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


                                  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, 2001

                                       OR

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

               For the transition period from _______ to _________

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

                         Commission File Number 01-14271

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

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

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

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

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

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

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during the  preceding  12 months  (or for such  shorter  periods  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past (90) days. YES [X] NO [ ]

     As of April 30,  2001 the  Registrant  had  8,561,180  shares of its no par
value Common Stock outstanding.

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




<PAGE>

<TABLE>
<CAPTION>

                                      INDEX


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

                Item 1. Financial Statements--USOL Holdings, Inc.
                                            Condensed Consolidated Balance Sheet as of
                                            March 31, 20014...................................................      3
                                            Condensed Consolidated Statements of Operations for the
                                            Three Months Ended March 31, 2001 and 2000........................      4
                                            Condensed Consolidated Statements of Cash Flows for the
                                            Three Months Ended March 31, 2001 and 2000........................      5
                                            Notes to Condensed Consolidated Financial Statements..............      6

                                Item 2.     Management's Discussion and Analysis of Financial
                                            Condition and Results of Operations................................     9
                                            Forward-Looking Statements.........................................     9
                                            General............................................................     9
                                            Overview...........................................................     9
                                            Three Months Ended March 31, 2001 Compared to
                                            Three Months Ended March 31, 2000..................................     9
                                            Liquidity and Capital Resources....................................    10

                                Item 3.     Quantitative and Qualitative Disclosures about
                                            Market Risk........................................................    11

                  PART II                   OTHER INFORMATION

                                Item 1.     Legal Proceedings..................................................    12

                                Item 2.     Changes in Securities..............................................    12

                                Item 3.     Defaults Upon Senior Securities....................................    12

                                Item 4.     Submission of Matters to a Vote of Security Holders................    12

                                Item 5.     Other Information..................................................    12

                                Item 6.     Exhibits and Reports on Form 8-K...................................    12

                                Signatures......................................................................   13

</TABLE>
                                       2

<PAGE>


                               USOL HOLDINGS, INC.
<TABLE>
<CAPTION>

                      CONDENSED CONSOLIDATED BALANCE SHEET

                                   (Unaudited)


                                                                             March 31,
                                ASSETS                                        2001
                                                                             ---------
<S>                                                                      <C>
Current assets:
  Cash and cash equivalents......................................        $      3,054,368
  Accounts receivable, net of allowance for doubtful
    accounts of $273,974.........................................               1,154,013
  Notes receivable, related parties..............................                 169,681
  Other current assets...........................................                 245,787
                                                                         ----------------
          Total current assets...................................               4,623,849

Property and equipment, net......................................              21,081,808

GOODWILL AND OTHER INTANGIBLES, net..............................              31,220,149

DEFERRED LOAN COSTS, net.........................................               1,973,860

Other assets.....................................................                 153,550
                                                                         ----------------

          Total assets...........................................        $     59,053,216
                                                                         ================

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable...............................................        $        406,141
  Accrued liabilities............................................               2,099,833
  Current portion of capital lease obligations...................                 573,235
  Preferred dividends payable....................................               1,108,500
  Deferred revenue...............................................                 680,689
  Note payable including accrued interest, related party.........               5,413,472
                                                                         ----------------
          Total current liabilities..............................              10,281,870
                                                                         ----------------

CAPITAL LEASE OBLIGATIONS, less current portion..................               1,045,953
                                                                         ----------------

SENIOR CREDIT FACILITY...........................................               7,000,000
                                                                         ----------------

OTHER LONG-TERM LIABILITIES......................................                  59,096
                                                                         ----------------

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST................................................                 106,154
                                                                         ----------------

STOCKHOLDERS' EQUITY:
  Convertible preferred stock, no par value; 5,000,000 shares
     authorized--
    Series A, 1,321,640 shares issued and outstanding; liquidation
       preference of $33,041,000.................................              30,597,573
    Series B, 155,000 shares issued and outstanding;
       liquidation preference of $3,875,000......................               3,588,439
  Common stock, no par value; 50,000,000 shares authorized,
       8,561,180 shares issued and outstanding...................              45,059,181
  Deferred compensation..........................................                (352,711)
  Accumulated deficit............................................             (38,332,339)
                                                                         ----------------
          Total stockholders' equity.............................              40,560,143
                                                                         ----------------
          Total liabilities and stockholders' equity.............        $     59,053,216
                                                                         ================

</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,
                                                                         -----------------------------
                                                                              2001           2000
                                                                         -------------  --------------
<S>                                                                      <C>             <C>
Revenue.............................................................     $   3,263,645   $   2,261,513
                                                                         -------------   -------------

expenses:
  Operating.........................................................         1,918,088       1,723,834
  Selling, general and administrative...............................         2,555,214       2,099,594
  Depreciation and amortization.....................................         1,605,980       1,567,928
  Stock compensation expense........................................            99,192         202,428
  Write-down of capitalized software costs..........................                --       1,870,551
                                                                         -------------   -------------
          Total operating expenses..................................         6,178,474       7,464,335
                                                                         -------------   -------------
          Loss from operations......................................        (2,914,829)     (5,202,822)
                                                                         -------------   -------------

Other INCOME (EXPENSE):
  Interest, net.....................................................          (559,495)         45,174
  Other, net........................................................           (60,135)             --
  Loss on disposal of assets........................................            (1,976)             --
                                                                         -------------   -------------
                                                                              (621,606)         45,174
                                                                         -------------   -------------
LOSS BEFORE MINORITY INTEREST.......................................        (3,536,435)     (5,157,648)

MINORITY INTEREST IN INCOME OF SUBSIDIARY...........................           (11,485)        (12,975)
                                                                         -------------   -------------

          Net loss..................................................     $  (3,547,920)  $  (5,170,623)
                                                                         =============   =============

PREFERRED STOCK DIVIDENDS...........................................        (1,108,500)     (1,110,000)
                                                                         -------------   -------------

LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS............................     $  (4,656,420)  $  (6,280,623)
                                                                         =============   =============

PER SHARE AMOUNTS:..................................................
  Basic and diluted loss per common share...........................     $        (.54)  $        (.86)
                                                                         =============   =============
  Basic and diluted weighted average common shares..................         8,568,412       7,342,218
                                                                         =============   =============
</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,
                                                                       -----------------------------------
                                                                               2001             2000
                                                                       ----------------  -----------------
<S>     <C>                                                            <C>               <C>
        Cash flows from operating activities:
          Net loss.................................................    $   (3,547,920)   $   (5,170,623)
          Adjustments to reconcile net loss to net cash used in
            operating activities--
              Depreciation and amortization........................         1,605,980         1,567,928
              Amortization of deferred loan costs..................           128,663                --
              Stock compensation expense...........................            99,192           202,428
              Write-down of capitalized software costs.............                --         1,870,551
              Loss on disposal of assets...........................             1,976                --
              Minority interest....................................            11,485            12,975
              Changes in assets and liabilities--
                 Accounts receivable...............................            83,241          (176,888)
                 Other assets......................................            65,320          (446,666)
                 Accounts payable and accrued liabilities..........        (1,766,305)         (864,150)
                 Deferred revenue and other........................           (41,821)          131,814
                                                                       --------------    --------------
                      Net cash used in operating activities........        (3,360,189)       (2,872,631)
                                                                       --------------    --------------

        Cash flows from investing activities:
          Purchases of property, equipment and other...............          (725,037)       (3,185,956)
          Loans to related parties, net............................                --           (47,258)
                                                                       --------------    --------------
                      Net cash used in investing activities........          (725,037)       (3,233,214)
                                                                       --------------    --------------

        Cash flows from financing activities:
          Principal payments under capital leases..................          (135,398)         (194,841)
          Proceeds from the exercise of stock options and
            warrants...............................................                --           713,467
          Borrowings under Senior Credit Facility..................         2,500,000                --
          Deferred loan costs......................................           (30,000)          (11,052)
                                                                       --------------    --------------
                      Net cash provided by financing activities....         2,334,602           507,574
                                                                       --------------    --------------
                      Net decrease in cash and cash equivalents....        (1,750,624)       (5,598,271)
        Cash and cash equivalents, beginning of period.............         4,804,992        13,637,511
                                                                       --------------    --------------
        Cash and cash equivalents, end of period...................    $    3,054,368    $    8,039,240
                                                                       ==============    ==============

        Supplemental DISCLOSURE OF cash flow information:
            Cash paid for interest.................................    $      328,095    $      257,989
            Deferred compensation..................................                --           540,000
            Accretion of dividends on preferred stock..............         1,108,500         1,110,000
            Issuance of common stock as payment of preferred
               stock dividends.....................................         1,110,000         1,973,333

</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>


                               USOL HOLDINGS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2001



(1)  Business Organization and Basis of Presentation

     USOL Holdings, Inc. ("Holdings"),  an Oregon corporation,  its wholly owned
subsidiary USOL, Inc. and USOL, Inc.'s 50% owned  subsidiary,  U.S. Austin Cable
Association  I,  Ltd.  (collectively  referred  to herein  as  "USOL"),  provide
integrated  telecommunications services including local telephone, long distance
telephone,  enhanced  calling  features  and cable  television  to  residents of
multifamily  apartment  complexes and  condominiums  ("MDUs") in Texas,  Oregon,
Virginia and  Colorado.  The services are provided to the tenants in  accordance
with long-term  operating  agreements between USOL and the property owners under
which the property owners receive royalties from the telecommunication  revenues
generated from their  properties.  The  agreements  provide the tenants with the
option to use either USOL or the local telephone and long distance  carriers for
telephone  services.  Tenants  desiring to  subscribe to cable  television  must
utilize USOL. USOL also owns a 98% interest in TheResidentsClub, Inc. ("TRC"), a
business that develops  private  labeled  Internet  solutions for MDUs and other
residential markets.  Holdings, USOL and TRC are collectively referred to herein
as the Company.

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

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

(2)  Liquidity

     The Company has not generated cash from  operations  since  inception,  and
both its  operations  and  purchases  of property  and  equipment  to expand its
subscriber  base have been funded  primarily from its initial equity  financing,
which occurred in July 1999.  During the last half of 2000, the Company began to
borrow against its senior credit facility (the "Facility").  Under the Facility,
the Company has the ability to borrow up to $35 million until December 31, 2002,
subject to certain borrowing base  limitations,  at which time the Facility will
convert to a five-year term loan. The borrowing base is calculated as a multiple
of the  Company's  number  of  cable  and  telephone  subscribers,  with a total
available borrowing base of approximately $13.1 million as of March 31, 2001, of
which $7 million has been borrowed  against.  In order to fund  expected  future
cash resource  needs,  the Company must continue to increase its subscriber base
and revenues.  Accordingly, the Facility maintains certain operational covenants
requiring the Company to meet increasing quarterly minimums related to revenues,
operating  cash  flow and the  number  of MDU  units to which  the  Company  has
available  service.  Management  believes  that  the  Company  will  attain  the
prescribed  growth in  subscribers,  revenues  and cash flow  during each of the
remaining quarters of 2001 and through the first quarter of 2002, either through
organic sales growth or through  acquisitions,  and that it will have sufficient
cash resources available under the Facility to fund operations. While management
believes  that the Company  will attain the  prescribed  growth in  subscribers,
revenue and cash flow,  such growth is  dependent  on  completing  acquisitions.
Management believes that the Company's  acquisition strategy will be successful,
but there can be no  assurance  that such  acquisitions  will be  completed on a
timely  basis  in  order  to meet the  increasing  quarterly  minimums.  If such
quarterly minimums are not met, the Company would be in default of its covenants
under  the  Facility  and the  holder  of the  Facility  could  call the  amount
outstanding under the Facility and or prevent additional borrowings. In order to
establish  an adequate  subscriber  base that can provide  sufficient  cash from
operations  to satisfy the  quarterly  repayment  requirements  of the  Facility
beginning  in 2003 (see  Note 5),  management  believes  that the  Company  must
continue to invest in long-term  assets through  September 2002 through  organic
sales  growth  and  through  acquisitions.   Based  on  management's  estimates,
beginning in April 2002, the borrowing base availability  under the Facility may
become  inadequate to continue to fund the necessary  growth  expenditures.  The


                                       6

<PAGE>

Company  is  currently  evaluating  financing  alternatives  to  determine  what
resources  are available to continue to fund growth  opportunities  if resources
under the Facility become unavailable during 2002.

(3)  Business Activities of TRC

     TRC received formal  notification  from its sole customer,  GMAC Commercial
Mortgage  Company  ("GMACM"),  on April 10, 2001, that GMACM was terminating the
technology and services  agreement (the "GMAC  Agreement")  entered into between
TRC and GMACM in August 2000. As part of the  termination,  TRC believes amounts
are owed by GMACM to TRC, but GMACM and TRC are in  disagreement on the ultimate
amount owed. Since receiving  notice,  TRC and GMACM have continued to negotiate
the terms of the  termination  and have continued to discuss the  possibility of
entering into a new services agreement.

     At  March  31,  2001,  TRC had  approximately  $512,000  of  cash on  hand.
Management  believes that after making  operational staff and expense reductions
as a result of the termination of the GMAC Agreement,  current cash on hand will
be  sufficient to continue to fund future  operations  throughout  2001,  unless
TRC's  note  payable  (the "TRC Note  Payable")  to  Newman  Financial  Services
("NFS"), an entity related to GMACM, is not extended. At March 31, 2001, the TRC
Note Payable is approximately $5,413,000,  including interest, and is due on the
earlier of (a) the sale of TRC,  (b) the receipt of any proceeds by TRC due as a
result of the termination of the GMAC  Agreement,  or (c) August 3, 2001. In the
event any amounts  potentially  due as a result of the  termination  of the GMAC
Agreement  are not  received  by August  3,  2001,  NFS may elect to extend  the
maturity date,  however,  there is no assurance  regarding such matters.  If NFS
does not elect to extend the maturity date, or if the amounts potentially due to
TRC under the termination of the GMAC Agreement are not sufficient to repay NFS,
TRC does not currently have a revenue  source or sufficient  capital to continue
operations.  Holdings and USOL have not  guaranteed  any amounts of the TRC Note
Payable  and TRC's  remaining  liabilities  primarily  consist  of a  $2,000,000
intercompany note payable to USOL, which is eliminated in consolidation.  Should
TRC's operations  discontinue,  the Company's  financial position and results of
operations would not be negatively impacted.

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

(4)  Note Payable Related Party

     In August  2000,  NFS loaned $5 million to TRC under the TRC Note  Payable.
The TRC Note  Payable  matures on August 3, 2001 and bears  interest  at 13% per
annum.  The TRC Note Payable is secured by all of the common stock and assets of
TRC.  The TRC Note  Payable  provides  that  Holdings  and USOL have no monetary
liability upon an event of default.

     TRC failed to make a required  February 3, 2001 interest  payment.  NFS has
waived this  default and the TRC Note Payable has been amended such that the TRC
Note  Payable is now due on the earlier of (a) the sale of TRC,  (b) the receipt
of any proceeds by TRC due under any termination of the GMAC  Agreement,  or (c)
August 3, 2001.

    GMACM is a significant shareholder of the Company.

(5)  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.

(6)  Segment Disclosure

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

     Telecommunications    consists    principally   of   providing   integrated
telecommunications   services  including  telephone,  long  distance  telephone,
enhanced  call  features  and  cable  television  to  residents  of  multifamily
apartment complexes and condominiums in Texas, Oregon, Virginia and Colorado.


                                       7

<PAGE>

     TheResidentsClub   consists   principally   of   the   development   of   a
private-labeled Internet service portal for GMACM and related entities.

     The  operating  results by business  segment  were as follows for the three
months ended March 31, 2001:

                                                      Three Months Ended
                                                           March 31
                                       -----------------------------------------
                                         USOL, Inc.       TRC       Consolidated
                                       -------------  -----------   ------------
Revenues.........................      $  2,854,000   $  410,000    $ 3,264,000
Segment net loss.................        (3,004,000)    (544,000)    (3,548,000)
Total assets.....................        58,131,000      773,000     58,904,000
Capital expenditures.............           698,000       27,000        725,000
Depreciation and amortization....         1,594,000       12,000      1,606,000

(7)  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.

(8)  Warrants

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


                                       8
<PAGE>


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

Forward-Looking Statements

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

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

General

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

Overview

     The  Company  has  two  operating   subsidiaries.   USOL  provides  bundled
telecommunications   services  to  residents  of   multi-family   apartment  and
condominium  complexes.  Services provided include cable television and enhanced
local and long-distance telephone services and high-speed Internet access. As of
March 31,  2001,  the  Company  passed  27,586  cable,  12,309  phone and 13,764
Internet units in Austin,  Dallas/Ft.  Worth,  Denver,  Houston,  Portland,  San
Antonio and  Washington,  D.C.  compared to 23,430 cable,  11,343  telephone and
2,963  Internet  units at March 31, 2000. A passing is an apartment unit capable
of receiving a respective service. The Company had 16,804 cable, 5,589 telephone
and 1,000 Internet subscribers,  respectively,  as of March 31, 2001 compared to
15,429  cable,  4,633  phone and 177  Internet  subscribers  at March 31,  2000.
Through TRC, we develop Internet platforms to provide a range of private labeled
online solutions for MDU communities and other residential markets.

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

     The  Company  reported  a  loss  attributable  to  common  shareholders  of
approximately $4,656,000 for the three months ended March 31, 2001 compared to a
loss of  approximately  $6,281,000  for the same period of the prior  year.  The
decrease in net loss is attributable to increased revenues in 2001 combined with
the impact of a one-time charge recorded in 2000, offset by increased  operating
expense,  selling,  general and administrative  expenses and interest expense in
2001.

     Revenue  increased  approximately  $1,002,000  or 44% for the three  months
ended March 31, 2001 compared to the same period of the prior year. The increase
in revenue is primarily due to a 42% increase in operational passings,  which is
the result of the Company's  expansion of MDU's to which it provides  service in
existing  markets.  TRC,  which had  minimal  revenues  in 2000,  also  recorded
approximately $410,000 of revenues earned as part of the GMAC Agreement.

     Operating  expense  increased  approximately  $194,000 or 11% for the three
months ended March 31, 2001  compared to the same period of the prior year.  The
increase in operating  expense  between  periods is  primarily  due to personnel
increases and increased  cable  programming,  leased local  telephony  circuits,
wholesale  long-distance  minutes all associated  with the increases in passings
and subscribers. Operating expense was 59% of revenue for the three-month period
in 2001 compared to 76% in the same period of the prior year.

     Selling,   general  and  administrative  expense  increased   approximately
$456,000 or 22% for the three months  ended March 31, 2001  compared to the same
period of the prior year.  The increase in selling,  general and  administrative
expense was primarily the result of increased  sales and marketing  expenses and
increased  call center costs all  associated  with the increases in passings and
subscribers.  Selling, general and administrative expense was 78% of revenue for
the three months ended March 31, 2001 compared to 93% for the same period of the
prior year.

                                       9

<PAGE>


     Depreciation and amortization expense increased approximately $38,000 or 2%
for the three  months  ended March 31,  2001  compared to the same period of the
prior year. The change in depreciation  and  amortization  expense resulted from
increases in property and equipment  associated with new properties to which the
Company  provides  service in 2001,  offset by decreased  goodwill  amortization
resulting  from the  write-off of TRC's  goodwill  during the fourth  quarter of
2000.  Depreciation  and  amortization  expense was 49% of revenue for the three
months  ended  March 31,  2001  compared to 69% for the same period of the prior
year.

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

     The Company had other  expense of $621,000  during the three  months  ended
March 31, 2001 compared to other income of $45,000 during the same period of the
prior year.  The increase in other  expense  between  periods is  primarily  the
result of interest and fees  associated  with the Facility  compared to interest
income in 2000.

Liquidity and Capital Resources

     At March 31, 2001,  the Company had  approximately  $3,054,000  of cash and
cash  equivalents  compared to  $4,804,992  at December  31,  2000.  Net cash of
approximately  $3,360,000 was used in operating  activities for the three months
ended  March 31,  2001,  which was a result  of the  Company's  net loss for the
period combined with using approximately  $1,660,000 of working capital,  offset
by  noncash  charges  related  to  depreciation,  amortization,  loss  on  asset
disposals  and stock  compensation  expense.  TRC  accounted  for  approximately
$775,000 of the cash used in operating activities.

     Net cash of approximately $725,000 was used in investing activities,  which
was  primarily  the result of  purchases of property  and  equipment  related to
acquiring  or building new  passings.  Of this  amount,  TRC used  approximately
$27,000, primarily for web site and data base development.

     Net cash of approximately  $2,335,000 was provided by financing activities,
which primarily  consisted of proceeds from borrowings under the Facility offset
by principal payments under capital leases.

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

     USOL. USOL has approximately  $2,543,000 of cash on hand on March 31, 2001.
We believe that our cash on hand and  available  proceeds from the Facility will
be  sufficient  to fund the  activities of USOL for at least the next 12 months.
However,  an  integral  part  of the  USOL  business  plan  is to  grow  through
acquisitions.  Should USOL find acquisition opportunities that are either larger
in magnitude or in number than our business plan  anticipates,  then  additional
funding may be required sooner than planned.

     USOL is dependent on the Facility for its liquidity requirements. Under the
Facility,  USOL has the ability to borrow up to $35 million  until  December 31,
2002, subject to certain borrowing base limitations,  at which time the Facility
will convert to a five-year  term loan.  The  borrowing  base is calculated as a
multiple  of  USOL's  number of cable and  telephone  subscribers,  with a total
available borrowing base of approximately $13.1 million as of March 31, 2001, of
which $7 million has been borrowed  against.  In order to fund  expected  future
cash  resource  needs,  USOL must continue to increase its  subscriber  base and
revenues.  Accordingly,  the Facility  maintains certain  operational  covenants
requiring  USOL to meet  increasing  quarterly  minimums  related  to  revenues,
operating  cash flow and the  number of MDU  units to which  USOL has  available
service.  We believe that USOL will attain the prescribed growth in subscribers,
revenues and cash flow during each of the remaining quarters of 2001 and through
the first  quarter  of 2002,  either  through  organic  sales  growth or through
acquisitions,  and that it will have sufficient  cash resources  available under
the  Facility  to fund  operations.  While we believe  that USOL will attain the
prescribed  growth  in  subscribers,  revenue  and cash  flow,  such  growth  is
dependent  on  completing  acquisitions.  We  believe  that  USOL's  acquisition
strategy  will  be  successful,   but  there  can  be  no  assurance  that  such
acquisitions will be completed on a timely basis in order to meet the increasing
quarterly  minimums.  If such  quarterly  minimums are not met, USOL would be in
default of its  covenants  under the  Facility  and the holders of the  Facility
could call the amount  outstanding under the Facility and or prevent  additional
borrowings.  In order to establish an adequate  subscriber base that can provide
sufficient cash from operations to satisfy the quarterly repayment  requirements
of the  Facility  beginning  in 2003  (see Note 5),  we  believe  that USOL must
continue to invest in long-term  assets through  September 2002 through  organic
sales  growth and through  acquisitions.  Based on our  estimates,  beginning in
April 2002,  the  borrowing  base  availability  under the  Facility  may become

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<PAGE>

inadequate  to  continue  to fund  the  necessary  growth  expenditures.  We are
currently  evaluating  financing  alternatives  to determine  what resources are
available  to continue  to fund  growth  opportunities  if  resources  under the
Facility become unavailable during 2002.

     USOL maintains various cancelable and noncancelable  service agreements for
telecommunications  services  with  several LECs and one IXC that commit USOL to
the LECs' and IXCs' services.  These agreements  require minimum monthly charges
ranging  from $340 to $25,000 per month and have terms  ranging from one year to
five years.  USOL also has agreements  with certain cable  providers to purchase
bulk cable signal at some of its properties.  The agreements provide for USOL to
pay fixed  monthly  amounts  regardless of the number of customers it has at the
properties.  At March 31, 2001, the fixed minimum charges for all  noncancelable
agreements  over  the  life  of  the  agreements  was  approximately   $506,000.
Additionally,  USOL is planning on upgrading existing head-ends to give USOL the
ability to  provide  digital  cable to  selected  properties  during  2001.  The
anticipated costs of such upgrades are approximately $617,000.

     TRC. At March 31, 2001, TRC had approximately  $512,000 of cash on hand. We
believe that after making  operational staff and expense  reductions as a result
of the  termination  of the  GMAC  Agreement,  current  cash  on  hand  will  be
sufficient to continue to fund future operations throughout 2001, unless the TRC
Note Payable to NFS is not extended.  At March 31, 2001, the TRC Note Payable is
approximately  $5,413,000  and is due on the earlier of (a) the sale of TRC, (b)
the  receipt of any  proceeds by TRC due as a result of the  termination  of the
GMAC Agreement,  or (c) August 3, 2001. In the event any amounts potentially due
as a result of the  termination of the GMAC Agreement are not received by August
3,  2001,  NFS may elect to  extend  the  maturity  date,  however,  there is no
assurance regarding such matters.

     If TRC is not able to  negotiate  a new  agreement  with  GMACM or  another
entity,  if NFS does not elect to extend the  maturity  date,  or if the amounts
potentially  due to TRC  under the  termination  of the GMAC  Agreement  are not
sufficient  to repay  NFS,  TRC will not have a  revenue  source  or  sufficient
capital  to  continue  operations.  Holdings  and USOL have not  guaranteed  any
amounts  of the TRC Note  Payable  and  TRC's  remaining  liabilities  primarily
consist of a $2,000,000  intercompany  note payable to USOL, which is eliminated
in consolidation.  Should TRC's operations discontinue,  the Company's financial
position and results of operations would not be negatively impacted.

Preferred Stock Dividends

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

Adoption of New Accounting Standards

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

    Not applicable.

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<PAGE>


                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 2. Changes in Securities

     Not applicable.

Item 3. Defaults Upon Senior Securities

     None.

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

     None.

Item 5. Other Information

     None.

Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits

         Exhibit Number            Description              Filed
         --------------            -----------              -----

          3.1(ii)             Amendment to Bylaws         Herewith

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

Dated May 15, 2001

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