduced  interest  expense  during  the first  quarter  of 2002 as
compared to the same period in the prior year.

     The Company  reported  an  increase  in minority  interest in the income of
subsidiary  of  approximately  $257,000.  This was the  result  of the  proceeds
received from Grande  pursuant to the terms of the Sale Agreement (see Note 3 in
the notes to the condensed  consolidated financial statements included elsewhere
in this  quarterly  report)  for  properties  owned by the  Company's  50% owned
partnership  USAC, which resulted in a gain for the partnership.  The total gain
recorded by USAC for the three  months  ended  March 31, 2002 was  approximately
$591,000,  which  resulted in  approximately  $296,000  of minority  interest in
income of subsidiary for the Company.

                                       13

<PAGE>


Liquidity and Capital Resources

     At March 31, 2002, the Company had $1,147,505 of cash and cash  equivalents
compared  to  $2,020,764  at  December  31,  2001.  Net  cash  of  approximately
$4,778,000 was used in operating activities for the three months ended March 31,
2002,  which was a result of the Company's net loss for the period combined with
using  approximately  $3,500,000 of working  capital,  offset by noncash charges
related to depreciation,  amortization,  minority  interest,  stock compensation
expense and a cumulative effect of change in accounting principle.

     Net cash of approximately  $4,900,000 was provided by investing activities,
which was primarily the result the proceeds of approximately $6,724,000 received
by the Company pursuant to the terms of the Grande Sale Agreement. These amounts
were offset by  approximately  $1,592,000  used for  purchases  of property  and
equipment related to acquiring or building new passings and capital expenditures
for upgrading services to passings currently served.

     Net cash of approximately $995,000 was used in financing activities,  which
primarily  consisted of proceeds of  approximately  $3,500,000  from  borrowings
under the Facility offset by approximately  $149,000 in principal payments under
capital  leases  and  approximately  $4,346,000  which was  applied  toward  the
repayment of the Facility.

     The Company has suffered  recurring  losses from  operations and net losses
since inception,  and it has not generated cash from operations since inception.
The Company's  operations  and its purchases of property and equipment to expand
its  subscriber  base have been funded  primarily from the Company's last 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
it has continued to borrow under the Facility  through March 31, 2002. Under the
Facility, the Company has the ability to borrow up to $25 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 borrowing base of approximately $16.6 million as of March 31, 2002,
of which the Company has  borrowed  approximately  $14.8  million.  The Company,
however,  did not have access to the remaining  available  borrowing  base as of
March 31,  2002,  as it was not in  compliance  with  certain  covenants  in the
Facility as of that date.  The holders of the  Facility  must waive the covenant
violations  in order for the Company to have access to the  remaining  available
borrowing base. In May 2002, the holders of the Facility  temporarily waived the
covenant  violations in order to allow the Company to borrow  additional  funds.
There can be no  assurance,  however,  that the  holders  of the  Facility  will
continue  to provide  access to the  Facility in order to fund  operations  with
similar future  waivers or amendments to the Facility,  or that the holders will
not call the amount outstanding because of the existing covenant violations.

     In addition to existing covenant violations,  based on current projections,
the Company is not expected to meet its minimum  revenue and operating cash flow
covenants during the remaining  quarters of 2002. If such quarterly minimums are
not met, the Company would continue to be in default of its covenants  under the
Facility and the holders of the Facility could call the amount outstanding under
the  Facility  and  prevent  additional  borrowings.  The  Company is  currently
dependent  upon  such  borrowings  to fund  operations  and to fund the  capital
expenditure  cost of increasing its passings  base,  which is needed to increase
subscribers  and revenues.  Management is currently  working with the holders of
the  Facility to amend the  covenants to resolve  both  existing  and  projected
covenant  violations.  The process has been delayed as a result of the Company's
current  negotiations  for a possible  acquisition  of a company that would also
require bank  approval and  amendment to the  Facility.  The Company  expects to
obtain a waiver and amend the covenants as part of the required approval of this
transaction;  however,  if the  Company is not  successful  in  completing  this
acquisition,  then management  expects to separately  proceed with obtaining the
necessary  waiver and  amendment to the  Facility.  There is no  assurance  that
management  will be able to obtain the waiver and amendment.  Management is also
continuing  to market the Company's  services in order to attain the  prescribed
growth  in   subscribers,   revenues  and  cash  flow,  and  they  are  pursuing
acquisitions.  There is no assurance,  however,  that the Company can adequately
market its services or complete  acquisitions  necessary to meet the existing or
revised covenants.  In addition,  the Company's ability to complete acquisitions
is  dependent  on its  ability  to  borrow  under the  Facility.  As a result of
existing and projected  covenant  violations,  the amount  outstanding under the
Facility as of March 31, 2002 has been classified as a current  liability in the
accompanying condensed consolidated balance sheet.


                                       14

<PAGE>



     The matters  discussed  above raise  substantial  doubt about the Company's
ability to continue as a going  concern.  The condensed  consolidated  financial
statements  included  elsewhere  in this  quarterly  report do not  include  any
adjustments that might result from the outcome of this uncertainty.  The Company
has been advised by its independent  public accountants that, should the Company
be subject to an audit for the year ending  December 31, 2002,  their  auditors'
report on those  financial  statements  would be  modified  for the  uncertainty
regarding the Company's  ability to continue as a going concern if the Company's
existing covenant  violations are not waived and its covenants favorably amended
prior to the  completion  of their  audit,  so that the  Company  has  access to
adequate funding which is necessary to sustain its operations.

     We maintain 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 $10,000 per month and have terms  ranging from one year to
10 years.  We also have agreements with certain cable providers to purchase 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.  At March 31, 2002, the fixed minimum charges for all  noncancelable
agreements over the life of the agreements was approximately $1,867,000.

Preferred Stock Dividends

     On November 20, 2001, the Board of Directors  approved the restructuring of
the  Company's   Series  A  and  Series  B  convertible   preferred  stock.  The
restructuring  included amending certain dividend provisions of the Series A and
Series B convertible  preferred  stock in exchange for the issuance of 5,000,000
shares of the Company's common stock.  After receiving  shareholder  approval on
December 27, 2001, the amendment and exchanges of shares was declared  effective
on December 31, 2001. The amended convertible preferred stock provisions contain
terms that are  substantially  consistent with prior preferred stock  provisions
with the exception of a revision to the prior dividend rate of 12.0%,  which was
revised so that: no dividends are paid through  December 31, 2003;  beginning on
January 1, 2004 through  December 31, 2004  dividends  will be paid at a rate of
2.0%;  beginning on January 1, 2005 through  December 31, 2005 dividends will be
paid at a rate of 4.0%; and,  beginning on January 1, 2006 and beyond the stated
dividend rate will be 6.0%.

     As a result of this  restructuring,  the Company determined the fair market
value for the newly issued common stock and amended convertible  preferred stock
based on the average daily closing price of common stock on the Nasdaq  exchange
for  the  10-day  period   immediately   prior  to  the   announcement  of  this
restructuring and using comparative fair values of similar convertible preferred
securities  of public  companies,  respectively.  The combined fair value of the
newly issued common stock and amended convertible preferred stock was determined
to be $22.6 million, resulting in a discount of approximately $11.6 million from
the value of the preferred stock prior to the amendment of its terms. Based upon
the fair values recorded,  the amended convertible preferred stock will yield an
effective  dividend  rate of  9.0%  on the  carrying  value  of the  convertible
preferred stock.

     The condensed  consolidated  statement of  operations  for the three months
ended March 31, 2001 included  elsewhere in this quarterly report,  reflects the
preferred  stock dividend at the 12% rate in effect during that period.  For the
three months ended March 31, 2002, the preferred  stock dividend is reflected at
the 9%  effective  dividend  rate  discussed  above,  and the  dividend has been
recorded as a charge to the accumulated deficit with a corresponding increase to
the carrying value of the Series A and Series B convertible preferred stock. The
Company will continue to increase the carrying  value of its Series A and Series
B  convertible  preferred  stock until January 1, 2006, at which time the stated
dividend rate will yield the 9% effective dividend rate.

Adoption of New Accounting Standards

     In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No.  141,  "Business  Combinations"  and  SFAS  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.  On January 1, 2002, the Company adopted SFAS No. 142 which requires
that goodwill and other intangible assets with indefinite useful lives no longer
be amortized.  This statement also requires that within the first interim period
of adoption,  the intangible  assets with indefinite  lives should be tested for
impairment as of the date of adoption,  and that if any impairment  results,  it
should be recognized as a change in accounting principle. Additionally, SFAS No.
142 requires  that,  within six months of  adoption,  any  impairment  should be
measured  and  recorded  before  the end of the year of  adoption.  SFAS No. 142
requires  that any goodwill  impairment  loss  recognized as a result of initial
application  be reported in the first interim  period of adoption as a change in
accounting principle and that the income per share effect of the accounting


                                       15


<PAGE>


change be separately disclosed.  The adoption of SFAS No. 142 on January 1, 2002
resulted in a write down of goodwill of  approximately  $3.1 million.  The write
down has  been  recorded  as a  cumulative  effect  of a  change  in  accounting
principle in the condensed  consolidated  statements of operations for the three
months ended March 31, 2002 and Note 4 to the condensed  consolidated  financial
statements included elsewhere in this quarterly report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     Not applicable.



                                       16



<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 No.                     Description
                -----------     ------------------------------------------------
                  10.18         Fifth Amendment to Credit Agreement dated May 8,
                                2002 between the Company and the parties listed
                                in the first paragraph of this exhibit

     (b) Reports

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



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<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 May 15, 2002





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