SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549

                                 FORM 10-Q

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

        For the quarterly period ended March 31, 1997

                                     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 333-16265


                          USN COMMUNICATIONS, INC.
           ------------------------------------------------------
           (Exact name of registrant as specified in its charter)


                   Delaware                                36-3947804
        -------------------------------               -------------------
        (State or other jurisdiction of                (I.R.S. Employer
        incorporation or organization)                Identification No.)


        10 South Riverside Plaza, Suite 401, Chicago, Illinois       60606
        --------------------------------------------------------------------
        (Address of principal executive offices)                  (Zip Code)


         Registrant's telephone number, including area code  (312) 906-3600

                                    N/A
            ----------------------------------------------------
            (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
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 13, 1997, there were 721,251 shares outstanding of the
registrant's Class A Common Stock, par value $.01 per share.



                       PART I. FINANCIAL INFORMATION

 ITEM 1. FINANCIAL STATEMENTS

 USN COMMUNICATIONS, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                   MARCH 31,           DECEMBER 31,
                                                     1997                 1996
                                                 -------------         ------------
                                                  (UNAUDITED)
 ASSETS

 CURRENT ASSETS:
<S>                                               <C>                  <C>         
 Cash and cash equivalents                        $ 40,638,708         $ 60,569,365
 Accounts receivable, net                            4,346,484            3,004,408
 Prepaid expenses                                      391,231              187,051
 Other receivables                                     168,333              172,567
 Interest receivable                                    99,119              249,113
                                                  ------------         ------------
      Total current assets                          45,643,875           64,182,504

 PROPERTY AND EQUIPMENT - Net                        6,063,492            3,507,350
 OTHER ASSETS                                        9,947,229           10,362,438
                                                 -------------         ------------

 TOTAL ASSETS                                    $  61,654,596         $ 78,052,292
                                                 =============         ============

 LIABILITIES, REDEEMABLE PREFERRED STOCK,
  AND COMMON STOCKHOLDERS' DEFICIT

 CURRENT LIABILITIES:
 Accounts payable                                $   6,615,995         $  7,907,654
 Accrued expenses and other liabilities              3,956,145            3,176,762
 Capital lease obligations - current                   284,305              277,844
 Current maturities on notes payable                   311,222              386,522
                                                 -------------         ------------
      Total current liabilities                     11,167,667           11,748,782

 Capital lease obligations - noncurrent                248,343              312,280
 Notes payable                                          28,450               49,727
 14% Senior Discount Notes, net of 
      Original Issue Discount                       32,317,611           31,242,614
  9% Convertible Subordinated Discount 
      Notes, net of Original Issue 
      Discount                                      28,888,399           28,259,555
                                                 -------------         ------------
      Total liabilities                             72,650,470           71,612,958

 REDEEMABLE PREFERRED STOCK:
 9% Cumulative Convertible Pay-In-Kind 
     Preferred stock: par value $1:  
     30,000 shares authorized; 10,450 
     shares outstanding at 1997 and 1996                10,450               10,000
 Accumulated unpaid dividends                                -              225,000
 Additional paid-in capital                         10,259,735            9,810,185
                                                 -------------         ------------
      Total redeemable preferred stock              10,270,185           10,045,185

 COMMON STOCKHOLDERS' DEFICIT:
 Common stock: par value $.01: 2,500,000 
   shares authorized; 718,526 shares 
   issued at 1997 and 1996                               7,185                7,185
 Additional paid-in capital                         54,305,121           54,179,423
 Accumulated deficit                               (75,577,288)         (57,791,382)
 Common stock held in Treasury: 1997 and 
   1996 - 1,000 shares                                  (1,077)              (1,077)
                                                 -------------         ------------
      Total common stockholders' equity            (21,266,059)          (3,605,851)
                                                 -------------         ------------

 TOTAL LIABILITIES, REDEEMABLE PREFERRED 
 STOCK, AND COMMON STOCKHOLDERS' DEFICIT         $  61,654,596         $ 78,052,292
                                                 =============         ============
</TABLE>

        See notes to Condensed Consolidated Financial Statements



USN COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                            THREE MONTHS ENDED MARCH 31,
                                         ----------------------------------
                                              1997                1996
                                         ----------------    --------------
                                           (UNAUDITED)         (UNAUDITED)

 NET SERVICE REVENUE                     $     3,822,703      $   2,280,629
 COST OF SERVICES                              3,507,554          1,960,653
                                         ---------------      -------------

      Gross margin                               315,149            319,976

 EXPENSES:
   Sales and marketing                        10,023,979          1,603,219
   General and administrative                  6,462,343          2,964,611
                                         ---------------      -------------

 OPERATING LOSS                              (16,171,173)        (4,247,854)

 OTHER INCOME (EXPENSE):
   Interest income                               643,290            148,398
   Interest expense                           (2,036,327)            (6,840)
   Other income                                    3,305          8,093,813
                                         ---------------      -------------

     Other income (expense) - net             (1,389,732)         8,235,371

 NET INCOME (LOSS)                        $  (17,560,905)     $   3,987,517
                                         ===============      =============

 ACCUMULATED UNPAID PREFERRED 
 DIVIDENDS                               $             -      $   4,962,966

                                         ===============      =============
 NET LOSS PER COMMON SHARE               $        (24.47)      $      (2.30)
                                         ===============      =============

 WEIGHTED AVERAGE COMMON AND COMMON
     EQUIVALENT SHARES OUTSTANDING               717,526            423,909
                                         ===============      =============

        See notes to Condensed Consolidated Financial Statements




USN COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED MARCH 31,
                                                          1997                1996
                                                      ---------------     -------------
                                                        (UNAUDITED)         (UNAUDITED)

 CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                   <C>                  <C>          
 Net income (loss)                                    $  (17,560,905)      $   3,987,517
 Adjustments to reconcile net income (loss)
   to net cash flows from operating activities:

   Depreciation and amortization                             361,243              73,435
   Amortization of organization costs and 
     intangibles                                             676,996             178,794
   Interest accreted on debt obligation                    1,703,841                   -
   Stock compensation award expense                          125,697                   -
   Gain on disposal of assets                                      -          (8,078,901)
   Changes in:
     Accounts receivable, net                             (1,342,076)           (630,662)
     Prepaid expenses                                       (204,180)             37,696
     Other receivables                                         4,234            (325,142)
     Interest receivable                                     149,994               9,858
     Other assets                                           (294,338)             99,775
     Accounts payable                                     (1,291,659)            223,034
     Accrued expenses and other liabilities                  779,383            (234,451)
                                                       -------------       -------------

       Net cash flows from operating activities          (16,891,770)         (4,659,047)

 CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property and equipment                       (2,917,385)            (37,686)
 Proceeds from sale of assets                                      -           9,532,600
                                                       -------------       -------------

       Net cash flows from investing activities           (2,917,385)          9,494,914

 CASH FLOWS FROM FINANCING ACTIVITIES:
 Issuance of common stock                                          -               3,298
 Repurchase of common stock                                        -              (1,077)
 Deposits                                                     32,550             (91,783)
 Repayment of notes payable                                  (96,577)           (121,435)
 Repayment of capital lease obligations                      (57,476)            (21,808)
                                                       -------------       -------------

       Net cash flows from financing activities             (121,503)           (232,805)
                                                       -------------       -------------

 NET INCREASE (DECREASE) IN CASH                         (19,930,658)          4,603,062

 CASH AND CASH EQUIVALENTS - Beginning of period          60,569,366          13,705,025

 CASH AND CASH EQUIVALENTS - End of period               $40,638,708       $  18,308,087
                                                       =============       =============

 SUPPLEMENTAL CASH FLOW INFORMATION:
 Dividends Paid in Kind                               $      450,000                   -
                                                      ==============       =============
 Dividends Declared but Unpaid                                     -       $   1,152,966
                                                      ==============       =============

 Cash Paid for Interest                               $       26,464       $       7,628
                                                      ==============       =============
 Cash Paid for Income Taxes                                        -                   -
                                                      ==============       =============
</TABLE>

        See notes to Condensed Consolidated Financial Statements




                 USN COMMUNICATIONS, INC. AND SUBSIDIARIES

       NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               MARCH 31, 1997

1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     The unaudited, condensed consolidated financial statements of USN
Communications, Inc. (the "Company") included herein have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. The interim financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results for the interim periods presented. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's latest
annual report on Form 10-K. The results of operations for the interim
periods should not be considered indicative of results to be expected for
the full year.

2.   GAIN CONTINGENCY

     In 1995, a subsidiary of the Company, USN Communications Northeast,
Inc. ("USNCN"), submitted a claim of approximately $1.4 million with TelCo
One requesting that certain revenues, purportedly not billed by TelCo One
to its USNCN customers, be paid to USNCN. In the fourth quarter of 1996,
USNCN recorded $867,000 of this claim as revenue. TelCo One is in the
process of reviewing USNCN's remaining claim and has not formally concluded
on the amount or terms of a settlement. While USNCN believes its claim has
merit, it is unable to predict, at this time, whether it will be successful
in fully resolving this matter favorably.


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

OVERVIEW

        The Company commenced operations in April 1994 as a provider of
local and long distance telecommunications services to meet the needs of
small and medium-sized business subscribers, through the purchase of US
Network Corporation ("US Network"). US Network had four months of
operations prior to being acquired by the Company. Operations during this
four month period included limited administrative expenses and no revenues,
and assets consisted primarily of cash and organization costs. In October
1995, the Company, through a newly formed wholly owned acquisition
subsidiary, Quest United, Inc. ("Quest"), acquired certain assets and
assumed certain liabilities of Quest America, LP., a telecommunications
reseller and consulting firm (the "Quest Acquisition").

        Initially, the Company entered the local telecommunications market
as a facilities-based competitive access provider with network facilities
in Ohio. Due to the high costs associated with the initial construction,
installation and expansion of each local network facility, including
right-of-way costs, franchise fees, interconnection charges and other
operating expenses and in anticipation of the impact of the passage of the
Telecommunications Act of 1996, the Company refocused its operations. The
Company sold its existing facilities in Ohio and certain other assets in
February 1996, and transferred certain liabilities with respect to those
facilities, to pursue a non-facilities-based approach to the local
telecommunications market.

        The Company negotiated for the first broad based resale agreement
with Ameritech for local services, which was signed in November 1995, and
negotiated with NYNEX for a comprehensive local resale agreement which was
signed in July 1996. The Company also consummated various other agreements
in 1996 with certain carriers for the resale of long distance and enhanced
and other value-added services. The Company commenced the marketing and
provisioning of services under those agreements during the latter half of
1996. Although management believes that its current strategy will have a
positive effect on the Company's results of operations over the long-term,
through an increase in its subscriber base and product offerings, this
strategy is expected to have a negative effect on the Company's results of
operations over the short-term. The Company anticipates losses and negative
cash flow for the foreseeable future, attributable in part to significant
investments in operating, sales, marketing, management information
systems and general and administrative expenses. To date, the Company's
growth, including capital expenditures, has been funded primarily by the
capital contributions of Chase Venture Capital Associates, L P., CIBC Wood
Gundy Ventures, Inc., Hancock Venture Partners IV - Direct Fund, L.P., BT
Capital Partners, Inc., Northwood Capital Partners LLC, Northwood Ventures
and Enterprises & Transcommunications, LP and by the proceeds from the
September 30, 1996 sale to Merrill Lynch Global Allocation Fund, Inc. of
debt securities and warrants to purchase Class A Common Stock.

RESULTS OF OPERATIONS

Three Months Ended March 31, 1997 Compared to 
Three Months Ended March 31, 1996

        Net service revenue increased to $3.8 million for the three months
ended March 31, 1997 from $2.3 million for the three months ended March 31,
1996. The increase in net service revenue was due primarily to a 127%
increase in the subscriber base in the Company's geographic markets, (from
approximately 1,245 customers at March 31, 1996 to approximately 2,825
customers at March 31, 1997).

        Gross margin of $0.3 million for the three months ended March 31,
1997 remained flat compared to the three months ended March 31, 1996.
However, the gross margin rate decreased from 14.0% for the first quarter
of 1996 to 8.2% for the same quarter in 1997. Due to the significant change
in the Company's business strategy and corresponding change in cost
structure from the original facilities-based business to a
non-facilities-based reseller of a variety of telecommunications services,
the year to year gross margins are not comparable. The fourth quarter of
1996 was the first full quarter of operations under the new reseller
business. Negative gross margins were realized in that quarter due to the
start up of the business. The first quarter of 1997 has significantly
improved from the fourth quarter in 1996 as the reseller business is
becoming more established and policies and procedures are being
streamlined. Future quarterly gross margins are expected to continue to
improve.

        Sales and marketing expenses increased $8.4 million, or 625%, from
$1.6 million for the three months ended March 31, 1996 to $10.0 million for
the three months ended March 31, 1997. The increase was due primarily to an
increase in the number of sales and marketing employees from approximately
115 at March 31, 1996 to approximately 420 at March 31, 1997, which
resulted in increases to salaries and benefits of approximately $4.9
million, travel and training costs of approximately $0.9 million,
recruitment costs of approximately $0.5 million and facility and office
related expenses of approximately $0.6 million. Additionally, advertising
costs increased approximately $1.4 million due to product launches in the
Company's target markets.

        General and administrative expenses increased $3.5 million, or
218%, to $6.5 million for the three months ended March 31, 1997 versus $3.0
million for the three months ended March 31, 1996. The increase was due
primarily to an increase in the number of operations and administrative
employees from approximately 70 at March 31, 1996 to over 200 at March 31,
1997, which resulted in increases to salaries and benefits of approximately
$1.8 million and facility and office costs of approximately $0.6 million.
Additionally, fees paid to consultants and other professionals increased
approximately $0.4 million, primarily relating to the development and
expansion of the Company's customer service, billing and administrative
information systems and facilities.

        Interest and other income decreased to $0.6 million for the three
months ended March 31, 1997 from $8.2 million for the three months ended
March 31, 1996 due primarily to an $8.1 million non-recurring gain on the
sale of the Company's switching facilities in Ohio in February 1996.

        Interest expense increased to $2.0 million for the three months
ended March 31, 1997 from $7,000 for the three months ended March 31, 1996.
This increase was due primarily to interest expense attributable to the
Senior Notes and Convertible Notes issued in September 1996.

        As a result of the factors described above, the Company had a net
loss of $17.6 million for the three months ended March 31, 1997 compared to
a net income of $4.0 million for the three months ended March 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES

        Since inception, the Company has funded its operations primarily
through cash from its investors. As of March 31, 1997, the Company had cash
and cash equivalents of $40.6 million and working capital of $34.5 million.
The Company's operating activities utilized cash of approximately $16.9
million for the three months ended March 31, 1997 and $4.7 million for the
three months ended March 31, 1996.

        The Company's investing activities have consisted primarily of
property and equipment purchases of $2.9 million and $38,000 the three
months ended March 31, 1997 and 1996, respectively. In 1997, these
expenditures were primarily related to the buildout of new office space in
several of the Company's target markets. In February 1996, the Company
received $9.5 million in proceeds from the December 1995 sale of facilities
in Ohio.

        Although at March 31, 1997, the Company had working capital of
approximately $34.5 million, the projected cash usage in 1997 combined with
an anticipated net loss in 1997, absent the infusion of additional capital
resources, is anticipated to fully deplete the Company's working capital
prior to December 31, 1997. Such events would place substantial doubt about
the Company's ability to continue as a going concern. Although the
Company's management believes that the Company will be able to raise
sufficient funds, through capital contributions or additional equity or
debt financings, to meet its operating expenses and other cash
requirements, there can be no assurance that the Company would be able to
complete such contributions or financing or that any such contributions or
financing would be completed on terms satisfactory to the Company.

RECENT ACCOUNTING PRONOUNCEMENTS

        In February 1997, the Financial Accounting Standard Boards issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
which simplifies the method for computing earnings per share. Under the new
requirements, primary earnings per share will be replaced with basic
earnings per share. The statement, which will not impact the results of
operations, financial position or cash flows of the Company, is effective
for financial statements issued for periods ending after December 15, 1997
and will be adopted by the Company in the fourth quarter of 1997.


                                  PART II

                             OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

        From time to time the Company is party to routine litigation and
proceedings in the ordinary course of its business. The Company and its
subsidiaries are not aware of any current or pending litigation that the
Company believes would have a material adverse effect on the Company's
results of operations or financial condition. The Company and its
subsidiaries continue to participate in regulatory proceedings before the
FCC and state regulatory agencies concerning the authorization of services
and the adoption of new regulations.

ITEM 2.  CHANGES IN SECURITIES

         None.

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

         11.  Statement Re Computation of Net Loss per Common Share

         27.  Financial Data Schedule

(b)     REPORTS ON FORM 8-K

        None.



                                 SIGNATURE

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.

                                    USN COMMUNICATIONS, INC.
                                           (Registrant)

Date:  May 14, 1997                  /s/ GERALD J. SWEAS
                                    ----------------------------------
                                    Executive Vice President and Chief
                                    Financial Officer (Duly authorized
                                    officer and principal financial
                                    officer of the registrant)


INDEX TO EXHIBITS

                                                               SEQUENTIALLY
  EXHIBIT                                                        NUMBERED
  NUMBER          EXHIBIT DESCRIPTION                              PAGE
  -------         -------------------                           -----------

    11            Statement Regarding Computation of Per
                    Share Earnings                                    12
    27            Financial Data Schedule                             13