<PAGE>

                                   FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   (MARK ONE)

      [X] QUARTERLY REPORT PURUANT 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 TRASITION PERIOD FROM ______ TO ______

                         COMMISSION FILE NUMBER: 0-31193

                                 USIP.COM, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


         Utah                                      16-1583162
         ----                                      ----------
      (STATE OR OTHER JURISDICTION              (I.R.S. EMPLOYER
      INCORPORATION OR ORGANIZATION)            IDENTIFICATION NO.)

                      7325 OSWEGO ROAD, LIVERPOOL, NY 13090

               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                  REGISTRANT'S TELEPHONE NUMBER: (315) 451-7515

Indicate by check mark whether the Registrant has (1) 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 period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

As of May 11, 2001, there were 17,619,388 shares of Registrant's Common Stock
outstanding.


                                       2
<PAGE>

                         USIP.COM, INC. AND SUBSIDIARIES
                                   FORM 10-QSB

                                TABLE OF CONTENTS


         PART I   FINANCIAL INFORMATION


<TABLE>
<S>                                                                          <C>
         ITEM 1

         Financial Statements:

         Consolidated Balance Sheet                                          4

         Consolidated Statement of Operations                                5

         Consolidated Statement of Cash Flows                                6

         Notes to Consolidated Financial Statements                          7

         ITEM 2

         Managements Discussion and Analysis of Financial Condition          10
         and Results of Operation.

         ITEM 3

         Quantitative and Qualitative Disclosure About Market Risk           13

         PART II  OTHER INFORMATION

         ITEM 1

         Legal Proceedings                                                   14

         ITEM 6

         Exhibits and Reports on form 8-K                                    14

         SIGNATURES                                                          15
</TABLE>


                                       3
<PAGE>

PART I   FINANCIAL INFORMATION
ITEM 1  FINANCIAL STATEMENTS

                         USIP.COM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                        (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                                     March 31       December 31
                                                                       2001            2000
                                                                       ----            -----
                                                                    Unaudited         Audited
<S>                                                           <C>                    <C>
ASSETS

CURRENT ASSETS:
Cash                                                          $        39,119          117,619
Commission Receivable                                                 163,702          166,033
Inventory                                                              35,620           36,250
Prepaid Insurance                                                      11,084                -
                                                              --------------------------------
                  TOTAL CURRENT ASSETS                                249,525          319,902

FIXED ASSETS:
Telephone and Office Equipment                                      1,896,525        1,846,572
Vehicles                                                               74,542           74,542
                                                              --------------------------------
Less: Accumulated Depreciation                                       (332,356)        (310,711)
         Net Fixed Assets                                     $     1,638,711        1,610,403

                  TOTAL ASSETS                                $     1,888,236        1,930,305
                                                              ================================
LIABILITIES & STOCKHOLDER'S EQUITY

CURRENT LIABILITES
Accounts Payable                                              $       231,148          203,809
Line of Credit                                                        118,886           98,886
Accrued Payroll & Payroll Taxes                                        14,910            5,545
Accrued State Gross Receipts Taxes                                     14,551           20,642
Other Accrued Expenses                                                  5,250            1,508
Current Portion of Long-Term Debt                                       4,850           13,990
                                                              --------------------------------
                  TOTAL CURRENT LIABILITIES                   $       389,595          344,180

LONG-TERM LIABILITIES
Long-Term Debt, Less Current Portion                                   44,999           39,238
                                                              --------------------------------
                  TOTAL LIABILITIES                           $       434,594          383,418

STOCKHOLDERS'S EQUITY
Common Stock, $.01 par value  25,000,000                      $       176,194          176,194
  Shares authorized, 17,619,388 shares
  issued and outstanding
Addition Paid In Capital                                            1,378,673        1,382,358
Retained Earnings                                                    (101,225)         (11,665)
                                                              --------------------------------
                  TOTAL STOCKHOLDERS' EQUITY                  $     1,453,642        1,546,887

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                      $     1,888,236        1,930,305
                                                              ================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these unaudited financial statements


                                       4
<PAGE>

                         USIP.COM, INC. AND SUDSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                                                            March 31,
                                                                  2001                 2000
                                                                  ----                 ----
                                                                Unaudited             Audited
<S>                                                           <C>                      <C>
Commissions                                                   $      49,031             38,510
Coin Collections                                                    118,588             94,600
Dial Around                                                          75,244             58,000
Phone Card Sales                                                     24,996             21,965
Equipment Sales                                                      10,477             13,210
Service & Repair Sales                                               18,633              1,415
                                                              ---------------------------------
         TOTAL SALES                                          $     296,969            227,700

Telecommunication Costs                                       $     189,309             44,007
Commissions                                                           9,062             23,757
Repairs and Service Supplies                                          1,583              7,064
Other Direct Expenses - Travel                                        7,400              9,956
Depreciation                                                         26,361             13,315
Contractor Fees                                                      21,653             13,773
Bad Debt Expense                                                       -                64,611
                                                              ---------------------------------
         TOTAL COST OF SALES                                  $     255,368            176,483
                                                              ---------------------------------
                  GROSS PROFT                                 $      41,601             51,217

Officers' Salaries                                            $      14,760             14,649
Salaries & Wages                                                     49,286             32,542
Payroll Taxes                                                         7,442              5,525
Insurance                                                            14,856             15,454
Office Supplies                                                       9,534              2,156
Telephones                                                            8,445               -
Utilities                                                             4,015              1,031
Vehicle Expenses                                                      5,835              6,876
Rent                                                                 18,330             15,179
Professional Fees                                                     5,000                136
Outside Services                                                       -                 2,025
                                                              ---------------------------------
         TOTAL OPERATING EXPENSES                             $     137,503             95,573
                                                              ---------------------------------
         OPERATING INCOME(LOSS)                               $     (95,902)           (44,356)

Other Income(Expense)                                         $      (2,102)              (786)
NY State Gross  Receipt Tax                                            (425)              -
Other/Interest                                                          202              3,561
                                                              ---------------------------------
         TOTAL OTHER INCOME                                   $      (2,325)             2,775
                                                              ---------------------------------
                  NET INCOME (LOSS)                           $     (98,227)           (41,581)
                                                              =================================
Weighted Common Shares Outstanding                               17,619,388          8,863,888
Net Loss per Common Share                                     $        -                  -
                                                              =================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these unaudited financial statements


                                       5
<PAGE>

                         USIP.COM, INC. AND SUDSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                            March 31,
                                                                   2001                2000
                                                                   ----                ----
                                                                Unaudited             Audited

<S>                                                           <C>                      <C>
Cash Flows From Operating Activities:
  Net (Loss)                                                  $     (98,227)           (41,581)
  Adjustments to reconcile net (loss) to net
    Cash provided (used) by operating activities:
    Depreciation                                                     26,361             13,315
    Bad Debt Expense                                                   -                64,611
    (Increase) Decrease in Commissions & Sales Receivables            1,935            (26,696)
    (Increase) in Inventory                                            -               (43,629)
    (Increase) Decrease in Prepaid Insurance                        (11,962)             5,233
    Decrease in Due From Related Parties                               -                 3,775
    Increase Accounts Payable                                        27,734             19,218
    Increase (Decrease) in Accrued Expenses & Wages                  13,706             (6,915)
    (Decrease) in Accrued State Gross Receipts Taxes                   -                (4,200)
                                                              ---------------------------------
         Net Cash (used) by Operating Activities              $     (40,453)           (16,869)
                                                              ---------------------------------
Cash Flows From Investing Activities:
    Acquisitions of Equipment                                 $     (54,668)              -
    Stockholder Capital Contribution                                            -       10,000
                                                              ---------------------------------
         Net Cash Provided by Investing Activities            $     (54,668)            10,000
                                                              ---------------------------------
Cash Flows From Financing Activities:
    Proceeds Received from Line of Credit                     $      20,000               -
    Principal Payments on Long-term Debt                             (3,379)              -
    Repayment on Line of Credit Borrowings                             -                   (50)
                                                              ---------------------------------
        Net Cash (used) by Financing Activities               $      16,621)               (50)
                                                              ---------------------------------

Net Increase in Cash                                          $     (78,500)            (6,919)

Cash - Beginning of Period                                          117,619              9,413
                                                              ---------------------------------
Cash - End of Period                                          $      39,119              2,494
                                                              =================================
Supplemental Disclosures of Cash Flow Information
   Cash Paid During Period For:                               $       2,102                480
      Interest                                                $         425              4,200
      Income Tax
</TABLE>


The accompanying Notes to Consolidated Financial Statements are an integral part
of these unaudited financial statements


                                       6
<PAGE>

                         USIP.COM, INC AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



1. GENERAL


ORGANIZATION

USIP.COM, Inc., (the "Company" or "USIP" or "We"), was in incorporated under the
laws of the State of Utah on April 6, 1978 as Derby Farms, Inc. On January 19,
1982, the Articles of Incorporation were amended and the name of the company was
changed to Commerce Oil of Kentucky, Inc. ("Commerce Oil"). On December 31, 1983
Commerce Oil's Certificate of Incorporation was suspended for failure to file an
annual report. On December 20, 1984 Commerce Oil filed a petition for relief
under Chapter Eleven of the United States Bankruptcy Code. The case was filed in
the United States Bankruptcy Court, Middle District of Tennessee. The case was
converted to Chapter Seven on July 1, 1986. On September 1, 1992 the court
signed a Final Decree, and the case was closed. The company's Certificate of
Incorporation was reinstated on June 18, 1992 by the Utah Department of
Commerce, Division of Corporation. On January 31, 2000, Datone Communications,
Inc. ("Datone"), a New York corporation and independent payphone provider
("IPP") merged into Commerce Oil. All of Datone shares were retired. Datone
shareholders received 7,268,388 restricted shares of common stock for its stock.
On February 4, 2000 the Article of Incorporation were amended and the name of
the company was changed to USIP.Com, Inc.

On April 29, 2000 we purchased all shares of NB Payphones, Ltd. ("NB"), the
owner of 466 payphones in Pennsylvania and Cointel Leasing, Inc., ("Cointel"),
the owner of 45 payphones in Syracuse, New York. On August 30, 2000, we
incorporated Datone, Inc., as a Delaware corporation. Datone is a wholly owned
subsidiary.

On February 1, 2001, we purchased 91 payphones and associated equipment of
Chautauqua & Erie Telephone Corporation for the sum of $50,050.00. This purchase
provided geographical continuity between the New York payphone base and the
Pennsylvania payphone base.

As of March 31, 2001, we owned and operated a network of approximately 1,669
payphones in three states. Our installed payphone base generates revenue through
coin calls (local and long-distance), non-coin calls (calling card, credit card,
collect, and third party billed calls using our preselected operator service).


BASIS OF PRESENTATION

The unaudited consolidated financial statements of USIP.Com, Inc. (the
"Company"), include the accounts of the Company and its two wholly owned
subsidiaries: Datone Inc. and NB Payphones Ltd. All significant inter-company
amounts have been eliminated. The unaudited consolidated financial statements of
USIP present herein, should be read in conjunction with the audited consolidated
financial statements of USIP as of and for the year ended December 31, 2000. In
the opinion of management, the unaudited consolidated financial statements
presented herein reflect all adjustments (consisting only of normal recurring
adjustments) necessary for fair presentation. Interim results are not necessary
indicative of results to be expected for the entire year.

USIP. Com, Inc. prepares its consolidated financial statements in accordance
with generally accepted principles, which require that management make estimates
and assumptions that affect reported amounts. Actual results could differ from
these estimates.

NOTES PAYABLE

For additional capital requirements, we have increased our line of credit with
our banking institution up to


                                       7
<PAGE>

$200,000. In March 2001, we drew on this line of credit in the amount of $20,000
increasing our liability to $48,886.00 . We have an additional, unsecured line
of credit with Lilly Beter Capital Group, Ltd. in the amount of $200,000.00. As
of this date $70,000.00 has been used in part to fund the purchase of the
payphones routes. We intend to use the remaining monies for our continued
expansion.


IMPACT OF INFLATION

Inflation is not considered a material factor affecting the Company's business.
General operating expenses such as salaries, employee benefits and occupancy
costs are, however, subject to normal inflationary pressures.

SEASONALITY

The Company's revenues from payphone operation are affected by seasonal
variations, geographic distribution of payphones and type of location. Because
the Company operates in the northeastern part of the country with many of the
payphones located outdoor, weather patterns affect our revenue streams. Revenues
drop off significantly during winter and conversely show an increase in the
spring and summer. Revenues are generally lowest in the first quarter and
highest in the third quarter.

PROVISION FOR DIAL-AROUND COMPENSATION

On September 20, 1996, the Federal Communications Commission (FCC) adopted rules
in a docket entitled IN THE MATTER OF IMPLEMENTATION OF THE PAYPHONE
RECLASSIFICATION AND COMPENSATION PROVISIONS OF THE TELECOMMUNICATIONS ACT OF
1996, FCC 96-388 (the "1996 Payphone Order"), implementing the payphone
provisions of Section 276 of the Telecommunications Act of 1996 (The "Telecom
Act"). The 1996 Payphone Order, which became effective November 7, 1996,
initially mandated dial-round compensation for both access code calls and 800
subscriber calls at a flat rate of $45.85 per payphone per month (131 calls
multiplies by $0.35 per call). Commencing October 7, 1997, and ending October 6,
1998, the $45.85 per payphone per month rate was to transition to a per-call
system at the rate of $0.35 per call. Several parties filed petitions for
judicial review of certain of the FCC regulations including the dial-around
compensation rate. On July 1, 1997, the U.S. Court of Appeals for the District
of Columbia Circuit (the "Court") responded to appeals related to the 1996
Payphone Order by remanding certain issues to the FCC for reconsideration. These
issues included, among other things, the manner in which the FCC established the
dial-around compensation for 800 subscriber and access code calls, the manner in
which the FCC established the interim dial-around compensation plan and the
basis upon which interexchange carriers ("IXC"s) would be required to compensate
payphone service providers ("PSP"s). The Court remanded the issue to the FCC for
further consideration, and clarified on September 16, 1997 that it had vacated
certain portions of the FCC's 1996 Payphone Order, including the dial-around
compensation rate. Specifically, the Court determined that the FCC did not
adequately justify (i) the per-call compensation rate for 800 subscriber and
access code calls at the deregulated local coin rate of $0.35, because it did
not sufficiently justify its conclusion that the costs of local coin call are
similar to those of 800 subscriber and access code calls: and (ii) the
allocation of the payment obligation among the IXCs for the period November 7,
1996 to October 6, 1997.

In accordance with the Court's mandate, on October 9, 1997, the FCC adopted and
released its SECOND REPORT AND ORDER in the same docket, FCC 97-371 (the "1997
Payphone Order"). This order addressed the per-call compensation rate for 800
subscriber and access code calls that originate from payphones in light of the
decision of Court which vacated and remanded certain portions of the FCC's 1996
Payphone Order. The FCC concluded that the rate for per-call compensation for
800 subscriber and access code calls from payphones is the deregulated local
coin rate adjusted for certain cost differences. Accordingly, FCC established a
rate of $0.284 ($0.35-$0.066) per call for the first two years of per-call
compensation (October 7, 1997 through October 6, 1999) The IXCS were required to
pay this per-call amount to PSP's including the Company, beginning October 7,
1997.

On March 9, 1998, the FCC issued a Memorandum Opinion and Order, FCC 98-481,
which extended and waived certain requirements concerning the provision by the
LECs of payphone-specific coding digits that identify a call as originating from
a payphone. Without the transmission of payphone specific coding


                                       8
<PAGE>

digits, some of the IXCs have claimed they are unable to identify a call as a
payphone call eligible for dial-around compensation. With the stated purpose of
ensuring the continued payment of dial-around compensation, the FCC, by
Memorandum and Order issued on April 3, 1998, left in place the requirement for
payment of per-call compensation for payphones on lines that do not transmit the
requisite payphone-specific coding digits, but gave the IXCs a choice for
computing the amount of compensation for payphones on LEC lines not transmitting
the payphone-specific coding digits of either accurately computing per-call
compensation from their databases or paying per-phone, flat-rate compensation
computed by multiplying the $0.284 per call rate by the nationwide average
number of 800 subscriber and access code calls placed from RBOC payphones for
corresponding payment periods. Accurate payments made at the flat rate are not
subject to subsequent adjustment for actual call counts from applicable
payphone.

On May 15, 1998, the Court again remanded the per-call compensation rate to the
FCC for Further explanation without vacating the $0.284 per call rate. The Court
opined that the FCC had failed to explain adequately its derivation of the
$0.284 default rate. The Court stated that any resulting overpayment would be
subject to refund and directed the FCC to conclude its proceedings within a
six-month period from the effective date of the Court's decision.

In response to the Court's second remand, the FCC conducted further proceedings
and sought additional comment from interested parties to address the relevant
issues posed the Court. On February 4, 1999, the FCC released its Third Report
and Order, and Order on Reconsideration of the Second Report and Order (the
"1999 Payphone Order"), in which the FCC abandoned its efforts to derive a
"market-based" default dial-around compensation rate and instead adopted a
"cost-based" rate of $0.24 per dial-around call.

On June 16, 2000, the Court affirmed the 1999 Payphone Order setting a $0.24
dial-around compensation rate. On all the issues, including those raised by the
IXCs and the payphone providers, the court applied the "arbitrary and
capricious" standard of review, and found the FCC's rulings were lawful and
sustainable under that standard. As a result of the Court's June 16, 2000
decision, the $0.24 dial-around compensation rate is likely to remain in place
until the end of 2001, when the FCC has promised to complete a third-year review
of the rate. Certain payphone providers have filed with the FCC a Petition for
Reconsideration of the 1999 Payphone Order. The Petition is still pending and
has yet to be ruled on by the FCC. In view of the Court's affirmation of the
1999 Payphone Order, it is unlikely that FCC will adopt material changes to the
key components of the Order pursuant to the pending Reconsideration Petition,
although no assurance can be given.

On April 5, 2001, the FCC released an order that is expected to have a
significant impact on the obligations of telecommunication carriers to pay
dial-around compensation to PSPs. The effect of the decision is to clarify that
the first carrier to handle a dial-around call originating from a payphone has
the obligation to track and pay compensation on the call, regardless of whether
other carriers may subsequently transport or complete the call. Under the FCC
ruling, implementation of this system modification is scheduled to occur on
November 27, 2001. The Company believes that this modification to the
dial-around compensation system will result in a significant increase to the
number of calls upon which the Company is able to collect such compensation.
Because, however, the FCC ruling is potentially subject to administrative
reconsideration or judicial appeal and the system modification is as yet
untested, no assurance can be given as to the precise timing or magnitude of
revenue impact that may flow from the decision.

The new $0.24 rate became effective April 21, 1999, and will serve as the
default rate through January 31, 2002. The new rate will also be applied
retroactively to the period beginning on October 7, 1997, less a $0.002 amount
to account for FLEX ANI payphone tracking costs, for a net compensation of
$0.238. The 1999 Payphone Order deferred a final ruling on the interim period
(November 7, 1996 to October 6, 1997) treatment to a later, as yet unreleased
order. However, it appears that the $0.238 rate will be applied to the period
from November 7, 1996 to October 6, 1997. Upon establishment of the interim
period rate, the FCC has further ruled that a true-up may be made for all
payments or credits (with applicable interest) due and owing between the IXCs
and the PSPs, including the Company, for the payment period commencing on
November 7, 1996 through the effective date of the new $0.24 per call rate. It
is possible that the final implementation of the 1999 Payphone Order, including
resolution of this retroactive adjustment and the outcome of any related
administrative or judicial review, could have a material adverse effect on the
Company.


                                       9
<PAGE>

ITEM 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATION

The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and notes thereto appearing
elsewhere herein.

Management's Discussion and Analysis of Financial Condition and result of
Operations"(MD&A) are forward-looking statements that are based on certain
assumptions and are subject to certain risk and uncertainties. You can identify
these statements by the use of forwarding-looking words such as "may", "will",
"expect", "anticipate", "continue", or other similar words. The forward-looking
statements are based on management's expectations as of the date hereof. Actual
future performance and results could differ from that contained in or suggested
by these forward-looking statements as a result of these factors set forth in
this MD&A and related filings with the Securities and Exchange Commission (SEC).
The Company assumes no obligation to update any such forward-looking statements.
Certain of the statements contained below are forward-looking statements (rather
than historical facts) that are subject to risks and uncertainties that could
cause actual results to differ from those described in the forward-looking
statements.

The Company owns, operates and manages privately owned public payphones in New
York, Pennsylvania, and Massachusetts. The Company derives its revenue from
three (3) principal sources: coin-calls and non-coin calls, sales and service of
payphones, and prepaid phone cards.

Coin calls represent calls paid for by callers with coins deposited in the
payphones. Coin call revenue are recorded as the actual amount of coins
collected from the payphones.

Non-Coin calls are calls made from the payphones without deposit of coin by the
caller. The caller makes payment via calling card, credit card, collect or third
party. The company utilizes various local and long-distance carriers such as
Qwest Communications, Pacific Telemanagement Services to handle and bill for
these calls. These carriers pay the Company a commission, typically based on a
percentage of revenue generated by these calls, pursuant to a contract as the
primary carrier for applicable traffic.

The Company also recognizes non-coin revenues from calls that are dialed from
its payphones to gain access to a long distance company other than the one
selected by the Company as the primary carrier for the phone. These types of
calls are commonly referred to as "dial-around" traffic. See "Regulatory
Impact on Revenue - Dial Around Compensation".

The principle costs related to the ongoing operation of the Company's payphones
include telephone charges, commissions, service, maintenance and network costs.
Telephone charges consist of payments made by the Company to LEC or competitive
Local Exchange Carriers and long distance carrier for access to and use of their
telecommunications networks. Commission expense represents payments to owners or
operators of the premises at which a payphone is located. Service, maintenance
and network cost represent the cost of servicing and maintaining the payphones
on an ongoing basis, cost related to the operation of the Company's switch and,
in connection with unbundled services arrangements, the fees paid for those
services.

REGULATORY IMPACT ON REVENUE

LOCAL COIN RATES

To ensure the "fair compensation" for local coin calls, the Federal
Communications Commission ("FCC") previously determined that local coins rates
from payphones should be generally deregulated by October 7, 1997, but provided
for possible modifications or exemptions from deregulation upon a detailed
showing by an individual state that there are market failures within the state
that would not allow market-based rates to develop. On July 1, 1997, a federal
court issued an order that upheld the FCC's authority to deregulate local coin
call rates. The Company's rates for local coin calls are $0.25 and $0.35. Given
the lack of


                                       10
<PAGE>

direction on the part on the part of the FCC on specific requirements for
obtaining a state exemption, the Company's inability to predict the responses of
individual states or the markets, and the Company's inability to provide
assurance that deregulation, if and where implanted, will lead to higher local
coin call rates, the Company is unable to predict the ultimate impact on its
operation of local rate deregulation.

DIAL-AROUND COMPENSATION

On September 20, 1996, the Federal Communications Commission ("FCC") adopted
rules, which became effective November 7, 1996 (the "1996 Payphone Order"),
initially mandating dial-around compensation for both access code calls and 800
subscriber calls at a flat rate of $45.85 per payphone per month (131 calls
multiplies by $0.35 per call) Commencing October 7, 1997 and ending October 6,
1998 the $45.85 per payphone per month rate was to transition to a per-call
system at the rate of $0.35 per call. Several parties challenged certain of the
FCC regulations including the dial-around compensation rate. On July 1, 1997, a
federal court vacated certain portions of the FCC's 1996 Payphone Order,
including the dial-around compensation rate.

In accordance with the court's mandate, on October 9, 1997, the FCC adopted a
second order (the "1997 Payphone Order"), establishing a rate of $0.284 per
calls for the first two years of per-call compensation (October 7, 1997 through
October 6, 1999). The IXCs were required to pay this per-call amount to payphone
service providers, beginning October 7, 1997. On May 15, 1998, the court again
remanded the per-call compensation rate to the FCC for further explanation
without vacating the $0.284 default rate.

In accordance with the court's second mandate, on February 4, 1999, the FCC
released a third order (the "1999 Payphone Order"), in which the FCC abandoned
its efforts to derive a "market based" default dial-around compensation rate and
instead adopted a "cost based" rate of $0.24 per dial-around call. This rate
became effective on April 21, 1999 and will serve as a default rate through
January 31, 2002.

On April 5, 2001, the FCC released an order that is expected to have significant
impact on the obligations of telecommunication carriers to pay dial-around
compensation to PSPs. The effect of the decision is to clarify that the first
carrier to handle a dial-around call originating from a payphone has the
obligation to track and pay compensation on the call, regardless of whether
other carriers may transport or complete the call. Implementation of this
system modification, under the FCC ruling, is scheduled to occur in November
27, 2001. The Company believes that this modification to dial-around
compensation system will result in a significant increase to the number of
call that the Company is able to collect compensation. However, the FCC
ruling is subject to administrative reconsideration or judicial appeal and
the system modification is untested, no assurance can be given as to the
precise timing or magnitude of revenue impact that will flow from this
decision.

The new $0.24 rate became effective April 21, 1999, and will serve as the
default rate through January 31, 2002. The new rate will also be applied
retroactively to the period beginning on October 7, 1997, less a $0.002 amount
to account for FLEX ANI payphone tracking costs, for a net compensation of
$0.238. The 1999 Payphone Order deferred a final ruling on the interim period,
November 7, 1996 to October 6, 1997, to at later, as yet unreleased order;
however, it appears that the $0.238 rate will be applied to this period. It is
possible that the final implementation of the 1999 Payphone Order, including
resolution of this retroactive adjustment and the outcome of any administrative
or judicial review, could have a material adverse effect on the Company.


THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000

REVENUES

The following discussion is based in part on our unaudited Financial Statements
for the three months ended March 31, 2001. Our overall revenue increased for the
months ending March 31, 2001 by $69,269 or 30.4% when compared to the first
three months of 2000. The components making up this increase are as follows:
Commission revenue increased by $10,521; Coin collection increased by $23,988;
Dial Around revenue increased by $17,244, when compared to the same period in
2000. These increases can be


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attributed to the purchase of new routes from small independent phone companies
as well as increased payphone installation in existing areas. Equipment sales,
phone card sales, repairs and service added $17,516 to our revenue streams when
compared to the period ending March 31, 2000.

COST OF SALES

With the increase in payphones and territories our cost of sales increased
during the aforementioned time period, increasing $78,885 or 44.5% from $176,483
to $255,368. Telecommunication costs increased by $145,302, the cost of
providing telephone service to 1,669 payphones in 2001 as compared to 686
payphones in 2000. Commissions payable decreased by $14,695 due to a decrease in
payphone usage, a direct response to increase use of cellular phones and
pre-paid phone cards. Some site owners are no longer receiving commission and in
most cases are being invoiced monthly for payphone services. Contractors' fees
increased by $7,880, this is due in part to the Company contracting with an
independent contractor to handle the additional territories. The increase of
$13,046 in depreciation is due directly to the Company's acquisitions of
payphones, related equipment and four vehicles. This increase reflects the
continuing investment in our network infrastructure in order to support our
growth in customers and service. The Company owns telephone equipment and motor
vehicles, which provide a service for a number of years. The term of service is
commonly referred to as the "useful life" of the asset. Because an asset such as
telephone equipment or motor vehicle is expected to provide service for many
years, it is recorded as an asset, rather than an expense, in the year acquired.
A portion of the cost of the long-lived asset is reported as an expense during
the cost of an asset to expense over its life in a rational and systematic
manner.

OPERATING AND ADMINISTRATIVE EXPENSES

Operating expenses increased by $41,931 over the same period in 2000. These
increases in cost are due to the rapid expansion of our company. Rent increased
by $3,151 when compared to 2000. This increase is due to renting space in
Pennsylvania and leasing additional space in New York to accommodate the
expansion of the company. Salaries, telephone, professional fees, utilities and
office expense added $38,780 to the operating expense increase when compared to
the first three months of 2000. Contributing to this increase was the hiring of
additional management staff and related operating expenses, increased facilities
costs and increased information technology expenses.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW

The Company's primary sources of liquidity have been cash from operations and
borrowing under various credit facilities. On April 2000 the Company entered in
an agreement with Lilly Beter Capital Group, Ltd. to obtain a revolving line of
credit. This line of credit has a maximum borrowing of $200,000 of which $70,000
was outstanding on March 31, 2001. In September 2000 we renegotiated our
revolving line of credit with our banking institution. Our maximum line of
credit was raised to $200,000, as of March 31, 2001, $48,886 was outstanding.

Capital expenditures for the three months ended March 31, 2001 were $55,898.
These expenditures were for the purchase of payphone assets of an Independent
Telephone Operating Company (ITOC) and purchase of new computers and associated
software.

The Company believes that its principal competition is from providers of
wireless communications services for both local and long distance traffic.
Certain providers of wireless communication services have introduced rate plans
that have negatively impacted the usage of payphones throughout the nation.
However, we have attempted to minimize some of the impact from cellular use by
avoiding traditional travel locations where cellular use is high.
Plans for 2001


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PLANS FOR FISCAL YEAR 2001

         OUR PLANS OF OPERATION FOR THE FISCAL YEAR 2001 WILL CONSIST OF THE
         FOLLOWING ACTIVITIES:

         o        INVESTIGATING AND, IF APPROPRIATE, PURSUING DEFINITIVE
                  AGREEMENTS FOR ACQUISITIONS BELIEVED BY THE BOARD TO BE
                  CONSISTENT WITH THE COMPANY'S BUSINESS PLAN FOR MORE PAYPHONES
                  AND NEW SITE LEASING AGREEMENTS;
         o        DEVELOPING AN INFRASTRUCTURE TO SUPPORT OUR FUTURE EXPANSION,
                  SALES AND MARKETING EFFORTS.
         o        THE COMPANY'S OBJECTIVE IS TO IMPROVE ROUTE DENSITY AND
                  SERVICE QUALITY, MONITOR AND TAKE ACTION ON ITS
                  UNDER-PERFORMING TELEPHONES AND PLACE EMPHASIS ON EXPANDING IN
                  ECONOMICALLY FAVORABLE TERRITORIES.
         o        THE COMPANY'S PAYPHONES UTILIZE "SMART" TECHNOLOGY, WHICH
                  PROVIDES VOICES SYNTHESIZED CALLING INSTRUCTIONS, DETECTS AND
                  COUNTS COIN DEPOSITS DURING EACH CALL. THE COMPANY'S PAYPHONES
                  CAN ALSO DISTINGUISH COINS BY SIZE AND WEIGHT, REPORT TO ITS
                  CENTRAL HOST COMPUTER THE TOTAL AMOUNT OF COIN IN THE COIN
                  BOX, PERFORM SELF-DIAGNOSIS AND AUTOMATICALLY REPORT PROBLEMS
                  TO A PRE-PROGRAMMED SERVICE NUMBER.
         o        THE COMPANY'S TECHNOLOGY ALSO ALLOWS IT TO EFFICIENTLY TRACK
                  AND FACILITATE THE ACTIVITIES OF ITS FIELD TECHNICIANS VIA
                  INTERACTIONS FROM THE PAYPHONES WITH THE COMPANY'S COMPUTER
                  SYSTEMS AND TECHNICAL SUPPORT PERSONNEL AT THE COMPANY'S
                  HEADQUARTERS.
         o        THE COMPANY'S STRATEGY IS TO PROVIDE OUTSTANDING CUSTOMER
                  SERVICE. THE COMPANY'S TECHNOLOGY ENABLES QUICK RESPONSE TO
                  EQUIPMENT MALFUNCTIONS AND MAINTAINS ACCURATE RECORDS OF
                  PAYPHONE ACTIVITY. THE COMPANY EMPLOYS BOTH ADVANCED
                  TELECOMMUNICATIONS TECHNOLOGY AND TRAINED TECHNICIANS AS PART
                  OF ITS COMMITMENT TO PROVIDE SUPERIOR CUSTOMER SERVICE.

ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

RISKS ASSOCIATED WITH OUR BUSINESS

In addition to the other information in this report, the following risks should
be considered carefully in evaluating our business and projects:

WE MAY NOT SUCCEED OR BECOME PROFITABLE

We will need to generate significant revenue to achieve profitability and we may
be unable to do so. Even if we do achieve profitability, we may not be able to
sustain or increase profitability in the future. We expect that our expenses
will continue to increase and there is no guarantee that we will not experience
operating losses and negative cash flow from operations for this fiscal year or
the foreseeable future. If we do not achieve or sustain profitability, then we
may be unable to continue our operations.

WE WILL NEED ADDITIONAL CAPITAL FINANCING IN THE FUTURE

We may be required to seek additional financing in the future to respond to
increased expenses or shortfalls in anticipated revenues, accelerate product
development and deployment. Respond to competitive pressures, develop new or
enhanced products, or take advantage of unanticipated acquisition opportunities.
We cannot be certain we will be able to find such additional financing on
reasonable terms, or that at all.  If we are unable obtain additional financing
when needed, we could be required to modify our business plan in accordance with
the extent of available financing. We also may not be able to accelerate the
development and deployment of our products, respond to competitive pressures,
develop or enhance our products or take advantage on unanticipated
opportunities.

IF WE ARE UNABLE TO COMPETE SUCCESSFULLY IN THIS HIGHLY COMPETITIVE MARKET, OUR
BUSINESS WILL FAIL.

The market for payphones is worldwide and highly competitive and we expect
competition to intensify in the future. There are few substantial barriers to
entry and additional competition from existing competitors


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and new market entrants will likely occur in the future. An increase in
competitive pressures in our market or our failure to compete effectively may
result in pricing reductions, reduced gross margins and loss of market share.
Many of our current or potential competitors have longer operating histories,
greater name recognition, larger customer bases and significantly greater
financial, technical, marketing and other resources than we do. In addition, our
current and potential competitors may establish cooperative relationships among
themselves or with third parties that may further enhance their resources. As a
result, they may be able to adapt more quickly to new technologies and customer
needs, devote greater resources to the promotion or sale of their products and
services, initiate or withstand price competition, take advantage of acquisition
or other opportunities more readily or develop and expand their product and
services offerings more quickly, In addition, our competitors may bundle
products that compete with ours. If these companies were to use their greater
financial, technical and marketing resources in our target markets, it could
adversely affect our business.


PART II  OTHER INFORMATION

ITEM 1  LEGAL PROCEEDINGS

We do not believe there are any pending or threatened legal proceedings that, if
adversely determined, would have a material adverse effect on us.

ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits

         None
    (b)  Reports on Form 8-K

         No reports on Form 8-K were filed in the first quarter of 2001


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-QSB to be signed on its behalf by the
undersigned thereunto duly authorized.


                           USIP.COM, INC.

Date: May 21, 2001         /s/ Craig H. Burton
                           -------------------

                           Craig H. Burton
                           President


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