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


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

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

                                   Form 10-QSB

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

                  For the quarterly period ended June 30, 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 August 10, 2000 the  Registrant  had  7,803,161  shares of its no par
value Common Stock outstanding.

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




<PAGE>

<TABLE>
<CAPTION>
                                      INDEX


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

                Item 1.                     Financial Statements--USOL Holdings, Inc.
                                            Condensed Consolidated Balance Sheets as of
                                            June 30, 2000 and December 31, 1999...............................      3
                                            Condensed Consolidated Statements of Operations for the
                                            Three and Six Months Ended June 30, 2000 and 1999.................      4
                                            Condensed Consolidated Statements of Cash Flows for the
                                            Six Months Ended June 30, 2000 and 1999...........................      5
                                            Notes to Condensed Consolidated Financial Statements..............      6

                                            Financial Statements--U.S. OnLine Communications, Inc.
                                            Condensed Consolidated Statement of Operations for the
                                            Three and Six Months Ended June 30, 1999..........................      9
                                            Condensed Consolidated Statement of Cash Flows for the Six
                                            Months Ended June 30, 1999........................................     10
                                            Notes to Condensed Consolidated Financial Statements..............     11

                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 June 30, 2000 Compared to
                                            Three Months Ended June 30, 1999...................................    12
                                            Six Months Ended June 30, 2000 Compared to
                                            Six Months Ended June 30, 1999.....................................    13
                                            Liquidity and Capital Resources....................................    13

                Item 3.                     Quantitative and Qualitative Disclosures about
                                            Market Risk........................................................    15

        PART II                             OTHER INFORMATION

                Item 1.                     Legal Proceedings..................................................    15

                Item 2.                     Changes in Securities..............................................    15

                Item 3.                     Defaults Upon Senior Securities....................................    15

                Item 4.                     Submission of Matters to a Vote of Security Holders................    15

                Item 5.                     Other Information..................................................    15

                Item 6.                     Exhibits and Reports on Form 8-K...................................    15

                Signatures......................................................................................   16

</TABLE>
                                       2

<PAGE>

<TABLE>
<CAPTION>

                               USOL HOLDINGS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                       June 30, 2000 and December 31, 1999

                                                                                                June 30,         December 31,
                                                                                                  2000              1999
                                                 ASSETS                                  -----------------  ------------------
                                                                                             (Unaudited)
<S>              <C>                                                                     <C>                <C>
                 Current assets:
                   Cash and cash equivalents......................................       $      3,570,881   $     13,637,511
                   Accounts receivable, net of allowance for doubtful
                     accounts of $272,151 and $146,721 at June 30, 2000
                     and December 31, 1999, respectively..........................                810,291            535,262
                   Notes receivable, related parties..............................                162,657            102,742
                   Supply inventory...............................................              1,129,562            818,837
                   Other current assets...........................................                510,746            221,609
                                                                                         ----------------   ----------------
                           Total current assets...................................              6,184,137         15,315,961

                 Property and equipment, net......................................             19,493,297         16,458,736

                 GOODWILL AND OTHER INTANGIBLES, net                                           35,977,585         35,159,285

                 DEFERRED LOAN COSTS, net                                                       1,670,150          1,780,903

                 Other assets.....................................................                345,166          4,210,588
                                                                                         ----------------   ----------------

                           Total assets...........................................       $     63,670,335   $     72,925,473
                                                                                         ================   ================

                                  LIABILITIES AND STOCKHOLDERS' EQUITY

                 Current liabilities:
                   Accounts payable...............................................       $        788,728   $      1,369,636
                   Accrued liabilities............................................              1,608,559          2,416,239
                   Current portion of capital lease obligations...................                527,317            601,784
                   Preferred dividends payable....................................              1,110,000          1,973,333
                   Deferred revenue...............................................                631,613            419,262
                   Related-party payable..........................................                294,857            294,857
                                                                                         ----------------   ----------------
                           Total current liabilities..............................              4,961,074          7,075,111
                                                                                         ----------------   ----------------

                 CAPITAL LEASE OBLIGATIONS, less current portion..................              1,500,033          1,749,818
                                                                                         ----------------   ----------------

                 OTHER LONG-TERM LIABILITIES......................................                 59,298             48,666
                                                                                         ----------------   ----------------

                 COMMITMENTS AND CONTINGENCIES

                 MINORITY INTEREST................................................                 77,942             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,
                        7,675,376 and 6,892,668 shares issued and outstanding
                        at June 30, 2000 and December 31, 1999, respectively......             41,428,647         36,735,911
                   Deferred compensation..........................................               (724,977)          (344,201)
                   Accumulated deficit............................................            (17,895,482)        (6,662,136)
                                                                                         ----------------   ----------------
                           Total stockholders' equity.............................             57,071,988         63,993,374
                                                                                         ----------------   ----------------
                           Total liabilities and stockholders' equity.............       $     63,670,335   $     72,925,473
                                                                                         ================   ================
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

<TABLE>
<CAPTION>


                               USOL HOLDINGS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                       For the Three and Six Months Ended
                             June 30, 2000 and 1999
                                    (Note 2)

                                                                      Three Months Ended                Six Months Ended
                                                                           June 30,                         June 30,
                                                                -----------------------------    -----------------------------
                                                                     2000            1999            2000             1999
                                                                -------------   -------------    --------------  -------------
<S>           <C>                                               <C>             <C>              <C>             <C>
              Revenue........................................   $   2,460,587   $          --    $    4,722,100  $          --
                                                                -------------   -------------    --------------  -------------

              Expenses:
                Operating....................................       2,475,122              --         4,198,956             --
                Selling, general and administrative..........       1,955,450              --         4,055,044             --
                Depreciation and amortization................       1,632,349              --         3,200,277             --
                Stock compensation expense...................         149,020         849,575           351,448        849,575
                Write-down of capitalized software costs.....              --              --         1,870,551             --
                                                                -------------   -------------    --------------  -------------
                        Total operating expenses.............       6,211,941         849,575        13,676,276        849,575
                                                                -------------   -------------    --------------  -------------
                        Loss from operations.................      (3,751,354)       (849,575)       (8,954,176)      (849,575)
                                                                -------------   -------------    --------------  -------------

              Other INCOME (EXPENSE):
                Interest, net................................         (19,240)             --            25,934             --
                Loss on disposal of assets...................         (56,144)             --           (56,144)            --
                                                                -------------   -------------    --------------  -------------
                                                                      (75,384)             --           (30,210)            --
                                                                -------------   -------------    --------------- -------------
              LOSS BEFORE MINORITY INTEREST..................      (3,826,738)       (849,575)       (8,984,386)      (849,575)

              MINORITY INTEREST IN INCOME OF
                SUBSIDIARY...................................         (15,986)             --           (28,960)            --
                                                                -------------   -------------   ---------------  -------------

                        Net loss.............................   $  (3,842,724)  $    (849,575)   $   (9,013,346) $    (849,575)
                                                                =============   =============    ==============  =============

              PREFERRED STOCK DIVIDENDS......................      (1,110,000)             --        (2,220,000)            --
                                                                -------------   -------------    --------------  -------------

              LOSS ATTRIBUTABLE TO COMMON
                SHAREHOLDERS.................................   $  (4,952,724)  $    (849,575)   $  (11,233,346) $    (849,575)
                                                                =============   =============    ==============  =============

              PER SHARE AMOUNTS:.............................
                Basic and diluted loss per common share......   $        (.65)  $       (2.00)   $        (1.50) $       (2.00)
                                                                =============   =============    ==============  =============
                Basic and diluted weighted average
                  common shares..............................       7,642,192         425,000         7,492,205        425,000
                                                                =============   =============    ==============  =============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

<TABLE>
<CAPTION>

                               USOL HOLDINGS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                            For the Six Months Ended
                             June 30, 2000 and 1999
                                    (Note 2)

                                                                                           2000            1999
                                                                                     -------------- --------------
<S>                  <C>                                                             <C>            <C>
                     Cash flows from operating activities:

                       Net loss.................................................     $  (9,013,346) $    (849,575)
                       Adjustments to reconcile net loss to net cash used in
                         operating activities--
                           Depreciation and amortization........................         3,200,277             --
                           Stock compensation expense...........................           351,448        849,575
                           Write-down of capitalized software costs.............         1,870,551             --
                           Minority interest....................................            28,960             --
                           Changes in assets and liabilities--
                              Accounts receivable...............................          (275,029)            --
                              Other assets......................................          (568,454)            --
                              Accounts payable and accrued liabilities..........        (1,388,587)            --
                              Deferred revenue and other........................           222,846             --
                                                                                     -------------  -------------
                                   Net cash used in operating activities........        (5,571,334)            --
                                                                                     -------------  -------------

                     Cash flows from investing activities:
                       Purchases of property, equipment and other...............        (4,969,334)            --
                       Loans to related parties, net............................           (57,258)            --
                                                                                     -------------  -------------
                                   Net cash used in investing activities........        (5,026,592)            --
                                                                                     -------------  -------------

                     Cash flows from financing activities:
                       Principal payments under capital leases..................          (324,252)            --
                       Proceeds from the exercise of stock options and
                         warrants...............................................           877,178             --
                       Deferred loan costs......................................           (21,630)            --
                       Proceeds from the sale of common stock...................                --            425
                                                                                     -------------  -------------
                                   Net cash provided by financing activities....           531,296            425
                                                                                     -------------  -------------
                                   Net decrease in cash and cash equivalents....       (10,066,630)           425
                     Cash and cash equivalents, beginning of period.............        13,637,511             --
                                                                                     -------------  -------------
                     Cash and cash equivalents, end of period...................     $   3,570,881  $         425
                                                                                     =============  =============

                     Supplemental DISCLOSURE OF cash flow information:
                         Cash paid for interest.................................     $     368,612  $          --
                         Deferred compensation..................................           540,000             --
                         Accretion of dividends on preferred stock..............         2,220,000             --
                         Issuance of common stock as payment of preferred
                            stock dividends.....................................         3,083,333             --

</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       5

<PAGE>


                               USOL HOLDINGS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 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 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  the  Company  believes  that the  disclosures
included herein are adequate to make the information presented not misleading. A
description of the Company's accounting policies and other financial information
is included in the audited financial statements as filed with the Securities and
Exchange Commission in the Company's Annual Report on Form 10-KSB.

     The financial statements and related notes as of June 30, 2000, and for the
three and six months  ended June 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 six months  ended June 30,  2000 are not  necessarily
indicative  of the results that may be expected for the year ended  December 31,
2000.

(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 wholly owns TheResidentClub,  Inc. ("TRC"), a business that
develops  Internet  platforms  that  provide a range of  private-labeled  online
solutions for MDU communities and other residential markets.

     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:

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

                                       6
<PAGE>

     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
("GMACCM").  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.

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

     The table below reflects the unaudited  combined results of US OnLine,  the
Company's  accounting  predecessor,  and FirstLink for the six months ended June
30, 1999:

<TABLE>
<CAPTION>

                                                  US OnLine           FirstLink
                                               (Preacquisition)      (Premerger)     Combined
                                               ----------------     ------------   -------------
<S>                                              <C>                <C>            <C>
Revenues..................................       $  2,831,079       $   676,415    $  3,507,494
Loss from operations......................         (1,650,765)         (803,926)     (2,454,691)
Loss before minority interest.............         (3,451,406)         (754,188)     (4,205,594)
Net loss..................................         (3,448,992)         (754,188)     (4,203,180)

</TABLE>

     Financial  statements  for the three and six months ended June 30, 2000 for
US OnLine are included elsewhere in this Form 10-QSB.

(3)  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.

(4)  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.


                                       7
<PAGE>

     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.

     The  operating  results by  business  segment  were as follows  for the six
months ended June 30, 2000:

<TABLE>
<CAPTION>

                                                USOL, Inc.                  TRC              Consolidated
                                               -------------           -------------         -------------
<S>                                            <C>                     <C>                   <C>
Revenues...........................            $  4,717,765            $      4,335          $  4,722,100
Segment net loss...................              (7,262,701)             (1,750,645)           (9,013,346)
Total assets.......................              59,754,676               3,915,659            63,670,335
Capital expenditures...............               4,076,594                 892,740             4,969,334
Depreciation and amortization......               3,025,995                 174,282             3,200,277

</TABLE>

(5)  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                  Six Months Ended
                                                          June 30,                           June 30,
                                                 ---------------------------        ---------------------------
                                                   2000              1999             2000              1999
                                                 ----------        ---------        ----------      -----------
<S>                                              <C>               <C>              <C>             <C>
Preferred stock shares as converted....          18,500,000               --        18,500,000               --
Common stock warrants..................           3,106,863               --         3,106,863               --
Stock options--
  Shares...............................           2,234,667               --         2,234,667               --
  Weighted average price...............               $2.21               --             $2.21               --

</TABLE>


                                       8





<PAGE>



<TABLE>
<CAPTION>


                        U.S. ONLINE COMMUNICATIONS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                       For the Three and Six Months Ended
                                  June 30, 1999

                                    (Note 2)

                                              Three Months    Six Months Ended
                                                  Ended       ----------------
                                              June 30, 1999    June 30, 1999
                                              -------------   ----------------
<S>                                            <C>              <C>
REVENUES...............................        $  1,420,164     $  2,831,079
                                               ------------     ------------

OPERATING EXPENSES:
   Operating...........................           1,052,216        2,100,739
   Selling, general and administrative.             763,623        1,554,807
   Depreciation and amortization.......             414,557          826,298
                                               ------------     ------------

         Total expenses................           2,230,396        4,481,844
                                               ------------     ------------

LOSS FROM OPERATIONS...................            (810,232)      (1,650,765)
                                               ------------     ------------

OTHER:

   Interest expense....................            (667,949)      (1,722,942)
   Other expense, net..................             (56,823)         (77,699)
                                               ------------     ------------

         Total other...................            (724,772)      (1,800,641)
                                               ------------     ------------

LOSS BEFORE MINORITY
  INTEREST.............................          (1,535,004)      (3,451,406)

MINORITY INTEREST IN
  (INCOME) LOSS OF
   SUBSIDIARY..........................                (237)           2,414
                                               ------------     ------------

         Net loss......................        $ (1,535,241)    $ (3,448,992)
                                               ============     ============

</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       9

<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.

                                       10

<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 Annual Report on Form 10-KSB.

     The financial  statements and related notes as of June 30, 1999 and for the
three and 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.

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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
Financial  Statements  and the Notes  thereto of the Company and US OnLine,  the
Company's predecessor, included elsewhere in this Quarterly Report.

Overview

     Through USOL, we provide 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 June 30, 2000,  the Company  passed  24,521
cable,  12,027  phone and 4,197  Internet  units in  Austin,  Dallas/Ft.  Worth,
Denver,  Houston,  Portland,  San Antonio and  Washington,  D.C. A passing is an
apartment unit capable of receiving a respective service. The Company had 16,056
cable, 5,111 telephone and 286 Internet subscribers,  respectively. 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 results for the six months ended June 30, 1999 are those of the
Company's predecessor, US OnLine.

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

     The Company  reported a net loss of  $4,952,724  for the three months ended
June 30, 2000  compared to a net loss of  $1,535,241  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  $1,040,423  or 73% for the three  months ended June 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  $1,422,906 or 135% for the three months ended
June 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 and wholesale  long-distance minutes, all associated with the
increase in revenue.  Operating  expense was 101% of revenue for the three-month
period in 2000 compared to 74% in the same period of the prior year.

     Selling,  general and administrative  expense increased  $1,191,827 or 156%
for the three  months  ended June 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,

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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.  Selling,  general and administrative  expense was 79% of revenue
for the three months ended June 30, 2000  compared to 54% for the same period of
the prior year.

     Depreciation and amortization  expense increased $1,217,792 or 294% for the
three months ended June 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 three months ended June 30, 2000
compared to 29% for the same period of the prior year.

     The Company had other expense of $75,384 during the three months ended June
30,  2000  compared to  $724,772  during the same period of the prior year.  The
decrease in other expense between periods is primarily the result of the Company
having certain interest  bearing debt  instruments  outstanding in 1999 that did
not exist in 2000.

Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999

     The Company reported a net loss of $9,013,346 for the six months ended June
30, 2000 compared to a net loss of  $3,448,992  for the same period of the prior
year.  The  increase in net 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)  and  increased
selling, general and administrative expenses.

     Revenue increased  $1,891,021 or 67% for the six months ended June 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  $2,098,217  or 100% for the six months ended
June 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 and wholesale  long-distance minutes, all associated with the
increase in  revenue.  Operating  expense  was 89% of revenue for the  six-month
period in 2000 compared to 74% in the same period of the prior year.

     Selling,  general and administrative  expense increased  $2,500,237 or 161%
for the six months ended June 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.  Selling,  general and administrative  expense was 86% of revenue
for the six months  ended June 30,  2000  compared to 55% for the same period of
the prior year.

     Depreciation and amortization  expense increased $2,373,979 or 287% for the
six months  ended June 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 68% of revenue for the six months  ended June 30, 2000
compared to 29% for the same period of the prior year.

     The Company had other  expense of $30,210  during the six months ended June
30, 2000  compared to $1,800,641  during the same period of the prior year.  The
reduction in other expense between periods is the combined result of the Company
having higher cash balances in 2000 when compared to 1999 (resulting in interest
income), as well as the Company having certain interest bearing debt instruments
in 1999 that were not outstanding in 2000.

Liquidity and Capital Resources

     At June 30, 2000, the Company had  $3,570,881 of cash and cash  equivalents
compared to $13,637,511 at December 31, 1999. Net cash of $5,571,334 was used in
operating  activities for the six months ended June 30, 2000, which was a result
of the Company's net loss for the period  combined with using  approximately  $2
million of working  capital,  offset by noncash charges related to depreciation,
amortization,  the  write-down of certain  capitalized  software costs and stock
compensation expense.

     Net  cash  of  $5,026,592  was  used in  investing  activities,  which  was
primarily the result of purchases of property and equipment related to acquiring
or building new passings.

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     Net cash of $531,296 was provided by financing activities,  which primarily
consisted of 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. We believe that our cash on hand and
available proceeds from the Company's credit facility (the "Facility") should be
sufficient  to fund the  activities  of USOL for at  least  the next 12  months.
However,  an  integral  part  of the  USOL  business  plan  is to  grow  through
acquisitions. Should 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%.  Borrowings  cannot take
place  under  the  Facility  until  we have  used all of the  proceeds  from the
preferred stock sale. We anticipate that this will occur in the third quarter of
2000.  The  Facility is secured by all of the assets of the  Company,  excluding
TRC. At June 30, 2000, there were no borrowings under the Facility.

     After the first draw under the  Facility,  USOL will be dependent  upon the
Facility  for its  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. 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.  Unless
alternative  financing sources were obtained,  the inability to borrow under the
Facility would have a material adverse effect on USOL.

     The Facility  limits the amount of funding that can be provided to TRC from
the preferred stock and Facility  proceeds to an aggregate of $2 million,  which
was temporarily  increased to $3 million through August 31, 2000. As of June 30,
2000,  we had  provided  approximately  $3.3  million of funding to TRC under an
intercompany note agreement resulting in a technical default under the Facility.
Accordingly, TRC will require funding from other sources in order to execute its
business plan.  The amount of funding  required to execute the TRC business plan
is still being determined and is dependent upon numerous  variables.  Management
expects  that  approximately  $20  million to $30  million  in  funding  will be
required  over the next 18 to 24 months to execute the TRC  business  plan.  Any
delays in raising the  required  funding will delay  executing  the TRC business
plan, which could adversely impact TRC and the Company.

     In August  2000,  we signed an  engagement  letter (the  "Agreement")  with
Newman & Associates,  Inc.  ("Newman"),  a subsidiary of GMACCM, to assist us in
obtaining  financing  for TRC and/or the  Company.  Pursuant to the terms of the
Agreement,  Newman will loan, subject to certain  conditions,  $5 million to TRC
under a secured promissory note (the "Note"). The Note bears interest at 13% per
annum,  payable  semi-annually  on February 3 and August 3. The Note  matures on
August 3, 2001 and is secured by the stock and assets of TRC.

     On August 4, 2000, Newman advanced $2.5 million under the Note. Pursuant to
the  terms of the  Facility,  we  utilized  approximately  $1.7  million  of the
proceeds to repay the intercompany  note between USOL and TRC, thus reducing the
amount  funded to TRC by USOL to $2 million.  As a result of the  repayment,  we
remedied the technical default under the Facility mentioned above,  bringing the
Company  into  compliance.  The ability to draw the  remaining  $2.5  million is
subject to satisfying certain conditions.

     We believe that the remaining  proceeds from the Note (assuming the ability
to fully draw) should be adequate to fund TRC's operations for at least the next
six months, at which time additional  financing will be required.  As previously
mentioned  above,  we have  retained  Newman  to  assist  us in  obtaining  such
financing.

     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 $25,000 per month and have terms  ranging from one year to
five 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.  As of  December  31,  1999,  the  fixed  minimum  charges  for  all
noncancelable agreements over the life of the agreements was $2,515,635.

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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.

                           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.


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                                   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 August 10, 2000

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