**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**FORM        10-QSB**

| |X| | **Quarterly                  Report Under Section 13 Or 15(d) Of The Securities Exchange Act                  Of                  1934** |
|-----|------------------------------------------------------------------------------------------------------------------------------------------|

| |_| | **Transition                  Report Under Section 13 Or 15(d) Of The Securities Exchange Act                  Of                  1934** |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

**U.S.        MICROBICS, INC.**

| **Colorado**                                     | **84-0990371**                                     |
|--------------------------------------------------|----------------------------------------------------|
| (State                  or other jurisdiction of | (IRS                  Employer Identification No.) |
| incorporation                  or organization)  |                                               |

| Title                  of each class | Name                  of each exchange on which registered |
|--------------------------------------|------------------------------------------------------------|
| None                                 | None                                                       |

----

**PART        1 - FINANCIAL INFORMATION**

**ITEM        1. FINANCIAL STATEMENTS**

**U.S.        MICROBICS, INC., AND SUBSIDIARIES**

**Consolidated        Condensed Balance Sheets**

|                                                                                                            |   | **As                  of**    |        |   | **As                  of**         |   |
|-----------------------------------------------------------------------------------------------------------------|--------|-------------------------------|-------------|--------|------------------------------------|--------|
|                                                                                                            |   | **June                  30,** |        |   | **September                  30,** |   |
|                                                                                                            |   | **2007**                      |        |   | **2006**                           |   |
|                                                                                                            |   | **(Unaudited)**               |        |   | **(Audited)**                      |   |
| **Current                  Assets:**                                                                            |   |                          |        |   |                               |   |
| Cash                                                                                                            |   | $                             | 4,393       |   |                               | $      | 341,678 |   |
| Accounts                  receivable                                                                            |   |                          | 48,890      |   |                               |   | 49,994 |   |
| Inventory                                                                                                       |   |                          | 57,247      |   |                               |   | -- |   |
| Prepaid                  expenses and other                  assets                                             |   |                          | 157,732     |   |                               |   | 155,415 |   |
| Total                  current                  assets                                                          |   |                          | 268,262     |   |                               |   | 547,087 |   |
|                                                                                                            |   |                          |        |   |                               |   |   |   |
| **Property                  and equipment, net**                                                                |   |                          |        |   |                               |   |   |   |
| Office                  equipment                                                                               |   |                          | 258,356     |   |                               |   | 256,783 |   |
| Leasehold                  improvements                                                                         |   |                          | 14,376      |   |                               |   | 14,376 |   |
| Manufacturing                  equipment                                                                        |   |                          | 240,500     |   |                               |   | 231,735 |   |
| Production                  and transportation                  equipment                                       |   |                          | 23,351      |   |                               |   | 23,351 |   |
|                                                                                                            |   |                          | 536,583     |   |                               |   | 526,245 |   |
| Less:                  accumulated                  depreciation                                                |   |                          | (413,545    | )      |                               |   | (373,631 | ) |
|                                                                                                            |   |                          | 123,038     |   |                               |   | 152,614 |   |
|                                                                                                            |   |                          |        |   |                               |   |   |   |
| **Other                  Assets**                                                                               |   |                          | 30,310      |   |                               |   | 30,310 |   |
| Total                  assets                                                                                   |   | $                             | 421,610     |   |                               | $      | 730,011 |   |
|                                                                                                            |   |                          |        |   |                               |   |   |   |
| **Liabilities                  and deficiency in Stockholders' Equity**                                         |   |                          |        |   |                               |   |   |   |
| **Current                  Liabilities:**                                                                       |   |                          |        |   |                               |   |   |   |
| Line                  of credit                                                                                 |   | $                             | 999,665     |   |                               | $      | 345,000 |   |
| Accounts                  payable and accrued                  expenses                                         |   |                          | 2,020,100   |   |                               |   | 1,591,567 |   |
| Note                  payable                                                                                   |   |                          | 110,000     |   |                               |   | 150,000 |   |
| Notes                  payable to related                  parties, current portion                             |   |                          | 93,418      |   |                               |   | 111,829 |   |
| Total                  current                  liabilities                                                     |   |                          | 3,223,183   |   |                               |   | 2,198,396 |   |
|                                                                                                            |   |                          |        |   |                               |   |   |   |
| Total                  liabilities                                                                              |   |                          | 3,223,183   |   |                               |   | 2,198,396 |   |
|                                                                                                            |   |                          |        |   |                               |   |   |   |
| **Minority                  Interest**                                                                          |   |                          | 6,828,171   |   |                               |   | 6,117,872 |   |
|                                                                                                            |   |                          |        |   |                               |   |   |   |
| **Deficiency                  in Stockholders' Equity:**                                                        |   |                          |        |   |                               |   |   |   |
| Convertible                  preferred stock, $.10 par value; 20,000,000 shares                  authorized:    |   |                          |        |   |                               |   |   |   |
| Series                  II; authorized 500,000                  shares; 5,875, and 5,875 issued                 |   |                          |        |   |                               |   |   |   |
| and                  outstanding as                  of  June 30, 2007 and September 30, 2006;        |   |                          |        |   |                               |   |   |   |
| aggregate                  liquidation                  preference of $5,875                                    |   |                          | 588         |   |                               |   | 588 |   |
| Series                  B; authorized 500,000                  shares; 5,272 and 5,272 shares issued and        |   |                          |        |   |                               |   |   |   |
| outstanding                  as of June 30,                  2007 and September 30, 2006;                       |   |                          |        |   |                               |   |   |   |
| aggregate                  liquidation                  preference of $5,272                                    |   |                          | 527         |   |                               |   | 527 |   |
| Series                  C; authorized 500,000                  shares; 33,339 and 33,339 issued and outstanding |   |                          |        |   |                               |   |   |   |
| as                  of  June 30, 2007                  and September 30, 2006; aggregate              |   |                          |        |   |                               |   |   |   |
| liquidation                  preference                  of  $3,333,900                               |   |                          | 3,334       |   |                               |   | 3,334 |   |
| Series                  D; authorized 500,000                  shares; 43,330 and 43,330 shares issued and      |   |                          |        |   |                               |   |   |   |
| outstanding                  as of June 30,                  2007 and September 30, 2006; no                    |   |                          |        |   |                               |   |   |   |
| liquidation                  preference                                                                         |   |                          | 4,330       |   |                               |   | 4,330 |   |
| Series                  E; authorized 50,000                  shares; -0- shares issued and outstanding as      |   |                          |        |   |                               |   |   |   |
| of                  June 30, 2007 and September                  30, 2006,                                      |   |                          |        |   |                               |   |   |   |
| (aggregate                  liquidation                  preference of $-0-)                                    |   |                          |        |   |                               |   |   |   |
| Series                  R; authorized 2,000,000                  shares; -0- shares issued and outstanding as   |   |                          |        |   |                               |   |   |   |
| of                  June 30, 2007 and September                  30, 2006,                                      |   |                          |        |   |                               |   |   |   |
| (aggregate                  liquidation                  preference of $-0-)                                    |   |                          |        |   |                               |   |   |   |
| Common                  stock; $.0001 par                  value; authorized 500,000,000 shares;                |   |                          |        |   |                               |   |   |   |
| 449,131,735                  and 404,630,489                  shares issued and outstanding as of               |   |                          |        |   |                               |   |   |   |
| June                  30, 2007 and September                  30, 2006, respectively                            |   |                          | 44,913      |   |                               |   | 40,463 |   |
| Additional                  paid-in capital                                                                     |   |                          | 25,713,730  |   |                               |   | 25,315,763 |   |
| Treasury                  stock, at cost                                                                        |   |                          | (117,400    | )      |                               |   | (117,400 | ) |
| Stock                  subscriptions receivables                                                                |   |                          | (53,526     | )      |                               |   | (282,700 | ) |
| Deferred                  equity issuance costs                                                                 |   |                          | (668,500    | )      |                               |   | (668,500 | ) |
| Deferred                  financing costs                                                                       |   |                          | (471,540    | )      |                               |   | (471,540 | ) |
| Accumulated                  deficit                                                                            |   |                          | (34,086,200 | )      |                               |   | (31,411,122 | ) |
| Total                  deficiency in                  stockholders' equity                                      |   |                          | (9,629,744  | )      |                               |   | (7,586,257 | ) |
| Total                  liabilities and                  deficiency in stockholders' equity                      |   | $                             | 421,610     |   |                               | $      | 730,011 |   |

----

**U.S.        MICROBICS, INC., AND SUBSIDIARIES**

**Consolidated        Condensed Statements of Losses**

|                                                            |   | For                  the Nine MonthsEnded                  June 30, |        |   | For                  the Three MonthsEnded                  June 30, |   |
|-----------------------------------------------------------------|--------|---------------------------------------------------------------------|-------------|--------|----------------------------------------------------------------------|--------|
|                                                            |   | 2007                                                                |        |   | 2006                                                                 |   |   | 2007 |   |   | 2006 |   |
|                                                            |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |
| Revenues                                                        |   | $                                                                   | 232,118     |   |                                                                 | $      | 447,697 |   |   | $ | 57,829 |   |   | $ | 76,661 |   |
| Cost                  of revenues                               |   |                                                                | 85,892      |   |                                                                 |   | 283,382 |   |   |   | 41,396 |   |   |   | 38,982 |   |
|                                                            |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Gross                  profit                                   |   |                                                                | 146,226     |   |                                                                 |   | 164,315 |   |   |   | 16,433 |   |   |   | 37,679 |   |
|                                                            |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Selling,                  general and administrative expenses   |   |                                                                | 3,075,900   |   |                                                                 |   | 2,864,069 |   |   |   | 1,101,984 |   |   |   | 1,035,781 |   |
| Depreciation                  and amortization                  |   |                                                                | 39,913      |   |                                                                 |   | 44,543 |   |   |   | 12,579 |   |   |   | 16,862 |   |
|                                                            |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  from operations                           |   |                                                                | (2,969,587  | )      |                                                                 |   | (2,744,297 | ) |   |   | (1,098,130 | ) |   |   | (1,014,964 | ) |
|                                                            |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Other                  income (expense):                        |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  income                                |   |                                                                | 910         |   |                                                                 |   | 818 |   |   |   | 9 |   |   |   | 351 |   |
| Interest                  expense                               |   |                                                                | (75,014     | )      |                                                                 |   | (49,133 | ) |   |   | (24,570 | ) |   |   | (8,654 | ) |
| Realized                  gain (loss) on sale of securities     |   |                                                                | --          |   |                                                                 |   | 30,525 |   |   |   | -- |   |   |   | -- |   |
| Loss                  before minority interest and income taxes |   |                                                                | (3,043,691  | )      |                                                                 |   | (2,762,087 | ) |   |   | (1,122,691 | ) |   |   | (1,023,267 | ) |
|                                                            |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Minority                  interest                              |   |                                                                | 368,613     |   |                                                                 |   | 189,520 |   |   |   | 173,392 |   |   |   | 60,329 |   |
|                                                            |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net                  Loss Before Income Taxes                   |   |                                                                | (2,675,078  | )      |                                                                 |   | (2,572,567 | ) |   |   | (949,299 | ) |   |   | (962,938 | ) |
|                                                            |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Income                  tax expenses                            |   |                                                                | --          |   |                                                                 |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                            |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                       |   | $                                                                   | (2,675,078  | )      |                                                                 | $      | (2,572,567 | ) |   | $ | (949,299 | ) |   | $ | (962,938 | ) |
|                                                            |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss per common share (basic and diluted)  |   | $                                                                   | (0.01       | )      |                                                                 | $      | (0.01 | ) |   | $ | (0.00 | ) |   | $ | (0.00 | ) |
|                                                            |   |                                                                |        |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average common shares outstanding     |   |                                                                | 419,547,371 |   |                                                                 |   | 290,308,517 |   |   |   | 429,342,735 |   |   |   | 316,592,399 |   |

----

**U.S.        MICROBICS, INC., AND SUBSIDIARIES**

**Consolidated        Condensed Statements of Cash Flows**

|                                                                                                                                     |   | **For                  the Nine Months Ended****June                  30,** |       |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|------------|
|                                                                                                                                     |   | **2007**                                                                    |       |   | **2006** |   |
|                                                                                                                                     |   |                                                                        |       |   |   |   |
| Net                  Cash Used in Operating Activities                                                                                   |   | $                                                                           | (1,649,833 | ) |   | $ | (1,586,333 | ) |
|                                                                                                                                     |   |                                                                        |       |   |   |   |   |   |
| Purchase                  of property and equipment                                                                                      |   |                                                                        | (11,961    | ) |   |   | (57,030 | ) |
| Disposal                  of property and equipment                                                                                      |   |                                                                        | 1,624      |   |   |   | -- |   |
| Net                  Gain on sale of securities                                                                                          |   |                                                                        | --         |   |   |   | 500 |   |
| Net                  Cash Used in Investing Activities                                                                                   |   |                                                                        | (10,337    | ) |   |   | (56,530 | ) |
|                                                                                                                                     |   |                                                                        |       |   |   |   |   |   |
| Proceeds                  from line of credit                                                                                            |   |                                                                        | 654,665    |   |   |   | -- |   |
| Proceeds                  from notes payable – related parties                                                                     |   |                                                                        | 4,089      |   |   |   | 20,532 |   |
| Proceeds                  from common stock issued for ESOP                                                                              |   |                                                                        | 140,339    |   |   |   | 996,844 |   |
| Cash                  received for common stock                                                                                          |   |                                                                        | --         |   |   |   | 48,000 |   |
| Cash                  received for preferred stock                                                                                       |   |                                                                        | --         |   |   |   | 2,000 |   |
| Proceeds                  from SSWM common stock issued for ESOP                                                                         |   |                                                                        | 472,292    |   |   |   | 137,000 |   |
| Cash                  received for SSWM common stock                                                                                     |   |                                                                        | 11,500     |   |   |   | 15,000 |   |
| Proceeds                  from SSWM stock subscription receivable                                                                        |   |                                                                        | 40,000     |   |   |   | -- |   |
| Net                  Cash Provided by Financing Activities                                                                               |   |                                                                        | 1,322,885  |   |   |   | 1,659,360 |   |
|                                                                                                                                     |   |                                                                        |       |   |   |   |   |   |
| Net                  Decrease in Cash                                                                                                    |   |                                                                        | (337,285   | ) |   |   | 16,497 |   |
|                                                                                                                                     |   |                                                                        |       |   |   |   |   |   |
| Cash                  at Beginning of Period                                                                                             |   |                                                                        | 341,678    |   |   |   | 108,498 |   |
|                                                                                                                                     |   |                                                                        |       |   |   |   |   |   |
| Cash                  at End of Period                                                                                                   |   | $                                                                           | 4,393      |   |   | $ | 124,995 |   |
|                                                                                                                                     |   |                                                                        |       |   |   |   |   |   |
| Supplemental                  disclosures of non-cash investing and financing                  activities:                               |   |                                                                        |       |   |   |   |   |   |
|                                                                                                                                     |   |                                                                        |       |   |   |   |   |   |
| Common                  stock issued for cash received                                                                                   |   | $                                                                           | --         |   |   | $ | 48,000 |   |
| Common                  stock issued in exchange for services                                                                            |   | $                                                                           | 94,700     |   |   | $ | 244,000 |   |
| Common                  stock issued in exchange for compensation                                                                        |   | $                                                                           | --         |   |   | $ | 20,000 |   |
| Common                  stock issued for accounts payable                                                                                |   | $                                                                           | 124,000    |   |   | $ | 259,364 |   |
| Common                  stock issued for accrued vacation pay                                                                            |   | $                                                                           | --         |   |   | $ | 3,342 |   |
| Common                  stock issued for accrued note payable interest                                                                   |   | $                                                                           | --         |   |   | $ | 15,000 |   |
| Common                  stock issued for employee stock options charged to                  operations                                   |   | $                                                                           | 17,422     |   |   | $ | 280,988 |   |
| Common                  stock issued for employee stock options for subscription                  receivable                             |   | $                                                                           | 98,725     |   |   | $ | -- |   |
| Common                  stock issued for accrued payroll                                                                                 |   | $                                                                           | 102,000    |   |   | $ | 53,820 |   |
| Common                  stock cancelled for accrued payroll                                                                              |   | $                                                                           | (87,820    | ) |   | $ | -- |   |
| Common                  stock cancelled for stock subscription receivable                                                                |   | $                                                                           | (50,000    | ) |   | $ | -- |   |
| Preferred                  stock issued for cash received                                                                                |   | $                                                                           | --         |   |   | $ | 2,000 |   |
| Black-Scholes                  expense for common stock options issued                                                                   |   | $                                                                           | 103,389    |   |   | $ | -- |   |
| Common                  stock issued by subsidiary in exchange for services (S-8 and                  restricted)                        |   | $                                                                           | 218,375    |   |   | $ | 29,600 |   |
| Common                  stock issued to employees by subsidiary in exchange for                  compensation                            |   | $                                                                           | --         |   |   | $ | 112,000 |   |
| Common                  stock issued to director by subsidiary in exchange for                  compensation                             |   | $                                                                           | 10,000     |   |   | $ | 10,000 |   |
| Common                  stock issued by subsidiary for accounts payable                                                                  |   | $                                                                           | 141,565    |   |   | $ | 77,752 |   |
| Common                  stock issued by subsidiary for accrued payroll                                                                   |   | $                                                                           | 17,500     |   |   | $ | -- |   |
| Common                  stock issued in settlement of notes payable by subsidiary (S-8                  and                  restricted) |   | $                                                                           | 62,500     |   |   | $ | 85,000 |   |
| Common                  stock issued by subsidiary for stock subscription                  receivable                                    |   | $                                                                           | 50,000     |   |   | $ | -- |   |
| Common                  stock issued by subsidiary for accrued interest                                                                  |   | $                                                                           | 14,670     |   |   | $ | -- |   |
| Common                  stock issued by subsidiary for a finance fee                                                                     |   | $                                                                           | 112,500    |   |   | $ | -- |   |
| Common                  stock issued by subsidiary for employee stock options charged to                  operations                     |   | $                                                                           | 115,391    |   |   | $ | -- |   |
| Common                  stock issued by subsidiary for employee stock options for subscription                  receivable               |   | $                                                                           | 324,912    |   |   | $ | -- |   |
| Preferred                  stock issued to employees by subsidiary for compensation                                                      |   | $                                                                           | --         |   |   | $ | 2,000 |   |
| Preferred                  stock issued by subsidiary for licensing agreement                                                            |   | $                                                                           | --         |   |   | $ | 150,000 |   |
| Preferred                  stock issued by subsidiary for consulting agreement                                                           |   | $                                                                           | --         |   |   | $ | 360,000 |   |
| Cash                  paid for:                                                                                                          |   |                                                                        |       |   |   |   |   |   |
| Interest                                                                                                                                 |   | $                                                                           | --         |   |   | $ | -- |   |
| Income                  taxes                                                                                                            |   | $                                                                           | --         |   |   | $ | -- |   |
| Dividends                                                                                                                                |   | $                                                                           | --         |   |   | $ | -- |   |

----

**U.S.        MICROBICS INC., AND SUBSIDIARIES**

**Notes        To Condensed Consolidated Financial Statements**

**Nine        Months Ended June 30, 2007 And 2006**

**(Unaudited)**

**NOTE        A - SUMMARY OF ACCOUNTING POLICIES**

----

**U.S.        MICROBICS INC., AND SUBSIDIARIES**

**Notes        To Condensed Consolidated Financial Statements**

**Nine        Months Ended June 30, 2007 And 2006**

**(Unaudited)**

|                      |      | Options                  and Warrants |   |                          |   | Options                  and Warrants |
|---------------------------|-----------|---------------------------------------|--------|-------------------------------|--------|---------------------------------------|
|                      |      |                                  |   | Weighted                      |   |                                  |   |   |   |   |
|                      |      |                                  |   | Average                       |   | Weighted                              |   |   |   | Weighted |
| Range                  of |      |                                  |   | Remaining                |   | Average                               |   |   |   | Average |
| Exercise                  |      | Number                                |   |  Contractual             |   | Exercise                              |   | Number |   | Exercise |
| Prices                    |      | Outstanding                           |   | Life                  (Years) |   | Price                                 |   | Exercisable |   | Price |
| $                         | 0.01      |                                  |   | 14,964,285                    |   |                                  | 4.56 |   | $ | 0.01 |   |   | 14,964,285 |   | $ | 0.01 |
|                      | 0.03      |                                  |   | 6,000,000                     |   |                                  | 1.93 |   |   | 0.03 |   |   | 6,000,000 |   |   | 0.03 |
|                      |      |                                  |   |                          |   |                                  |   |   |   |   |   |   |   |   |   |   |
| $                         | 0.01-0.03 |                                  |   | 20,964,285                    |   |                                  |  3.80 |   | $ | 0.01 |   |   | 20,964,285 |   | $ | 0.01 |

----

**U.S.          MICROBICS INC., AND SUBSIDIARIES**

**Notes          To Condensed Consolidated Financial Statements**

**Nine          Months Ended June 30, 2007 And 2006**

**(Unaudited)**

**NOTE        A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

|                                        |   |   |        |   | Weighted                        |   |
|---------------------------------------------|--------|--------|-------------|--------|---------------------------------|--------|
|                                        |   |   |        |   | Average                         |   |
|                                        |   | Shares |        |   | Exercise                  Price |   |
| Balance,                  October 1, 2006   |   |   | 6,500,000   |   |                            | $      | 0.03 |   |
| Granted                                     |   |   | 4,687,500   |   |                            |   | 0.01 |   |
| Exercised                                   |   |   | --          |   |                            |   | -- |   |
| Expired/Canceled                            |   |   | --          |   |                            |   | -- |   |
| Balance,                  December 31, 2006 |   |   | 11,187,500  |   |                            |   | 0.02 |   |
| Granted                                     |   |   | 11,284,284  |   |                            |   | 0.01 |   |
| Exercised                                   |   |   | (3,471,784  | )      |                            |   | (0.01 | ) |
| Expired/Canceled                            |   |   | (500,000    | )      |                            |   | (0.02 | ) |
| Balance,                  March 31, 2007    |   |   | 18,500,000  |   |                            |   | 0.02 |   |
| Granted                                     |   |   | 14,464,285  |   |                            |   | 0.01 |   |
| Exercised                                   |   |   | (12,000,000 | )      |                            |   | (0.01 | ) |
| Expired/Canceled                            |   |   | --          |   |                            |   | -- |   |
| Balance,                  June 30, 2007     |   |   | 20,964,285  |   |                            | $      | 0.01 |   |

----

**U.S.            MICROBICS INC., AND SUBSIDIARIES**

**Notes            To Condensed Consolidated Financial Statements**

**Nine            Months Ended June 30, 2007 And 2006**

**(Unaudited)**

**NOTE        B - NOTES PAYABLE**

**NOTE        C – INVENTORIES**

| Raw                  materials    |   | $      | --     |   |
|-----------------------------------|--------|--------|--------|--------|
| Work                  in progress |   |   | 57,247 |   |
|                              |   |   |   |   |
|                              |   |   | 57,247 |   |

----

**U.S.          MICROBICS INC., AND SUBSIDIARIES**

**Notes          To Condensed Consolidated Financial Statements**

**Nine          Months Ended June 30, 2007 And 2006**

**(Unaudited)**

**NOTE        D - CAPITAL STOCK**

----

**U.S.        MICROBICS INC., AND SUBSIDIARIES**

**Notes        To Condensed Consolidated Financial Statements**

**Nine        Months Ended June 30, 2007 And 2006**

**(Unaudited)**

**NOTE        E - MINORITY INTEREST**

|                                                            |   | Amount |    |
|-----------------------------------------------------------------|--------|--------|---------|
|                                                            |   |   |    |
| USM                  Capital Group, Inc.                        |   | $      | 12      |   |
| Sub                  Surface Waste Management of Delaware, Inc. |   |   | 173,381 |   |
| Sol-Tech                  Corporation                           |   |   | --      |   |
| Bio-Con                  Microbes                               |   |   | --      |   |
| Totals                                                          |   | $      | 173,393 |   |

----

**U.S.          MICROBICS INC., AND SUBSIDIARIES**

**Notes          To Condensed Consolidated Financial Statements**

**Nine          Months Ended June 30, 2007 And 2006**

**(Unaudited)**

**NOTE        F - COMMITMENTS AND CONTINGENCIES**

**NOTE        G - SEGMENT INFORMATION**

|   | · | Management                  services and planning      |
|--------|--------|--------------------------------------------------------|
|   | · | Becoming                  a publicly reporting company |
|   | · | Becoming                  a publicly trading company   |
|   | · | Capital                  financing                     |
|   | · | Aftermarket                  support                   |
|   | · | Investor                  Relations                    |
|   | · | Corporate                  governance                  |
|   | · | Administrative                  services               |
|   | · | CEO                  Training                          |

----

**U.S.        MICROBICS INC., AND SUBSIDIARIES**

**Notes        To Condensed Consolidated Financial Statements**

**Nine        Months Ended June 30, 2007 And 2006**

**(Unaudited)**

**NOTE        G - SEGMENT INFORMATION (continued)**

|                                                      |   | **For                  the Nine Months Ended****June                  30,** |       |
|-----------------------------------------------------------|--------|-----------------------------------------------------------------------------|------------|
|                                                      |   | 2007                                                                        |       |   | 2006 |   |
| Net                  Sales to External Customers:         |   |                                                                        |       |   |   |   |
| Consulting                  and Financial Services        |   | $                                                                           | --         |   |   | $ | -- |   |
| Engineering                  Services Corporate           |   |                                                                        | 229,668    |   |   |   | 444,082 |   |
| Corporate                                                 |   |                                                                        | 2,450      |   |   |   | 3,615 |   |
| Total                  Sales to External Customers        |   | $                                                                           | 232,118    |   |   | $ | 447,697 |   |
|                                                      |   |                                                                        |       |   |   |   |   |   |
| Depreciation                  Expense:                    |   |                                                                        |       |   |   |   |   |   |
| Consulting                  and Financial Services        |   | $                                                                           | --         |   |   | $ | -- |   |
| Engineering                  Services                     |   |                                                                        | 20,850     |   |   |   | 18,151 |   |
| Corporate                                                 |   |                                                                        | 19,063     |   |   |   | 26,392 |   |
| Total                  Depreciation Expense               |   | $                                                                           | 39,913     |   |   | $ | 44,543 |   |
|                                                      |   |                                                                        |       |   |   |   |   |   |
| General                  and Administrative Expense:      |   |                                                                        |       |   |   |   |   |   |
| Consulting                  and Financial Services        |   | $                                                                           | 202        |   |   | $ | 50 |   |
| Engineering                  Services                     |   |                                                                        | 2,028,732  |   |   |   | 1,640,064 |   |
| Corporate                                                 |   |                                                                        | 1,046,966  |   |   |   | 1,223,955 |   |
| Total                  General and Administrative Expense |   | $                                                                           | 3,075,900  |   |   | $ | 2,864,069 |   |
|                                                      |   |                                                                        |       |   |   |   |   |   |
| Capital                  Expenditures:                    |   |                                                                        |       |   |   |   |   |   |
| Consulting                  and Financial Services        |   | $                                                                           | --         |   |   | $ | -- |   |
| Engineering                  Services                     |   |                                                                        | 8,764      |   |   |   | 57,030 |   |
| Corporate                                                 |   |                                                                        | 1,573      |   |   |   | -- |   |
| Total                  Capital Expenditures               |   | $                                                                           | 10,337     |   |   | $ | 57,030 |   |
|                                                      |   |                                                                        |       |   |   |   |   |   |
| Operating                  (Losses):                      |   |                                                                        |       |   |   |   |   |   |
| Consulting                  and Financial Services        |   | $                                                                           | (202       | ) |   | $ | (50 | ) |
| Engineering                  Services                     |   |                                                                        | (1,909,586 | ) |   |   | (1,522,911 | ) |
| Corporate                                                 |   |                                                                        | (1,059,799 | ) |   |   | (1,221,336 | ) |
| Total                  Segment Operating Losses           |   | $                                                                           | (2,969,587 | ) |   | $ | (2,744,297 | ) |
|                                                      |   |                                                                        |       |   |   |   |   |   |
| Segment                  Assets:                          |   |                                                                        |       |   |   |   |   |   |
| Consulting                  and Financial Services        |   | $                                                                           | 76         |   |   | $ | 277 |   |
| Engineering                  Services – Net         |   |                                                                        | 274,263    |   |   |   | 584,612 |   |
| Corporate                                                 |   |                                                                        | 147,271    |   |   |   | 59,589 |   |
| Total                  Segment Assets                     |   | $                                                                           | 421,610    |   |   | $ | 644,478 |   |

----

**U.S.            MICROBICS INC., AND SUBSIDIARIES**

**Notes            To Condensed Consolidated Financial Statements**

**Nine            Months Ended June 30, 2007 And 2006**

**(Unaudited)**

**NOTE        G - SEGMENT INFORMATION (continued)**

|                                                   |   | June                  30, |    |   | June                  30, |   |
|--------------------------------------------------------|--------|---------------------------|---------|--------|---------------------------|--------|
|                                                   |   | 2007                      |    |   | 2006                      |   |
| **Net                  Sales To External Customers:**  |   |                      |    |   |                      |   |
| United                  States                         |   | $                         | 142,473 |   |                      | $      | 17,083 |   |
| Mexico                                                 |   |                      | 89,645  |   |                      |   | 430,614 |   |
| **Total                  Sales To External Customers** |   | $                         | 232,118 |   |                      | $      | 447,697 |   |
|                                                   |   |                      |    |   |                      |   |   |   |
| **Assets:**                                            |   |                      |    |   |                      |   |   |   |
| United                  States                         |   | $                         | 299,840 |   |                      | $      | 513,679 |   |
| Mexico                                                 |   |                      | 121,770 |   |                      |   | 130,799 |   |
| **Total                  Assets**                      |   | $                         | 421,610 |   |                      | $      | 644,478 |   |

----

**PART        I**

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

*This        report 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. All forward-looking statements are inherently        uncertain as they are based on current expectations and assumptions concerning        future events or future performance of the company. Readers are cautioned        not to        place undue reliance on these forward-looking statements, which are only        predictions and speak only as of the date hereof. Forward-looking statements        usually contain the words "estimate," "anticipate," "believe," "expect,"        or        similar expressions, and are subject to numerous known and unknown risks        and        uncertainties. In evaluating such statements, prospective investors should        carefully review various risks and uncertainties identified below, as well        as        the matters set forth in the Company's Annual Report on 10-KSB for the year        ended September 30, 2006 and its other SEC filings. These risks and        uncertainties could cause the company's actual results to differ materially        from        those indicated in the forward-looking statements. The Company undertakes        no        obligation to update or publicly announce revisions to any forward-looking        statements to reflect future events or developments.*

**The        Company**

----

**RESULTS        OF OPERATIONS**

**For        the nine months and three months ended June 30, 2007 with nine months and        three        months ended June 30, 2006**

----

**Liquidity        And Capital Resources.**

----

**Risks        And Uncertainties**

----

**ITEM        3. CONTROLS AND PROCEDURES**

**PART        II - OTHER INFORMATION**

**ITEM        1. LEGAL PROCEEDINGS.**

**ITEM        2. CHANGES IN UNREGISTERED SECURITIES AND USE OF PROCEEDS.**

----

**Issuer        Purchases Of Equity Securities**

| Period    |   | (a)Total                  Number ofShares                  (orUnits)Purchased) |   | (b)AveragePricePaid                  perShare(or                  Unit) |   | (c)TotalNumber                  ofShares                  (orUnits)Purchased                  asPart                  ofPubliclyAnnouncedPlansor                  Programs(1) |   | (d)MaximumNumber                  (orApproximateDollar                  Value)that                  May YetBePurchasedUnderthe                  Plans orPrograms                  (1) |
|-----------|--------|--------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10/01/06- |   | --                                                                             |   | --                                                                      |   | --                                                                                                                                                                            |   | --                                                                                                                                                                               |
| 10/31/06  |   | 0                                                                              |   | $0                                                                      |   | 0                                                                                                                                                                             |   | 0                                                                                                                                                                                     |
|      |   |                                                                           |   |                                                                    |   |                                                                                                                                                                          |   |                                                                                                                                                                                  |
| 11/01/06- |   | --                                                                             |   |  --                                                                |   |  --                                                                                                                                                                      |   | --                                                                                                                                                                               |
| 11/30/06  |   | 0                                                                              |   | $0                                                                      |   | 0                                                                                                                                                                             |   | 0                                                                                                                                                                                     |
|      |   |                                                                           |   |                                                                    |   |                                                                                                                                                                          |   |                                                                                                                                                                                  |
| 12/01/06- |   | --                                                                             |   | --                                                                 |   | --                                                                                                                                                                       |   | --                                                                                                                                                                               |
| 12/31/06  |   | 0                                                                              |   | $0                                                                      |   | 0                                                                                                                                                                             |   | 0                                                                                                                                                                                     |
|      |   |                                                                           |   |                                                                    |   |                                                                                                                                                                          |   |                                                                                                                                                                                  |
| 01/01/07- |   | --                                                                             |   | --                                                                      |   | --                                                                                                                                                                            |   | --                                                                                                                                                                               |
| 01/31/07  |   | 0                                                                              |   | $0                                                                      |   | 0                                                                                                                                                                             |   | 0                                                                                                                                                                                     |
|      |   |                                                                           |   |                                                                    |   |                                                                                                                                                                          |   |                                                                                                                                                                                  |
| 02/01/07- |   | --                                                                             |   |  --                                                                |   |  --                                                                                                                                                                      |   | --                                                                                                                                                                               |
| 02/28/07  |   | 0                                                                              |   | $0                                                                      |   | 0                                                                                                                                                                             |   | 0                                                                                                                                                                                     |
|      |   |                                                                           |   |                                                                    |   |                                                                                                                                                                          |   |                                                                                                                                                                                  |
| 03/01/07- |   | --                                                                             |   | --                                                                 |   | --                                                                                                                                                                       |   | --                                                                                                                                                                               |
| 03/31/07  |   | 0                                                                              |   | $0                                                                      |   | 0                                                                                                                                                                             |   | 0                                                                                                                                                                                     |
|      |   |                                                                           |   |                                                                    |   |                                                                                                                                                                          |   |                                                                                                                                                                                  |
| 04/01/07- |   | --                                                                             |   | --                                                                      |   | --                                                                                                                                                                            |   | --                                                                                                                                                                               |
| 04/30/07  |   | 0                                                                              |   | $0                                                                      |   | 0                                                                                                                                                                             |   | 0                                                                                                                                                                                     |
|      |   |                                                                           |   |                                                                    |   |                                                                                                                                                                          |   |                                                                                                                                                                                  |
| 05/01/07- |   | --                                                                             |   |  --                                                                |   |  --                                                                                                                                                                      |   | --                                                                                                                                                                               |
| 05/31/07  |   | 0                                                                              |   | $0                                                                      |   | 0                                                                                                                                                                             |   | 0                                                                                                                                                                                     |
|      |   |                                                                           |   |                                                                    |   |                                                                                                                                                                          |   |                                                                                                                                                                                  |
| 06/01/07- |   | --                                                                             |   | --                                                                 |   | --                                                                                                                                                                       |   | --                                                                                                                                                                               |
| 06/30/07  |   | 0                                                                              |   | $0                                                                      |   | 0                                                                                                                                                                             |   | 0                                                                                                                                                                                     |

----

**ITEM        3. DEFAULTS UPON SENIOR SECURITIES.**

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

**ITEM        5. OTHER INFORMATION.**

----

**ITEM        6. EXHIBITS**

| (a)    | Exhibits. |                                                                                                                                                                                                                           |
|--------|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |      |                                                                                                                                                                                                                           |
|   | 3.1       | Articles                  of Incorporation, as amended.                                                                                                                                                                        |
|   |      |                                                                                                                                                                                                                           |
|   | 3.2       | Bylaws,                  as amended.                                                                                                                                                                                           |
|   |      |                                                                                                                                                                                                                           |
|   | 10.1      | Lease                  Agreement, dated as of July 14, 1998, by and among the Company                  and each of                  Ridgecrest Properties, R and B Properties and Hindry West                  Development.(1) |
|   |      |                                                                                                                                                                                                                           |
|   | 10.2      | Employment                  Agreement, effective as of October 1, 1998, between Robert C. Brehm                  and                  the Registrant.(1)                                                                       |
|   |      |                                                                                                                                                                                                                           |
|   | 10.3      | Employment                  Agreement, effective as of October 1, 1998, between Mery C. Robinson                  and                  the Registrant.(1)                                                                      |
|   |      |                                                                                                                                                                                                                           |
|   | 10.4      | Stock                  for Stock Acquisition Agreement, effective as of August 31, 1997,                  among                  XyclonyX, Mery C. Robinson and the Registrant.(1)                                             |
|   |      |                                                                                                                                                                                                                           |
|   | 10.5      | Technology                  License Agreement, effective as of March 1, 1998, between XyclonyX                  and                  West Coast Fermentation Center.(1)                                                        |
|   |      |                                                                                                                                                                                                                           |
|   | 10.6      | Technology                  License Agreement, effective as of March 1, 1998, between XyclonyX                  and                  Sub-Surface Waste Management, Inc. (1)                                                    |
|   |      |                                                                                                                                                                                                                           |
|   | 10.7      | Technology                  License Agreement, effective as of August 21, 1997, among XyclonyX                  and                  Mery C. Robinson, Dominic J. Colasito and Alvin J. Smith.                  (1)            |
|   |      |                                                                                                                                                                                                                           |
|   | 10.8      | Technology                  License Agreement, effective as of March 1, 1998, between XyclonyX                  and                  Bio-Con Microbes, Inc.(1)                                                                 |
|   |      |                                                                                                                                                                                                                           |
|   | 10.9      | Technology                  License Agreement, effective as of March 1, 1998, between XyclonyX                  and                  Sol-Tech Corporation.(1)                                                                  |
|   |      |                                                                                                                                                                                                                           |
|   | 10.10     | Product                  Line License Agreement effective May 24, 1999, between Sub-Surface                  Waste                  Management, Inc. and Builders Referral, Inc.(2)                                            |
|   |      |                                                                                                                                                                                                                           |
|   | 21        | Subsidiaries                  of the Registrant.(1)                                                                                                                                                                            |
|   |      |                                                                                                                                                                                                                           |
|   | 31.1      | Certification                  of Robert C. Brehm pursuant to 18 U.S.C. Section 1350, as adopted                  to                  section 302 of the Sarbanes-Oxley Act of 2002.                                           |
|   |      |                                                                                                                                                                                                                           |
|   | 31.2      | Certification                  of Conrad Nagel pursuant to 18 U.S.C. Section 1350, as adopted                  to section                  302 of the Sarbanes-Oxley Act of 2002.                                              |
|   |      |                                                                                                                                                                                                                           |
|   | 32.1      | Certification                  of Robert C. Brehm pursuant to 18 U.S.C. Section 1350, as adopted                  to                  section 906 of the Sarbanes-Oxley Act of 2002.                                           |
|   |      |                                                                                                                                                                                                                           |
|   | 32.2      | Certification                  of Conrad Nagel pursuant to 18 U.S.C. Section 1350, as adopted                  to section                  906 of the Sarbanes-Oxley Act of                  2002.                             |

----

**SIGNATURES**

|                                              |                                                                                    |                                      |
|---------------------------------------------------|-----------------------------------------------------------------------------------------|-------------------------------------------|
|                                              | **U.S.                  MICROBICS, INC.**                                               |
|                                         |                                                                               |                                 |
| Date: August                  20, 2007  | By:                                                                           | /s/ Robert                  C. Brehm |
|                                              | Robert                  C. Brehm, President andChief                  Executive Officer |

|                                              |                                                   |                                   |
|---------------------------------------------------|--------------------------------------------------------|----------------------------------------|
|                                              | **COMPANY                  NAME CORPORATION**          |
|                                         |                                              |                              |
| Date: August                  20, 2007  | By:                                          | /s/ Conrad                  Nagel |
|                                              | Conrad                  Nagel, Chief Financial Officer |