<PAGE>



                            UNITED STATES OF AMERICA
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 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 September 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    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              November  5, 1998



<PAGE>

                     USA DETERGENTS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                     ASSETS

<TABLE>
<CAPTION>

                                                                December 31,  September 30,
                                                                    1997          1998
                                                                    ----          ----
                                                                               (Unaudited)
<S>                                                            <C>           <C>
Current assets:
Cash                                                             $   1,848      $  1,710
Accounts receivable, net of customer allowances and doubtful
    accounts of $867 and $1,257 , respectively                      24,349        19,904
Inventories                                                         17,258        16,056
Refundable income taxes                                              7,120         3,885
Prepaid expenses and other current assets                            3,173         3,260
                                                                 ---------      --------

           Total current assets                                     53,748        44,815

Property and equipment - net                                        45,672        45,757
Restricted funds                                                       275             -
Deferred financing costs                                               567         1,790
Other non-current assets                                             2,546         1,945

                                                                 ---------      --------
           Total assets                                          $ 102,808      $ 94,307
                                                                 =========      ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt                                $   2,501      $ 15,415
Accounts payable                                                    29,880        24,630
Accrued expenses                                                    13,259        12,065
Other current liabilities                                            1,405           245
                                                                 ---------      --------

           Total current liabilities                                47,045        52,355

Long-term debt - net of current portion                             38,998        21,547
Other non-current liabilities (Note 3)                                 -           3,295
Deferred rent payable                                                1,181           943
                                                                 ---------      --------

           Total liabilities                                        87,224        78,140
                                                                 ---------      --------

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)      (12,996)
Note receivable - warrant                                             (175)         (175)
                                                                 ---------      --------

           Total stockholders' equity                               15,584        16,167
                                                                 ---------      --------

           Total liabilities and stockholders' equity            $ 102,808      $ 94,307
                                                                 =========      ========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       2

<PAGE>

                     USA DETERGENTS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
         (IN THOUSANDS, EXCEPT NET INCOME/(LOSS) PER SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                         Three months                 Nine months
                                                     ended September 30,          ended September 30,
                                                   ------------------------    ------------------------
                                                      1997          1998         1997             1998
                                                   ---------      ---------    ---------      ---------
                                                  (Unaudited)     (Unaudited) (Unaudited)     (Unaudited)
<S>                                             <C>             <C>           <C>              <C>
Net sales                                          $  57,345      $  52,709    $ 172,985      $ 163,459
                                                               
Cost of goods sold                                    41,073         34,794      137,185        111,597
                                                   ---------      ---------    ---------      ---------
                                                               
Gross profit                                          16,272         17,915       35,800         51,862
                                                               
Selling, general and administrative                   16,547         15,455       56,184         44,382
Restructuring costs                                     -              -           2,379            400
Litigation settlement (Note 3)                          -              -            -             3,266
                                                   ---------      ---------    ---------      ---------
                                                      16,547         15,455       58,563         48,048
                                                               
Income/(loss) from operations                           (275)         2,460      (22,763)         3,814
                                                               
Interest and amortization of deferred                          
    financing costs - net                                770          1,784        2,365          4,024
                                                   ---------      ---------    ---------      ---------
                                                               
Income/(loss) before provision/(benefit)                       
    for income taxes                                  (1,045)           676      (25,128)          (210)
Provision/(benefit) for income taxes                    -                25       (3,909)            71
                                                   ---------      ---------    ---------      ---------
Net income/(loss)                                  $  (1,045)     $     651    $ (21,219)     $    (281)
                                                   =========      =========    =========      =========

Basic net income/(loss) per share                     $ (.08)     $     .05    $   (1.54)     $    (.02)
                                                   =========      =========    =========      =========
Weighted average shares outstanding                   13,795         13,826       13,785         13,822
                                                   =========      =========    =========      =========

Diluted net income/(loss) per share                   $ (.08)     $     .05    $   (1.54)     $    (.02)
                                                   =========      =========    =========      =========
Weighted average shares outstanding and                        
    common share equivalents                          13,795         14,074       13,785         13,822
                                                   =========      =========    =========      =========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       3

<PAGE>

                     USA DETERGENTS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 NINE MONTHS ENDED SEPTEMBER 30, 1997, AND 1998
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                              1997              1998
                                                                              ----              ----
                                                                           (Unaudited)       (Unaudited)
<S>                                                                      <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                               $ (21,219)       $     (281)
     Adjustments to reconcile net loss to net
        cash used in operating activities:
     Depreciation                                                               3,030             3,900
     Amortization of deferred financing costs                                     481             1,405
     Amortization of slotting                                                   3,116             3,258
     Other amortization                                                           472               691
     Change in the provision for customer allowances and doubtful 
        accounts                                                                2,489               390
     Decrease in deferred rent                                                    (49)             (118)
Changes in operating assets and liabilities:
     Decrease in accounts receivable                                            1,422             4,055
     Decrease in inventories                                                   10,117             1,202
     Increase in prepaid expenses and other current assets                     (3,061)           (3,345)
     Increase in other non-current assets                                        (126)              (90)
     Increase/(decrease) in accounts payable and accrued expenses              16,887            (6,444)
     (Increase)/decrease in refundable income taxes                            (3,740)            3,235
     Decrease in deferred tax asset                                               534              -
     Decrease in deferred tax liability                                          (735)             -
                                                                            ---------        ----------
        Net cash provided by operating activities                               9,618             7,858
                                                                            ---------        ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of property and equipment                                       (21,813)           (3,985)
                                                                            ---------        ----------
        Net cash used in investing activities                                 (21,813)           (3,985)
                                                                            ---------        ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Net repayments of current portion of long-term debt                         (229)           (1,226)
     Net proceeds from/(repayments to) credit facilities                        6,674            (7,036)
     Increase in short-term note payable                                         -                4,000
     Increase in other current liabilities                                       -                   87
     Increase/(repayments) of Oracle purchase obligation                        1,604            (1,367)
     Increase in deferred financing costs                                        (735)           (1,878)
     Increase in other non-current liabilities                                   -                3,295
     Net proceeds from exercise of options                                        258               114
     Decrease in note receivable                                                2,250              -
                                                                            ---------        ----------
        Net cash provided by/(used in) financing activities                     9,822            (4,011)
                                                                            ---------        ----------
Net decrease in cash                                                           (2,373)             (138)

Cash at beginning of period                                                     2,373             1,848
                                                                            ---------        ----------
Cash at September 30,                                                       $    -           $    1,710
                                                                            =========        ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS FROM OPERATING ACTIVITIES:
     Interest paid                                                              1,703        $    2,496
                                                                            =========        ==========
     Income taxes                                                           $      32        $       70
                                                                            =========        ==========
     Income tax refunds received                                            $    -           $    3,235
                                                                            =========        ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS FROM FINANCING ACTIVITIES:

     Value of warrants issued in connection with bank and 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 NINE MONTHS ENDED SEPTEMBER 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
period amounts to conform with the presentation for the current period.

NOTE 2 - DEBT

         On August 14, 1998, the Company entered into a Senior Loan and
Security Agreement ("FINOVA Agreement") with a syndicate of lenders including
FINOVA Capital Corporation ("FINOVA") as agent for itself and other lenders,
providing the Company with up to $48.5 million of available financing. The
FINOVA Agreement consists of a five-year revolving credit facility of up to
$40.0 million, subject to availability based on eligible accounts receivable
and inventory, and two five-year term loans aggregating $8.5 million. The
revolving credit facility bears interest at a rate of prime +.75% and on
September 30, 1998, the rate was 9.25%. Unused portions of the revolving credit
facility are subject to a commitment fee of .0375%. On September 30, 1998, net
availability to the Company under the revolving credit facility was $900,000
million and the amount outstanding was $14.4 million.

         One of the term loans in the amount of $6.4 million is repayable in 59
fixed monthly principal payments of $76,190 and a final principal payment of
$1,904,767. This loan bears interest at a fixed rate of 9.33%. The second term
loan in the amount of $2.1 million is repayable in 60 fixed monthly principal
payments of $35,000. This loan bears interest at prime plus 2.0% and on
September 30, 1998 the rate was 10.50%. The aggregate amount outstanding on
September 30, 1998 under both term loans was $8.5 million.


                                       5

<PAGE>

         The FINOVA Agreement contains various covenants which include, among
other things, specified levels of debt to equity, current ratios, a minimum net
worth and a minimum senior debt service coverage ratio. The FINOVA Agreement 
also prohibits the payment of dividends and incurrence of new debt.
Funding under the Agreement is secured by a first priority security interest in
substantially all of the assets of the Company and its subsidiaries, except for
certain real estate.

         $25 million of the initial proceeds from the FINOVA Agreement was used
to pay down the Company's credit facility with PNC Bank, N.A. ("PNC"). In
connection with this payment, the due date of the remaining $10 million of debt
owed to PNC was extended until June 30, 1999, personal guarantees by certain
shareholders of the Company aggregating $5 million were cancelled and the
number of shares of Common Stock issuable to PNC pursuant to a previously
issued warrant was fixed at the minimum level of approximately 140,000 shares,
subject to certain anti-dilution provisions. The remaining $10 million of debt
continues to be secured by certain real property owned by the Company and bears
interest at a rate that ranges from prime plus .75% to 2.0%. On September 30, 
1998 the rate was 9.5%.

         During the three months ended September 30, 1998, the Company recorded
a $602,000 charge related to the write-off of previously incurred unamortized
financing costs associated with the closing of the new financing agreement with
FINOVA Capital Corporation.

EDA LOAN

         On September 3, 1998, as required by the FINOVA Agreement, the Company
repaid $1,034,512 to the New Jersey Economic Development Authority, fully
satisfying the Company's remaining obligation to that entity.

ORACLE PURCHASE OBLIGATION

         On September 30, 1998, the Company paid $18,466 to Sanwa Business
Credit Corporation ("SBCC"), representing the last payment required to be made
under the April 16, 1998 forbearance agreement between the Company and SBCC.
This payment fully satisfied the Company's remaining obligation to SBCC.

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 


                                       6

<PAGE>

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 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. Such amount,
less attorney fees, has been classified as a non-current liability because a
portion of the Company's revolving credit facility has been reserved for the
payment of this obligation. The preliminary order approving the agreed upon
settlement was signed on October 14, 1998 and a notice of the proposed
settlement was sent to all affected shareholders who are members of the class
action suit on October 23, 1998. A final approval hearing is scheduled for
December 14, 1998. 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 intends to continue to cooperate with the SEC in this matter.

         As previously reported, on October 20, 1997, the Company instituted an
action in the Superior Court of New Jersey, Chancery Division, Middlesex County
challenging a claim by North Brunswick Water, LLC ("NBW") that the Company had
failed to pay approximately $5,000,000 in water and sewer charges and seeking
to enjoin NBW from discontinuing water and sewer services. On October 21, 1997
the Company and NBW entered into a Consent Order, pursuant to which the Company
paid $532,118, subject to refund pending resolution of the matter. Thereafter,
based upon a preliminary ruling by the trial court, and in the context of
settlement discussions, NBW as acknowledged that the actual amount due is less
than the original $5,000,000 demand. NBW has, for settlement purposes reduced
its demand to approximately $1,800,000; however, the final amount demanded by
NBW will be determined at the conclusion of the discovery process. The matter
is currently in discovery which must be completed by January 1999. Trial is
scheduled in February, 1999.

         Based upon an assessment made by independent counsel for the Company
and independent engineering estimates of the amount of water used and the
extent of the sewer discharge, management believes that the Company's
obligation if any to NBW will not have a significant impact on the Company's
results of operations or financial position beyond amounts already paid.

NOTE 4 - NET INCOME (LOSS) PER SHARE

         Basic net income (loss) per share is based on the weighted average
number of shares outstanding during the periods presented. Diluted net income
per share also includes Common Stock equivalents that are dilutive. Common
Stock equivalents have not been included in the computation of diluted net loss
per share since the impact is antidilutive.


                                       7

<PAGE>

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

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

         Net sales for the three months ended September 30, 1998 decreased 8.1%
to $52.7 million from $57.3 million for the three months ended September 30,
1997. The decrease was primarily the result of a decrease in unit sales of
laundry products, household cleaners and scented candles.

         Gross profit for the three months ended September 30, 1998 increased
10.1% to $17.9 million from $16.3 million for the three months ended September
30, 1997. Gross profit as a percentage of net sales increased to 34.0% for the
three months ended September 30, 1998 from 28.4% for the same period in 1997.
The increase in gross profit as a percentage of net sales was primarily
attributable to a decrease of 5.2% in material costs due to more favorable
pricing and manufacturing efficiencies, and a decrease as a percentage of net
sales of 1.6% in facilities overhead costs, offset in part by a combined slight
increase as a percentage of net sales of 1.2% in direct labor, manufacturing
and distribution overhead.

         Selling, general and administrative expenses decreased 6.6% to $15.5
million in the three months ended September 30, 1998 from $16.5 million for the
three months ended September 30, 1997. As a percentage of net sales, these
expenses increased to 29.3% for the three months ended September 30, 1998 from
28.9% for the same period in 1997. The increase as a percentage of net sales
was primarily due to an increase of 1.6% in general and administrative
expenses, which included increases for salaries, 1998 bonus accruals (1997 did
not have a bonus accrual) of .44%, accounting and general legal expenses of
 .19%, equipment rental charges of .16%, expenses relating to the implementation
of new software of .25%, warrant amortization costs of .12%; and an increase of
 .8% in marketing funds (co-op advertising, promotional allowances and slotting
amortization). These increases were offset in part by decreases as a percentage
of net sales of 1.7% in freight costs to customers and .3% in selling expenses.

         Interest and amortization of deferred financing costs (net) increased
to $1.8 million for the three months ended September 30, 1998 from $0.8 million
for the three months ended September 30, 1997, primarily as a result of higher
average outstanding borrowings and the accelerated amortization of warrant and
bank closing costs related to the FINOVA Agreement.

         Income tax provision for the three month periods ended September 30,
1998 and September 30, 1997 are based on actual tax computations for each of
the periods. The difference between the effective rates and the statutory rate
relates primarily to the Company's net operating loss carry forward for which
the Company has not provided a tax benefit.


                                       8

<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED 
SEPTEMBER 30, 1997

         Net sales for the nine months ended September 30, 1998 decreased 5.5%
to $163.5 million from $173.0 million for the nine months ended September 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 nine months ended September 30, 1998 increased
44.9% to $51.9 million from $35.8 million for the nine months ended September
30, 1997. Gross profit as a percentage of net sales increased to 31.7% for the
nine months ended September 30, 1998 from 20.7% for the same period in 1997.
The increase in gross profit as a percentage of net sales was primarily
attributable to a decrease of 8.8% in material costs due to more favorable
pricing and manufacturing efficiencies, and to a lesser extent, by decreases as
a percentage of net sales in distribution, manufacturing overhead, direct labor
and facilities overhead costs, resulting from improved cost control measures.

         Selling, general and administrative expenses decreased 21.0% to $44.4
million for the nine months ended September 30, 1998 from $56.2 million for the
nine months ended September 30, 1997. As a percentage of net sales, these
expenses decreased to 27.2% for the nine months ended September 30, 1998 from
32.5% for the same period in 1997. The decrease as a percentage of net sales
was primarily due to decreases of 2.6% in marketing funds (co-op advertising,
promotional allowances and slotting amortization), 1.9% in freight to customers
and 1.4% in selling expenses, offset by an increase of .6% in general and
administrative expenses.

         In June 1998, the Company recorded an additional $400,000 charge
relating to its future lease commitment (net of 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, a consolidated stockholder class action lawsuit. 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. Such
amount, less attorney fees, has been classified as a non-current liability
because a portion of the Company's revolving credit facility has been reserved
for the payment of this obligation. The preliminary order approving the agreed
upon settlement was signed on October 14, 1998 and a notice of the proposed 
settlement was sent to all affected shareholders who are members of the class
action suit on October 23, 1998.  A final approval hearing is scheduled for 
December 14, 1998. 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
$4.0 million for the nine months ended September 30, 1998 from $2.4 million for
the nine months ended September 30, 1997, primarily as a result of higher
average outstanding borrowings and the accelerated amortization of warrant and
bank closing costs directly related to the FINOVA Agreement.

         Income tax provision for the nine months ended September 30, 1998 of
$71,000 and the income tax benefit for the nine months ended September 30, 1997
of $3.9 million are based on actual tax computations for each of the periods.
The difference 


                                       9


<PAGE>

between the effective rates and the statutory rate relates primarily to the 
Company's net operating loss carry forward for which the Company has not 
provided a tax benefit.

LIQUIDITY AND CAPITAL RESOURCES

         On August 14, 1998, the Company entered into a Senior Loan and
Security Agreement with a syndicate of lenders including FINOVA Capital
Corporation as agent for itself and other lenders, providing the Company with
up to $48.5 million of available financing. The FINOVA Agreement consists of a
five-year revolving credit facility of up to $40.0 million, subject to
availability based on eligible accounts receivable and inventory, and two
five-year term loans aggregating $8.5 million. The revolving credit facility
bears interest at a rate of prime +.75% and on September 30, 1998, the rate was
9.25%. Unused portions of the revolving credit facility are subject to a
commitment fee of .0375%. On September 30, 1998, net availability to the
Company under the FINOVA Agreement was $900,000 million and the amount 
outstanding was $14.4 million.

         One of the term loans in the amount of $6.4 million is repayable in 59
fixed monthly principal payments of $76,190 and a final principal payment of
$1,904,767. This loan bears interest at a fixed rate of 9.33%. The second term
loan in the amount of $2.1 million is repayable in 60 fixed monthly principal
payments of $35,000. This loan bears interest at prime plus 2.0% and on
September 30, 1998 the rate was 10.50%. The aggregate amount outstanding on
September 30, 1998 under both term loans was $8.5 million.

         The FINOVA Agreement contains various covenants which include, among
other things, specified levels of debt to equity, current ratios, a minimum net
worth and a minimum senior debt service coverage ratio. The Agreement
also prohibits the payment of dividends and incurrence of new debt. Funding
under the Agreement is secured by a first priority security interest in
substantially all of the assets of the Company and its subsidiaries, except for
certain real estate.

         $25 million of the initial proceeds from the FINOVA Agreement was used
to pay down the Company's credit facility with PNC Bank, N.A. ("PNC"). In
connection with this payment, the due date of the remaining $10 million of debt
owed to PNC was extended until June 30, 1999, personal guarantees by certain
shareholders of the Company aggregating $5 million were cancelled and the
number of shares of Common Stock issuable to PNC pursuant to a previously
issued warrant was fixed at the minimum level of approximately 140,000 shares,
subject to certain anti-dilution provisions. The remaining $10 million of debt
continues to be secured by certain real property owned by the Company and bears
interest at a rate that ranges from prime plus .75% to 2.0%. On September 30, 
1998 the interest rate was 9.5%.

         During the three months ended September 30, 1998, the Company recorded
a $602,000 charge related to the write-off of previously incurred unamortized
financing costs associated with the closing of the new financing agreement with
FINOVA.

EDA LOAN

         On September 3, 1998, as required by the FINOVA Agreement, the Company
paid $1,034,512 to the New Jersey Economic Development Authority, fully
satisfying the Company's remaining obligation to that entity.


                                      10

<PAGE>

ORACLE PURCHASE OBLIGATION

         On September 30, 1998, the Company paid $18,466 to Sanwa Business
Credit Corporation ("SBCC"), representing the last payment required to be made
under the April 16, 1998 forbearance agreement between the Company and SBCC.
This payment fully satisfied the Company's remaining obligation to SBCC.

         At September 30, 1998, the Company's working capital deficiency was
$7.5 million compared to a positive working capital of $6.7 million at December
31, 1997. The decrease in working capital is primarily attributable to the
classification of the $10 million indebtedness to PNC, due in June 1999, as
current.

         Net cash provided by operating activities for the nine months ended
September 30, 1998 was $7.9 million compared to $9.9 million for the nine
months ended September 30, 1997. The cash provided by operating activities
resulted primarily from a decrease in inventories of $1.2 million, a decrease
in accounts receivable of $4.1 million, a decrease in refundable income taxes
of $3.2 million and an increase of $9.2 in depreciation and amortization,
offset in part by the net loss of $.3 million, a decrease in accounts payable
and accrued expenses of $6.4 million and an increase in prepaid expenses and
other current assets of $3.3 million.

         Net cash used in investing activities for the nine months ended
September 30, 1998 was $4.0 million relating to the purchase of machinery and
equipment. This compares to net cash used in investing activities of $21.8
million for the nine months ended September 30, 1997. The Company anticipates
that capital expenditures for the remainder of 1998 will be approximately $1
million, which includes certain expenditures to upgrade the Company's
manufacturing and distribution capabilities and enhance the Company's
information systems.

         Net cash used in financing activities for the nine months ended
September 30, 1998 was $4.0 million compared to the net cash provided by
financing activities of $9.6 million for the nine months ended September 30,
1997. Net cash used in financing activities resulted primarily from a repayment
of PNC debt of $5.0 million, an increase in deferred financing costs of $1.9
million, and repayments to SBCC of $1.4 million, offset in part by an increase
in a short-term note payable to a related party of $4.0 million and an
increase in a long-term debt of $3.3 million.

         For the nine months ended September 30, 1998, the Company has
experienced losses relating to, among other things, additional restructuring
costs associated with the closing of its Edison facility and the settlement of
the shareholder litigation. 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 three months of 1998 includes
continuing its cost reduction programs. The cost reduction programs include
additional automation of manufacturing facilities, further 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.


                                      11

<PAGE>

         On June 30, 1999, PNC's remaining debt of approximately $10.0 million
will mature and on July 31, 1999, 101 Realty Associates, L.L.C.'s debt of $4.0
million will also mature. Management is currently negotiating with FINOVA and
other financial institutions to refinance the Company's respective debts with
PNC and 101 Realty Associates, L.L.C. The Company must refinance these debts
with FINOVA or obtain other sources of financing in order to meet these
anticipated near-term commitments. Although the Company is optimistic about its
ability to refinance these debts, there can be no assurance that the Company
will be successful in obtaining the refinancing from FINOVA or any other
lender.

YEAR 2000 DISCLOSURE

         This section discusses the processes currently being implemented with
respect to issues relating to the Year 2000.

READINESS:
----------

          The Company initiated its Year 2000 project in late 1996 with a
complete review of all products, manufacturing facilities, information systems
and the impact on the Company from customers and suppliers that may fail to
deal with the issue. The Year 2000 issues that need to be addressed within the
organization pertain to the Company's internal information systems that date
stamp transactions. All current applications, operating systems, databases, and
EDI transactions requiring conversion are expected to be completed by the end
of 1998 or first quarter of 1999.

PRODUCTS:
---------

         The Year 2000 issue with respect to the Company's product line is
minimal because our products are not date sensitive and require no internal or
external date tracking.

MANUFACTURING FACILITIES:
-------------------------

         All existing pieces of machinery and equipment have been reviewed and
examined and management believes that Year 2000 issues regarding them will not
effect production or delivery of product because the equipment is not date
reliant and the product movement is a manual process.


                                      12

<PAGE>

INFORMATION SYSTEMS:
--------------------

     Year 2000 issues with respect to information systems, have been addressed
in six major areas:

1.    Operating Systems
2.    Databases
3.    Business Systems
4.    Support Systems
5.    Backup Systems
6.    Hardware Platforms

The following comments discuss the status of each area:

OPERATING SYSTEM:

         The Company has been advised by its software vendors that all existing
operating systems, Novell 3.12, Windows NT, Unix 4.0D, and Windows 95 are
currently Year 2000 compliant.

DATABASE:

         The Company has been advised by its software vendors that all
databases used by the current systems and anticipated new systems are Year 2000
compliant.

BUSINESS SYSTEMS:

         It is expected that by year-end 1998, all existing business systems
will be Year 2000 compliant. To date approximately 95% of the applications have
been converted in a test environment and will soon be placed into a production
status.

SUPPORT SYSTEMS:

         Support systems include all desktop applications. These applications
have been upgraded to be Year 2000 compliant.

BACKUP SYSTEMS:

         The Company has been advised by its software vendors that all
applications that currently back up business applications and databases are
Year 2000 compliant.

                                      13

<PAGE>

HARDWARE PLATFORMS:

         The Company has been advised by its hardware vendors that all
platforms that run the aforementioned systems and databases are Year 2000
compliant.

CUSTOMERS
---------

         The Company has responded to all customers who have requested Y2K
compliance information, plans, and due dates.

SUPPLIERS:
----------

         The Company has contacted its major suppliers and has asked them to
respond to questions concerning their ability to be Year 2000 compliant on a
timely basis. The Company plans to monitor the information received in response
to these inquiries on a continuous basis into 2000. The final analysis of the
responses, which is expected to be completed during the 1st quarter of 1999
will determine the need and extent for contingency planning.

COST OF YEAR 2000 READINESS
---------------------------

         Based on management's assessment of systems, the cost of addressing
the Year 2000 is not currently expected to have a material adverse impact on
the Company's financial condition. To date, the Year 2000 conversion costs
incurred are approximately $60,000, and should not exceed $100,000. (Conversion
costs do not include funds spent by the Company on the purchase of the Oracle
system, which would have been acquired irrespective of the Year 2000 issues).
The Oracle system has been represented to be Year 2000 compliant .

RISK OF THE COMPANY'S YEAR 2000 ISSUES
--------------------------------------

         Achieving Year 2000 compliance is dependent on many factors, some of
which are not completely within the Company's control. There can be no
assurance that the Company has or will be able to identify all aspects of its
business that are subject to Year 2000 problems of customers or suppliers that
affect the Company's business. There also can be no assurance that the
Company's software vendors are correct in their assertions that the software is
Year 2000 compliant, or that the Company's estimate of the costs of systems
preparation for Year 2000 compliance will prove ultimately to be accurate.
Should either the Company's internal systems or internal systems of one or more
significant suppliers or customers fail to achieve Year 2000 compliance, or the
Company's estimate of the costs of becoming Year 2000 compliant prove to be
materially inaccurate, the Company's business and its results of operations
could be adversely affected. In addition to becoming Year 2000 compliant on the
existing applications, the Company is in the process of converting to ORACLE
database and applications, which is scheduled for completion before the Year
2000.


                                      14

<PAGE>

IMPACT OF INFLATION

         General inflation in the economy increases 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.
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.

NEW ACCOUNTING PRINCIPLES

         During 1997, and 1998, 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), Statement of Financial
Accounting Standards No. 132 "Employers Disclosures about Pension and other
Post retirement Benefit Plans" (SFAS No. 132) and Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities. The Company does not expect any material effect from adoption of
SFAS Nos. 131, 132 and 133. The Company will report comprehensive income as a
component of equity. During the quarter ended September 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.


                                      15

<PAGE>

MISCELLANEOUS

         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.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         None.



                                      16

<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 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. Such amount, less attorney fees, has been 
         classified as a non-current liability because a portion of the 
         Company's revolving credit facility has been reserved for the payment
         of this obligation. The preliminary order approving the agreed upon
         settlement was signed on October 14, 1998 and a notice of the
         proposed settlement was sent to all affected shareholders who are
         members of the class action suit on October 14, 1998. A final
         approval hearing is scheduled for December 14, 1998. 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 


                                      17

<PAGE>


         Exchange Commission ("SEC") for the production of various documents. 
         The Company intends to continue to cooperate with the SEC in this 
         matter

         As previously reported, on October 20, 1997, the Company instituted an
action in the Superior Court of New Jersey, Chancery Division, Middlesex County
challenging a claim by North Brunswick Water, LLC ("NBW") that the Company had
failed to pay approximately $5,000,000 in water and sewer charges and seeking
to enjoin NBW from discontinuing water and sewer services. On October 31, 1997
the Company and NBW entered into a Consent Order, pursuant to which the Company
paid $532,118, subject to refund pending resolution of the matter. Thereafter,
based upon a preliminary ruling by the trial court, and in the context of
settlement discussions, NBW as acknowledged that the actual amount due is less
than the original $5,000,000 demand. NBW has, for settlement purposes reduced
its demand to approximately $1,800,000; however, the final amount demanded by
NBW will be determined at the conclusion of the discovery process. The matter
is currently in discovery which must be completed by January 1999. Trial is
scheduled in February, 1999.

         Based upon an assessment made by independent counsel for the Company
and independent engineering estimates of the amount of water used and the
extent of the sewer discharge, management believes that the Company's
obligation if any to NBW will not have a significant impact on the Company's
results of operations or financial position beyond amounts already paid.

ITEM 2.        CHANGES IN SECURITIES:
               None.

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES:
               None.

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
               None.

ITEM 5.        OTHER INFORMATION
               None.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

               (a)   Exhibits

                     10.29  Amended and Restated Warrant, dated August 14, 1998
                            issued by the Company to PNC Bank National 
                            Association.
                     
                     10.30  Second Amended and Restated Loan and Security 
                            Agreement, dated August 14, 1998, between the 
                            Company and PNC Bank National Association.
                     
                     10.31  Loan and Security Agreement, dated August 14, 1998, 
                            between the Company and a syndicate of lenders 
                            including FINOVA Capital Corporation as Agent for 
                            itself and other lenders.
                     
                     10.32  Revolving Loan Note, dated August 14, 1998, issued 
                            by the Company to FINOVA  Capital Corporation.
                     
                     10.33  Term Loan A Note, dated August 14, 1998, issued by 
                            the Company to FINOVA Capital Corporation.
                     
                     10.34  Term Loan B Note, dated August 14, 1998, issued by
                            the Company to FINOVA Capital Corporation.
                     
                     10.35  Agency Agreement dated August 14, 1998 between the
                            Company, FINOVA Capital Corporation, First Source 
                            Financial LLP, Merrill Lynch Business Financial 
                            Services, Inc., and Foothill Capital Corporation.
                
                     27     Financial Data Schedule

               (b)   Reports on Form 8-K

                     None.


                                      18

<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.


November 13, 1998                                    By: /s/ Uri Evan
                                                         ----------------------
                                                     Uri Evan
                                                     Chairman of the Board and
                                                     Chief Executive Officer


November 13, 1998                                        /s/ Richard D. Coslow
                                                         ----------------------
                                                     Richard D. Coslow
                                                     Executive Vice President
                                                     & Chief Financial Officer



                                      19