<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                   FORM 10-QSB

[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30,2000

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______

COMMISSION FILE NUMBER 0-25339

                             U.S. Laboratories Inc.
                             ----------------------
        (Exact name of small business issuer as specified in its charter)

         Delaware                                                33-0586167
         --------                                                ----------
(State or other jurisdiction of                               (I.R.S.Employer
incorporation or organization)                              Identification No.)

                           7895 Convoy Court, Suite 18
                           San Diego, California 92111
                           ---------------------------
                    (address of principal executive offices)

                                  858-715-5800
                                  ------------
                           (Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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 ____  No    X

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.

<TABLE>
<CAPTION>

CLASS                                         OUTSTANDING AS OF AUGUST 11, 2000
-----                                         ---------------------------------
<S>                                           <C>
Common Stock, $0.1 par value per share                         3,201,065
</TABLE>

Transitional Small Business Disclosure Format: Yes ____  No X



<PAGE>

                             U.S. LABORATORIES INC.


                                      INDEX
<TABLE>
<CAPTION>
<S>                                                                       <C>
PART I - FINANCIAL INFORMATION                                            Page

Item 1. Financial Statements

Consolidated Balance Sheets at
June 30, 2000 (unaudited) and December 31,1999                              3

Consolidated Statements of Income
For the Six Months ended June 30, 2000 and 1999 (unaudited)                 5
And the Three Months ended June 30, 2000 and 1999 (unaudited)

Consolidated Statements of Stockholders' Equity
For the Six Months Ended June 30, 2000(unaudited)                           6

Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 2000 and 1999 (unaudited)                 7

Notes to Consolidated Financial Statements                                  9

Item 2. Management's Discussion and Analysis of
        Financial Condition and Results of Operations                      16


PART II - OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds                          19

Item 4. Submission of Matters to a Vote of Security Holders                19

Item 5. Other Information                                                  20

Item 6. Exhibits and Reports on Form 8-K                                   21

Signatures                                                                 22

Exhibits                                                                   23
</TABLE>


                                     2

<PAGE>


                     U.S. LABORATORIES INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 2000 AND DECEMBER 31, 1999

                                     ASSETS
<TABLE>
<CAPTION>

                                                        June 30,     December 31,
                                                         2000            1999
                                                         ----            ----
                                                     (unaudited)
<S>                                                   <C>            <C>
Current assets

Cash .............................................    $   273,609    $ 1,217,527
Accounts receivable,net of allowance for
  doubtful accounts of $649,283 and $209,956,
  respectively ...................................      7,756,116      4,783,095
Work-in-progress .................................        747,532        329,899
Prepaid expenses and other current assets ........        334,102         85,147
Current portion of notes receivable-related
  party ..........................................         47,054         46,905
                                                      -----------    -----------

         Total current assets ....................      9,158,413      6,462,573

Furniture and equipment, net of accumulated
  depreciation of $1,344,412 and $1,077,836,
  respectively ...................................      1,787,786      1,102,149
Goodwill, net of accumulated amortization
  of $673,243 and $575,420, respectively .........      2,604,565      1,629,826
Note receivable-related party,net of current
  portion ........................................         93,809         93,809
Other assets .....................................        418,311        303,420
                                                      -----------    -----------

         Total assets ............................    $14,062,884    $ 9,591,777
                                                      ===========    ===========
</TABLE>

                             See accompanying notes



                                     3

<PAGE>


                     U.S. LABORATORIES INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                       JUNE 30, 2000 AND DECEMBER 31, 1999

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                      June 30,     December 31,
                                                       2000            1999
                                                   ------------    ------------
                                                   (unaudited)
<S>                                                <C>             <C>
Current liabilities
   Bank overdraft ..............................   $    297,266    $       --
   Lines of credit .............................      1,677,231          63,641
   Current portion of long-term debt ...........        236,974         132,750
   Current portion of capitalized
     lease obligations .........................           --             4,966
   Current portion of notes payable ............        776,095         157,325
   Accounts payable ............................        665,164         736,540
   Accrued payroll and payroll taxes ...........      1,457,863         308,757
   Deferred income tax .........................        472,288         306,203
   Income tax payable ..........................        459,813         777,434
                                                   ------------    ------------

           Total current liabilities ...........      6,042,694       2,487,616

   Long-Term debt,net of current portion .......        299,901         283,173
   Notes payable,net of current portion ........        151,670         225,000
                                                   ------------    ------------

        Total liabilities ......................      6,494,265       2,995,789

Commitments

Stockholders' equity
   Preferred stock,$0.01 par value
     5,000,000 shares authorized
     none issued and outstanding ...............           --              --
   Common stock,$0.01 par value
     50,000,000 shares authorized
     3,201,065 and 3,200,000 shares
     issued and outstanding, respectively ......         32,010          32,000
   Treasury stock,at cost ......................         (4,327)       (114,088)
   Additional paid-in capital ..................      5,244,354       5,188,442
   Retained earnings ...........................      2,296,582       1,489,634
                                                   ------------    ------------

      Total stockholders' equity ...............      7,568,619       6,595,988
                                                   ------------    ------------

   Total liabilities and stockholders' equity ..   $ 14,062,884    $  9,591,777
                                                   ============    ============
</TABLE>

                             See accompanying notes


                                       4

<PAGE>


                     U.S. LABORATORIES INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
          FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999(UNAUDITED)
           AND THE SIX MONTHS ENDED JUNE 30,2000 AND 1999 (UNAUDITED)

<TABLE>
<CAPTION>

                               For the Three Months Ended     For the Six Months Ended
                                       June 30,                        June 30,
                                       --------                        --------
                                 2000           1999             2000             1999
                                 ----           ----             ----             ----
                             (unaudited)    (unaudited)     (unaudited)      (unaudited)
<S>                          <C>             <C>             <C>             <C>
Revenue ..................   $  9,011,820    $  3,802,001    $ 15,941,958    $  6,984,701

Cost of goods sold .......      5,184,651       1,831,639       8,975,295       3,551,576
                             ------------    ------------    ------------    ------------

Gross profit .............      3,827,169       1,970,362       6,966,663       3,433,125
                             ------------    ------------    ------------    ------------

Selling,general,and
  administrative expenses       2,995,753       1,845,805       5,402,680       3,115,848
                             ------------    ------------    ------------    ------------

Income from operations ...        831,416         124,557       1,563,983         317,277
                             ------------    ------------    ------------    ------------

Other income (expense)
 Interest expense ........        (60,621)        (25,478)       (127,014)        (68,820)
 Interest income .........           --            27,699          10,221          40,642
 Other income ............           --            19,290             952          34,946
 Other expense ...........        (21,310)           --           (23,047)           --
                             ------------    ------------    ------------    ------------
   Total other income
   (expense) .............        (81,931)         21,511        (138,888)          6,768

Income before provision
  for income taxes .......        749,485         146,068       1,425,095         324,045

Provision for
  income taxes ...........        324,932          51,611         618,147         129,618
                             ------------    ------------    ------------    ------------

Net income ...............        424,553    $     94,457    $    806,948    $    194,427
                             ============    ============    ============    ============

Basic and diluted
  income per share .......            .13    $        .03    $        .25    $        .07
                             ============    ============    ============    ============

Weighted average
  shares outstanding .....      3,201,065       3,200,000       3,201,065       2,905,555
                             ============    ============    ============    ============
</TABLE>

                             See accompanying notes


                                       5

<PAGE>


                     U.S. LABORATORIES INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                FOR THE SIX MONTHS ENDED JUNE 30, 2000(UNAUDITED)

<TABLE>
<CAPTION>

                                                   Additional
                     Common Stock        Treasury   Paid-In        Retained
                   Shares     Amount      Stock      Capital        Earnings   Total
<S>                <C>        <C>        <C>         <C>           <C>         <C>
 Balance,12/31/99.. 3,200,000  $32,000    $(114,088)  $5,188,442   $1,489,634  $6,595,988

 Adjustment to
 balance to
 reflect acquisition
 of subsidiary.....                                       30,000                   30,000

 Issuance of 20,000
 treasury shares
 for purchase of
 AGS,Inc...........                          63,613       16,387                   80,000

 Issuance of 15,000
 treasury shares
 for purchase of
 Sage Engineering,
 Inc...............                          50,475        9,525                   60,000

 Issuance of common
 stock.............     1,065       10                                                 10

 Purchase of 1,065
 shares of Treasury
 stock, at cost....                          (4,327)                               (4,327)

 Net income........                                                   806,948     806,948
                      -------  -------    --------    ----------  ----------  -----------

 Balance,6/30/00... 3,201,065  $32,010    $ (4,327)   $5,244,354  $2,296,582   $7,568,619
                    =========  =======    ========    ==========   =========  ===========
</TABLE>

                             See accompanying notes


                                      6

<PAGE>

                     U.S. LABORATORIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
           FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)

<TABLE>
<CAPTION>

                                                   For the Six Months Ended
                                                            June 30,
                                                  -----------------------------
                                                     2000             1999
                                                     ----             ----
                                                  (Unaudited)       (Unaudited)
                                                  -----------       ----------
<S>                                                 <C>             <C>
Cash flows from operating activities

Net income .....................................    $   806,948     $   194,427
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities
Amortization of Goodwill .......................         97,823          52,614
Depreciation ...................................        264,655         135,094
Deferred Income Tax ............................         (5,267)           --

(Increase) Decrease in

Accounts receivable ............................       (866,059)        (62,345)
Work in progress ...............................       (233,552)       (118,724)
Prepaid expenses ...............................       (189,526)       (212,618)
Other assets ...................................        (53,767)        (71,957)

Increase (Decrease) in

Accounts payable ...............................       (579,437)         45,161
Accrued payroll and payroll taxes ..............      1,053,428          73,895
Other accrued expenses .........................           --           176,313
Income tax payable .............................       (317,621)         67,818
                                                    -----------     -----------

Net cash (used in) provided by operating
activities .....................................        (22,375)        279,678
                                                    -----------     -----------

Cash flows from investing activities

Purchase of furniture and equipment(net) .......       (507,697)       (141,529)
Acquisitions of businesses,
net of cash acquired ...........................     (2,906,839)       (184,178)
Note Receivable-related party ..................           (149)           --
                                                    -----------     -----------

Net cash (used in) investing activities ........     (3,414,685)       (325,707)
                                                    -----------     -----------
</TABLE>

                             See accompanying notes


                                  7

<PAGE>

                     U.S. LABORATORIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS(CONTINUED)
            FOR THE SIX MONTHS ENDED JUNE 30,2000 AND 1999(UNAUDITED)

<TABLE>
<CAPTION>

                                                     For the Six Months Ended
                                                           June 30
                                                   ----------------------------
                                                      2000           1999
                                                      ----           ----
                                                   (unaudited)      (unaudited)
<S>                                                 <C>             <C>
Cash flows from financing activities

  Increase (decrease) in bank

  Overdraft ....................................    $   297,266     $   (82,616)
  Line of credit,(net) .........................      1,613,590      (1,877,744)
  Due to stockholders,(net) ....................           --             2,664
  Payments on long-term debt, capitalized
    lease obligations and notes payable ........        530,691        (313,854)
  Proceeds from the initial stock offering
    net of the deferred offering costs .........           --         4,785,685
  Issuance of common & treasury stock ..........         51,595            --
                                                    -----------     -----------

Net cash provided by
    financing activities .......................      2,493,142       2,514,135
                                                    -----------     -----------

Net (decrease) increase in cash ................       (943,918)      2,468,106

Cash,beginning of period .......................      1,217,527         121,782
                                                    -----------     -----------

Cash,end of period .............................    $   273,609     $ 2,589,888
                                                    ===========     -----------

Supplemental disclosures of cash flow
    information

Interest paid ..................................    $   127,014     $    68,820
                                                    ===========     ===========

Income taxes paid ..............................    $   364,700     $    61,800
                                                    ===========     ===========
</TABLE>

Supplemental Schedule of Financing Activities

In the first quarter 2000, the company issued treasury stock of $114,088 as
the initial payment for the purchase of Sage Engineering Inc. and as an
installment payment for AGS Inc., purchased in 1999, as per the respective
purchase agreements.

                             See accompanying notes



                                        8
<PAGE>


                     U.S. LABORATORIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               AS OF JUNE 30, 2000 AND DECEMBER 31, 1999 AND FOR
             THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999(UNAUDITED)


NOTE 1 - ORGANIZATION AND BUSINESS

         U.S. Laboratories Inc. and its subsidiaries (collectively the"Company")
         offers engineering and design services,project management,construction
         quality control, structural engineering and design, environmental
         engineering and inspection and testing. The Company has facilities in
         California, New Jersey, Florida, Nevada and Virginia and grants credit
         to customers in those states. Readers of this report should refer to
         additional information in the annual report filed on Form 10K-SB for
         December 31, 1999.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         GENERAL
         As contemplated by the Securities and Exchange Commission under Item
         310(b) of Regulation S-B, the accompanying financial statements and
         footnotes have been condensed and therefore do not contain all
         disclosures required by generally accepted accounting principles. The
         interim financial data is unaudited. However, in the opinion of the
         Company the interim data includes all adjustments, consisting only of
         normal recurring adjustments,necessary for a fair statement of the
         financial position and results for the interim periods. The
         Company's interim results are not necessarily indicative of the
         results to be expected for the full year.

         PRINCIPLES OF CONSOLIDATION
         The consolidated financial statements include the accounts of
         U.S.Laboratories Inc. and its subsidiaries. All material intercompany
         accounts and transactions have been eliminated.

         CASH AND CASH EQUIVALENTS
         For purposes of the statements of cash flows,the Company consider all
         highly-liquid investments purchased with original maturities of three
         months or less to be cash equivalents.

         FURNITURE AND EQUIPMENT
         Furniture and equipment,including equipment under capital leases,are
         recorded at cost, less accumulated depreciation and amortization.
         Depreciation and amortization are provided using the straight-line
         method over the estimated useful lives as follows:

<TABLE>
                <S>                                             <C>
                 Automobile and trucks                          3 to 5 years
                 Furniture and fixtures                         5 to 7 years
                 Office hardware and software                        5 years
                 Machinery and equipment                        5 to 7 years
                 Leasehold improvements                              5 years
</TABLE>

         Maintenance, repairs, and minor renewals are expensed as
         incurred.Expenditures for additions and major improvements are
         capitalized. Gains and losses on disposals are included in the
         statements of income.



                                       9

<PAGE>


                     U.S. LABORATORIES INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                AS OF JUNE 30, 2000 AND DECEMBER 31, 1999 AND FOR
             THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999(UNAUDITED)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

         INTANGIBLES
         Intangibles consist of goodwill which is being amortized over
         a period not exceeding twenty years. The Company continually
         evaluates whether events or circumstances have occurred that indicate
         the remaining estimated value of goodwill may not be recoverable. When
         factors indicate that the value of goodwill may be impaired, the
         Company estimates the remaining value and reduces the goodwill to that
         amount.

         REVENUE RECOGNITION
         Revenue from services performed, including fixed-price and unit-price
         contracts, is recorded as earned over the lives of the contract.
         Revenue from services is recognized when service has been performed and
         accepted. At the time loss on a contract becomes known, the entire
         amount of the estimated ultimate loss is recognized in the financial
         statements. The Company has not experienced any material losses on its
         contracts.

         ADVERTISING
         The Company expenses advertising costs as incurred.

         INCOME TAXES
         The Company utilizes Statement of Financial Accounting
         Standards("SFAS") No. 109," Accounting for Income Taxes," which
         requires the recognition of deferred tax assets and liabilities for the
         expected future tax consequences of events that have been included in
         the financial statements or tax returns. Under this method, deferred
         income taxes are recognized for the tax consequences in future years of
         differences between the tax bases of assets and liabilities and their
         financial reporting amounts at each year-end based on enacted tax law
         and statutory tax rates applicable to the periods in which the
         differences are expected to affect taxable income. Valuation allowances
         are established, when necessary, to reduce deferred tax assets to the
         amount expected to be realized. The provision for income taxes
         represents the tax payable for the period and the change during the
         period in deferred tax assets and liabilities.

         ESTIMATES
         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosures of contingent assets and liabilities at the
         date of the financial statements, as well as the reported amounts of
         revenues and expenses during the reporting period. Actual results could
         differ from those estimates.




                                       10

<PAGE>


                     U.S. LABORATORIES INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                AS OF JUNE 30, 2000 AND DECEMBER 31, 1999 AND FOR
             THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999(UNAUDITED)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

         FAIR VALUE OF FINANCIAL INSTRUMENTS
         For certain of the Company's financial instruments including
         cash,accounts receivable, accounts payable, and other accrued expenses,
         the carrying amounts approximate fair value due to their short
         maturities. The amounts shown for long-term debt and capital lease
         obligations also approximate fair value because current interest rates
         and terms offered to the Company for similar long-term debt and capital
         lease obligations are substantially the same.

         CONCENTRATIONS OF RISK
         The Company provides contract services to construction companies and
         the military, primarily in California, New Jersey, Florida, Nevada and
         Virginia. It also extends credit based on an evaluation of the
         customer's financial condition,generally without requiring collateral.
         Exposure to losses on receivables is principally dependent on each
         customer's financial condition. The Company monitors its exposure for
         credit losses and maintains allowances for anticipated losses.

         NET INCOME PER SHARE
         For the three months and six months ended June 30, 1999 and 2000, basic
         earnings per share is computed by dividing net income to common
         stockholders by the weighted-average number of common shares
         outstanding during the accounting period. Diluted earnings per share is
         computed similar to basic earnings per share except that the
         denominator is increased to include the number of additional common
         shares that would have been outstanding if the potential common shares
         had been issued and if the additional common shares were dilutive.

         RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
         In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
         Instruments and Hedging Activities." As amended by SFAS No. 137, this
         pronouncement, is effective for financial statements in fiscal
         quarters of fiscal years beginning after June 15, 2000. SFAS No. 133
         and SFAS No. 137 establish accounting and reporting standards for
         derivative instruments, including certain derivative instruments
         embedded in other contracts, and for hedging activities. The Company
         does not expect adoption of SFAS No. 133 to have a material effect, if
         any, on its interim or annual financial position or results of
         operations.

NOTE 3 - CASH

         The Company maintains cash deposits at banks located in California,
         Nevada, Florida, Virginia and New Jersey. Deposits at each bank are
         insured by the Federal Deposit Insurance Corporation up to $100,000.
         As of June 30, 2000 and December 31, 1999, uninsured portions of
         balances held at banks aggregated $0 and $1,079,135, respectively. The
         Company has not experienced any losses in such accounts and believes
         it is not exposed to any significant credit risk on cash.




                                       11

<PAGE>


                     U.S. LABORATORIES INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
                AS OF JUNE 30, 2000 AND DECEMBER 31, 1999 AND FOR
             THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999(UNAUDITED)


NOTE 4 - FURNITURE AND EQUIPMENT

    Furniture and equipment consisted of the following:

<TABLE>
<CAPTION>

                                                  June 30,        December 31,
                                                    2000              1999
                                                    ----              ----
<S>                                              <C>               <C>
  Automobile and trucks.....................     $ 1,287,536       $  963,259
  Furniture and fixtures....................         381,432          319,136
  Office hardware and software..............         490,486          168,735
  Machinery and equipment...................         794,058          596,337
  Leasehold improvements....................         178,686          132,518
                                                  ----------       -----------
                                                   3,132,198        2,179,985
                                                  ----------       -----------
  Less:accumulated depreciation.............       1,344,412        1,077,836
                                                  ----------       -----------
           Total............................     $ 1,787,786       $1,102,149
                                                 ===========       ==========
</TABLE>

    Depreciation expense for the six months ended June 30,
    2000 and 1999 was $264,655 and $135,094, respectively.

NOTE 5 - NOTES PAYABLE

    Notes payable consisted of the following at June 30, 2000:

<TABLE>
    <S>                                                             <C>
    Note payable to stockholder of Wyman Enterprises,Inc.in
       connection with the acquisition. The amount is to be
       paid in two annual installments of $75,000 beginning
       March 25,2001.......................................          $  150,000

    Note payable to stockholder of Advanced Geo Materials Inc.
       in connection with the acquisition. The amount is to be
       paid in installments commencing October 15,2000.....             154,188

    Note payable to stockholder of Stewart Enviromental Inc.
       in connection with the acquisition.
       The amount is to be paid on March 31, 2001...........             27,985

    Note payable to stockholders of BTC Associates, Inc.
       in connection with the acquisition.
       The amount is to be paid on July 7, 2000............             550,000

    Note payable to stockholders of Sage Engineering Inc.
       in connection with the acquisition.The amount is to be
       paid in installments commencing February 1, 2001....              45,662
                                                                     ----------

    Less:current portion.....................................           776,095
                                                                     ----------

    Long term portion........................................        $  151,670
</TABLE>

The notes payable bear interest at the prime rate at the date of acquisition.




                                       12

<PAGE>


                     U.S. LABORATORIES INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                AS OF JUNE 30, 2000 AND DECEMBER 31, 1999 AND FOR
             THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999(UNAUDITED)


NOTE 6 - RELATED PARTY TRANSACTIONS

         DUE FROM STOCKHOLDER
         At June 30, 2000, the Company had amounts due from the majority
         stockholder of $140,863. The amounts are due in three annual equal
         installments, are non-interest bearing and are due starting
         September 30, 2000. On November 30, 1999, the Company entered into a
         stock purchase agreement with a related party to purchase all of the
         issued and outstanding shares of capital stock of the Building
         Department Inc.(BDI) for a purchase price of $30,000 in cash which
         was paid in 1999 and an additional payment of $63,000 paid in the
         first quarter,2000.

NOTE 7 - STOCK OPTION PLAN

         In July 1998, the Board of Directors adopted and approved the 1998
         Stock Option Plan (the"Option Plan") under which a total of 500,000
         shares of common stock have been reserved for issuance. In June 1999,
         the Board of Directors and the stockholders approved an increase in the
         number of shares reserved under the Option Plan to bring the total
         number of shares reserved to 810,000. Options under this plan may be
         granted to employees, officers, and directors and consultants of the
         Company. The exercise price of the options is determined by the Board
         of Directors, but the exercise price may not be less than 100% of the
         fair market value on the date of grant. Options vest over periods not
         to exceed 5 years. In June 2000, the Company had 395,000 stock options
         outstanding at an exercise price ranging from $6.00 to $6.60 per share,
         of which 238,632 stock options were exercisable. The Board of Directors
         also approved the grant of an additional 62,500 options to various
         employees under the plan.

NOTE 8 - WARRANTS

         In July 1998, the Board of Directors approved the grant of 150,000
         stock warrants to certain employees of the Company. The warrants
         entitle the holder to purchase Company common stock at a price of $5.00
         per share. The warrants are exercisable at the earlier of (i) the date
         on which the closing price of a share of the Company's common stock as
         reported on the Nasdaq Small-Cap Market is greater than $12.00 or (ii)
         the date on which the audited consolidated earnings for any fiscal year
         are at least twice the base period earnings of $841,041. The warrants
         expire upon termination or November 9, 2003.

NOTE 9 - INITIAL PUBLIC OFFERING

         On February 23, 1999, the Company completed an initial public offering
         that generated net cash of $4,825,000 in the first quarter, 1999.
         1,000,000 shares of common stock, which represented 31.125% of the post
         offering common stock were sold in the offering. A part of the proceeds
         of the offering was used to retire debt in the approximate amount of
         $2,150.000.




                                       13

<PAGE>


                     U.S. LABORATORIES INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF JUNE 30, 2000 AND DECEMBER 31, 1999 AND FOR
             THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999(UNAUDITED)


NOTE 10 - LINES OF CREDIT

         In the third quarter 1999, the Company entered into a $4,000,000
         revolving working capital line of credit facility as part of its
         ongoing efforts to ensure appropriate levels of liquidity. At June 30,
         2000, this working capital line of credit balance was $1,677,231.

         In the third quarter 1999, the Company entered into a $200,000 capital
         purchases line of credit facility. This line of credit is used for
         equipment purchases of the Company and at the end of one year this
         facility will convert to a five year term loan. At June 30, 2000, this
         capital purchases line of credit balance was $199,762, included in long
         term debt.

         In the third quarter 1999, the Company entered into a $350,000 term
         loan facility to refinance existing equipment debt. At June 30, 2000,
         this term loan facility was unused and available for future use.

         In the second quarter 2000, the Company entered into a $500,000
         commercial lease line of credit. This line of credit is used for
         vehicle financing and at June 30, 2000, this vehicle line of credit was
         unused and available for future use.

         All of these credit facilities are secured by the assets of the
         Company and its subsidiaries and bear interest at the variable prime
         rate.

         The Company also has a line of credit with Bank of America in the
         amount of $500,000. Dickerson Wright and his spouse have personally
         guaranteed this line of credit. It is an unsecured note that was due in
         July 2000. The note bears interest at the prime rate. This line of
         credit is still in place and had a zero outstanding balance since the
         end of 1998. The Company does not intend to use this credit facility in
         the future.

NOTE 11 - ACQUISTIONS

         In January 2000, the Company entered into a stock purchase agreement to
         purchase all the outstanding shares of BTC Laboratories, Inc("BTC") for
         a total purchase price of $1,200,000 payable for $500,000 in cash,
         which has been paid on January 3, 2000. Additionally, the Company will
         pay to the sellers cash equal to the collections of accounts receivable
         and work in progress during the six months immediately following the
         closing date up to a maximum amount of $700,000 of which $150,000 of
         this amount was paid on April 3, 2000.

         In January 2000, Buena Engineers, Inc., subsidiary of the Company,
         entered into an asset purchase agreement with Stewart Environmental,
         Inc. to purchase substantially all of its assets for a purchase price
         of $60,000, of which $30,000 has been paid thru March 31, 2000.

         In January 2000, San Diego Testing Engineers, Inc., a subsidiary of the
         Company, purchased substantially all the assets of SAGE Engineering,
         Inc. for a total purchase price of approximately $110,000, including
         15,000 shares of the Company's common stock.

         In February 2000, the Company purchased substantially all of the assets
         of Intertek Technical Services, which will operate under the name
         Unitek Technical Services, Inc., for a total purchase price of
         $1,650,000 in cash which has been paid as of February 22, 2000.





                                       14

<PAGE>


                     U.S. LABORATORIES INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                AS OF JUNE 30, 2000 AND DECEMBER 31, 1999 AND FOR
             THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999(UNAUDITED)


NOTE 11 - ACQUISTIONS (CONTINUED)

         In June 2000, the Company acquired the fixed assets of Moore
         Consulting for a purchase price of $20,000, which was paid on
         June 23, 2000.

         The above acquisitions were recorded by the Company under the purchase
         method of accounting. Goodwill was recorded based on the excess of the
         purchase price over the fair value of the assets acquired and is
         being amortized over a period not exceeding twenty years.

NOTE 12 - SUBSEQUENT EVENT

         On July 7, 2000, the Company paid $499,662 to the previous shareholders
         of BTC as payment toward the principal and interest due, for the
         acquistion of the stock of BTC. A holdback of $3,433 has been made
         until certain provisions of the acquisition agreement are fulfilled.





                                       15

<PAGE>


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

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                     Six Months Ended June 30, 2000 and 1999

         REVENUE. Revenue for the six months ended June 30, 2000 was
$15,941,958, an increase of 128% over the same period in 1999. The increase was
due equally to growth from internal operations and to acquisitions. The Company
experienced an internal growth rate of approximately 65%, with the remaining 63%
attributed to the expansion of operations through the acquisition of several
engineering consulting services companies in the first and second quarters of
2000.

         GROSS PROFIT. Gross profit for the six months ended June 30, 2000 was
$6,966,663, an increase of 103% over the same period in 1999. This increase in
gross profit was due primarily to the increase in revenues described above.

         INCOME BEFORE PROVISION FOR INCOME TAXES. Income before provision for
income taxes for the six months ended June 30, 2000 was $1,425,095, an increase
of 340% over the same period in 1999. The profit increased due to the completion
of five acquisitions in the first and second quarters of 2000, while selling,
general and administrative ("SG&A")expense decreased as a percentage of
revenues. Included in the second quarter SG&A expenses was a $95,000 provision
for 1998 penalties imposed by the IRS. The Company expects a favorable
settlement of this amount before the end of this year.

         INTEREST EXPENSE. Interest expense was $127,014 in the six months ended
June 30,2000,an increase of 184% over the same period in 1999. This increase was
due primarily to funding the cost of acquiring five companies in the first and
second quarters of 2000 whereas previously the Company had used approximately
$1,500,000 of the net proceeds from its initial public offering to fund
acqusitions.

         NET INCOME. Net income for the six months ended June 30,2000 was
$806,948, an increase of 315% over the same period in 1999. The increase in
net income was primarily due to the inclusion of the results of operations
for five acquisitions made in the first and second quarters of 2000 and a
decrease as a percentage of revenue in SG&A expenses.

LIQUIDITY AND CAPITAL RESOURCES

         During the six months ended June 30, 2000, the Company's net cash used
in operating activities was $22,375, a decrease of 135% over the same period in
1999, primarily due to the working capital requirements of the Company during
the summer months and several large projects which started in the second
quarter of fiscal 2000.

         In the third quarter 1999, the Company entered into a $4,000,000
revolving working capital line of credit facility as part of the Company's
ongoing efforts to ensure appropriate levels of liquidity. At June 30, 2000,
this working capital line of credit balance was $1,677,231, and is included as a
current liability.

         In the third quarter 1999, the Company entered into a $200,000 capital
purchases line of credit facility. This line of credit is used for equipment
purchases of the company and at the end of one year this facility will convert
to a five year term loan. At June 30, 2000, this capital purchases line of
credit balance was $199,762, included in long term debt.

         In the third quarter 1999, the Company entered into a $350,000 term
loan facility to refinance existing equipment debt. At June 30, 2000, this term
loan facility was unused and available for future use.





                                       16

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

         In the second quarter 2000, the Company entered into a $500,000
commercial lease line of credit. This line of credit is used for vehicle
financing and at June 30, 2000, this vehicle line of credit was unused and
available for future use.

         All of these credit facilities are secured by the assets of the
Company and its subsidiaries and bear interest at the variable prime rate.

         The Company also has a line of credit with Bank of America in the
amount of $500,000. Dickerson Wright and his spouse have personally guaranteed
this line of credit. It is an unsecured note that was due in July 2000. The note
bears interest at the prime rate. This line of credit is still in place and has
had a zero outstanding balance since the end of 1998. The Company does not
intend to use this credit facility in the future.

         Management believes that its available cash and cash equivalents as
well as cash generated from operations will be sufficient to meet its cash
requirements for at least the next twelve months. The Company's, nevertheless,
is currently negotiating with a number of lenders to secure credit facilities
that can be used to finance additional acquisitions. During the remainder of
2000, the Company intends to actively continue its search for acquisitions in
order to expand our geographical representation and enhance its technical
capabilities.

ACQUISITIONS

         In January 2000, the Company entered into a stock purchase agreement to
purchase all the outstanding shares of BTC Laboratories, Inc. for a total
purchase price of $1,200,000 payable for $500,000 in cash, which has been paid
on January 3,2000. Additionally, the Company will pay to the seller cash equal
to the collections of accounts receivable and work in progress during the six
months immediately following the closing date, up to maximum amount of $700,000
of which $150,000 of this amount was paid on April 3, 2000.

         In January 2000, Buena Engineers, Inc., a subsidiary of the Company,
entered into an asset purchase agreement with Stewart Environmental, Inc. to
purchase substantially all of the assets of Stewart for a purchase price of
$60,000 of which $30,000 had been paid thru March 31, 2000.

         In January 2000, San Diego Testing Engineers, Inc., a subsidiary of the
Company, purchased substantially all the assets of SAGE Engineering, Inc. for a
total purchase price of $3,000 in cash and 15,000 shares of common stock.

         In February 2000, the Company purchased assets of Intertek Technical
Services, which operates under the Unitek Technical Services, Inc., for a total
purchase price of $1,650,000 in cash which has been paid as of February 22,2000.

         In June 2000, the Company acquired the fixed assets of Moore
Consulting for a purchase price of $20,000 which has been paid on June 23,
2000.

         The above acquisitions were recorded by the Company under the
purchase method of accounting. Goodwill was recorded based on the excess of
the purchase price over the fair value of the assets acquired and is being
amortized over a period not exceeding twenty years.

MANAGEMENT INDEBTEDNESS

         At June 30, 2000, the Company had amounts due from the majority
stockholder in the amount of $140,863. This amount was evidenced by a
non-interest bearing promissory note due in three equal annual installments
beginning September 30, 2000.




                                       17

<PAGE>


INFLATION

         Inflation does not currently affect our operations, and we do not
expect inflation to affect our operations in the foreseeable future.

BACKLOG

As of June 30, 2000, the Company's backlog has reached approximately $19.4
million. This amount has increased approximately 76% or $8.4 million from $11.0
million at December 31, 1999.

The increase in backlog for the second quarter 2000 can be attributed to the
increase in long term contract awards in the public sector along with an
increase in commercial sector business. Also contributing to this increase is
the ongoing and contracted work associated with the first and second quarter
of fiscal 2000 acquisitions of BTC Laboratories, Intertek Technical Services,
Stewart Environmental, Sage Engineering and Moore Consulting with increased
contract awards noted in the aerospace and communciation business sectors.

YEAR 2000 ISSUE - UPDATE

The Company has completed a comprehensive review of its computer systems to
identify the systems that could be affected by ongoing Year 2000 problems.
Upgrades to systems judged critical to business operations have been
successfully installed. To date, no significant costs have been incurred in
the Company's systems related to the Year 2000.

The Company continues to monitor the impact of Year 2000 on its operations,
and a contingency plan for critical business applications and continuing
project operations is in place in the event unidentified issues cause
business disruptions. The Company also continues to monitor the Year 2000
readiness of its clients, suppliers, subcontractors and vendors.

FORWARD LOOKING AND CAUTIONARY STATEMENTS

         Except for the historical information and discussions contained
herein, statements contained in this Form 10-QSB may constitute 'forward
looking statements' within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements involve a number of risks, uncertainties
and other factors that could cause actual results to differ materially,
including the Company's failure to continue to develop and market new and
innovative products and services and to keep pace with technological change;
competitive pressures; failure to obtain or protect intellectual property
rights; financial condition or results of operations; quarterly fluctuations
in revenues and volatility of stock prices; the Company's ability to attract
and retain key personnel; currency and customer financing risks; dependence
on certain suppliers; changes in the financial or business condition of the
Company's distributors or resellers; the Company's ability to successfully
manage acquisitions and alliances; legal, political and economic changes and
other risks, uncertainties and factors discussed in the Company's other
filings with the Securities and Exchange Commission, and in materials
incorporated therein by reference.

                                       18

<PAGE>


                                     PART II

Item 2. Changes in Securities and Use of Proceeds.

         (a) Not applicable

         (b) Not applicable

         (c) In January 2000, San Diego Testing Engineers, Inc., a subsidiary of
the Company, entered into an asset purchase agreement to purchase substantially
all the assets of SAGE Engineering, Inc. As part of the consideration for this
acquisition, the Company issued 15,000 shares of the Company's common stock to
stockholders in SAGE Engineering, Inc. The Company issued these securities under
the exemption form registration provided by Section 4 (2) of the Securities Act
of 1933.

         (d) The Company's registration statement of Form SB-2 was made
effective by the Securities and Exchange Commission of February 23, 1999. We
sold 1,000,000 units, each consisting of one share of common stock, $0.01 par
value per share, and one redeemable warrant to purchase one share of common
stock at an exercise price of $7.80. Our managing underwriters were Cardinal
Capital Management, Inc. and Janda & Garrington LLC. After deducting the
underwriting discounts, commissions and all the offering's expenses, the Company
received approximately $4,275,000 from the offering.

As of August 11, 2000, we have used the net proceeds as described in the table
below.

<TABLE>
<CAPTION>
===============================================================================
              Use                                               Amount
-------------------------------------------------------------------------------
<S>                                                            <C>
         Acquisitions                                          $1,495,000
-------------------------------------------------------------------------------
       Repayment of Debt                                       $2,150,000
-------------------------------------------------------------------------------
 Working Capital for Operations                                $  630,000
===============================================================================
</TABLE>

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

On June 3, 2000, the Company's Annual Meeting of Stockholders was held in Red
Bank, New Jersey,for the following purposes:

         (a) The following directors were elected to serve one-year terms to
expire at the year 2001 Annual Meeting of Stockholders:

<TABLE>
<CAPTION>
===============================================================================
ELECTION OF DIRECTORS                   FOR           AGAINST           ABSTAIN
-------------------------------------------------------------------------------
<S>                                  <C>                 <C>              <C>
Dickerson Wright                     3,188,469           0                500
-------------------------------------------------------------------------------
Gary Elzweig                         3,188,469           0                500
-------------------------------------------------------------------------------
Donald C. Alford                     3,188,469           0                500
-------------------------------------------------------------------------------
Mark Baron                           3,188,469           0                500
-------------------------------------------------------------------------------
Martin B. Lowenthal                  3,188,269           0                700
-------------------------------------------------------------------------------
Joseph Wasilewski                    3,188,469           0                500
-------------------------------------------------------------------------------
Thomas H. Chapman                    3,188,469           0                500
-------------------------------------------------------------------------------
James L. McCumber                    3,188,319           0                650
-------------------------------------------------------------------------------
Robert E. Petersen                   3,188,319           0                650
===============================================================================
</TABLE>


                                       19
<PAGE>


Item 4. Submission of Matters to a Vote of Security Holders.(Continued)

         (b) The Stockholders approved the Company's 1999 Stock Incentive Plan,
as amended, which authorizes the grant of common stock up to 100,000 shares for
award by the Compensation Committee of the Board of Directors.

The total number of votes cast for, against and abstained was 3,178,094; 5,775;
and 5,100 respectively.

Item 5. Other Information

         The Board of Directors authorized a stock buyback program for the
repurchase of up to 100,000 shares of the Company's common stock on November 2,
1999. The open market transactions are made from time to time in compliance with
applicable rules and regulations utilizing corporate earnings, and may be
discontinued at any time. Through June 30, 2000, the Company had repurchased
61,065 shares pursuant to this buyback program.






                                       20

<PAGE>


Item 6.             Exhibits and Reports Form 8-K

            a.      Exhibits

            27      Financial Data Schedule
                    (EDGAR version only)

            b.      Reports on Form 8-K

           (1)      On April 28, 2000, the Company filed a Form 8-K which
                    disclosed, under Item 4, that it had engaged Ernst &
                    Young LLP as its independent auditors for the fiscal
                    year ending December 31, 2000. The Board of Directors
                    of the Company decided to change its auditors to
                    Ernst & Young LLP. There were no outstanding issues
                    or disagreements with the previous auditors.




                                       21

<PAGE>


                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    U.S. LABORATORIES INC.

Dated: August 11, 2000              /s/ Dickerson Wright
                                    ------------------------
                                    Dickerson Wright, President

Dated: August 11, 2000              /s/ Joseph M. Wasilewski
                                    --------------------------
                                    Joseph M. Wasilewski,
                                    Vice President and Chief Financial Officer





                                       22

<PAGE>



                                  EXHIBIT INDEX

Exhibit Number
--------------


27                  Financial Data Schedule
                    (EDGAR version only)