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 March 31, 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, Suite 18
                           San Diego, California 92111
                           ---------------------------
                    (Address of principal executive offices)

                                  619-715-5800
                                  ------------
                           (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 March  31, 2000
-----                                         ---------------------------------

Common Stock, $.01 par value per share                    3,201,065

Transitional Small Business Disclosure Format: Yes___  No _X_


                                        1
<PAGE>

                             U.S. Laboratories Inc.

                                      Index

                                                                            Page
Part I - Financial Information

Item 1. Financial Statements

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

Consolidated Statements of Income
For the Three Months ended March 31, 2000 (unaudited) and 1999               5

Consolidated Statements of Stockholders Equity
For the Three Months Ended March 31, 2000 (unaudited)                        6

Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2000 (unaudited) and 1999               7

Notes to Consolidated Financial Statements                                   9

Item 2.  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations             15


Part II - Other Information

Item 2. Changes in Securities and Use of Proceeds                           18

Item 5. Other Information                                                   18

Item 6. Exhibits and Reports on Form 8-K                                    19

Signatures                                                                  20

Exhibits                                                                    21


                                        2
<PAGE>

Part I - Financial Information

Item 1.           Financial Statements
<TABLE>
                               U.S. LABORATORIES INC. AND SUBSIDIARIES
                                     CONSOLIDATED BALANCE SHEETS
                          December 31, 1999 and March 31, 2000 (unaudited)


                                     ASSETS
<CAPTION>
                                                                    December 31,      March 31,
                                                                       1999             2000
                                                                   -------------    --------------
                                                                                     (unaudited)
Current assets
<S>                                                                <C>              <C>
   Cash............................................................   $1,217,527       $   529,683
   Accounts receivable, net of allowances for doubtful
       accounts of $209,956 and $571,000, respectively.............    4,783,095         6,775,253
   Work-in-process.................................................      329,899           719,839
   Prepaid expenses and other current assets.......................       85,147           283,523
      Current portion of notes receivable-related party............       46,905            46,905
                                                                   -------------    --------------

                  Total current assets.............................    6,462,573         8,355,203

Furniture and equipment, net of accumulated depreciation
   of $ 1,077,836 and $1,199,548, respectively.....................    1,102,149         1,658,487
Excess cost over fair value of net assets acquired, net
   of accumulated amortization of $575,420 and $622,565,
   respectively....................................................    1,629,826         2,548,579
Note Receivable-related party,net of current portion...............       93,809            93,958
Other assets.......................................................      303,420           346,043
                                                                   -------------    --------------



                   Total assets....................................   $9,591,777       $13,002,270
                                                                   =============    ==============

</TABLE>
                            See accompanying notes.


                                        3
<PAGE>
<TABLE>
                               U.S. LABORATORIES INC. AND SUBSIDIARIES
                               CONSOLIDATED BALANCE SHEETS (Continued)
                          December 31, 1999 and March 31, 2000 (unaudited)

                                LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>

                                                                    December 31,      March 31,
                                                                       1999             2000
                                                                   -------------    --------------
                                                                                     (unaudited)
Current liabilities
<S>                                                                <C>              <C>
   Bank overdraft..................................................  $         -      $    509,444
   Lines of credit.................................................       63,641           756,450
   Current portion of long-term debt...............................      132,750           132,750
   Current portion of capitalized lease obligations................        4,966                 -
   Current portion of notes payable................................      157,325           832,633
   Accounts payable................................................      736,540         1,165,369
   Accrued payroll and payroll taxes...............................      308,757           503,810
   Deferred income tax.............................................      306,203           724,433
   Income tax payable..............................................      777,434           768,570
                                                                   -------------    --------------

       Total current liabilities...................................    2,487,616         5,393,459

   Long-term debt, net of current portion..........................      283,173           314,233
   Notes payable, net of current portion...........................      225,000           146,185
                                                                   -------------    --------------

       Total liabilities...........................................    2,995,789         5,853,877
                                                                   -------------    --------------

   Commitment

   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
         3,200,000 and 3,201,065 shares issued and outstanding.....       32,000            32,010
       Treasury Stock at cost......................................     (114,088)                -
       Additional paid-in capital..................................    5,188,442         5,244,354
       Retained earnings...........................................    1,489,634         1,872,029
                                                                   -------------    --------------

       Total stockholders' equity..................................    6,595,988         7,148,393
                                                                   -------------    --------------

               Total liabilities and stockholders' equity..........  $ 9,591,777      $ 13,002,270
                                                                   =============    ==============
</TABLE>
                            See accompanying notes.


                                        4
<PAGE>
<TABLE>
                               U.S. LABORATORIES INC AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF INCOME
                   For the Three Months Ended March 31, 2000 and 1999 (unaudited)



                                                                     For the Three Months Ended
                                                                              March 31,
                                                                   -------------------------------
                                                                      2000               1999
                                                                   -------------    --------------
                                                                    (unaudited)      (unaudited)

<S>                                                                <C>              <C>
       Revenue.....................................................  $ 6,930,138       $ 3,182,700

       Cost of goods sold..........................................    3,790,644         1,719,937
                                                                   -------------    --------------

       Gross profit................................................    3,139,494         1,462,763
                                                                   -------------    --------------

       Selling, general, and administrative expenses...............    2,406,927         1,270,043
                                                                   -------------    --------------

       Income from operations......................................      732,567           192,720
                                                                   -------------    --------------

       Other income (expense)
         Interest expense..........................................      (66,393)          (43,342)
         Interest income...........................................       10,221            12,943
         Other income..............................................          952            15,656
         Other expense.............................................       (1,737)                -
                                                                   -------------    --------------

           Total other income (expense)............................      (56,957)          (14,743)
                                                                   -------------    --------------

       Income before provision for income taxes....................      675,610           177,977
       Provision for income taxes..................................      293,215            78,007
                                                                   -------------    --------------

       Net income..................................................  $   382,395       $    99,970
                                                                   =============    ==============

       Basic and diluted income per share..........................  $       .12       $       .04
                                                                   =============    ==============

       Weighted average shares outstanding.........................    3,201,065         2,611,111
                                                                   =============    ==============
</TABLE>
                            See accompanying notes.


                                                 5
<PAGE>
<TABLE>
                                         U.S. LABORATORIES INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 For the Three Months Ended March 31, 2000 ( unaudited)

<CAPTION>

                                                                             Additional
                                          Common Stock           Treasury       Paid-In          Retained
                                      Shares       Amount           Stock       Capital          Earnings         Total
                                   ---------      -------       ---------    ----------       -----------    ----------
<S>                                <C>            <C>           <C>          <C>              <C>            <C>
Balance, December 31, 1999.........3,200,000      $32,000       $(114,088)   $5,188,442       $ 1,489,634    $6,595,988

Adjustment to opening 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


Net income.........................                                                               382,395       382,395
                                   ---------      -------       ---------    ----------       -----------    ----------

Balance, March 31, 2000............3,201,065      $32,010               0    $5,244,354        $1,872,029    $7,148,393
                                   =========      =======       =========    ==========       ===========    ==========

</TABLE>
                            See accompanying notes.


                                                          6
<PAGE>
<TABLE>
                               U.S. LABORATORIES INC. AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                   For the Three Months Ended March 31, 2000 and 1999 (unaudited)
<CAPTION>
                                                                     For the Three Months Ended
                                                                              March 31,
                                                                   -------------------------------
                                                                      2000               1999
                                                                   -------------    --------------
                                                                    (unaudited)      (unaudited)
   Cash flows from operating activities
<S>                                                                <C>              <C>
            Net income.............................................   $  382,395         $  99,970
            Adjustments to reconcile net income
            to net cash provided by operating
            activities
            Amortization...........................................       47,145            29,903
            Depreciation...........................................      119,806            45,651
            Deferred Income Tax....................................      246,878                 -

   (Increase) decrease in
            Accounts receivable....................................      114,804            52,809
            Work in process........................................     (205,859)           16,573
            Prepaid expenses.......................................     (138,947)         (228,262)
            Other assets...........................................       18,511            (4,564)
            Increase (decrease) in
            Accounts payable.......................................        3,170            60,748
            Accrued payroll and payroll taxes......................       99,375            25,939
            ther accrued expenses..................................            -            53,662
            Income tax payable.....................................       (8,864)           74,755
                                                                   -------------    --------------
   Net cash provided by operating
   activities......................................................      678,414           227,184
                                                                   -------------    --------------
   Cash flows from investing activities
            Purchase of furniture and equipment (net)..............     (230,240)          (62,612)
                                                                   -------------    --------------

            Investment in BTC, Inc net of cash acquired............   (1,143,839)                -
            Investment in Unitech Technical
            Services Inc...........................................   (1,650,000)                -
            Investment in BDI, Inc.................................      (63,000)                -
            Note Receivable-related party..........................         (149)                -
            Investment in Stewart Envriomental,Inc.................      (30,000)                -
                                                                   -------------    --------------

   Net cash (used in) investing activities.........................   (3,117,228)          (62,612)
                                                                   -------------    --------------
</TABLE>
                            See accompanying notes.


                                        7
<PAGE>
<TABLE>
                               U.S. LABORATORIES INC. AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                   For the Three Months Ended March 31, 2000 and 1999 (unaudited)
<CAPTION>

                                                                     For the Three Months Ended
                                                                              March 31,
                                                                   -------------------------------
                                                                      2000               1999
                                                                   -------------    --------------
                                                                    (unaudited)      (unaudited)
                                                                   -------------    --------------
   Cash flows from financing activities
<S>                                                                <C>              <C>
       Increase (decrease) in bank
       overdraft...................................................    $ 509,444        $ (125,635)
       Line of credit, (net).......................................      692,809        (1,877,744)
       Due to stockholders, (net)..................................            -              (360)
       Payments on long-term debt, capitalized
       lease obligations and notes payable.........................      492,797          (285,028)
       Proceeds from the initial stock offering
       net of the deferred offering costs..........................            -         4,825,008
       Issuance of common & treasury stock.........................       55,920                 -
   Net cash provided by
   financing activities............................................    1,750,970         2,536,241
                                                                   -------------    --------------

   Net increase (decrease) in cash.................................     (687,844)          209,549

   Cash, beginning of period.......................................    1,217,527            94,132
                                                                   -------------    --------------

   Cash, end of period.............................................    $ 529,683       $   303,681
                                                                   =============    ==============

   Supplemental disclosures of cash flow information

   Interest paid...................................................    $  66,393       $    27,579
                                                                   =============    ==============

   Income taxes paid...............................................    $  50,000        $      (61)
                                                                   =============    ==============
</TABLE>


Supplemental Schedule of Financing Activities
---------------------------------------------

In the first quarter,  the company issued  treasury stock 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 December 31, 1999 and March 31, 2000 (unaudited) and for
           the Three Months Ended March 31, 2000 and 1999 (unaudited)


NOTE 1 - ORGANIZATION AND BUSINESS

     U.S. Laboratories Inc. and 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.  Please 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 results for the interim periods.

     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  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 as follows:

          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

     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 operations.

     Intangibles
     -----------
     Intangibles  consist of goodwill which is being  amortized over fifteen and
     twenty year periods.  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.


                                        9
<PAGE>
                     U.S. LABORATORIES INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
         As of December 31, 1999 and March 31, 2000 (unaudited) and for
           the Three Months Ended March 31, 2000 and 1999 (unaudited)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


     Revenue Recognition
     -------------------
     Revenue from  services  performed,  including  fixed-price  and  unit-price
     contracts,  is recorded as earned over the lives of the contracts.  Revenue
     from services is recognized when services have been performed and accepted.
     At the time a loss or 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 laws 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.

     Interim Unaudited Financial Information
     ---------------------------------------
     The  unaudited   financial   information   furnished  herein  reflects  all
     adjustments,  consisting only of normal recurring adjustments, which in the
     opinion  of  management,  are  necessary  to  fairly  state  the  Company's
     financial  position,  the  results  of  operations,  and cash flows for the
     periods  presented.  The results of  operations  for the three months ended
     March 31,  2000 are not  necessarily  indicative  of results for the entire
     fiscal year ending December 31, 2000.

     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.

     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.


                                       10
<PAGE>
                     U.S. LABORATORIES INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
         As of December 31, 1999 and March 31, 2000 (unaudited) and for
           the Three Months Ended March 31, 2000 and 1999 (unaudited)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


     Concentrations of Risk
     ----------------------
     The Company sells products and 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  ended March 31, 2000 and 1999,  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
     -----------------------------------------
     SFAS  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
     Activities,"  is  effective  for  financial  statements  with fiscal  years
     beginning  after June 15, 1999.  SFAS No. 133  establishes  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  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 December 31,
     1999 and March 31,  2000,  uninsured  portions  of  balances  held at banks
     aggregated to $1,079,135 and $ 147,567,  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 STATEMENT (Continued)
         As of December 31, 1999 and March 31, 2000 (unaudited) and for
           the Three Months Ended March 31, 2000 and 1999 (unaudited)



NOTE 4 - FURNITURE AND EQUIPMENT

     Furniture and equipment consisted of the following:

                                                    December 31,     March 31,
                                                       1999          2000

     Automobile and trucks..........................  $  963,259    $ 1,121,024
     Furniture and fixtures.........................     319,136        375,833
     Office hardware and software...................     168,735        454,640
     Machinery and equipment........................     596,337        755,916
     Leasehold improvements.........................     132,518        150,622
                                                      ----------    -----------

     Less accumulated depreciation and amortization.   1,077,836      1,199,548
                                                      ----------    -----------

          Total..................................... $ 1,102,149    $ 1,658,487
                                                     ===========    ===========

     Depreciation and amortization  expense for the three months ended March 31,
     1999 and 2000 was $45,651 and $119, 806, respectively.


NOTE 5 - NOTES PAYABLE

     Notes payable consisted of the following at March 31, 2000:

     Note payable to stockholders 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 paid commencing October
       15, 2000........................................................  159,115

     Note payable to stockholder of Stewart Enviromental Inc.
       in connection with the acquisition
       the amount is to be paid on March 31, 2001......................   27,372

     Note payable to stockholders of BTC Associates, Inc.
       in connection with the acquisition.
       the amount is to be paid on June 30, 2000.......................  538,588



                                       12
<PAGE>
                     U.S. LABORATORIES INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
         As of December 31, 1999 and March 31, 2000 (unaudited) and for
           the Three Months Ended March 31, 2000 and 1999 (unaudited)




NOTE 5 - NOTES PAYABLE (Continued)

     Note payable to stockholders of Sage Engineering Inc.
       in connection with the acquisition. The amount..................
       is due starting February 1, 2001................................  103,743
                                                                       ---------
                                                                         978,818
                    Less: current portion..............................  832,633
                                                                       ---------
                    Long term portion.................................. $146,185

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

NOTE 6 - RELATED PARTY TRANSACTIONS

     Due from Stockholder
     At  March  31,  2000,  the  company  had  amounts  due  from  the  majority
     stockholder  of  $140,863.  The  amounts  are  due in  three  annual  equal
     installments and are non - interest bearing.

     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 March 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  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 the fiscal year ending December 31, 1998,
     or any fiscal year thereafter,  are at least twice the base period earnings
     of $841,041. The warrants expire upon termination or November 9, 2003.


                                       13
<PAGE>
                     U.S. LABORATORIES INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
         As of December 31, 1999 and March 31, 2000 (unaudited) and for
           the Three Months Ended March 31, 2000 and 1999 (unaudited)

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. The offering was for
     the sale of 1,000,000 shares of common stock which represent 31.l25% of the
     post offering common stock. A part of the proceeds of the offering was used
     to retire debt in the approximate amount of $2,150,000.

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 the end of March 31, 2000, this
     working capital line of credit balance was $756,450.

     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 the end of March 31, 2000,  this
     capital  purchases  line of credit  balance was $184,713,  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 the end of March 31,
     2000, this term loan facility was unused and available for future use.

     All of these credit  facilities  are secured with 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 guarantee this line of credit. It
     is an unsecured  note that is all due in July 2000. The note bears interest
     at the  prime  rate.  This  line of  credit  is still in place and has been
     reduced to a zero  outstanding  balance since the end of 1998.  The company
     does not intend to use this credit facility in the future.

NOTE 11 - ACQUISITIONS

     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
     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.

     In January 2000, Buena Engineers, Inc., a majority-owned subsidiary of U.S.
     Laboratories,  Inc.,  entered into an asset purchase agreement with Stewart
     Environmental, Inc. ("Stewart") to purchase substantially all of the 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. purchased substantially
     all the assets of SAGE  Engineering,  Inc.  ("SAGE")  for a total  purchase
     price of $53,000 in cash and 15,000 shares of common stock.

     In February  2000, the Company  purchased 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.

     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.

                                       14
<PAGE>

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

     Financial Condition and Results of Operations

               Three Months Ended March 31, 2000 and 1999

          Revenue.  Revenue  for the  three  months  ended  March  31,  2000 was
$6,930,138,  an increase of 118% over the same period in 1999.  The  increase is
primarily  attributable to an internal growth rate of  approximately  67 %, with
the  remaining  51%  attributed  to the  expansion  of  operations  through  the
acquisition of several  engineering  consulting  services companies in the first
quarter 2000.

          Gross  Profit.  Gross  profit  for the  three  months  ended  2000 was
$3,139,494,  an increase of 115% 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 three months ended March 31, 2000 was $675,610, an increase
of 280%  over  the  same  period  in  1999.  The  profit  increased  due to four
acquisitions  in the  first  quarter  2000,  while  general  and  administrative
expenses decreased as a percentage of revenues.

          Interest  Expense.  Interest  expense was $66,393 in the three  months
ended March 31,  2000,  an  increase  of 53% over the same period in 1999.  This
increase was due primarily to the cost of acquiring  four companies in the first
quarter 2000.

          Net Income. Net income for the three months ended March 31, 2000 was $
382,395,  a increase of 282 % over the same period in 1999.  The increase in net
income was  primarily  due to a decrease as a percentage  of revenue in selling,
general and administrative  expenses and the four acquisitions made in the first
quarter, 2000.


Liquidity and Capital Resources

          During the three months ended March 31, 2000, our net cash provided by
operating  activities  was $678,414,  a increase of 199% over the same period in
1999 primarily due to the increases in net income mentioned above.

          In the third  quarter  1999,  we entered into a  $4,000,000  revolving
working capital line of credit facility as part of our ongoing efforts to ensure
appropriate  levels of  liquidity.  At the end of March 31,  2000,  this working
capital line of credit balance was $756,450.

          In  the  third  quarter  1999,  we  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 the end of March 31, 2000,  this capital  purchases
line of credit balance was $184,713, included in long term debt.

          In the  third  quarter,  1999 we  entered  into a  $350,000  term loan
facility to refinance  existing  equipment  debt.  At the end of March 31, 2000,
this term loan facility was unused and available for future use.


                                       15
<PAGE>
Liquidity and Capital Resources (Continued)


          All of these  credit  facilities  are  secured  with the assets of our
company and our subsidiaries and bear interest at the variable prime rate.

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

          We believe that our  available  cash and cash  equivalents  as well as
cash generated from operations will be sufficient to meet our cash  requirements
for at least the next twelve months. We are, nevertheless, currently negotiating
with a number of lenders to secure credit facilities that can be used to finance
additional acquisitions.  During 2000, we intend to actively continue our search
for acquisitions in order to expand our geographical  representation and enhance
our technical capabilities.

Acquisitions

          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 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.

          In January 2000, Buena Engineers, Inc., a majority-owned subsidiary of
U.S.  Laboratories,  Inc., entered into an asset purchase agreement with Stewart
Environmental,  Inc. ("Stewart") to purchase substantially all of the 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.  purchased
substantially  all the assets of SAGE  Engineering,  Inc.  ("SAGE")  for a total
purchase price of $53,000 in cash and 15,000 shares of common stock.

          In  February  2000,  the  Company  purchased  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.

          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.

Management Indebtedness

               At March 31, 2000, we had amounts due from a majority stockholder
in the amount of $140,863.  This amount was  evidenced by a promissory  note and
the  principal  payments  are due in three  equal  annual  installments  and are
non-interest bearing.

Inflation

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


                                       16
<PAGE>
Backlog

As at March 31, 2000, our backlog has reached  approximately $16.3 million. This
figure has  increased  approximately  48% or $ 5.3 million from $11.0 million at
December 31, 1999.

The increase in backlog can be attributed to the increase in contract awards for
the core business of U.S.  Laboratories.  Also  contributing to this increase is
the ongoing and contracted work associated with the first quarter acqusitions of
BTC Laboratories,  Interteck Technical Services,  Stewart Environmental and Sage
Engineering.



Forward Looking and Cautionary Statements

               Except for the historical  information and discussions  contained
herein,  statements  contained in this Form 10-QSB (including  statements in the
Year 2000 discussion above) 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;  the ultimate impact of the various Year
2000  issues on the  company's  business,  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.


                                       17
<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. entered into an
asset  purchase  agreement  to  purchase  substantially  all the  assets of SAGE
Engineering,  Inc. As part of the consideration for this acquisition,  we issued
15,000  shares of common  stock to  stockholders  in SAGE  Engineering,  Inc. We
issued  these  securities  under the  exemption  from  registration  provided by
Section 4(2) of the Securities Act of 1933.

          (d) Our registration  statement of Form SB-2 was made effective by the
Securities  and Exchange  Commission  On February 23,  1999.  We sold  1,000,000
units,  each consisting of one share of common stock,  $0.1 par Value per share,
and one redeemable  warrant to purchase one share of common stock at an exercise
price  of  $7.80.  We  sold  the  units  on  February  23,  1999.  Our  managing
underwriters were Cardinal Capital Management,  Inc. and Janda & Garrington LLC.
After deducting the underwriting  discounts,commissions,  and all the offering's
expenses, we received approximately $4,275,000 from the offering.

          As of May 15, 2000,  we have used the net proceeds as described in the
table below.

--------------------------------------------------------------------------------
                   Use                                   Amount
--------------------------------------------------------------------------------
               Acquisitions                            $1,495,000
--------------------------------------------------------------------------------
            Repayment of Debt                          $2,150,000
--------------------------------------------------------------------------------
      Working Capital for Operations                   $  630,000
--------------------------------------------------------------------------------

Item 5.   Other Information

          The Board of  Directors  authorized  a stock  buyback  program for the
repurchase of up to 100,000  shares of our common stock on November 2, 1999. The
open market  transactions  will be made from time to time as  determined  by us.
Repurchases  will be made in compliance  with  applicable  rules and regulations
utilizing corporate earnings, and may be discontinued at any time.


                                       18
<PAGE>

Item 6.   Exhibits and Reports on Form 8-K

          a.   Exhibits

          See Exhibit Index

27        Financial Data Schedule
               (EDGAR version only)

          b.   Reports on Form 8-K

          The company  filed two Current  Reports on Form 8-K during the quarter
     ended March 31, 2000.  No financial  information  was filed with those Form
     8-K's

     (1)  The first Form 8-K filed  during the quarter  ended March 31, 2000 was
          filed on January  21,  2000,  in  connection  with the stock  purchase
          agreement the company entered into with BTC Laboratories, Inc. ("BTC")
          to purchase all the outstanding shares of BTC in exchange for $500,000
          in cash and $700,000 in notes.

     (2)  The second Form 8-K filed during the quarter  ended March 31, 2000 was
          filed  on  March 9,  2000,  in  connection  with  the  asset  purchase
          agreement  the company  entered into with  Intertek,  Inc. The company
          purchased  certain assets and assumed certain  liabilities of Intertek
          in exchange for $1,600,000 in cash.


                                       19
<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.


Date: May 15, 2000                  /S/ Dickerson Wright
                                    ------------------------------------
                                    Dickerson Wright, President


Date: May 15, 2000                  /S/ Joseph M. Wasilewski
                                    ------------------------------------
                                    Joseph M. Wasilewski,
                                    Vice President and Chief Financial Officer



                                       20
<PAGE>
                                  Exhibit Index

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

27                   Financial Data Schedule
                     (EDGAR version only)



                                       21