<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20509

                                    FORM 10-Q

(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended 
         June 30, 1998.

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
         For the transition period from ................ to ...................

         Commission file number 0-26568

                              USA Detergents, Inc.
             (Exact name of registrant as specified in its charter)

         Delaware                                    11-2935430
(State or other jurisdiction of          (IRS Employer Identification No.)
incorporation or organization)

             1735 Jersey Avenue, North Brunswick, New Jersey 08902
              (Address of principal executive offices - Zip code)

                                 (732) 828-1800
              (Registrant's telephone number, including area code)

                           --------------------------
         (Former name, former address and former fiscal year, if changed
                               since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required to
file reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] (1)    No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

 Class of Stock        No. of Shares Outstanding                  Date
 --------------        -------------------------                  ----
    Common                  13,825,602                       August 14, 1998


(1) The  Company was  delinquent  in the filing of its Form 10-Q for the quarter
    ended June 30, 1997, which Form has since been filed.
<PAGE>

                      USA DETERGENTS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                            ASSETS
                                                                December 31,         June 30,
                                                                    1997               1998
                                                                    ----               ----

<S>                                                            <C>               <C>
Current assets:
Cash                                                                 $ 1,848            $ 3,610
Accounts receivable, net of customer allowances and doubtful
      accounts of $867 and $1,069 , respectively                      24,349             20,703
Inventories                                                           17,258             13,619
Refundable income taxes                                                7,120              7,057
Prepaid expenses and other current assets                              3,249              2,892
                                                                -------------      -------------
         Total current assets                                         53,824             47,881

Property and equipment - net                                          45,672             45,795
Restricted funds                                                         275                275
Deferred financing costs                                                 491              1,476
Other non-current assets                                               2,546              2,140
                                                                -------------      -------------
         Total assets                                              $ 102,808           $ 97,567
                                                                =============      =============


                             LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt                                    $ 2,501           $ 36,321
Accounts payable                                                      29,880             24,784
Accrued expenses                                                      13,259             15,318
Other current liabilities                                              1,367                518
                                                                -------------      -------------
         Total current liabilities                                    47,007             76,941

Long-term debt - net of current portion                               38,998                  -
Long-term note payable                                                     -              4,000
Deferred rent payable                                                  1,219              1,110
                                                                -------------      -------------
         Total liabilities                                            87,224             82,051
                                                                -------------      -------------

Commitments and Contingencies

Stockholders' equity:
Preferred stock-no par value; authorized 1,000,000
    shares, none issued                                                    -                  -
Common stock-$.01 par value; authorized 30,000,000 shares, issued
    and outstanding 13,806,279 and 13,825,602 shares, respectively       138                138
Additional paid-in capital                                            28,336             29,200
Deficit                                                              (12,715)           (13,647)
Note receivable - warrant                                               (175)              (175)
                                                                -------------      -------------
         Total stockholders' equity                                   15,584             15,516
                                                                -------------      -------------
         Total liabilities and stockholders' equity                $ 102,808           $ 97,567
                                                                =============      =============
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       2
<PAGE>


                      USA DETERGENTS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              (in thousands, except net loss per share information)
<TABLE>
<CAPTION>

                                                                     Three months            Six months
                                                                    ended June 30,         ended June 30,
                                                                 ---------------------  -----------------------
                                                                    1997        1998         1997         1998
                                                                    ----        ----         ----         ----
<S>                                                            <C>            <C>         <C>          <C>

Net sales                                                          $ 54,970    $ 54,072    $ 115,640   $ 110,750

Cost of goods sold                                                   46,767      36,826       96,112      76,803
                                                                 ----------   ---------   ----------   ---------
Gross profit                                                          8,203      17,246       19,528      33,947

Selling, general and administrative                                  20,948      14,648       40,093      29,082
Restructuring costs                                                   2,379         400        2,379         400
Litigation settlement                                                     -       3,266            -       3,266
                                                                 ----------   ---------   ----------   ---------
                                                                     23,327      18,314       42,472      32,748

Income/(loss) from operations                                       (15,124)     (1,068)     (22,944)      1,199

Interest and amortization of deferred financing costs - net             685       1,182        1,139       2,085
                                                                 ----------   ---------   ----------   ---------

Loss before provision/(benefit) for income taxes                    (15,809)     (2,250)     (24,083)       (886)
Provision/(benefit) for income taxes                                 (1,092)         25       (3,909)         46
                                                                 ----------   ----------  -----------  ---------
Net loss                                                          $ (14,717)   $ (2,275)   $ (20,174)     $ (932)
                                                                 ==========   =========   ==========   =========


Basic net loss per share                                            $ (1.07)     $ (.16)     $ (1.46)     $ (.07)
                                                                 ==========   =========   ==========   =========
Weighted average shares outstanding                                  13,794      13,825       13,779      13,820
                                                                 ==========   =========   ==========   =========


Diluted net loss per share                                          $ (1.07)     $ (.16)     $ (1.46)     $ (.07)
                                                                 ==========   =========   ==========   =========
Weighted average shares outstanding                                  13,794      13,825       13,779      13,820
                                                                 ==========   =========   ==========   =========
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       3
<PAGE>



                      USA DETERGENTS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    SIX MONTHS ENDED JUNE 30, 1997, AND 1998
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                            1997           1998
                                                                            ----           ----
<S>                                                                        <C>             <C>    

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                $(20,174)        $ (932)
    Adjustments to reconcile net loss to net
       cash used in operating activities:
    Depreciation and amortization                                              2,298          2,895
    Amortization of warrants                                                       -            328
    Amortization of deferred financing costs                                       -            179
    Change in the provision for customer allowances and doubtful accounts      2,489            202
    Decrease in deferred rent                                                    (32)          (109)
Changes in operating assets and liabilities:
    (Increase)/decrease in accounts receivable                                (1,575)         3,444
    Decrease in inventories                                                    8,322          3,639
    (Increase)/decrease in prepaid expenses and other current assets            (112)           357
    Decrease in other non-current assets                                         194             13
    Increase/(decrease) in accounts payable and accrued expenses              19,248         (3,037)
    (Increase)/decrease in refundable income taxes                            (3,740)            63
    Decrease in deferred tax asset                                               534              -
    Decrease in deferred tax liability                                          (735)             -
                                                                             --------       --------
       Net cash provided by operating activities                               6,717          7,042
                                                                             --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                                       (17,434)        (2,705)
                                                                             --------       --------
       Net cash used in investing activities                                 (17,434)        (2,705)
                                                                             --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Repayments of long-term debt                                                (153)          (178)
    Net proceeds from/(repayments to) credit facility                          5,618         (5,000)
    Increase in non-current liabilities                                          602              -
    Repayments of Oracle purchase obligation                                       -           (849)
    Increase in deferred financing costs                                           -         (1,412)
    Net proceeds from exercise of options                                        258            864
    Increase in long-term note payable                                             -          4,000
    Decrease in note receivable                                                2,250              -
                                                                             --------       --------
       Net cash provided by/(used in) financing activities                     8,575         (2,575)
                                                                            ---------       --------
Net (decrease)/increase in cash                                               (2,142)         1,762
Cash at beginning of period                                                    2,373          1,848
                                                                             --------       --------
Cash at June 30,                                                               $ 231        $ 3,610
                                                                             ========       ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid during the period for:
       Interest                                                                $ 947        $ 1,471
                                                                             ========       ========
       Income taxes                                                             $ 32           $ 64
                                                                             ========       ========
       Income tax refunds received                                              $  -           $ 64
                                                                             ========       ========
    Value of warrants issued in connection with bank & 
      related party financings                                                  $  -           $750
                                                                             ========       ========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       4
<PAGE>


                      USA DETERGENTS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998

NOTE 1 - BASIS OF PRESENTATION

         The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules of the Securities and Exchange
Commission ("SEC") and in the opinion of management, include all adjustments,
(consisting of normal recurring accruals) necessary for the fair presentation of
the Company's financial position, results of operations and cash flows. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules. The Company believes the
disclosures made are adequate to make such financial statements not misleading.
The results for the interim periods presented are not necessarily indicative of
the results to be expected for the full year. These financial statements should
be read in conjunction with the Company's December 31, 1997 Form 10-K, as
amended, which includes financial information for the year ended December 31,
1997.

         Reclassification - Certain reclassifications have been made to prior
year amounts to conform with the presentation for the current year.

Note 2  - RESTRUCTURING COSTS

         In June 1998, the Company recorded a $400,000 charge relating to its
future lease commitment, offset by sublease income, and associated lease
expenses for its Edison, New Jersey facility which was closed during the second
quarter of 1997.

Note 3 - LEGAL PROCEEDINGS

         On May 5, 1997, a securities class action lawsuit entitled Feldbaum v.
USA Detergents, Inc. et al., No. 97-CV-3227, was filed in the U.S. District
Court for the Eastern District of Pennsylvania against the Company and certain
of its current and former officers and directors; the Feldbaum case subsequently
was transferred to the U.S. District Court for the District of New Jersey. On
May 15, 1997, a second securities class action lawsuit entitled Einhorn v. USA
Detergents, Inc. et al., No. 97-2459 was filed against the Company and certain
of its current and former officers and directors in the U.S. District Court for
the District of New Jersey. Since the Einhorn lawsuit was filed, twelve
additional securities class action lawsuits have been filed in the U.S. District
Court for the District of New Jersey against the Company and certain of its
current and former officers and directors. The class actions purport to be
brought on

                                       5
<PAGE>

behalf of all persons who purchased the Company's common stock between June 5,
1996, at the earliest, and May 8, 1997, at the latest (the "putative class
period"). The class actions generally allege that, during the putative class
period, the defendants made false or misleading public statements and engaged in
improper accounting practices, which caused the price of the Company's common
stock to be artificially inflated. The class actions assert that the defendants'
conduct violated Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, and SEC Rule 10b-5 promulgated thereunder, as well as state common law.
The class actions do not specify an amount of damages. In June and July 1997,
the U.S. District Court for the District of New Jersey entered orders
consolidating all of the pending class actions with the Einhorn case. In August
1997, the court entered an order establishing a master docket for the
consolidated class actions, In re USA Detergents, Inc. Securities Litigation,
Master File No. 97-CV-2459 (MTB), and appointed lead plaintiffs and lead
plaintiffs' co-lead counsel.

         The Company has reached an agreement in principle to settle for $10.0
million the consolidated stockholder class action. The Company's total cost
under the agreement, including legal fees, after insurance and other
participation, is anticipated to be approximately $3.3 million, and the Company
recorded a charge in that amount during the second quarter of 1998. The
proposed settlement is subject to several contingencies, including execution of
a formal stipulation of settlement, notice to the class, and judicial approval.
There can be no assurance that the settlement will finally be approved on these
terms, if at all.

         In connection with certain events related to the foregoing litigation,
including the restatement of the Company's financial statements for the year
ended December 31, 1996, each of the quarters in 1996 and the quarter ended
March 31, 1997, the Company received a formal request from the Securities and
Exchange Commission ("SEC") for the production of various documents. The Company
fully intends to cooperate with the SEC in this matter.

Note 4 - NET  LOSS PER SHARE

         Net loss per share is based on the weighted average number of shares
outstanding during the periods presented. Common stock equivalents have not been
included in the computation of net loss per share since the impact is
antidilutive.

                                       6
<PAGE>


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

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997

         Net sales for the three months ended June 30, 1998 decreased 1.6% to
$54.1 million from $55.0 million for the three months ended June 30, 1997. The
decrease was primarily the result of a decrease in unit sales of household
cleaners and scented candles offset by an increase in unit sales of laundry
products.

         Gross profit for the three months ended June 30, 1998 increased 109.8%
to $17.2 million from $8.2 million for the three months ended June 30, 1997.
Gross profit increased as a percentage of net sales to 31.9% for the three
months ended June 30, 1998 from 14.9% for the same period in 1997. The increase
in gross profit as a percentage of net sales was primarily attributable to a
decrease of 12.5% in material costs due to more favorable pricing and
manufacturing efficiencies and, to a lesser extent, by decreases as a percentage
of net sales of 2.2%, 1.4%, and 0.9% in distribution, manufacturing overhead and
facilities overhead costs, respectively, resulting from improved cost control
measures.

         Selling, general and administrative expenses decreased 30.1% to $14.6
million in the three months ended June 30, 1998 from $20.9 million for the three
months ended June 30, 1997. As a percentage of net sales, these expenses
decreased to 27.1% for the three months ended June 30, 1998 from 38.1% for the
same period in 1997. The decrease as a percentage of net sales was primarily due
to decreases of 5.3% in marketing funds (co-op advertising, promotional
allowances and slotting amortization), 3.0% in freight to customers, 1.4% in
sales commissions, 0.8% in accounting fees and 0.5% in trade show expense.
Additionally, during the quarter ended June 30, 1998 the Company wrote-off
$155,000 of legal fees related to aborted financing transactions.

         In June 1998, the Company recorded a $400,000 charge related to its 
future lease commitment, offset by sublease income, and associated lease
expenses for its Edison, New Jersey facility which was closed during the second
quarter of 1997.

         The Company has reached an agreement in principle to settle for $10.0
million the consolidated stockholder class action. The Company's total cost 
under the agreement, including legal fees, after insurance and other 
participation, is anticipated to be approximately $3.3 million, and the Company 
recorded a charge in that amount during the second quarter of 1998. The proposed
settlement is subject to several contingencies, including execution of a formal 
stipulation of settlement, notice to the class, and judicial approval. There can
be no assurance that the settlement will finally be approved on these terms, if 
at all.

         Interest and amortization of deferred financing costs-net increased to
$1.2 million for the three months ended June 30, 1998 from $0.7 million for the
three months ended June 30, 1997, primarily as a result of higher average
outstanding borrowings and the amortization of warrant and bank closing costs.

                                       7
<PAGE>

         Income tax provision for the three months ended June 30, 1998 of
$25,000 and the income tax benefit for the three months ended June 30, 1997 of
$1.1 million are based on actual tax computations for each of the periods. The
difference in the effective rates between the periods relates primarily to the
Company's net operating loss carry forward for which the Company has not
provided a tax benefit.

                                       8

<PAGE>

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

         Net sales for the six months ended June 30, 1998 decreased 4.2% to
$110.8 million from $115.6 million for the six months ended June 30, 1997. The
decrease was primarily the result of a decrease in unit sales of household
cleaners and candles offset by an increase in unit sales of laundry products.

         Gross profit for the six months ended June 30, 1998 increased 73.8% to
$33.9 million from $19.5 million for the six months ended June 30, 1997. Gross
profit increased as a percentage of net sales to 30.7% for the six months ended
June 30, 1998 from 16.9% for the same period in 1997. The increase in gross
profit as a percentage of net sales was primarily attributable to a decrease of
10.6% in material costs due to more favorable pricing and manufacturing
efficiencies, and to a lesser extent, by decreases as a percentage of net sales
of 1.7%, 0.5%, 0.2%, and 0.8% in distribution, manufacturing overhead, direct
labor and facilities overhead costs, respectively, resulting from improved cost
control measures.

         Selling, general and administrative expenses decreased 27.4% to $29.1
million for the six months ended June 30, 1998 from $40.1 million for the six
months ended June 30, 1997. As a percentage of net sales, these expenses
decreased to 26.3% for the six months ended June 30, 1998 from 34.7% for the
same period in 1997. The decrease as a percentage of net sales was primarily due
to decreases of 4.2% in marketing funds (co-op advertising, promotional
allowances and slotting amortization), 2.1% in freight to customers, 1.1% in
sales commissions, 0.3% in trade show expense and 0.2% in consulting expenses.

         In June 1998, the Company recorded a $400,000 charge related to its 
future lease commitment, offset by sublease income, and associated lease 
expenses from its Edison, New Jersey facility which was closed during the 
second quarter of 1997.

         The Company has reached an agreement in principle to settle for $10.0
million the consolidated stockholder class action. The Company's total cost 
under the agreement, including legal fees, after insurance and other 
participation, is anticipated to be approximately $3.3 million, and the Company 
recorded a charge in that amount during the second quarter of 1998. The proposed
settlement is subject to several contingencies, including execution of a formal 
stipulation of settlement, notice to the class, and judicial approval. There can
be no assurance that the settlement will finally be approved on these terms, if 
at all.

         Interest and amortization of deferred financing costs-net increased to
$2.1 million for the six months ended June 30, 1998 from $1.1 million for the
six months ended June 30, 1997, primarily as a result of higher average
outstanding borrowings and the amortization of warrant and bank closing costs.

         Income tax provision for the six months ended June 30, 1998 of $46,000
and the income tax benefit for the six months ended June 30, 1997 of $3.9
million are based on actual tax computations for each of the periods. The
difference in the effective rates between the periods relates primarily to the
Company's net operating loss carry forward for which the Company has not
provided a tax benefit.

                                       9
<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

PNC BANK DEBT

         On February 25, 1998, the Company and PNC Bank, National Association
("PNC") entered into an amended and restated Loan and Security Agreement (the
"February 1998 PNC Facility"). Under the amended agreement, the Company made a
principal payment of $5 million and granted PNC a security interest in
substantially all of the assets of the Company. The balance of the principal
indebtedness, approximately $35 million, has been extended to January 4, 1999
and bears interest at rates which range from prime plus .25% to prime plus 2%.
The actual rate depends on the timing of the repayment of the indebtedness. The
February 1998 PNC Facility requires the Company to, among other things, maintain
a ratio of current assets to current liabilities (as defined) in excess of 1.1,
and prohibits the payment of dividends and the incurrence of new debt. Of the $5
million paid to PNC, $4 million was loaned to the Company, which is secured by a
second mortgage lien, by an entity owned by certain of the Company's principal
stockholders at a rate of 9.5% per annum, and is due in July 1999. These
stockholders also personally guaranteed the repayment of up to an additional $5
million of the indebtedness owed to PNC. At June 30, 1998, the total amount due
PNC of approximately $35 million is classified as current.

         In connection with the transaction, PNC received a warrant to purchase
between approximately 138,000 and 690,000 shares of the Company's common stock,
depending on the repayment date of the remaining indebtedness (138,000 shares if
paid in full by September 30, 1998). In conjunction with the issuance of this
warrant, the Company recognized in the first quarter of 1998, a deferred charge
of $415,000. This charge is being deferred and amortized over the period ending
January 4, 1999. The Company engaged the services of an independent specialty
investment banking firm to establish the valuation of this warrant.

         The stockholders who funded $4 million of the $5 million payment
described above and guaranteed the repayment of an additional $5 million have
been granted warrants to purchase between approximately 99,000 and 194,000
shares of the Company's common stock, depending on whether the $5 million which
is the subject of the guarantee is required to be paid. The warrants were
approved by the Board of Directors on April 30, 1998. In conjunction with the
issuance of these warrants, the Company recognized, in the first quarter of
1998, a deferred charge of $335,000 based on a warrant for approximately 99,000
shares. This charge is being deferred and amortized over an 18 month period. The
Company engaged the services of an independent specialty investment banking firm
to calculate and establish the valuation of these warrants.

                                      10
<PAGE>

EDA LOAN

         The Company also has a loan facility of $2.75 million from the New
Jersey Economic Development Authority (the "EDA Loan"). As of June 30, 1998, the
Company had used approximately $2.5 million of the EDA Loan for purchases of
machinery and equipment and improvements to the Company's North Brunswick
manufacturing facility. The remaining funds are restricted for the duration of
the EDA Loan. The EDA Loan, of which $1.1 million is outstanding at June 30,
1998, is payable in monthly installments of approximately $26,000 through
November 1, 2002. Interest on the EDA Loan is payable at a variable rate (3.45%
at June 30, 1998). As a result of several factors, including those relating to
the Company's historical financial performance, amounts owed under the EDA Loan,
at the option of the issuing lender thereunder, may be declared immediately due
and payable. There can be no assurance that all such amounts in the future will
not be declared immediately due and payable. The Company remains current with
respect to scheduled principal and interest payments. Consequently, the entire
obligation has been classified as current in the June 30, 1998 balance sheet.

ORACLE PURCHASE OBLIGATION

         On April 16, 1998 the Company obtained a forbearance agreement from
Sanwa Business Credit Corporation, ("SBCC") which provided that SBCC would
forbear exercising its rights and remedies available to it under the Company's
May 29, 1997 agreement with Oracle Software, which was assigned to SBCC on
August 20, 1997. Under the terms of the forbearance agreement the Company has
agreed to pay SBCC the entire amount due in monthly installments by September
30, 1998. At June 30, 1998, the Company's obligation to SBCC was approximately
$518,000.



LIQUIDITY

         At June 30, 1998, the Company's working capital deficiency was $29.1
million compared to working capital of $6.8 million at December 31, 1997. The
decrease in working capital is primarily attributable to the reclassification of
all amounts owed to PNC from long-term to current.

         Net cash provided by operating activities for the six months ended June
30, 1998 was $7.0 million compared to $6.7 million for the six months ended June
30, 1997. The increase in cash provided by operating activities resulted
primarily from a decrease in inventories of $3.6 million and a decrease in
accounts receivable of $3.4 million, offset, in part by operating losses of $0.9
million and a decrease in accounts payable and accrued expenses of $3.0 million.

         Net cash used in investing activities for the six months ended June 30,
1998 was $2.7 million relating primarily to the purchase of machinery and
equipment. This compares to net cash used in investing activities of $17.4
million for the six months ended June 30, 1997. The Company anticipates that
capital expenditures for the remainder of 1998 will be approximately $2 million,
which includes certain expenditures 

                                      11
<PAGE>

to upgrade the Company's manufacturing and distribution capabilities and enhance
the Company's information systems.

         Net cash used in financing activities for the six months ended June 30,
1998 was $2.6 million compared to the net cash provided by financing activities
of $8.6 million for the six months ended June 30, 1997. Net cash used in
financing activities resulted primarily from a repayment to PNC of $5.0 million,
an increase in deferred financing costs of $1.4 million, and repayments to SBCC
of $0.8 million, offset in part by an increase in a long-term debt of $4.0
million and proceeds from the exercise of stock options of $0.9 million.

         For the six months ended June 30, 1998, the Company has experienced
significant operating losses relating to, among other things, restructuring
costs associated with the close of its Edison facility and the shareholder
litigation settlement. The Company requires the availability of sufficient cash
flow and borrowing capacity to finance its operations, meet its debt service
obligations and fund future capital expenditure requirements. The Company's
operating plan for the remaining six months of 1998 includes continuing its cost
reduction programs and refinancing its debt to PNC. The cost reduction programs
include automation of manufacturing facilities related to spray products,
production rationalization, increased use of high speed fillers and cartoners
and improved production planning and control. There can be no assurance that the
Company will be successful in these efforts.

IMPACT OF INFLATION

         General inflation in the economy has increased operating expenses of
most businesses. The Company has provided compensation increases generally in
line with the inflation rate and incurred higher prices for goods and services. 
The Company continually seeks methods of reducing costs and streamlining 
operations while maximizing efficiency through improved internal operating 
procedures and controls. While the Company is subject to inflation as described 
above, management believes that inflation currently does not have a material 
effect on the Company's operating results, but there can be no assurance that 
this will continue to be so in the future.

                                      12
<PAGE>

NEW ACCOUNTING PRINCIPLE

         During Fiscal 1997, the Financial Accounting Standards Board issued the
following account standards: Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS No. 130), Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS No. 131) and Statement of Financial Accounting
Standards No. 132 "Employers Disclosures about Pension and other Post retirement
Benefit Plans" (SFAS No. 132). The Company does not expect any material effect
from adoption of SFAS Nos. 131 and 132. The Company will report comprehensive
income as a component of equity. During the quarter ended June 30, 1998, the
Company does not have any items that would be reportable as a component of
comprehensive income other than its income from operations.

                  The Company's quarterly and annual operating results are
affected by a wide variety of factors that could materially and adversely affect
revenues and profitability, including competition from other suppliers of
laundry and household cleaning products; changes in consumer preferences and
spending habits; the inability to successfully manage growth; seasonality; the
ability to introduce and the timing of the introduction of new products; the
inability to obtain adequate supplies or materials at acceptable prices; the
inability to reduce expenses to a level commensurate with revenues; and the
inability to negotiate acceptable credit terms with the current or prospective
lenders. As a result of these and other factors, the Company may experience
material fluctuations in future operating results on a quarterly or annual
basis, which could materially and adversely affect its business, financial
condition, operating results, and stock price. Furthermore, this document and
other documents filed by the Company with the Securities and Exchange Commission
(the "SEC") contain certain forward looking statements with respect to the
business of the Company, including prospective financing arrangements. These
forward-looking statements are subject to certain risks and uncertainties,
including those mentioned above, which may cause actual results to differ
significantly from these forward-looking statements. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements which may be to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events. An
investment in the Company involves various risks, including those mentioned
above and those which are detailed from time to time in the Company's SEC
filings.

                                      13
<PAGE>

Part II - OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS:

                  On May 5, 1997, a securities class action lawsuit entitled
         Feldbaum v. USA Detergents, Inc. et al., No. 97-CV-3227, was filed in
         the U.S. District Court for the Eastern District of Pennsylvania
         against the Company and certain of its current and former officers and
         directors; the Feldbaum case subsequently was transferred to the U.S.
         District Court for the District of New Jersey. On May 15, 1997, a
         second securities class action lawsuit entitled Einhorn v. USA
         Detergents, Inc. et al., No. 97-2459, was filed against the Company and
         certain of its current and former officers and directors in the U.S.
         District Court for the District of New Jersey. Since the Einhorn
         lawsuit was filed, twelve additional securities class action lawsuits
         have been filed in the U.S. District Court for the District of New
         Jersey against the Company and certain of its current and former
         officers and directors. The class actions purport to be brought on
         behalf of all persons who purchased the Company's common stock between
         June 5, 1996, at the earliest, and May 8, 1997, at the latest (the
         "putative class period"). The class actions generally allege that,
         during the putative class period, the defendants made false or
         misleading public statements and engaged in improper accounting
         practices, which caused the price of the Company's common stock to be
         artificially inflated. The class actions assert that the defendants'
         conduct violated Sections 10(b) and 20(a) of the Securities Exchange
         Act of 1934, and SEC Rule 10b-5 promulgated thereunder, as well as
         state common law. The class actions do not specify an amount of
         damages. In June and July 1997, the U.S. District Court for the
         District of New Jersey entered orders consolidating all of the pending
         class actions with the Einhorn case. In August 1997, the court entered
         an order establishing a master docket for the consolidated class
         actions, In re USA Detergents, Inc. Securities Litigation, Master File
         No. 97-CV-2459 (MTB), and appointed lead plaintiffs and lead
         plaintiffs' co-lead counsel.

                  The Company reached an agreement in principle to settle for
         $10.0 million the consolidated stockholder class action. The Company's
         total cost under the agreement, including legal fees, after insurance
         and other participation, is anticipated to be approximately $3.3
         million, and the Company recorded a charge in that amount during the
         second quarter of 1998. The proposed settlement is subject to several
         contingencies, including execution of a formal stipulation of
         settlement, notice to the class, and judicial approval. There can be no
         assurance that the settlement will finally be approved on these terms,
         if at all.

                  In connection with certain events related to the foregoing
         litigation, including the restatement of the Company's financial
         statements for the year ended December 31, 1996, each of the quarters
         in 1996 and the quarter ended March 31, 1997, the Company received a
         formal request from the Securities and Exchange Commission ("SEC") for
         the production of various documents. The Company fully intends to
         cooperate with the SEC in this matter.

                                      14
<PAGE>

ITEM 2.           CHANGES IN SECURITIES:

                  None

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES:

                  None

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                           (a) The Company 's Annual Meeting of Stockholders was
                  held on May 27, 1998 (the "Annual Meeting"). 

                           (b) The following matters were voted upon and
                  approved by the Company's stockholders at the Annual Meeting:

                                    (i) The election of five directors to serve
                           for the ensuing year. The following nominees were
                           elected as directors of the Company (with the
                           Company's stockholders having voted as set forth
                           below):

                                             WITHHELD AUTHORITY
       NOMINEE                VOTES FOR           TO VOTE
      ---------               ---------           -------
Frederick R. Adler            8,164,762            16,765
Daniel Bergman                8,164,762            16,765
Uri Evan                      8,164,762            16,765
Christopher Illick            8,164,762            16,765
Richard A. Mandell            8,164,762            16,765



                                    (ii) Amendment of the Company's 1995 Stock
                           Option Plan to increase the number of shares
                           available for issuance thereunder. The Company's
                           stockholders voted as follows: For: 6,803,310
                           Against: 1,371,717 Abstentions: 6,500

                                    (iii) The ratification of the appointment of
                           Deloitte & Touche LLP as the Company's independent
                           certified public accountants for the fiscal year
                           ending December 31, 1998. The Company's stockholders
                           voted as follows: For: 8,145,257 Against: 31,270
                           Abstentions: 5,000 

ITEM 5.    OTHER INFORMATION 

           None

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a) Exhibits
               
               10.28 Warrant dated April 30, 1998 issued by the Registrant to
                     101 Realty Associates, L.L.C.

               27    Financial Data Schedule

           (b) Reports on Form 8-K

               None.

                                      15
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                              USA DETERGENTS, INC.


August 14, 1998                               By:  /s/   Uri Evan
                                                        ----------
                                              Uri Evan
                                              Chairman of the Board and
                                              Chief Executive Officer


August 14, 1998                                /s/   Richard D. Coslow
                                                     ------------------ 
                                               Richard D. Coslow
                                               Senior Vice President
                                               Chief Financial Officer


                                      16