FORM 10-Q
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended June 30, 1998

                        Commission File Number 1-14089


                              LANDCARE USA, INC.
            (Exact name of Registrant as Specified in its Charter)


                       DELAWARE                       76-0562801      
             (State or other jurisdiction          (I.R.S. Employer   
          of incorporation or organization)     Identification Number)
                                                            
                            
                            
                            

                 THREE RIVERWAY, SUITE 630
                       HOUSTON, TEXAS                    77056   
          (Address of Principal Executive Offices)     (Zip Code)

      Registrant's telephone number, including area code: (713) 965-0336


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


 Number of shares of common stock outstanding at August 13, 1998: 16,186,413
<PAGE>
                               LANDCARE USA, INC.
                               INDEX TO FORM 10-Q
                      For the Quarter Ended June 30, 1998



Part I   -  Financial Information
     Item 1   -   Financial Statements
          General Information....................................     3
          Historical Consolidated Balance Sheets  -  Unaudited
                  LandCARE USA, Inc. as of June 30, 1998 and
                  December 31, 1997..............................     5
          Unaudited Statements of Operations - LandCARE USA, Inc.
                  Historical Consolidated for the Three Months
                  and Six Months ended June 30, 1998 and 1997
                  and Pro Forma Combined for the Three Months
                  and Six Months ended June 30, 1998 and 1997....     6
          Unaudited Consolidated Statement of Changes in
                  Stockholders' Equity  -  LandCARE USA, Inc.
                  for the six month period ended June 30,
                  1998...........................................     8
          Unaudited Historical Consolidated Statements of Cash
                  Flows  -  LandCARE USA, Inc. for the Six
                  Months ended June 30, 1998 and 1997............     9
          Notes to the Consolidated and Combined Financial
          Statements.............................................    10
     Item 2  -  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations..    16
Part II  -  Other Information
     Item 1 -  Legal Proceedings.................................    22
     Item 2  -  Recent Sales of Unregistered Securities..........    22
     Item 6  -  Exhibits and Reports on Form 8-K.................    22
     Signature...................................................    23

                                       2
<PAGE>
                               LANDCARE USA, INC.

                         PART I - FINANCIAL INFORMATION


      ITEM 1.  FINANCIAL STATEMENTS

      GENERAL INFORMATION

            LandCARE USA, Inc., a Delaware corporation, ("LandCARE" or the
      "Company"), was founded in 1997 to be a national provider of comprehensive
      landscape and tree services to the commercial and institutional markets
      and to pursue the consolidation of the highly fragmented landscape and
      tree service industry. On June 9, 1998, LandCARE completed its initial
      public offering (the "IPO") of 5,000,000 shares of its common stock, par
      value $.01 per share (the "Common Stock"). Simultaneous with the
      completion of the IPO, LandCARE acquired: Trees, Inc. ("Trees"), Four
      Seasons Landscape and Maintenance, Inc. ("Four Seasons"), Southern Tree &
      Landscape Co., Inc. ("Southern Tree"), D.R. Church Landscape Co., Inc.
      ("Church"), Ground Control Landscaping, Inc. ("Ground Control"), Arteka
      Corporation ("Arteka"), and Desert Care Landscaping, Inc. ("Desert Care"),
      (collectively referred to herein as the "Founding Companies") for $19.9
      million in cash and 5,162,645 shares of Common Stock (the "Mergers"). In
      connection with the IPO, the Company granted the underwriters an option to
      acquire up to 750,000 additional shares of Common Stock at $8.00 per share
      to cover over-allotments. On June 29, 1998, the underwriters exercised
      such over-allotment option in part, electing to acquire 659,900 shares of
      Common Stock. The Company intends to continue to acquire additional
      companies, through merger or purchase, to expand its national operations.

            Prior to the acquisition of the Founding Companies, LandCARE had not
      conducted any revenue generating activities of its own. For the period
      from inception through June 9, 1998, all of LandCARE'S activity was
      related to the completion of the IPO and the Mergers. LandCARE's
      expenditures from the date of inception through the completion of the IPO
      were advanced by Notre Capital Ventures II, L.L.C. ("Notre"). In exchange,
      Notre received 1,565,158 shares of LandCARE'S Common Stock, of which
      1,296,408 shares were exchanged for 1,296,408 shares of LandCARE'S
      Restricted Voting Common Stock.

            Operating results for interim periods are not necessarily indicative
      of the results for a full year. The financial statements included herein
      should be read in conjunction with the Unaudited Pro Forma Combined
      Financial Statements of the Company and the related notes thereto, the
      Financial Statements of the Company and the related notes thereto, the
      Financial Statements of LandCARE, Trees, Four Seasons, Southern Tree,
      Church, Ground Control, Arteka, and Desert Care and related notes thereto,
      and management's discussion and analysis of financial condition and
      results of operations related thereto, all of which are included in the
      Company's Registration Statement on Form S-1 (No. 333-48215), as amended
      (the "Registration Statement"), filed with the United States Securities
      and Exchange Commission in connection with the IPO.

            For financial statement purposes, Trees, one of the Founding
      Companies, has been identified as the accounting acquirer. Accordingly,
      the historical financial information included herein represents the
      information of Trees prior to the IPO and the Mergers and the consolidated
      results of the Company subsequent to the IPO and the Mergers. The Mergers
      were accounted for using the purchase method of accounting. The
      allocations of the purchase price to the assets acquired and the
      liabilities assumed from the Founding Companies have been initially
      assigned and recorded based on preliminary estimates of fair value and may
      be revised as additional information concerning the valuation of such
      assets and liabilities becomes available.

                                       3
<PAGE>
     The combined pro forma financial information for the three- and six-month
periods ended June 30, 1998 and 1997 includes the results of LandCARE combined
with the Founding Companies as if the Mergers had occurred at the beginning of
the periods. The pro forma financial information includes the effects of (i) the
IPO, (ii) the Mergers, (iii) certain reductions in salaries and benefits to the
former owners of the Founding Companies to which they agreed prospectively, (iv)
certain reductions in lease expense paid to the former owners of the Founding
Companies to which they agreed prospectively, (v) elimination of non-recurring,
non-cash compensation charges related to shares of Common Stock issued to
management, (vi) amortization of goodwill resulting from the Mergers, (vii)
decreases in interest expense resulting from the repayment of substantially all
the Founding Companies' outstanding debt, and (viii) adjustments to the
provisions for federal and state income taxes.

                                       4
<PAGE>
                               LANDCARE USA, INC.
                     HISTORICAL CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                                                       
                                                JUNE 30, 1998  DECEMBER 31, 1997
                                                -------------  -----------------
                                                 (Unaudited)
                     ASSETS
CURRENT ASSETS:
   Cash and cash equivalents ....................  $ 1,231           $ 2,899 
   Accounts receivable, net .....................   23,218             6,893
   Inventories ..................................    2,788              --
   Deferred tax assets ..........................     --                 743
   Other current assets .........................    1,644               465
                                                   -------           -------  
      Total current assets ......................   28,881            11,000
PROPERTY AND EQUIPMENT, net .....................   20,590             9,020
GOODWILL, net ...................................   49,417              --
OTHER ASSETS ....................................      712               339
                                                   -------           -------  
      Total assets ..............................  $99,600           $20,359
                                                   =======           =======  
                                                                    
      LIABILITIES AND STOCKHOLDERS' EQUITY                          
CURRENT LIABILITIES:                                                
   Accounts payable and accrued expenses ........  $12,902           $ 5,527
   Payable to related party .....................     --               2,424
   Current maturities of long-term debt .........       25               335
   Deferred tax liability .......................    1,043              --
   Other current liabilities ....................      237               193
                                                   -------           -------  
      Total current liabilities .................   14,207             8,479
LONG-TERM DEBT, net .............................      170               484
OTHER LONG-TERM LIABILITIES .....................      584               515
DEFERRED TAX LIABILITY ..........................    2,795             1,813
COMMITMENTS AND CONTINGENCIES                                       
STOCKHOLDERS' EQUITY:                                               
   Preferred stock, $.01 par value, 5,000,000                       
     shares authorized; none issued and                             
     outstanding ................................     --                --
   Common stock, $.01 par value, 100,000,000                        
     shares authorized; 13,381,943 and 1,863,137                    
     shares issued and outstanding, at June 30,                     
     1998 and December 31, 1997, respectively ...      134                19
   Additional paid-in capital ...................   79,937               689
   Retained earnings ............................    1,773             8,360
                                                   -------           -------  
      Total stockholders' equity ................   81,844             9,068
                                                   -------           -------  
      Total liabilities and stockholders' equity   $99,600           $20,359
                                                   =======           =======  
                                                                    
The accompanying notes are an integral part of these consolidated financial
statements.

                                       5
<PAGE>
                               LANDCARE USA, INC.
              UNAUDITED HISTORICAL CONSOLIDATED STATEMENTS OF OPERATIONS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                           Three Months Ended        Six Months Ended
                                                June 30                  June 30
                                         -----------------------   ---------------------
                                            1998        1997         1998        1997
                                         -----------  ----------   ----------  ---------
<S>                                        <C>         <C>         <C>         <C>     
REVENUES ...............................   $ 23,164    $ 11,918    $ 37,004    $ 23,239

COST OF SERVICES .......................     18,504      10,257      30,862      20,159
                                           --------    --------    --------    --------
Gross profit ...........................      4,660       1,661       6,142       3,080

SELLING,  GENERAL  AND  ADMINISTRATIVE
EXPENSES ...............................      2,820         780       3,538       1,944
                                           --------    --------    --------    --------
Income from operations .................      1,840         881       2,604       1,136
OTHER INCOME (EXPENSE):
Interest expense .......................       (121)        (67)       (185)       (138)

Other income, net ......................         74         584         100         635
                                           --------    --------    --------    --------
INCOME BEFORE INCOME TAXES .............      1,793       1,398       2,519       1,633

INCOME TAX PROVISION ...................        803         536       1,080         626
                                           --------    --------    --------    --------


NET INCOME .............................   $    990    $    862    $  1,439    $  1,007
                                           ========    ========    ========    ========

NET INCOME PER SHARE:
BASIC ..................................   $   0.19    $   0.46    $   0.41    $   0.54
DILUTED ................................   $   0.19    $   0.46    $   0.41    $   0.54


WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC ..................................      5,100       1,863       3,490       1,863
DILUTED ................................      5,112       1,863       3,503       1,863

</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

                                       6
<PAGE>
                               LANDCARE USA, INC.
             UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
                       (IN THOUSANDS, EXCEPT SHARE DATA)


                                        Three Months Ended     Six Months Ended
                                             June 30               June 30
                                       -------------------   -------------------
                                         1998        1997      1998        1997
                                       --------    -------   --------    -------


REVENUES ...........................   $ 38,288    $30,595   $ 64,928    $54,127

COST OF SERVICES ...................   $ 29,658    $24,382   $ 51,688    $43,360
                                       --------    -------   --------    -------
Gross profit .......................   $  8,630    $ 6,213   $ 13,240    $10,767

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ...........................      5,206      3,638      9,021      7,213
                                       --------    -------   --------    -------
Income from operations .............      3,424      2,575      4,219      3,554
OTHER INCOME (EXPENSE):
Interest expense ...................         (3)      --           (3)      --

Other income, net ..................        104        722        160        787
                                       --------    -------   --------    -------
INCOME BEFORE INCOME TAXES .........      3,525      3,297      4,376      4,341

INCOME TAX PROVISION ...............      1,586      1,483      1,967      1,953
                                       --------    -------   --------    -------

NET INCOME .........................   $  1,939    $ 1,814   $  2,409    $ 2,388
                                       ========    =======   ========    =======

NET INCOME PER SHARE:
BASIC ..............................   $   0.15    $  0.14   $   0.19    $  0.19
DILUTED ............................   $   0.15    $  0.14   $   0.19    $  0.19


WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC ..............................     12,737     12,737     12,729     12,729
DILUTED ............................     12,749     12,737     12,742     12,729


The accompanying notes are an integral part of these combined financial
statements.

                                       7
<PAGE>
                               LANDCARE USA, INC.
         UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                        COMMON STOCK     Additional              Total    
                                        ------------      Paid-In    Retained  Stockholders' 
                                      SHARES     AMOUNT   CAPITAL    EARNINGS    EQUITY
                                      ------     ------   -------    --------    ------
<S>                                 <C>         <C>       <C>       <C>         <C>     
BALANCE, December 31, 1997 ......   1,863,137   $    19   $   689   $  8,360    $  9,068
   Issuance of shares to            
   Notre ........................   1,565,158        16    11,253        --       11,269
   Issuance of management,
   consultant and director      
   shares .......................     994,240        10     7,149        --        7,159
   Acquisition of Founding
   Companies and LandCARE .......   3,299,508        33    23,721        --       23,754
   IPO, net of offering costs ...   5,659,900        56    37,125        --       37,181 
   Distribution to
   stockholders .................        --        --        --       (8,026)     (8,026)

   Net income ...................        --        --        --        1,439       1,439
                                   ----------   -------   -------   --------    --------

BALANCE, June 30, 1998 .......... 13,381,943    $   134   $79,937   $  1,773   $  81,844
                                   ==========   =======   =======   ========    ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                        8
<PAGE>
                               LANDCARE USA, INC.
              UNAUDITED HISTORICAL CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                                             Six Months Ended
                                                                 June 30
                                                           --------------------
                                                             1998         1997
                                                           --------     -------
CASH FLOWS FROM OPERATING ACTIVITIES:
                                                     
   Net income .........................................    $  1,439     $ 1,007
   Adjustments to reconcile net income to net
     cash provided by operating activities --
      Depreciation and amortization ...................       1,452         555
      Gain on sale of equipment .......................        --           (88)
      Deferred income tax provision ...................         993        --
      Changes in assets and liabilities --
         Accounts receivable, net .....................      (1,332)     (1,054)
         Other current assets .........................        (361)        (28)
         Other assets and other liabilities ...........        (394)        (53)

         Accounts payable and accrued expenses ........      (2,568)     (1,096)
                                                           --------     -------

            Net cash used in operating activities .....        (771)       (757)
                                                           --------     -------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sales of property and equipment ......        --            91
   Purchases of property and equipment ................      (3,501)       (369)
   Cash paid for  Founding  Companies,  net of
   cash acquired ......................................     (11,795)       --
                                                           --------     -------

            Net cash used in investing activities .....     (15,296)       (278)
                                                           --------     -------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Debt issuance costs ................................        (275)       --
   Payments on long-term debt .........................     (16,636)       (153)
   Proceeds from issuance of Common Stock, net of
   offering Costs .....................................      39,336        --

   Distribution to stockholders .......................      (8,026)       --
                                                           --------     -------
            Net cash provided by (used in)
            financing activities ......................      14,399        (153)
                                                           --------     -------
NET DECREASE IN CASH ..................................      (1,668)     (1,188)

CASH, beginning of period .............................       2,899       4,369
                                                           --------     -------
CASH, end of period ...................................       1,231       3,181
                                                           ========     =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid during the period for --

      Interest ........................................    $     35     $    33

      Income taxes ....................................    $    580     $    62

The accompanying notes are an integral part of these consolidated financial
statements.

                                       9
<PAGE>
                               LANDCARE USA, INC.
            NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
                                 JUNE 30, 1998
                                  (UNAUDITED)



      1.     ORGANIZATION AND BASIS OF PRESENTATION

      ORGANIZATION

            LandCARE USA, Inc., a Delaware corporation, ("LandCARE" or the
      "Company"), was founded in 1997 to be a national provider of comprehensive
      landscape and tree services to the commercial and institutional markets
      and to pursue the consolidation of the highly fragmented landscape and
      tree service industry. On June 9, 1998, LandCARE completed its initial
      public offering (the "IPO") of 5,000,000 shares of its common stock, par
      value $.01 per share (the "Common Stock"). Simultaneous with the
      completion of the IPO, LandCARE acquired: Trees, Inc. ("Trees"), Four
      Seasons Landscape and Maintenance, Inc. ("Four Seasons"), Southern Tree &
      Landscape Co., Inc. ("Southern Tree"), D.R. Church Landscape Co., Inc.
      ("Church"), Ground Control Landscaping, Inc. ("Ground Control"), Arteka
      Corporation ("Arteka"), and Desert Care Landscaping, Inc. ("Desert Care"),
      (collectively referred to herein as the "Founding Companies") for $19.9
      million in cash and 5,162,645 shares of Common Stock (the "Mergers"). In
      connection with the IPO, the Company granted the underwriters an option to
      acquire an additional 750,000 shares of Common Stock at $8.00 per share to
      cover over-allotments. On June 29, 1998, the underwriters exercised such
      over-allotment option in part, electing to acquire 659,900 shares of
      Common Stock. The Company intends to continue to acquire additional
      companies, through merger or purchase, to expand its national operations.

      BASIS OF PRESENTATION

            HISTORICAL STATEMENTS OF OPERATIONS. For financial statement
      purposes, Trees, one of the Founding Companies, has been identified as the
      accounting acquirer. Accordingly, the historical financial information
      included herein represents the information of Trees prior to the IPO and
      the Mergers and the consolidated results of the Company subsequent to the
      IPO and the Mergers. The Mergers were accounted for using the purchase
      method of accounting. The allocations of the purchase price to the assets
      acquired and the liabilities assumed from the Founding Companies have been
      initially assigned and recorded based on preliminary estimates of fair
      value and may be revised as additional information concerning the
      valuation of such assets and liabilities becomes available.

            PRO FORMA STATEMENTS OF OPERATIONS. The pro forma financial
      information for the three- and six- month periods ended June 30, 1998 and
      1997 includes the results of LandCARE combined with the Founding Companies
      as if the Mergers had occurred at the beginning of the period. The pro
      forma financial information includes the effects of (i) the IPO, (ii) the
      Mergers, (iii) certain reductions in salaries and benefits to the former
      owners of the Founding Companies to which they agreed prospectively, (iv)
      certain reductions in lease expense paid to the former owners of the
      Founding Companies to which they agreed prospectively, (v) elimination of
      non-recurring, non-cash compensation charges related to shares of Common
      Stock issued to management, (vi) amortization of goodwill resulting from
      the Mergers, (vii) decreases in interest expense resulting from the
      repayment of substantially all of the Founding Companies' outstanding
      debt, and (viii) adjustments to the provisions for federal and state
      income taxes. The pro forma financial information may not be comparable to
      and may not be indicative of the Company's post-acquisition results of
      operations because the Founding Companies were not under common control or
      management.

                                       10
<PAGE>
            The pro forma adjustments are based on estimates, available
      information and certain assumptions which may be revised as additional
      information becomes available. The pro forma combined statements of
      operations do not purport to represent what the Company's consolidated
      results of operations would actually have been if such transactions had in
      fact occurred on those dates and are not necessarily representative of the
      Company's results of operations for any future period. Since the Founding
      Companies were not under common control or management, historical
      consolidated results may not be comparable to, or indicative of, future
      performance.

            INTERIM FINANCIAL INFORMATION. The accompanying unaudited interim
      financial statements are prepared pursuant to the rules and regulations
      for reporting on Form 10-Q. Accordingly, certain information and footnotes
      required by generally accepted accounting principles for complete
      financial statements are not included herein. The Company believes all
      adjustments necessary for a fair presentation of these interim statements
      have been included and are of a normal and recurring nature. The interim
      statements should be read in conjunction with the financial statements and
      related notes thereto included in the Company's Registration Statement on
      Form S-1 (No. 333-48215), as amended, filed with the United States
      Securities and Exchange Commission in connection with the IPO.

            USE OF ESTIMATES AND ASSUMPTIONS. The preparation of financial
      statements in conformity with generally accepted accounting principles
      require management to make estimates and assumptions that affect the
      reported amounts of assets and liabilities and disclosure of contingent
      assets and liabilities at the date of the financial statements and the
      reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.

            RECLASSIFICATIONS.  Certain  reclassifications  have  been  made  to
      the prior period amounts to conform to current period presentations.


      2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            There were no significant changes in the accounting policies of the
      Company during the periods presented. For a description of these policies,
      refer to Note 4 of Notes to Financial Statements of LandCARE and Note 2 of
      Notes to Financial Statements of Trees included in the Company's
      Registration Statement.


      3.     CREDIT FACILITY

            Effective June 9, 1998, the Company entered into a credit agreement
      with The First National Bank of Chicago NBD (the "Credit Facility"). The
      Credit Facility provided the Company with a revolving line of credit of up
      to $50 million, which may be used for general corporate purposes,
      including the repayment or refinancing of indebtedness of the Founding
      Companies and financing future acquisitions, capital expenditures and
      working capital. On July 28, 1998, the Credit Facility was amended to
      increase the Credit Facility to $55 million and to add Bankers Trust
      Company and NationsBank, N.A. as co-lenders under the facility. The Credit
      Facility is secured by the stock of the Founding Companies. Advances under
      the Credit Facility bear interest at the bank's designated prime lending
      rate. At the Company's option, the loans may bear interest based on the
      Eurodollar rate plus a margin ranging from 57.5 to 120 basis points,
      depending on the ratio of the Company's total debt to its earnings before
      interest, taxes, depreciation and amortization for the previous four
      quarters. Commitment fees of 17.5 to 30 basis points per annum are payable
      on the total facility, based on the same ratios. The Credit Facility
      contains a provision for standby letters of credit up to $5 million. The
      Credit Facility prohibits the payment of dividends by the Company,
      restricts the Company's incurring or assuming other indebtedness and
      requires the 

                                       11
<PAGE>
      Company to comply with certain financial covenants, including a minimum
      net worth, leverage ratio and minimum fixed charge coverage ratio. The
      Credit Facility will terminate and all amounts outstanding thereunder, if
      any, will be due and payable on May 31, 2001. As of June 30, 1998, the
      Company had no amounts outstanding under the Credit Facility.


      4.     CAPITAL STOCK

            On June 9, 1998, the Company completed the IPO, which involved the
      sale by the Company of 5,000,000 shares of Common Stock at a price to the
      public of $8.00 per share. In connection with the IPO, the Company granted
      the underwriters an option to acquire up to 750,000 additional shares of
      Common Stock at $8.00 per share to cover over-allotments. On June 29,
      1998, the underwriters exercised such over-allotment option in part,
      electing to acquire 659,900 shares of Common Stock. The net proceeds to
      the Company from the IPO (after deducting underwriting discounts,
      commissions and IPO expenses) were approximately $37.2 million. Of this
      amount, $19.9 million was used to pay the cash portion of the purchase
      price relating to the Mergers of the Founding Companies and the remainder
      was used to repay approximately $16.6 million of outstanding indebtedness
      of the Founding Companies.

            As a result of the Merger, the Company's historical capital 
     structure as of December 31, 1997, has been restated to give effect to the 
     exchange of Trees' then outstanding shares for 1,863,137 shares of LandCARE
     Common Stock. In conjunction with the IPO and the Mergers, the Company 
     issued (i) 1,565,158 shares of Common Stock to Notre; (ii) 994,240 
     shares of Common Stock to management, consultants and directors of 
     LandCARE; and (iii) 3,299,508 shares of Common Stock (excluding 1,863,137 
     shares issued to Trees) to owners of the Founding Companies as a 
     result of the Mergers.

            On July 14, 1998, the Company's registration statement registering
      5,000,000 additional shares of Common Stock to be issued from time-to-time
      in connection with future acquisitions was declared effective by the
      Securities and Exchange Commission.


      5.     EARNINGS PER SHARE

            In February 1997, the Financial Accounting Standards Board issued
      Statement of Financial Accounting Standards ("SFAS") No. 128, "'Earnings
      Per Share," which established new standards for computing and presenting
      earnings per share. The provisions of the statement are effective for
      fiscal years ending after December 15, 1997, and accordingly have been
      adopted in the accompanying financial statements.

            The historical periods ended June 30, 1997 represent the results of
      operations of Trees and the shares of common stock presented to calculate
      earnings per share for these periods are those issued to Trees in the
      Mergers. The computation of historical net income per share for the three-
      and six-month periods ended June 30, 1998 and pro forma net income per
      share for the three- and six-month periods ended June 30, 1997 and 1998 is
      based on the weighted average of Common Stock outstanding as of June 30,
      1998 which includes shares as follows:


          Issued in consideration for acquisition of
          Founding Companies...............................     5,162,645
          Sold pursuant to the IPO and the over-allotment..     5,659,900
          Issued to Notre ................................      1,565,158
          Issued to management and directors...............       994,240
                                                                ---------
                                                               13,381,943
                                                               ==========

                                       12
<PAGE>
      Basic and diluted historical net income per share is computed based on the
      following information:

                                       Three Months Ended,    Six Months Ended,
                                            June 30,              June 30,
                                      ---------------------   ------------------
                                        (in thousands, except per share amounts)
                                        1998       1997       1998       1997
                                      ---------  ----------  -------   ---------

Net income ...........................  $  990    $  862      $1,439     $1,007
                                                                         
BASIC:                                                                   
Basic weighted average shares ........   5,100     1,863       3,490      1,863
                                                                         
DILUTED:                                                                 
Basic weighted average shares ........   5,100     1,863       3,490      1,863
                                                                         
Dilutive securities:                                                     
     Options .........................      12      --            13       --
                                        ------    ------      ------     ------
                                                                         
Diluted weighted average shares ......   5,112     1,863       3,503      1,863
                                        ======    ======      ======     ======
                                                                         
NET INCOME PER SHARE:                                                    
                                                                         
      Basic ..........................  $ 0.19    $ 0.46        0.41     $ 0.54
                                        ======    ======      ======     ======
                                                                         
      Diluted ........................  $ 0.19    $ 0.46        0.41     $ 0.54
                                        ======    ======      ======     ======
                                                                      
      Basic and diluted pro forma net income per share is computed based on the
      following information:

                                        Three Months Ended,    Six Months Ended,
                                              June 30,              June 30,
                                        ---------------------  -----------------
                                        (in thousands, except per share amounts)
                                          1998       1997       1998       1997
                                        ---------  ----------  --------  -------

Net income ...........................   $1,939     $1,814      $2,409    $2,388
                                                                        
BASIC:                                                                  
Basic weighted average shares ........   12,737     12,737      12,729    12,729
                                                                        
DILUTED:                                                                
Basic weighted average shares ........   12,737     12,737      12,729    12,729
                                                                        
Dilutive securities:                                                    
     Options .........................       12       --            13      --
                                         ------     ------      ------    ------
                                                                        
Diluted weighted average shares ......   12,749     12,737      12,742    12,729
                                         ======     ======      ======    ======
                                                                        
NET INCOME PER SHARE:                                                   
                                                                        
      Basic ..........................   $ 0.15     $ 0.14        0.19    $ 0.19
                                         ======     ======      ======    ======
                                                                        
                                                                        
      Diluted ........................   $ 0.15     $ 0.14        0.19    $ 0.19
                                         ======     ======      ======    ======

                                       13
<PAGE>
      6.     INCOME TAXES

            The Company intends to file a consolidated federal income tax return
      which includes the operations of the Founding Companies for periods
      subsequent to the acquisition date. The Founding Companies will each file
      a "short period" federal income tax return through the date of the
      Mergers.

            The provision for income taxes included in the Unaudited Historical
      Consolidated Statements of Operations for the three- and six-month periods
      ended June 30, 1998 and the Unaudited Pro Forma Combined Statements of
      Operations for the three- and six-month periods ended June 30, 1998,
      assumes the application of statutory federal and state income tax rates
      and the non-deductibility of goodwill amortization. Interim period income
      tax provisions are based upon estimates of annual effective tax rates, and
      events may occur which will cause such rates to vary.


      7.     COMMITMENTS AND CONTINGENCIES

            The Company is involved in various legal proceedings that have
      arisen in the ordinary course of business. While it is not possible to
      predict the outcome of such proceedings with certainty, Management's
      assessment is that none of these matters are anticipated to have a
      material adverse effect on the financial position, liquidity or results of
      operations of the Company.


      8.    RECENT PRONOUNCEMENTS

            In October 1995, the Financial Accounting Standards Board issued
      Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
      for Stock-Based Compensation," which allows entities to choose between a
      new fair-value based method of accounting for employee stock options or
      similar equity instruments and the current intrinsic value-based method of
      accounting prescribed by Accounting Principles Board ("APB") Opinion No.
      25. Entities electing to remain with the accounting in APB Option No. 25
      must make pro forma disclosures of net income and earnings per share as if
      the fair value method of accounting prescribed in SFAS No. 123 had been
      applied. The Company will measure compensation expense attributable to
      stock options based on the method prescribed in APB Opinion No. 25 and
      will provide the required pro forma disclosure of net income and earnings
      per share, if applicable, in notes to future consolidated annual financial
      statements.

            In June 1997, the Financial Accounting Standards Board issued SFAS
      No. 131 "Disclosures About Segments of an Enterprise and Related
      Information," which requires that a public business enterprise report
      financial and descriptive information about its reportable operating
      segments. SFAS No. 131 is effective for financial statements for periods
      beginning after December 15, 1997. The Company will adopt SFAS No. 131 in
      the year ended December 31, 1998.


      9.     SUBSEQUENT EVENTS

            Subsequent to June 30, 1998, the Company acquired six landscape
      maintenance and installation companies with annualized revenues totaling
      approximately $60 million. The acquired companies were: Clean Cut, Inc.,
      Horticultural Landscapes, Inc., Continental Landscape Management, Inc.
      Landscape West, Inc., Gator & Gator Landscaping Company and Landscape 
      Resources, Inc. Two of such acquisitions will be accounted for utilizing 
      the "pooling-of-interests" method of accounting with the remaining four
      acquisitions being accounted for under the "purchase" method of
      accounting. The aggregate consideration paid by the Company to acquire
      these companies was approximately $12.1 million in cash 


                                       14
<PAGE>
      and 2,804,470 shares of Common Stock (excluding assumed indebtedness of
      approximately $10.9 million). The cash portion of the consideration was
      provided by borrowings under the Company's Credit Facility.

            On July 14, 1998, the Company's registration statement registering
      5,000,000 additional shares of Common Stock to be issued from time-to-time
      in connection with future acquisitions was declared effective by the
      Securities and Exchange Commission.


                                       15
<PAGE>
                               LANDCARE USA, INC.

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

INTRODUCTION

    The following discussion should be read in conjunction with the Unaudited
Pro Forma Combined Financial Statements of the Company and related notes
thereto, the individual financial statements of LandCARE and the seven Founding
Companies and related notes thereto and management's discussion and analysis of
financial condition and results of operations related thereto which are included
in the Company's Registration Statement. This discussion contains
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements are based on the Company's current plans and
expectations and involve risks and uncertainties that could cause actual future
activities and results of operations to be materially different from those set
forth in the forward-looking statements. Important factors that could cause
actual results to differ include, among others, risks associated with
acquisitions, volatility of stock price, changes in government regulations,
competition, integration of operations and growth of newly acquired businesses
and other risks detailed in the Company's reports filed with the Securities and
Exchange Commission.

  RESULTS OF OPERATIONS

    On June 9, 1998, the Company acquired the Founding Companies in connection
with its initial public offering. For financial statement presentation, however,
Trees has been identified as the "accounting acquirer." Accordingly, the
historical financial information included herein represents the information of
Trees prior to the IPO and the Mergers and the consolidated results of the
Company subsequent to the IPO and the Mergers. In addition, the Historical
Consolidated Statements of Operations for the three- and six-month periods ended
June 30, 1998 reflect income taxes provided at the statutory federal and state
income tax rates prior to non-deductible goodwill amortization.

    The pro forma combined financial information for the three- and six-months
ended June 30, 1998 and 1997 includes the results of LandCARE combined with the
Founding Companies as if the Mergers had occurred at the beginning of each
respective three-month and six-month period. The pro forma financial information
includes the effects of (i) the IPO; (ii) the Mergers; (iii) certain reductions
in salaries and benefits to the former owners of the Founding Companies to which
they agreed prospectively; (iv) certain reductions in lease expense paid to the
former owners of the Founding Companies to which they agreed prospectively; (v)
elimination of non-recurring, non-cash compensation charges related to pre-IPO
issuance of shares of Common Stock to management; (vi) amortization of goodwill
resulting from the Mergers; (vii) the repayment of substantially all of the
outstanding debt at the Founding Companies, including the corresponding
decreases in interest expense; and (viii) adjustments to the provisions for
federal and state income taxes. The pro forma financial information may not be
comparable to and may not be indicative of the Company's post-acquisition
results of operations because the Founding Companies were not under common
control or management.

    Interim results may also be materially affected by the timing and magnitude
of acquisitions, assimilation costs, gain or loss of a material customer and
variations in the services provided. Accordingly, the Company's operating
results for any three-month or six-month period are not necessarily indicative
of the results that may be achieved for any subsequent three-month or six-month
period or for a full fiscal year.


                                       16
<PAGE>
PRO FORMA COMBINED RESULTS FOR THE THREE MONTH PERIODS ENDED JUNE 30, 1998 AND
1997

    The following table sets forth certain selected pro forma combined financial
data and such data as a percentage of pro forma combined revenues for the
periods indicated:


                                            PRO FORMA COMBINED
                                         THREE MONTH PERIOD ENDED
                                                 JUNE 30
                                  ---------------------------------------
                                        1998                 1997
                                  ------------------  -------------------
                                          (dollars in thousands)
Revenues ......................... $38,288   100.0%    $30,595   100.0%
Cost of services ................. 29,658     77.5     24,382     79.7
                                   ------   ------     ------   ------
     Gross profit ................  8,630     22.5      6,213     20.3
Selling, general and                                  
administrative expenses ..........  3,941     10.3      3,324     10.9
Corporate overhead ...............    975      2.5       --       --
Goodwill                                              
amortization .....................    290      0.8        314      1.0
                                   ------   ------     ------   ------
Income from operations ...........   3424      8.9      2,575      8.4
Interest and other income,                            
net ..............................    101      0.3        722      2.4
                                   ======   ======     ======   ======
Income before income                                  
taxes ............................ $3,525      9.2%    $3,297     10.8%
                                   ======   ======     ======   ======
                                                    
    REVENUES. The Company's pro forma combined revenues increased by $7.7
million, or 25.1%, to $38.3 million for the three months ended June 30, 1998
from $30.6 million for the corresponding period of 1997 due primarily to an
increase of $4.1 million in pro forma combined maintenance revenues for utility
line clearing at Trees. This increase in Trees' maintenance revenues was
attributable to the addition of two new contracts during 1998 and the expansion
of several other contracts by utility customers. The Company's pro forma
combined landscape maintenance revenues increased by $1.2 million, principally
due to: (i) the acquisition by Arteka of two companies during December 1997
whose operations are exclusively maintenance; and (ii) the addition of new
landscape maintenance contracts at Four Seasons and Southern Tree. The Company's
pro forma combined landscape installation revenues increased by $2.4 million
between the periods, which increase was primarily attributable to early startup
of installation projects during 1998 at Church and Arteka.

    GROSS PROFITS. The Company's pro forma combined gross profit increased by
$2.4 million, or 38.9%, to $8.6 million for the three months ended June 30, 1998
from $6.2 million for the corresponding period of 1997. As a percentage of pro
forma combined revenues, pro forma combined gross profit increased to 22.5% for
the three months ended June 30, 1998 from 20.3% for the corresponding period of
1997. The margin increase was primarily due to (i) budget increases on several
utility line clearing contracts at Trees resulting in higher overtime billings;
(ii) an increase in maintenance contracts at Four Seasons' two newest branches,
which were opened during late 1996 and early 1997; (iii) the inclusion of
several high margin installation jobs at Church; and (iv) lower material costs
at Ground Control.

    SELLING GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma combined selling,
general and administrative expenses increased by $0.6 million to $3.9 million
for the three months ended June 30, 1998 from $3.3 million for the corresponding
period of 1997. The increase in pro forma combined selling, general and
administrative expenses was primarily attributable to the inclusion of
additional sales personnel at Southern Tree and an increase at Arteka related to
the two acquisitions completed during December 1997. As a percentage of pro
forma combined revenues, pro forma combined selling, general and administrative
expenses decreased to 10.3% for the three months ended June 30, 1998 from 10.9%
for the corresponding period of 1997.

    CORPORATE OVERHEAD. Corporate overhead increased to $1.0 million for the
three months ended June 30, 1998 compared with zero for the corresponding period
of 1997. The increase in corporate overhead was attributable to the
establishment of the LandCARE corporate office and an increase in professional
fees associated with being a 

                                       17
<PAGE>
public company. As a percentage of pro forma combined revenues, corporate
overhead totaled 2.5% for the three months ended June 30, 1998.

    INTEREST AND OTHER INCOME, NET. Pro forma combined interest and other
income, net, decreased by $0.6 million, or 86%, to $0.1 million for the three
months ended June 30, 1998 from $0.7 million for the corresponding period of
1997 due primarily to a $0.5 million insurance settlement received at Trees
during 1997.


PRO FORMA  COMBINED  RESULTS FOR THE SIX MONTH  PERIODS  ENDED JUNE 30, 1998 AND
1997

    The following table sets forth certain selected pro forma financial data as
a percentage of pro forma revenues for the periods indicated:


                                                   PRO FORMA
                                             SIX MONTH PERIOD ENDED
                                                    JUNE 30
                                      -------------------------------------
                                            1998               1997
                                      ------------------ ------------------
                                             (dollars in thousands)
Revenues ..........................   $64,928   100.0%    $54,127   100.0%
                                                         
Cost of services ..................   51,688     79.6     43,360     80.1
                                      ------   ------     ------   ------
     Gross profit .................   13,240     20.4     10,767     19.9
Selling, general and                                     
administrative expenses ...........    7,327     11.3      6,584     12.2
Corporate overhead ................    1,081      1.7       --       --
Goodwill                                                 
amortization ......................      613      0.9        629      1.2
                                      ------   ------     ------   ------
Income from operations ............    4,219      6.5      3,554      6.5
Interest and other income,                               
net ...............................      157      0.2        787      1.5
                                      ======   ======     ======   ======
Income before income                                     
taxes .............................   $4,376      6.7%    $4,341      8.0%
                                      ======   ======     ======   ======
                                                       

    REVENUES. The Company's pro forma combined revenues increased by $10.8
million, or 20.0%, to $64.9 million for the six months ended June 30, 1998 from
$54.1 million for the corresponding period of 1997, primarily due to an increase
of $6.5 million in pro forma combined maintenance revenues for utility line
clearing at Trees. The increase in line clearing revenues was attributable to
the addition of several new contracts and budget increases by utility customers
on several other contracts. This increase was partially offset by the loss of a
line clearing contract in a competitive bidding process. The Company's pro forma
combined landscape maintenance revenues increased by $2.0 million due primarily
to: (i) the addition of new maintenance contracts at Four Seasons and Southern
Tree; (ii) an increase in commercial tree services at Four Seasons; and (iii)
the acquisition by Arteka of two landscape maintenance companies during December
1997. The Company's pro forma combined landscape installation revenues increased
by $2.0 million due primarily to the inclusion of several large installation
jobs at Church and the earlier startup of installation work in the Midwest by
Church and Arteka due to mild winter conditions during 1998.

    GROSS PROFIT. The Company's pro forma combined gross profit increased by
$2.4 million, or 23.0%, to $13.2 million for the six months ended June 30, 1998
from $10.8 million for the corresponding period of 1997. As a percentage of pro
forma combined revenues, pro forma combined gross profit increased to 20.4% for
the six months ended June 30, 1998 from 19.9% for the same period of 1997. Gross
margin improvements were realized at Trees, Four Seasons and Church due
primarily to: (i) budget increases on several line clearing contracts at Trees
resulting in higher overtime billings; (ii) the addition of new maintenance
contracts at Four Seasons' two newest branches; and (iii) the inclusion of
higher margin installation jobs at Church. The gross margin at Desert Care
decreased between the corresponding periods primarily because of weather related
inefficiencies experienced during the first quarter of 1998.

                                       18
<PAGE>

    SELLING GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma combined selling,
general and administrative expenses increased by $0.7 million, or 11.3%, to $7.3
million for the six months ended June 30, 1998 from $6.6 million for the
corresponding period of 1997. As a percentage of pro forma combined revenues,
pro forma combined selling, general and administrative expenses decreased to
11.3% for the six months ended June 30, 1998 from 12.2% for the corresponding
period of 1997. The increase in pro forma combined selling, general and
administrative expenses was primarily due to the addition of sales and
administrative personnel at Church and Southern Tree and an increase at Arteka
related to the two acquisitions completed during December 1997.

    CORPORATE OVERHEAD. Corporate overhead increased to $1.1 million for the six
months ended June 30, 1998 from zero for the corresponding period of 1997. The
increase in corporate overhead was attributable to the establishment of the
LandCARE corporate office and an increase in professional fees associated with
being a public company. As a percentage of pro forma combined revenue, corporate
overhead totaled 1.7% for the six months ended June 30, 1998.

    INTEREST AND OTHER INCOME, NET. Interest and other income, net, decreased by
$0.6 million, or 80.1%, to $0.2 million for the six months ended June 30, 1998
from $0.8 million for the corresponding period of 1997, and this decrease was
primarily attributable to the receipt of a $0.5 million insurance settlement at
Trees during 1997.

HISTORICAL  RESULTS  FOR THE THREE  MONTH AND SIX MONTH  PERIODS  ENDED JUNE 30,
1998 AND 1997

    The following discussion includes the historical operations of Trees prior
to the IPO and the Mergers, which were consummated on June 9, 1998, and the
consolidated operations of the Company for the period subsequent to the IPO and
the Mergers. The following table sets forth certain selected historical
financial data and such data as a percentage of historical revenues for the
periods indicated:

<TABLE>
<CAPTION>
                                 THREE MONTHS ENDED JUNE 30,                      SIX MONTHS ENDED JUNE 30,
                         -----------------------------------------      ------------------------------------------
                           1998          %         1997         %          1998         %          1997         %
                         -------      -----       ------     -----      --------      -----       ------     -----
                                       (DOLLARS IN THOUSANDS)
<S>                       <C>         <C>         <C>        <C>        <C>           <C>         <C>        <C>   
Revenues ...............  23,164      100.0%      11,918     100.0%     $ 37,004      100.0%      23,239     100.0%

Cost of services .......  18,504       79.9       10,257      86.1        30,862       83.4       20,159      86.7
                          ------      -----       ------     -----      --------      -----       ------     -----

  Gross profit .........   4,660       20.1        1,661      13.9         6,142       16.6        3,080      13.3
Selling, general and
administrative .........   1,742        7.5          780       6.5         2,460        6.7        1,944       8.4
Corporate overhead .....     975        4.2         --        --             975        2.6         --        --
Goodwill amortization ..     103        0.5         --        --             103        0.3         --        --
                          ------      -----       ------     -----      --------      -----       ------     -----
  Income from
operations .............   1,840        7.9          881       7.4         2,604        7.0        1,136       4.9
Interest and other
income .................     (47)      (0.2)         517       4.3           (85)      (0.2)         497       2.1

                          ======      =====       ======     =====      ========      =====       ======     =====
Income before income
taxes ..................   1,793        7.7%       1,398      11.7%        2,519      6.8 %        1,633     7.0 %
                          ======      =====       ======     =====      ========      =====       ======     =====
</TABLE>

    REVENUES. Historical revenues increased to $23.2 million and $37.0 million
for the three- and six-months ended June 30, 1998, respectively, from $11.9
million and $23.2 million for the three-month and six-month periods ended June
30, 1997, respectively, primarily due to the acquisition of the Founding
Companies. Excluding the acquisition of the Founding Companies, revenues
increased between the corresponding periods due to the addition of new utility
line clearing contracts and the expansion of several other contracts by utility
customers.

    GROSS PROFIT. Gross profit increased to $4.7 million and $6.1 million for
the three- and six-month periods ended June 30, 1998, respectively, from $1.7
million and $3.1 million for the three- and six-months ended June 30, 1997,
respectively, primarily due to the acquisition of the Founding Companies.
Excluding the acquisition of the Founding Companies, gross profit increased due
to the inclusion of overtime on two utility line clearing contracts. As a
percentage of revenues, gross profit increased to 20.1% and 16.6% for the
three-month and six-month periods ended June 30, 1998, respectively, from 13.9%
and 13.3% for the three and six months ended June 30, 1997, respectively.

    SELLING GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $1.7 million and $2.5 million for the
three-month and six-month periods ended June 30, 1998, respectively, from 


                                       19
<PAGE>
$0.8 million and $1.9 million for the three-month and six-month periods ended
June 30, 1997, respectively, primarily due to the acquisition of the Founding
Companies.

    CORPORATE OVERHEAD. Corporate overhead totaled $1.0 million for each of the
three-month and six-month periods ended June 30, 1998. Corporate overhead is
comprised of LandCARE corporate salaries and professional fees associated with
being a public company. As a percentage of revenue, corporate overhead totaled
4.2% and 2.6% for the three-month and six-month periods ended June 30, 1998,
respectively.

    INTEREST AND OTHER INCOME (EXPENSE), NET. Interest and other income
(expense), net, decreased to an expense of $0.1 million for each of the
three-month and six-month periods ended June 30, 1998, respectively, from income
of $0.5 million for each of the three-month and six-month periods ended June 30,
1997, primarily due to the inclusion of a $0.5 million insurance settlement
received by Trees during 1997.

LIQUIDITY AND CAPITAL RESOURCES.

    On June 4, 1998, the Company sold 5,000,000 shares of its Common Stock to
the public at $8.00 per share in an underwritten IPO. The net proceeds (after
deducting underwriters' commissions and IPO expenses) were $34.4 million. In
connection with the IPO, the Company had granted the underwriters an option to
acquire an additional 750,000 shares at $8.00 per share. On June 29, 1998, the
underwriters exercised this option on 659,900 shares, from which proceeds to the
Company totaled $4.9 million after deducting underwriting commissions. Of the
IPO proceeds, $19.9 million was used to pay the cash portion of the purchase
price of the Founding Companies and $16.6 million was used to repay
substantially all of the outstanding debt at the Founding Companies.

    As of June 30, 1998, the Company had working capital of $14.7 million and no
outstanding long-term debt. Net cash used in operating activities totaled $0.8
million for the six months ended June 30, 1998. Net cash used in investing was
$15.3 million for the six months ended June 30, 1998, of which $11.8 million
represents the cash paid for the Founding Companies (excluding Trees) net of
cash acquired. Net cash provided by financing activities was $14.4 million for
the six months ended June 30, 1998 and was comprised of $39.3 million of net
proceeds from the IPO (before accrued offering costs), offset by $16.6 million
of debt repayments at the Founding Companies subsequent to the IPO and $8.0
million of distributions to Trees' stockholders representing the cash paid for
Trees in the Merger.

    Effective June 9, 1998, the Company entered into a credit agreement with The
First National Bank of Chicago NBD (the "Credit Facility"). The Credit Facility
provided the Company with a revolving line of credit of up to $50 million, which
may be used for general corporate purposes, including the repayment or
refinancing of indebtedness of the Founding Companies and financing future
acquisitions, capital expenditures and working capital. On July 28, 1998, the
Credit Facility was amended to increase the Credit Facility to $55 million and
to add Bankers Trust Company and NationsBank, N.A. as co-lenders under the
facility. The Credit Facility is secured by the stock of the Founding Companies.
Advances under the Credit Facility bear interest at the bank's designated prime
lending rate. At the Company's option, the loans may bear interest based on the
Eurodollar rate plus a margin ranging from 57.5 to 120 basis points, depending
on the ratio of the Company's total debt to its earnings before interest, taxes,
depreciation and amortization for the previous four quarters. Commitment fees of
17.5 to 30 basis points per annum are payable on the total facility, based on
the same ratios. The Credit Facility contains a provision for standby letters of
credit up to $5 million. The Credit Facility prohibits the payment of dividends
by the Company, restricts the Company's incurring or assuming other indebtedness
and requires the Company to comply with certain financial covenants, including a
minimum net worth, leverage ratio and minimum fixed charge coverage ratio. The
Credit Facility will terminate and all amounts outstanding thereunder, if any,
will be due and payable on May 31, 2001. As of June 30, 1998, the Company had no
amounts outstanding under the Credit Facility. As of August 13, 1998, the
Company had outstanding borrowings of $20.9 million on the Credit Facility
primarily related to the acquisitions completed during August 1998. (see Note 9
under "Notes to Consolidated and Combined Financial Statements" included
elsewhere herein)

                                       20
<PAGE>
    The Company intends to aggressively pursue acquisition opportunities. The
Company's acquisition program may require significant additional capital. The
Company intends to seek additional capital as necessary to fund such
acquisitions through one or more funding sources that may include borrowings
under the Credit Facility or offerings of debt and/or equity securities of the
Company. Cash provided by operating activities may also be used to fund a
portion of future acquisitions. Although management believes that the Company
will be able to obtain sufficient capital to fund acquisitions, there can be no
assurances that such capital will be available to the Company at the time it is
required or on terms acceptable to the Company.

    On July 14, 1998, the Company's registration statement registering 5,000,000
additional shares of Common Stock to be issued from time to time in connection
with future acquisitions was declared effective by the Securities and Exchange
Commission.

    The Company currently operates in a decentralized information systems
environment and uses a variety of software, computer systems and related
technologies for internal management, accounting and reporting purposes and for
revenue-generating activities. With respect to the Year 2000 issue, management
recently undertook a study to determine the potential impact of Year 2000 on its
computer related systems (operating, accounting, reporting and administrative)
and to what extent its current computer systems will meet internal needs and the
needs of customers and suppliers. The Company has not yet developed an estimate
of the potential cost of any system upgrades which might be required or the
impact on the Company's results of operations and financial position. In
addition, the Company is currently assessing the impact of the Year 2000 issue
related to its customers and supplier to determine what impact non-compliance
would have on the Company's results of operations and financial position.

    SEASONALITY AND CYCLICALITY. The Company has experienced and expects to
continue to experience variability in revenue and net income as a result of the
seasonal nature of the Company's business. Generally, the Company's revenues
from installation projects are concentrated during the warmer months of April to
October. Revenues from maintenance contracts remain relatively constant
throughout the year, except in colder climates, where landscape maintenance
contracts typically do not generate revenues in the winter unless snow removal
is contracted for by the customer. As a result, the gross margin from landscape
maintenance contracts can vary seasonally because the Company recognizes
revenues from the monthly payments from its landscape maintenance services in
full when they are due, rather than in proportion to the work performed. The
Company generally reports higher profit margins from landscape maintenance
services during winter months and significantly lower profit margins during peak
service periods in late spring and summer. The Company has not performed an
analysis to estimate the impact of accounting for revenue in proportion to the
work performed as compared with accounting for revenue from the monthly payments
from its landscape maintenance services in full when they are due; however, the
Company believes that combined gross margins would not have been or expect to be
materially different than historical actual gross margins. Most line clearing
contracts are not affected by seasonality. Line clearing contracts typically
have a lower profit margin than landscape maintenance and installation services.
Historically, the Founding Companies' maintenance services have not been
cyclical and have not been significantly affected by changes in economic
conditions. However, the Founding Companies landscape services operations have
experienced significant fluctuations based on weather, economic conditions, the
commercial real estate market and other factors beyond the control of the
Company. The Founding Companies collectively have a geographically broad
customer mix which may tend to mitigate regional seasonal and cyclical trends.
There can be no assurance, however, that period-to-period differences will not
occur in the future or that pronounced cyclical or seasonal patterns will not
emerge.


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<PAGE>
                               LANDCARE USA, INC.
                         PART II - - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

    The Company is involved in various legal proceedings that have arisen in the
ordinary course of business. The Company does not believe that any of these
proceedings will have a material adverse effect on the financial position or
results of operations of the Company.


ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES

    Set forth below is certain information concerning all sales of securities by
the Company during the three months ended June 30, 1997, that were not
registered under the Securities Act of 1933, as amended (the "Securities Act").

    On June 9, 1998, the Company issued 5,162,645 shares (including 1,863,137
shares issued to Trees) of its $0.01 par value Common Stock to the stockholders
of the Founding Companies as part of the consideration for the Mergers. These
shares of Common Stock were issued without registration under the Securities Act
in reliance on the exemption provided by Section 4(2) of the Securities Act.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits

      3.1-  Amended and Restated Certificate of Incorporation of LandCARE USA,
            Inc., as amended. (Filed as Exhibit 3.1 to the Registration
            Statement on Form S-1 filed on June 4, 1998, and is incorporated
            herein by reference (File No. 333-48215)).

      3.2-  Bylaws of LandCARE USA, Inc., as amended. (Filed as Exhibit 3.2 to
            the Registration Statement on Form S-1 filed on June 4, 1998, and is
            incorporated herein by reference (File No. 333-48215)).

      4.1-  Form of Certificate Evidencing Ownership of Common Stock of
            LandCARE USA, Inc. (Filed as Exhibit 4.1 to the Registration
            Statement on Form S-1 filed on June 4, 1998, and is incorporated
            herein by reference (File No. 333-48215)).

     10.1-  Credit Agreement dated as of June 9, 1998, among LandCARE USA, Inc.
            and The First National Bank of Chicago, as Agent (filed herewith).

     27.1-  Financial Data Schedule (filed herewith).

    (b)  Reports on Form 8-K

        None


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<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, who has signed this report on behalf of
the Registrant and as the principal financial officer of the Registrant.


                                     LANDCARE USA, INC.



Date:  August 14, 1998               By:  PETER C. FORBES
                                          Peter C. Forbes
                                     Senior Vice President and Chief Financial
                                     Officer (Principal Accounting Officer)


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