<PAGE>
==============================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                             -----------------------

                                   FORM 10-QSB
(Mark One)

/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934

For the quarter ended December 31, 2000

/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

    For the transition period from                   to
                                   ------------------   -----------------------
    Commission File No.: 0-14213

                              U.S. MICROBICS, INC.
                 (Name of small business issuer in its charter)

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

                             5922-B Farnsworth Court
                           Carlsbad, California 92008
                                 (760) 918-1860

       Securities registered under Section 12(b) of the Exchange Act: None

       Title of each class            Name of each exchange on which registered
              None                                        None.

 Securities registered under Section 12(g) of the Exchange Act: Common Stock,
 $0.0001 par value per share

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes  /X/  No  / /

 Common Stock, $0.0001 par value per share - 12,072,055 shares outstanding as of
 February 7, 2001

                   Documents Incorporated by Reference: None.

Transitional Small Business Disclosure Format (check one):  Yes  / / No  /X/

==============================================================================
<PAGE>


PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                      U.S. MICROBICS, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS

                                                                                  AS OF DECEMBER 31,      AS OF SEPTEMBER 30,
                                                                                         2000                     2000
                                                                                      (UNAUDITED)              (AUDITED)
                                                                                  -------------------     ---------------------
 ASSETS


CURRENT ASSETS:
<S>                                                                            <C>                     <C>
     Cash and cash equivalents                                                 $                   --  $               162,900
     Accounts receivable                                                                       52,512                       --
     Inventories                                                                               46,674                   28,800
     Prepaid expenses and other assets                                                          6,511                   20,200
                                                                                  --------------------    ---------------------
          Total current assets                                                                105,697                  211,900
                                                                                  --------------------    ---------------------

PROPERTY AND EQUIPMENT, NET                                                                   321,410                  287,500
DEPOSITS                                                                                       28,700                   28,700
DEFERRED TAX ASSET                                                                                 --                       --
                                                                                  --------------------    ---------------------
          Total assets                                                         $              455,807  $               528,100
                                                                                  ====================    =====================

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
     Accounts payable and accrued expenses                                     $            1,186,330  $               882,500
     Current portion of capital lease obligation                                                4,332                    4,900
     Notes payable, related parties                                                           133,625                   50,500
                                                                                  --------------------    ---------------------
          Total current liabilities                                                         1,324,287                  937,900

CAPITAL LEASE OBLIGATION, NET OF CURRENT PORTION                                                   --                      900
LONG-TERM NOTES PAYABLE, RELATED PARTIES, NET OF CURRENT PORTION                               24,375                       --
                                                                                  --------------------    ---------------------
           Total liabilities                                                                1,348,662                  938,800
                                                                                  --------------------    ---------------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' (DEFICIT) EQUITY :
     Convertible preferred stock, $.10 par value; 20,000,000 shares authorized:
          Series II; 500,000 shares authorized; 7,053 and 8,421 shares issued
               and outstanding; aggregate liquidation preference of $7,053
               and $8,421                                                                         705                      800
          Series B; 500,000 shares authorized; 5,772 and 6,959 shares
               issued and outstanding; aggregate liquidation preference of
               $5,772 and $6,959                                                                  577                      700
          Series C; 50,000 shares authorized; 43,312 and 39,342 shares
               issued and outstanding; aggregate liquidation preference of
               $4,331,200 and $3,934,200                                                        4,331                    3,900
          Series D; 50,000 shares authorized; 5,425 and 5,525 shares
               issued and outstanding; no liquidation preference                                  541                      600
     Common stock; $.0001 par value; 150,000,000 shares authorized;
          11,767,638 and 11,491,888 shares issued and outstanding                               1,177                    1,100
     Additional paid-in capital                                                            11,198,134               10,723,300
     Stock options and warrants                                                               929,880                1,130,900
     Stock subscription notes receivable                                                  (2,557,401)              (2,486,000)
      Deferred equity issuance costs                                                        (595,000)                (595,000)
     Accumulated deficit                                                                  (9,875,799)              (9,191,000)
                                                                                  --------------------    ---------------------
          Total stockholders' deficit                                                       (892,855)                (410,700)
                                                                                  --------------------    ---------------------
          Total liabilities and stockholders' deficit                          $              455,807  $               528,100
                                                                                  ====================    =====================
</TABLE>

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

                                                                              1

<PAGE>

                      U.S. MICROBICS, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                          FOR THE THREE
                                                                    MONTHS ENDED DECEMBER 31,
                                                                    -------------------------
                                                                   2000                   1999
                                                             ------------------     ------------------

<S>                                                       <C>                    <C>
REVENUES                                                  $            57,552    $             15,957

COST OF REVENUES                                                       63,402                   9,136
                                                             ------------------     ------------------

GROSS (LOSS) PROFIT                                                    (5,850)                  6,821

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES                          668,029                547,742
                                                             ------------------     ------------------

LOSS FROM OPERATIONS                                                  (673,879)              (540,921)

OTHER INCOME (EXPENSE):
     Interest Income                                                       228                    599

     Interest expense                                                  (11,169)                  (554)
                                                             ------------------     ------------------

                                                                       (10,941)                    45

NET LOSS BEFORE INCOME TAXES                                          (684,820)              (540,876)
PROVISION FOR INCOME TAXES                                                  --                     --
                                                             ------------------     ------------------

NET LOSS                                                  $          (684,820)   $          (540,876)
                                                             ==================     ==================

Net loss per share (basic and diluted)                    $              (.07)   $              (.09)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                           9,309,343              5,694,644
</TABLE>





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

                                                                              2

<PAGE>

                      U.S. MICROBICS, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                          FOR THE THREE
                                                                    MONTHS ENDED DECEMBER 31,
                                                                    -------------------------
                                                                 2000                    1999
                                                             --------------      ---------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                       <C>               <C>
   Net loss                                               $      (684,820)  $               (540,876)
   Adjustments to reconcile net income (loss) to
   net cash used in operating activities:
   Depreciation                                                     13,986                        367
   Stock options and warrants in exchange for services                  --                   (19,924)
   Issuance of common stock and preferred
      stock in exchange for services                                   569                         --
      Activities:
      Changes in operating assets and liabilities:
          Accounts receivable                                     (52,512)                   (27,490)
          Inventories                                             (17,874)                    (4,909)
          Prepaid expense, deposits and other                       13,689                     41,207
          Deposits                                                      --                      1,190
          Accounts payable and accrued expenses                    367,130                      7,250

                                                             --------------      ---------------------
   NET CASH USED IN OPERATING ACTIVITIES                         (359,832)                  (543,185)
                                                             --------------      ---------------------

CASH FLOWS USED IN INVESTING ACTIVITIES:
   Sales of property and equipment                                     --                      3,189

CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash proceeds from issuance of common and
      preferred stock net of placement fees                        198,400                    407,000
   Cash proceeds from exercise of stock options                         --                      7,200
   Repayment long-term portion of lease contract                   (1,468)                        396

                                                             --------------      ---------------------
   Net cash provided by financing activities                       196,932                    414,596
                                                             --------------      ---------------------

DECREASE IN CASH AND CASH EQUIVALENTS                             (162,900)                  (125,400)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                   162,900                    125,400
                                                             --------------      ---------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                $             --  $                      --
                                                             ==============      =====================
</TABLE>




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

                                                                              3

<PAGE>


                      U.S. MICROBICS, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                   (CONTINUED)

<TABLE>
<CAPTION>

                                                                                 FOR THE THREE
                                                                           MONTHS ENDED DECEMBER 31,
                                                                     --------------------------------------
                                                                          2000                  1999
                                                                     ----------------      ----------------
Supplemental disclosures of non-cash
     Investing and financing activities:

<S>                                                                  <C>                   <C>

     Preferred stock issued for note receivable                      $     75,000          $       --

     Common stock options exercised in settlement of
     accrued expenses                                                $       --            $     31,200

     Cash paid for:
          Interest                                                   $       --            $       554
          Income taxes                                               $       --            $       --
</TABLE>



The notes to consolidated condensed financial statements are an integral part
of these statements

                                                                              4

<PAGE>



U.S. MICROBICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED DECEMBER 31, 2000 AND 1999 (UNAUDITED)

1.   BASIS OF PRESENTATION

The unaudited consolidated condensed financial statements of U.S. Microbics,
Inc. and subsidiaries have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The company suggests that the
these financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's annual report on Form 10-KSB for the
fiscal year ended September 30, 2000.

In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments, consisting only of normal
recurring entries, necessary to present fairly its financial position at
December 31, 2000 and the results of its operations and its cash flows for the
periods presented.

The preparation of financial statements, in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and 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 these estimates.

Changes have been made to the quarter ended December 31, 1999, to reflect
certain adjustments which were made for the year ended September 30, 2000.

2.   ORGANIZATION AND RISKS AND UNCERTAINTIES

ORGANIZATION

U.S. Microbics, Inc. was organized December 7, 1984 under the laws of the State
of Colorado as Venture Funding Corporation. The Company amended its Articles of
Incorporation in June 1993 changing its name to Global Venture Funding, Inc. The
Company amended its Articles of Incorporation in May 1998 changing its name to
U.S. Microbics, Inc. The Company has been engaged in a variety of operations
since inception.

During August 1997, the Company acquired the assets of Xyclonyx, a privately
held company founded to develop, apply and license patented toxic and hazardous
waste treatment and recovery processes as well as to license and apply
microbially enhanced oil recovery technologies and products.

The Company has five wholly-owned subsidiaries: West Coast Fermentation Center,
Sub Surface Waste Management, Inc. (SSWM), Sol Tech Corporation (d.b.a. -
Wasteline Performance Corporation), Bio-Con Microbes and Applied Microbic
Technologies, Inc. West Coast Fermentation Center's primary business is to
cultivate microbial cultures that are to be sold to other subsidiaries of the
Company. Sub Surface Waste Management's business is to assemble and sell
products using technology licensed from Xyclonyx. Sol Tech Corporation and
Bio-Con Microbes are companies formed to service the sewage treatment and
agriculture markets, respectively. Applied Microbic Technologies, Inc. intends
to (i) license customers in the United States to use microbial blends that are
specially formulated for Microbially Enhanced Oil Recovery ('MEOR") in the
United States and (ii) provide related technical support services.

On August 2, 2000 Bio-Con formed a 98% owned Mexican corporation Natura
Agricultura, de C.V. to serve as its international marketing arm for
agricultural products and services based upon naturally occurring
micro-organizms and additives. The other 2% is owned by U.S. Microbics, Inc.,
Bio-Con's parent Company.

RISKS AND UNCERTAINTIES

                                                                              5

<PAGE>

For the three months ended December 31, 2000 the Company has generated only
limited revenues of $57,552 of which $52,512 is in accounts receivable.
During this same period, the Company incurred a net loss of $684,820 and had
negative cash flows from operations of $359,832. As of December 31, 2000, the
Company has an accumulated deficit of $9,875,799. The Company had limited
revenues of $18,900 during the fiscal year ended September 30, 2000 and
$66,900 during fiscal year ended September 30, 1999 which included $50,000
from related parties. The Company incurred net losses of $2,550,900 in fiscal
2000 and $2,932,500 in fiscal 1999.

To date, the Company has relied on private placements of equity and debt to fund
its operating and capital requirements. The Company is planning on raising
additional capital through the issuance of stock in private placements or a
public offering. The Company is currently developing business opportunities and
operations through its wholly-owned subsidiaries. There can be no assurance that
such additional equity financing will be available on terms acceptable to the
Company, if at all or that such business opportunities will occur as planned, if
at all. Based upon the current financial condition of the Company, additional
capital will be required in order for the Company to continue its ongoing
operations. These matters raise substantial doubt about the Company's ability to
continue as a going concern.

Subsequent to December 31, 2000, the Company has raised approximately $175,500,
net of issuance costs, pursuant to a sales commitment for the purchase of Series
C Preferred stock..

3.   INVENTORIES:

Inventories consist of the following:
<TABLE>
<CAPTION>

                                                                               DECEMBER  31,
                                                                                     200
                                                                            -------------------
<S>                                                                         <C>
       Raw materials and supplies                                           $            46,674
       Finished goods                                                                        --
                                                                            --- ----------------
                                                                            $            46,674
                                                                            === ================
</TABLE>


4.   NET LOSS PER SHARE

Basic and diluted net loss per share is computed by dividing net loss by the
weighted average number of shares of common stock outstanding during the
reporting period. During the three months ended December 31,2000 and 1999,
common stock equivalents are not considered because they would be anti-dilutive.

5.       COMMITMENTS AND CONTINGENCIES

Litigation:

       In March 1999, the Company was served with a stockholder derivative
       lawsuit titled Merriam v. U.S. Microbics, et. al. This lawsuit
       alleges, among other things, that certain stock was improperly issued
       to the President of the Company and to certain consultants for
       services. The Company has formed a special independent committee of
       the Board of Directors to investigate these claims. The Company has
       engaged outside legal counsel to represent it in this matter and
       intends to vigorously defend this action. Although management believes
       the lawsuit to be without merit, an unfavorable

                                                                              6

<PAGE>

   COMMITMENTS AND CONTINGENCIES (CONTINUED):

       ruling would have a material adverse impact on the Company's
       financial position and results of operations.

       In December, 1999, the Company was served with a lawsuit by one of its
       suppliers for nonpayment of various purchases.

6.         RELATED PARTY TRANSACTION

       During the quarter ended December 31, 2000, the Mexican subsidiary of
       Bio-Con, Natura Agricultura, purchased manufacturing equipment and
       inventory in the amount of $95,000 from an entity controlled by a
       relative of the president of Natura Agricultura. Accounts receivable
       of $49,500 are pledged as collateral on notes payable of $95,000
       related to the purchase.

     Purchase commitment:

       During the year ended September 30, 1999, the Company entered into an
       agreement with a supplier to purchase certain inventories at a total cost
       of $194,000. The Company made deposits totaling $29,400. The Company has
       not completed the purchase transaction and the supplier has sued the
       Company for performance under the purchase agreement.

7.         EQUITY FINANCING

During the three months ended December, 2000, the Company received cash
proceeds, net of offering costs, totaling $198,400 pursuant to a sales
commitment to purchase Series C Preferred stock..

                                                                              7


<PAGE>






                                     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, 1999 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

U.S. Microbics, Inc. (the "Company" or "USMX") intends to build an environmental
biotech company utilizing the proprietary microbial technology, bioremediation
patents, knowledge, processes and unique microbial culture collection developed
over 30 years by the late George M. Robinson and his daughter Mery C. Robinson
(collectively, the "Microbial Technology"). The Company creates and markets
proprietary microbial technologies that provide natural solutions to many of
today's environmental problems. The Company's microbes or "bugs" can be used to
break down various substances, including oil, diesel, fuel, arsenic, certain
toxic waste, and certain water and soil contaminants. The Company intends to
leverage the products, applications and customer contacts developed by the
Robinsons to apply, develop, license and commercialize the Microbial Technology.
The Company believes that it can build the foundation for the international
commercialization of proprietary products based on the Microbial Technology for
applications in the global environmental, manufacturing, agricultural and
natural resource markets. Unlike certain other start-up companies that need to
develop a product or technology and find a market and customers, USMX already
has advanced, proprietary technology, as well as products that have been
utilized in various environmental and agricultural applications worldwide. The
Company is in the process of determining and obtaining the capital, personnel
and manufacturing and distribution capacity necessary to commercialize the
Microbial Technology.

The Company's initial objective is to establish itself as a leading provider of
environmental technology and products to companies in the United States through
the licensing of technology

                                                                              8

<PAGE>

that meets governmental standards, is environmentally friendly, is easy to
manufacture and apply and yields profit for its licensees. To achieve this
objective, the Company intends to focus its strategy on the following three
elements: (i) licensing its bioremediation technology to high-volume end-users
for hydrocarbon waste cleanup; (ii) developing a manufacturing center for its
proprietary microbial blends; and (iii) licensing its technology to entities for
use in specific vertical markets and territories, site clean-up and maintenance
products, agricultural growth enhancement and aquaculture/mariculture
applications.

The Company's achievement of its objectives is highly dependent, among other
factors, on its ability to raise the necessary capital to build the production
facility that will supply potential new customers and satisfy the potential
demand from prior customers that previously utilized products based on the
Microbial Technology. The Company intends to raise additional working capital
through the sale of common and preferred stock or debt and through potential
licensing arrangements. There can be no assurance that the Company will raise
such capital on terms acceptable to the Company, if at all. The Company's
failure to obtain adequate financing may jeopardize its existence. See
"Liquidity and Capital Resources."




OVERVIEW
The Company has developed an organizational structure of multiple corporations
for the purpose of segmenting its operations into distinct units for proprietary
microbe or "bug" production, research and development ("R&D"), licensing and
patent protection and the intended sale and licensing of microbial products and
related services to specific market segments. As the public holding company, the
Company intends to coordinate the deployment of the Microbial Technology to its
subsidiaries that in turn will license the technology and sell products and
related services to end users. Several of the Company's subsidiaries utilize
corporate names that have been used successfully by predecessor companies
selling the Microbial Technology.

The Company and its subsidiaries are described more fully below:

                              U.S. MICROBICS, INC.
The Company intends to orchestrate profitably the operations of its subsidiaries
and to provide administrative functions at beneficial economies of scale. The
Company is in the process of acquiring the capital needed to acquire the
necessary personnel and facilities and to operate the individual subsidiaries.
The Company then intends to allocate its resources among the subsidiaries so
that they can operate profitably within the organizational structure. The
Company provides to its subsidiaries public relations, accounting, legal, human
resources, capital acquisition and merger and acquisition services.

West Coast Fermentation Center

   WCFC manufactures microbial blends by using fermentation technology, powder
blending techniques and combinatorial liquifaction including microbial blends
for the Remediline -TM-, Wasteline -TM- and Bi-Agra -TM- product lines. WCFC
intends to build a larger microbe laboratory, pilot plant and quality control
center to meet projected production demands in fiscal year 2001 if additional
funds are generated

                                                                              9

<PAGE>

from sales and/or equity/debt funding.
                                         XyclonyX

XyclonyX provides research, develop, formulate, protect, apply, acquire, license
and transfer its technologies, consisting of patents, proprietary knowledge,
products, processes and personnel, for hydrocarbon impacted soil and water
treatment and agricultural growth enhancement.

         In May 2000 XyclonyX completed a successful pilot program that
demonstrated the efficacy of using its proprietary microbes, (in a formulation
called MTBEctomy -TM-), to treat Methyl-Tertiary-Butyl-Ether (MTBE), a chemical
compound used as a fuel additive in gasoline, which has caused widespread and
serious contamination of the nation's drinking water supplies. Successful
implementation of the treatment protocol developed by XyclonyX could help reduce
the danger that MTBE poses to human health.

         While the use of MTBE as a fuel additive has helped to achieve
significant reductions in air emissions, unlike other components of gasoline,
MTBE dissolves and spreads readily in groundwater, does not degrade easily and
is difficult and costly to remove from groundwater. The U.S. Environmental
Protection Agency (EPA) is considering a limit or ban on the use of MTBE as a
fuel additive.

         In response to the growing concerns regarding MTBE and customer
requests for a cost effective, environmentally friendly alternative for MTBE
cleanup, the XyclonyX research team performed a pilot project on client MTBE
contaminated water, fine tuning the recipe of microbes required to treat the
MTBE. The sample consisted of MTBE, Benzene, Toluene, Ethylbenzene, and Xylene
(BTEX), and gasoline with concentrations over 10,000 parts per billion. Within
five days after initial microbial treatment, non-detect (ND) levels were
validated by an independent, state-certified lab.

         The excellent results achieved by the research team are directly
applicable to the cleanup of MTBE contaminated soil and water using injection of
microbes to contaminated groundwater, above-ground applications where
contaminated soil is processed through U.S. Microbics' patented Bio-Raptor -TM-,
in existing tank farm storage tanks, and, where necessary, transported to a
bioreactor for offsite treatment.


                       SUB-SURFACE WASTE MANAGEMENT, INC.

         In August of 29, 2000, Bruce Beattie was named President of Sub-Surface
 Waste Management, Inc. (SSWM). Mr. Beattie brings over 24 years experience in
 the environmental service industry with expertise in business development,
 operations and project management. In early September of 2000, under the
 directions of Mr. Beattie, SSWM formed an Engineering Services Division of four
 professionals which to direct, support and execute project assignments within
 SSWM and provide these same services to the water treatment and agriculture
 subsidiaries within U.S. Microbics. The Engineering Services Division is
 headquartered in Littleton, Colorado where Mr. Behzad Mirzayi, MS, P.E.,
 manages the office as Chief Engineer and Executive Vice President of SSWM.

                                                                             10

<PAGE>

         Mr. Behzad Mirzayi, MS, P.E. has over 19 years experience in
diversified areas of engineering, construction, and management. He has extensive
experience managing office and field staffs and professionals involved in
multi-discipline design and construction projects and management of profit and
loss centers. He has a diverse background in all types of management, civil,
environmental, geotechnical and structural engineering, construction management,
technical supervision analysis and design, and construction oversight, cost and
time management, risk evaluation, cost estimation and client and regulatory
interface for mining, industrial, oil and gas facilities. His major areas of
specialization include engineering design and construction management,
geotechnical and structural design, and the determination and implementation of
remedial corrective measures associated with soil and groundwater contamination
due to oil and gas industrial and mining activities.

         Mr. Behzad Mirzayi, MS, P.E. is a registered Professional Engineer,
 Nationally and in the States of Colorado, Montana, Nebraska, North Dakota, Utah
 and Wyoming and a Licensed General Contractor in the States of Idaho and New
 Mexico.



RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO THE THREE MONTHS ENDED
DECEMBER 31, 1999

The Company had revenues of $57,552 during the three months ended December 31,
2000, as compared to $15,957 of revenues for the same period in fiscal 1999.
Revenues for the three months ended December 31, 2000, consisted primarily of
bio-remediation of hydro-carbons in contaminated soil for and oil company and
sales of microbial blends for grease trap remediation.

Selling, general and administrative ("SG&A") expenses for first quarter of
fiscal year 2001 totaled $668,029 compared to $547,742 for the same period in
fiscal year 2000. SG&A expenses for the first quarter of fiscal year 2001
consisted of occupancy, payroll, accounting, legal, consulting, and public
relations expenses.

The Company incurred a net loss of $684,820 and had negative cash flows from
operations of $359,832 for the three months ended December 31, 2000 compared to
a net loss of $540,876 and negative cash flows from operations of $543,185 for
the three months ended December 31, 1999. Basic and diluted net loss per share
was $.07 for the three months ended December 31, 2000 compared to $ .09 for the
three months ended December 31, 1999.

Although the Company is expecting to increase revenues during the last half of
fiscal 2001, based on the current financial condition of the Company, additional
capital will be required in order for the Company to maintain its ongoing
operations. In order to continue implementing the Company's strategic plan, the
Company is planning on raising up-to an additional $5,000,000

                                                                             11

<PAGE>

from a private placement by a subsidiary, Sub Surface Waste Management, Inc.,
during the second and third quarters of fiscal 2001. The funds are targeted to
expand the fermentation manufacturing operation and the staffing of sales
subsidiaries.

There can be no assurance that the Company will be able to raise such capital on
terms acceptable to the Company, if at all.


LIQUIDITY AND CAPITAL RESOURCES.

Cash and cash equivalents totaled $ 0.00 and $162,900 at December 31, 2000 and
September 30, 2000, respectively. Net cash used in operations was $359,832 for
the three months ended December 31, 2000, compared to $543,185 for the
comparable period in fiscal 2000.

During the three months ended December 31, 2000, the Company raised $198,400 net
of placement fees of approximately $16,600, from a sales commitment. As of
December 31, 2000, the Company has negative working capital of $1,218,590 as
compared to negative working capital of $726,900 as of September 30, 2000. The
Company will need to continue to raise funds by various financing methods such
as private placements to maintain its operations until such time as cash
generated by operations is sufficient to meet its operating and capital
requirements. There can be no assurance that the Company will be able to raise
such capital on terms acceptable to the Company, if at all.

To date, the Company has financed its operations principally through private
placements of equity securities and debt. Subsequent to December 31, 2000 the
Company has raised approximately $175,500, net of placement fees. The Company
believes that it has sufficient cash to continue its operations through March
31, 2001, and anticipates that cash generated from anticipated private
placements and projected revenues during the last three quarters of fiscal 2001
will enable it to fulfill cash needs for fiscal 2001 and through fiscal 2002
operations.

         SWARTZ FINANCING

On March 14, 2000, the Company entered into an investment agreement to sell up
to $35 million of the Company's common stock to Swartz Private Equity, LLC
("Swartz")

Under the terms of the investment agreement the company periodically may choose
to sell shares of its common stock to Swartz. If the company elects to sell
shares to Swartz, then the purchase price for such shares will be the lesser of
(i) ninety-two percent (92%) of the lowest closing bid price for the Company's
common stock during the thirty days following the date that the shares are
delivered to Swartz, or (ii) the market price minus $.10 per share. In no event
will the purchase price be less than the designated minimum share price set by
the Company. The number of shares that the Company can sell to Swartz is limited
by specified amounts based upon shares that have traded in the market during
specified periods prior to the sale. If the Company elects not to sell shares to
Swartz, then it may be obligated to pay fees to Swartz of up to $100,000 every
six months. If the investment agreement is terminated by the Company, then

                                                                             12

<PAGE>

the Company may be obligated to pay fees to Swartz of up $200,000. Each time
that the Company elects to sell shares to Swartz, the Company is obligated to
issue Swartz a warrant to purchase a number of shares equal to fifteen
percent (15%) of the shares sold in the transaction. The warrant is
exercisable at one hundred ten-perecnt (110%) if the market price for such
shares.

         In Conjunction with the agreement, the Company registered, 20,000,000
shares of its common stock on Securities and Exchange Commission Form SB-2
Registration Statement.

         During fiscal 2000, the Company put 59,730 shares of common stock to
Swartz and received $44,798 as proceeds. Per the terms of the Agreement, the
Company issued warrants for 8,960 shares of common stock at an exercise price of
$0.8943 expiring on September 30, 2005.

The Company will need additional capital to continue its operations and will
endeavor to raise funds through the sale of equity shares and revenues from
operations. There can be no assurance that the Company will obtain sufficient
capital or generate revenues on acceptable terms, if at all. Failure to obtain
such capital or generate such revenues would have an adverse impact on the
Company's financial position and results of operations and ability to continue
as a going concern.

During the last half of fiscal 2001, the Company projects expenditures for plant
and equipment of approximately $1,500,000 and research and development costs of
less than $1,000,000, assuming the Company raises projected capital. Research
and development costs will be associated primarily with Bio-Raptor -TM-
configuration for specific applications. The Company also plans to increase its
number of employees to approximately 40 by the end of fiscal year 2001.

The Company's operating and capital requirements during the next fiscal year and
thereafter will vary based on a number of factors, including: (i) the rate at
which microbial products are shipped and generate profits; (ii) the necessary
level of sales and marketing activities for environmental products; and (iii)
the level of effort needed to develop additional distribution channels to the
point of commercial viability.


There can be no assurance that additional private or public financing, including
debt or equity financing, will be available as needed, or, if available, on
terms favorable to the Company. Any additional equity financing may be dilutive
to shareholders and such additional equity securities may have rights,
preferences or privileges that are senior to those of the Company's existing
common or preferred stock. Furthermore, debt financing, if available, will
require payment of interest and may involve restrictive covenants that could
impose limitations on the operating flexibility of the Company. The failure of
the Company to successfully obtain additional future funding may jeopardize the
Company's ability to continue its business and operations.

                                                                             13

<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS.

In March 1999, the Company was served with a shareholder derivative lawsuit
titled Merriam v. U.S. Microbics, et. al, Marin County Superior Court, Case No.
991288. This lawsuit alleges, among other things, that certain stock was
improperly issued to the President of the Company and to certain consultants for
services. The Company has formed a special independent committee of the Board of
Directors to investigate these claims. The Company has engaged outside legal
counsel to represent it in this matter and intends to vigorously defend this
action. Although management believes the lawsuit to be without merit, an
unfavorable ruling would have a material adverse impact on the Company's
financial position and results of operations.

On December 16, 1999, Extec USA, Inc. filed a lawsuit against the Company in the
Riverside County Superior Court, Case No. 336732. This lawsuit asserts that the
Company failed to pay the full purchase price for certain shredding equipment.
The Company has reached an out of court settlement with Extec USA.


ITEM 2.           CHANGES IN SECURITIES AND USE OF PROCEEDS.

During the three months ended December 31, 2000, the Company raised $198,400 net
of placement fees, from the issuance of shares of Series C Preferred Stock
pursuant to a sales commitment. The shares of Series C Preferred Stock issued
pursuant to the private placement were not registered under the Securities Act
of 1933, as amended, because the subject transaction involved a non-public
offering exempt from registration under Section 4(2) of the Securities Act of
1933, as amended, and Regulation D promulgated thereunder.


ITEM 3.           DEFAULTS UPON SENIOR SECURITIES.
                  None
ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .

                  None
ITEM 5.           OTHER INFORMATION .

SUBSEQUENT EVENTS:

Subsequent to December 31, 2000, the Company raised $175,500 net of placement
fees pursuant to a sales commitment for Series C Preferred Stock.

                                                                             14

<PAGE>

On February 9, 2001, Sub-Surface Waste Management, Inc., a subsidiary of U.S.
Microbics, Inc. entered into a contract for approximately $150,000 with
Environmental Reclamation Services Limited (ERS) of Glasgow, Scotland as its
technology and engineering partner to remediate diesel contamination at a
confidential major Oil & Gas industry client site in Scotland.



ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K.

                  None

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed in its behalf by the undersigned, thereunto duly
authorized. .



                                      U.S. MICROBICS, INC.


Date: February 14, 2001        By:    /s/ Robert C. Brehm
                                  -------------------------------------
                                      Robert C. Brehm, President and
                                      Chief Executive Officer

                               By:    /s/ Conrad Nagel
                                  -------------------------------------
                                      Conrad Nagel, Chief  Financial Officer

                                                                             15