<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 September 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.


Class                                        Outstanding as of November 13, 2000
-----                                        -----------------------------------


Common Stock, $0.1 par value per share                     3,201,065


Transitional Small Business Disclosure Format:  Yes_____ No X
                                                           -
<PAGE>

                            U.S. Laboratories Inc.


                                     Index




<TABLE>
<CAPTION>

Part I - Financial Information                                       Page
<S>                                                                  <C>
Item 1.  Financial Statements

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

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

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

Consolidated Statements of Cash Flows
For the Nine Months Ended September 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                                         20

Item 5. Other Information                                             21

Item 6. Exhibits and Reports on Form 8-K                              22

Signatures                                                            23

Exhibits                                                              24

</TABLE>

                                       2
<PAGE>
                    U.S. LABORATORIES INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                   September 30, 2000 and December 31, 1999



                                    ASSETS

<TABLE>
<CAPTION>
                                                 September 30,           December 31,
                                                     2000                   1999
                                                     ----                   ----
                                                 (unaudited)
<S>                                                 <C>                   <C>
Current assets
Cash and cash equivalents...................       $   515,092            $1,217,527
Accounts receivable, net of allowance for
  doubtful accounts of $607,121 and $209,956,
  respectively..............................         8,324,469             4,783,095
Work-in-progress............................           769,341               329,899
Prepaid expenses and other current
assets......................................           284,127                85,147
Notes receivable-related party,
  current portion...........................            46,905                46,905
                                                   -----------            ----------
         Total current assets...............         9,939,934             6,462,573
Furniture and equipment, net of accumulated
  depreciation of $1,461,659 and $1,077,836,
  respectively..............................         1,726,255             1,102,149
Goodwill, net of accumulated amortization of
  $719,511 and $575,420, respectively.......         2,730,088             1,629,826
Notes receivable-related party, net of
  current portion...........................            93,959                93,809
Other assets................................           393,776               303,420
                                                   -----------            ----------
     Total assets...........................       $14,884,012            $9,591,777
                                                   ===========            ==========
</TABLE>

                            See accompanying notes


                                       3

<PAGE>
                    U.S. LABORATORIES INC. AND SUBSIDIARIES
                    CONSOLIDATED BALANCE SHEETS (Continued)
                   September 30, 2000 and December 31, 1999


                     LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                              September 30,    December 31,
                                                  2000             1999
                                                  ----             ----
                                               (unaudited)
<S>                                            <C>            <C>
Current liabilities
   Lines of credit.......................      $ 2,237,231    $    63,641
    Notes payable, current portion.......          356,346        290,075
   Accounts payable......................        1,986,156        736,540
   Accrued liabilities...................          885,313        313,723
   Deferred income taxes.................          478,355        306,203
   Income taxes payable..................          398,275        777,434
                                               -----------    -----------
        Total current liabilities........        6,341,676      2,487,616

   Notes payable, net of current portion.          543,187        508,173
                                               -----------    -----------
        Total liabilities................        6,884,863      2,995,789

Commitments and Contingencies

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 ....................        2,727,112      1,489,634
                                               -----------    -----------
      Total stockholders' equity.........        7,999,149      6,595,988
                                               -----------    -----------
   Total liabilities and stockholders'
     equity..............................      $14,884,012    $ 9,591,777
                                               ===========    ===========
</TABLE>


                            See accompanying notes

                                       4
<PAGE>
                    U.S. LABORATORIES INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
       For the Three Months Ended September 30, 2000 and 1999(unaudited)
       And the Nine Months Ended September 30,2000 and 1999 (unaudited)

<TABLE>
<CAPTION>
                                                      For the Three Months Ended     For the Nine Months Ended
                                                           September 30,                   September 30,
                                                      --------------------------     -------------------------
                                                         2000             1999          2000          1999
                                                      -----------    -----------     -----------    -----------
                                                      (unaudited)    (unaudited)     (unaudited)    (unaudited)
<S>                                                  <C>             <C>            <C>             <C>
Revenue......................................         $9,517,387      $4,245,299     $25,459,345    $11,230,000
Cost of goods sold...........................          5,614,641       2,147,135      14,589,936      5,698,711
                                                       ---------       ---------      ----------    -----------
Gross profit.................................          3,902,746       2,098,164      10,869,409      5,531,289
                                                       ---------       ---------      ----------    -----------
Selling, general, and
  administrative expenses....................          3,041,263       1,790,362       8,443,943      4,906,210
                                                       ---------       ---------      ----------    -----------
Income from operations.......................            861,483         307,802       2,425,466        625,079
                                                       ---------       ---------      ----------      ---------
Other income (expense)
Interest expense.............................            (77,210)         (6,947)       (204,224)       (75,767)
Interest income..............................                 52          17,059          10,273         57,701
Other, net...................................            (24,146)            776         (46,241)        35,722
                                                       ---------       ---------      ----------      ---------
    Total other income (expense).............           (101,304)         10,888        (240,192)        17,656
Income before provision for income taxes.....            760,179         318,690       2,185,274        642,735

Provision for income taxes...................            329,649         127,476         947,796        257,094
                                                       ---------       ---------      ----------      ---------
Net income...................................            430,530        $191,214      $1,237,478      $ 385,641
                                                       =========       =========      ==========      =========
Basic and diluted income per share...........                .14        $    .06    $        .39      $     .13
                                                       =========       =========      ==========      =========
Weighted average shares outstanding..........          3,201,065       3,200,000       3,201,065      3,003,703
                                                       =========       =========      ==========      =========
</TABLE>

                            See accompanying notes

                                       5

<PAGE>
                    U.S. LABORATORIES INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
            For the Nine Months Ended September 30, 2000(unaudited)

<TABLE>
<CAPTION>
<S>                                  <C>                             <C>              <C>               <C>             <C>
                                                                                      Additional
                                            Common Stock              Treasury         Paid-In          Retained
                                          Shares     Amount            Stock           Capital          Earnings         Total

 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........................                                                                        1,237,478      1,237,478
                                      ---------     --------          --------        ----------         ----------    -----------
Balance, 9/30/00..................    3,201,065     $ 32,010          $ (4,327)       $5,244,354         $2,727,112    $ 7,999,149
                                      =========     ========          ========        ==========         ==========    ===========
</TABLE>





                            See accompanying notes

                                       6
<PAGE>
                    U.S. LABORATORIES INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
       For the Nine Months Ended September 30, 2000 and 1999 (unaudited)
<TABLE>
<CAPTION>
                                                                        For the Nine Months Ended
                                                                              September 30,
                                                                       ----------------------------
                                                                          2000              1900
                                                                          ----              ----
                                                                       (unaudited)       (unaudited)
                                                                        ---------         ---------
<S>                                                                    <C>                <C>
Cash flows from operating activities

Net income..........................................................    $1,237,478        $385,641
Adjustments to reconcile net income
to net cash (used in) provided by operating
activities

Amortization of Goodwill............................................       145,175          87,450
Depreciation........................................................       419,250         225,113
Deferred Income Taxes...............................................           800            -

Changes in assets and liabilities, excluding
the effects of businesses acquired

Accounts receivable.................................................    (1,434,412)       (326,708)
Work in progress....................................................      (255,361)       (223,642)
Prepaid expenses....................................................      (139,551)       (144,274)
Other assets........................................................       (29,232)        (40,667)
Accounts payable....................................................       741,555        (280,027)
Accrued liabilities.................................................       480,878         355,101
Income tax payable..................................................      (379,159)        140,245
                                                                         ----------       ---------
Net cash provided by operating
 activities.........................................................       787,421         178,232
                                                                         ----------       ---------
Cash flows from investing activities

Purchase of furniture and equipment, net
 of disposals.......................................................      (609,952)       (174,861)
Acquisitions of businesses,net of cash
 acquired...........................................................    (3,097,105)       (184,178)
Note receivable-related party.......................................          (148)           -
                                                                        -----------       ---------
Net cash (used in) investing activities.............................    (3,707,205)       (359,039)
                                                                       ------------      ----------
</TABLE>
                            See accompanying notes

                                       7

<PAGE>
                    U.S. LABORATORIES INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
       For the Nine Months Ended September 30, 2000 and 1999 (unaudited)
<TABLE>
<CAPTION>
                                                                               For the Nine Months Ended
                                                                                     September 30
                                                                           --------------------------------
                                                                               2000                1999
                                                                           ---------------------------------
                                                                           (unaudited)            (unaudited)
<S>                                                                        <C>                 <C>
Cash flows from financing activities

  Lines of credit,(net)..............................................       $2,173,590          $(1,877,744)
  Due to stockholders,(net)..........................................             -                (221,976)
  Repayments of notes payable........................................           (7,836)            (428,896)
  Proceeds from the initial stock offering
    net of the deferred offering costs...............................             -               4,785,685
  Issuance of common & treasury stock,
    net of purchases.................................................           51,595                 -
                                                                            ----------          ------------
Net cash provided by
    financing activities.............................................        2,217,349            2,257,069
                                                                            ----------          ------------
Net (decrease) increase in cash......................................         (702,435)           2,076,262

Cash, beginning of period............................................        1,217,527              121,782
                                                                            ----------          ------------
Cash, end of period..................................................       $  515,092          $ 2,198,044


Supplemental disclosures of cash flow
information

Interest paid.......................................................        $  204,224          $    75,767
                                                                            ==========          ===========
Income taxes paid...................................................        $  746,350          $   111,800
                                                                            ==========          ===========
</TABLE>

Supplemental Disclosure 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, in accordance with the respective
purchase agreements.


                            See accompanying notes

                                       8
<PAGE>

                    U.S. LABORATORIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         September 30, 2000 (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 to construction companies and U.S.
     government agencies. The Company has facilities in California, New Jersey,
     Florida, Nevada and Virginia. 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 - Interim Unaudited Financial Information
     -------------------------------------------------

     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
     -------------------------
     The Company considers 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 ranging from 3 to 7 years.

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

                                       9
<PAGE>

                    U.S. LABORATORIES INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
                         September 30, 2000 (unaudited)



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)

     Goodwill
     --------
     Goodwill 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 duration of the contract. Revenue
     from services is recognized when service has been performed and accepted.
     At the time losses 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.

     The Company records work-in-progress revenue on a percentage of completion
     method whereby income is recognized by a comparison of the work completed
     with the total estimate of work to be completed. All work-in-progress is
     expected to be billed within one year.

     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)
                         September 30, 2000 (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 U.S.
     government agencies, 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 nine months ended September 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 and No.
     138, this pronouncement is effective for financial statements of fiscal
     years beginning after June 15, 2000. SFAS No. 133 and SFAS No. 137,
     established 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 as amended to have a material effect, if any, on its interim or annual
     financial position or results of operations.

     Reclassifications
     -----------------
     The Company has reclassified certain prior year financial statement
     accounts to conform to current year presentations.

NOTE 3 - CASH AND CASH EQUIVALENTS

     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. The Company has not
     experienced any uninsured 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)
                         September 30, 2000 (unaudited)



NOTE 4 - FURNITURE AND EQUIPMENT

     Furniture and equipment consisted of the following:

<TABLE>
<CAPTION>

                                       September 30,     December 31,
                                            2000             1999
                                       ------------     -------------
<S>                                  <C>              <C>
     Automobiles and trucks..........    $1,336,941      $  963,259
     Furniture and fixtures..........       380,647         319,136
     Office hardware and software....       490,409         168,735
     Machinery and equipment.........       801,230         596,337
     Leasehold improvements..........       178,687         132,518
                                         ----------      ----------
                                          3,187,914       2,179,985
     Less:accumulated depreciation...     1,461,659       1,077,836
                                         ----------      ----------

                  Total..............    $1,726,255      $1,102,149
                                         ==========      ==========
</TABLE>

NOTE 5 - 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 September 30, 2000, this working
     capital line of credit balance was $2,237,231 and at December 31, 1999 the
     balance was $63,641.

     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 September 30, 2000, this capital
     purchases term loan balance was $196,432; included in long term debt was
     $157,146 and $39,286 was included as short term debt.

     In the third quarter 1999, the Company entered into a $350,000 term loan
     facility to refinance existing equipment debt. At September 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 September 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 had a line of credit with Bank of America in the amount of
     $500,000. The Company's majority shareholder and his spouse have personally
     guaranteed any borrowings against this line of credit. It was an unsecurred
     note that was due in July, 2000 and has expired. The Company does not
     intend to use this credit facility in the future.


                                       12
<PAGE>

                    U.S. LABORATORIES INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
                         September 30, 2000 (unaudited)


NOTE 6 - NOTES PAYABLE

     Notes payable consisted of the following:

<TABLE>
<CAPTION>
                                                         September 30,      December 31,
                                                             2000                1999
                                                             ----                ----
<S>                                                     <C>                <C>
Acquisitions Notes

     Note payable to stockholder of Wyman
       Enterprises,Inc. The amount is
       to be paid in two annual installments
       of $75,000 beginning March 25, 2001..............    $150,000           $225,000

     Note payable to stockholder of Advanced
       Geo Materials Inc. The amount is to be
       paid in installments commencing
       October 15, 2000.................................      89,504            157,325

     Note payable to stockholders of BTC Associates,
       Inc.The amount is to be paid on
       October 15, 2000.................................       3,433                  -

     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......................      46,775                  -

     Other Notes

     Notes payable to various motor credit
       corporations, collateralized by
       applicable equipment. Monthly payments
       includes interest ranging from
       7.75% to 13.5% per annum.........................     413,389            415,923

     Note payable to Bank of America
       in connection with the purchase
       of equipment. The amount is to be
       paid on starting September 30, 2000..............     196,432                  -

     Less:current portion...............................     356,346            290,075
                                                            --------          ---------

     Long term portion..................................    $543,187           $508,173

</TABLE>

Unless stated otherwise, notes payable bear interest at the prime rate at the
date of acquisition which range from 8% to 9%.

NOTE 7 - RELATED PARTY TRANSACTIONS

     Due from Stockholder

     At September 30, 2000 the Company had amounts due from the majority
     stockholder of $140,863. The total amount is due on September 20, 2005 in
     one payment and is non-interest bearing. At December 31, 1999 the amount
     was $140,714.

     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. 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.

                                       13
<PAGE>

                    U.S. LABORATORIES INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
                         September 30, 2000 (unaudited)


NOTE 8 - 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 Bard 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 Bard 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 September 2000, the
     Company had 696,950 stock options outstanding at an exercise price ranging
     from $6.00 to $6.60 per share, of which 575,280 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 9 - 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 10 - INITIAL PUBLIC OFFERING

     On February 23, 1999, The Company completed an initial public offering that
     raised net cash of $4,825,000 in the first quarter, 1999. The Company sold
     1,000,000 shares of common stock, which represented 31% of the post-
     offering common stock, in the offering. A part of the proceeds of the
     offering was used to retire debt in the approximate amount of $2,150,000.

NOTE 11 - ACQUISITIONS

     In January 2000, the Company entered into a stock purchase agreement to
     purchase all the outstanding shares of BTC Laboratories, Inc. The Company
     recorded goodwill of $609,380 in connection with this acquisition.

     During January 2000, Buena Engineers Inc., a subsidiary of the Company,
     entered into an asset agreement with Stewart Environmental Inc. to purchase
     substantially all its assets for a purchase price of $60,000, of which
     $30,000 was paid. In September 2000, the Company and the previous owner of
     Stewart Environmental Inc., entered into a repurchase agreement. The
     previous owner has agreed to repay to the Company the $30,000 in
     installments which had been previously paid by the Company and to forgive
     the $30,000 balance still owed by the Company to the previous owner. The
     first installment was received in October, 2000.

                                       14
<PAGE>

                    U.S. LABORATORIES INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        September 30, 2000 (unaudited)


NOTE 11 - ACQUISITIONS (continued)

     In January 2000, the Company, purchased substantially all the assets of
     SAGE Engineering, Inc. for a total purchase price of approximately $110,000
     which includes 15,000 shares of the Company's common stock. The Company
     recorded goodwill of $35,145 in connection with this acquisition.

     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. The
     Company recorded goodwill of $405,196 in connection with this acquisition.

     In June 2000, the Company acquired certain assets of Moore Consulting for a
     purchase price of $20,000, which was paid on June 23, 2000. The Company
     recorded no goodwill in connection with this acquisition.

     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 net assets acquired, and is being
     amortized over periods not exceeding twenty years.

NOTE 12 - INCOME TAXES

     The Company has amended its previously filed 1996, 1997 and 1998 federal
     tax returns during the third quarter, 2000 to apply for Research and
     Development Credits (R&D) available to the Company. The Company expects to
     file amended state tax returns in the fourth quarter, 2000 and apply for
     R&D Credits at the state level in the states where the Company performed
     its services from 1996 thru 1998.

     The Company has also applied for R&D Credits for 1999 with the filing of
     its 1999 federal tax return during the third quarter, 2000 and is in the
     process of amending its 1999 state tax returns in the states where the
     Company performed its services in 1999.

     The Company anticipates a reduction in its overall effective tax rates as a
     result of R&D Credits and will record the impact through the provision for
     income taxes when the Internal Revenue Service and the various states
     accept the filings.

NOTE 13 - SEGMENT DISCLOSURE

     The Company has adopted Statement of Financial Accounting Standards No.
     131-Disclosure about Segments of an Enterprise and Related Information
     ("SFAS 131"). SFAS 131 supercedes Statement of Financial Accounting
     Standards No. 14 - Financial Reporting for Segments of a Business
     Enterprise ("SFAS 14"). SFAS 131 replaces the "industry approach"
     definition of "segment" that was promulgated by SFAS 14 with the
     "management approach" to identify an entity's reportable segments. Under
     the management approach, an entity's reportable segments are determined by
     the internal organization used by the entity's management for making
     operating decisions and assessing performance. The Company's business is to
     provide professional and technical services. The Company provides its
     services from offices located primarily throughout the United States. In
     accordance with the provisions of SFAS 131, the Company has concluded that
     its operations may be aggregated into one reportable segment for purposes
     of this disclosure.

                                       15
<PAGE>

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

Financial Condition and Results of Operations

          Nine Months Ended September 30, 2000 and 1999 and the three months
ended September 30, 2000 and 1999.

     Revenue. Revenue for the nine months ended September 30, 2000 was
$25,459,345, an increase of 127% over the same period in 1999. The increase was
due to growth from internal operations of $7,164,562 and to acquisitions of
$7,064,783. The Company experienced an internal growth rate of approximately
64%, 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. For the three months ended September 30,
2000, the Company experienced revenues of $9,517,387 which represents an
increase of 124% over the comparable three months period ended September 30,
1999. The Company increased its revenues through internal growth, the results of
earlier acquisitions and an influx of major contracts primarily in the New
Jersey, California and Virginia operations of the Company.

     Gross Profit. Gross profit for the nine months ended September 30, 2000 was
$10,869,409, an increase of 97% over the same period in 1999. This increase in
gross profit was due primarily to the increase in revenues described above. For
the three months ended September 30, 2000, the Company experienced gross profit
of $3,902,746 which represents an increase of $1,804,582 or 86% over the
comparable three month period ended September 30, 1999. This increase is due
primarily to the added businesses from past acquisitions. Particularly, the
Unitek Technical Services Inc. business is primarily a high volume, low gross
margin business as compared to the Company's core inspection/testing business,
and as a result the gross margins declined to 41.0% from the third quarter 2000
a decrease of 8.4% over the comparable three months ended September 30, 1999.
Unitek was acquired in February 2000.

     Income Before Provision for Income Taxes. Income before provision for
income taxes for the nine months ended September 30, 2000 was $2,185,274, an
increase of 240% over the same period in 1999. The profit increased due to the
completion of four acquisitions in the first and second quarters of 2000, while
selling, general and administrative ("SG&A") expenses decreased as a percentage
of revenues. For the three months ended September 30, 2000, the Company
experienced income before provision for taxes of $760,179, an increase of
$441,489 or 139% over the comparable three month period ended September 30,
1999. In the third quarter, 2000 the Company received a favorable outcome of a
$95,000 provision for 1998 penalties imposed by the IRS. This amount reduced
SG&A expenses in the third quarter, 2000, which had been previously recorded in
the second quarter, 2000.

     For the three months ended September 30, 2000, the SG&A expenses for the
Company increased by $1,250,901 over the comparable three month period ending
September 30, 1999. This increase is primarily due to increased travel costs for
the mergers and acquisitions department and additional management personnel
required to manage the additional four acquisitions made in the first six months
of year 2000.

     On a percentage basis the SG&A expenses decreased as a percentage of
revenue to 32% in the three month period ending September 30, 2000, from 42% in
the comparable three month period ended September 30, 1999.

     Interest Expense. Interest expense was $204,224 for the nine months ended
September 30,2000,an increase of 170% over the same period in 1999. This
increase was due primarily to funding the cost of acquiring four 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 acquisitions. For the three months ended September 30, 2000 the Company
interest expense increased by $70,263 over the comparable period in the three
months ended September 30, 1999 for the same reasons mentioned above.

                                       16
<PAGE>

Financial Condition and Results of Operations (continued)

     Net Income. Net income for the nine months ended September 30,2000 was
$1,237,478, an increase of 221% over the same period in 1999. The increase in
net income was primarily due to the inclusion of the results of operations for
the four acquisitions made in the first and second quarters of 2000 and the
decrease as a percentage of revenue in selling, general and administrative
expenses. For the three months ended September 30, 2000, the Company experienced
an increase of net income of $239,316 or 125% over the three month comparable
period ending September 30, 1999. The combined effective tax rate for the three
months and nine month periods ending September 30, 2000 was 43.4% whereas the
combined effective tax rate for the three months and nine months periods ending
September 30, 1999 was 40%.

     As mentioned above, the SG&A expenses decreased to 32.0% as a percentage of
revenue in the three months ending September 30, 2000 from 42.1% in the
comparable three month period September 30, 1999 which is due primarily to the
decentralized management approach of the Company's operations which was also a
contributing factor to the increase in net income.

Liquidity and Capital Resources

     During the nine months ended September 30, 2000, the Company's net cash
used in operating activities was $787,421, a increase of 342% over the same
period in 1999, primarily due to the profitability of the Company during the
summer months and several large projects which started in the second quarter of
fiscal 2000 and which were billed in the third quarter, 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 September 30, 2000, this working
capital line of credit balance was $2,237,231, 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 was used for equipment
purchases of the company and at the end of August, 2000 this facility  converted
to a five year term loan. At September 30, 2000, the balance was $196,432, with
$157,146 treated as long term debt and $39,286 treated as short term debt.

     In the third quarter 1999, the Company entered into a $350,000 term loan
facility to refinance existing equipment debt. At September 30, 2000, and
December 31, 1999 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
September 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.

     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, 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 its geographical representation and enhance its technical capabilities.

                                       17
<PAGE>

Liquidity and Capital Resources (continued)


Acquisitions


     In January 2000, the Company entered into a stock purchase agreement to
purchase all the outstanding shares of BTC Laboratories, Inc. The Company
recorded goodwill of $609,380 in connection with this acquisition.

     During January 2000, Buena Engineers Inc., a subsidiary of the Company,
entered into an asset agreement with Stewart Environmental Inc. to purchase
substantially all of its assets for a purchase price of $60,000, of which
$30,000 was paid.In September 2000, the Company and the previous owner of
Stewart Environmental, Inc., entered into a repurchase agreement. The previous
owner has agreed to repay to the Company the $30,000 in installments, which had
been previously paid by the Company and to forgive the $30,000 balance still
owed by the Company to the previous owner. The first installment was received in
October 2000.

     In January 2000, the Company, purchased substantially all the assets of
SAGE Engineering, Inc. for a total purchase price of approximately $110,000
which includes 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 certain 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 net assets acquired over a period of twenty
years.

Management Indebtedness

     At September 30, 2000 the Company had amounts due from the majority
stockholder of $140,863. The total amount is due on September 20, 2005 in one
payment and is non interest bearing.

Inflation

     Currently, inflation does not significantly affect our operations, and we
do not expect inflation to affect our operations materially in the foreseeable
future.

Backlog

     As of September 30, 2000, the Company's backlog has reached approximately
$23.6 million. This amount has increased approximately 115% or $12.6 million
from $11.0 million at December 31, 1999.

     The increase in backlog for the third quarter, 2000  can be attributed to
internal growth from new projects in the New Jersey, California and Nevada
offices and new contracts and renewals in the public sector. Also contributing
to this increase were backlog contributions from the acquisitions of BTC
Laboratories, Inc. and Unitek Technical Services, Inc. in the first quarter,
2000 and Sage Engineering and Moore Consulting in the second quarter, 2000.

                                       18
<PAGE>

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.

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.

                                       19
<PAGE>

                                    Part II

Item 2.   Changes in Securities.

          (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 from registration provided by
Section 4 (2) of the Securities Act of 1933.

                                       20
<PAGE>

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 September 30, 2000, the Company had
repurchased a total of 61,065 shares pursuant to this buyback program.

     In January 2000, Buena Engineers Inc., a subsidiary of the Company, entered
into an asset agreement with Stewart Environmental Inc. to purchase
substantially all of its assets for a purchase price of $60,000, of which
$30,000 was paid. In September 2000, the Company and Keith Stewart, the previous
owner of Stewart Environmental, Inc. entered into a repurchase agreement. Keith
Stewart has agreed to repay to the Company the $30,000 in installments which had
been previously paid by the Company and to forgive the $30,000 balance still
owed by the Company to the previous owner. The first installment was received in
October, 2000.

                                       21
<PAGE>

Item 6.   Exhibits and Reports Form 8-K

          a.   Exhibits

          10.l Employment Agreement with Joseph M. Wasilewski.

          27   Financial Data Schedule

          b.   Reports on Form 8-K

          (1)  On October 2, 2000, the Company filed a Form 8-K(A) which
               provided the required pro-forma financial information on the
               combined effect of the Company's acquisition of Unitek Technical
               Services, Inc.

                                       22
<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: November 13, 2000        /s/ Dickerson Wright
                                --------------------
                                Dickerson Wright, President



Dated: November 13, 2000        /s/ Joseph M. Wasilewski
                                -------------------------
                                Joseph M. Wasilewski,
                                Vice President and Chief Financial Officer



                                       23
<PAGE>

                                 Exhibit Index



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

10.1      Employment Agreement with Joseph M. Wasilewski.

27        Financial Data Schedule

                                       24