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                                  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 March 31, 1999

|_|   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  of                      (IRS Employer
  incorporation  or  organization)                      Identification No.)

                             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 - 5,532,219 shares outstanding as
of May 12, 1999
                   
                   Documents Incorporated by Reference: None.

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

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<PAGE>
<TABLE>
<CAPTION>

Part I - Financial Information

Item 1.  Financial Statements

                                      U.S. Microbics Inc., and Subsidiaries
                                     (formerly Global Venture Funding, Inc.)
                                      Consolidated Condensed Balance Sheets
                                   
                                                                  As of                     As of
                                                                 March 31,               September 30,
                                                                   1999                      1998
                                                                -----------              -------------
ASSETS                                                          (Unaudited)
<S>                                                             <C>                      <C>   
Current assets:
     Cash and cash equivalents                                  $    19,660              $   316,600
     Accounts receivable ($125,000 from related parties)            128,074                     --
     Inventories                                                    139,519                     --
     Prepaid expenses and other                                      42,639                   10,000
                                                                -----------              -----------
          Total current assets                                      329,892                  326,600
                                                                -----------              -----------
Plant and equipment, net                                            335,350                   99,100
Deposits                                                             64,110                   17,500
                                                                -----------              -----------
          Total assets                                          $   729,352              $   443,200
                                                                ===========              ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable and accrued expenses                      $   501,028              $   206,300
     Current portion of capital lease obligation                      5,780                     --
                                                                -----------              -----------
          Total current liabilities                                 506,808                  206,300
                                                                ===========              ===========

Capital lease obligation, net of current portion                      9,633                     --
                                                                -----------              -----------
Commitments and Contingencies

Stockholders' Equity :
     Convertible preferred stock, $.10 par value;
       20,000,000 shares authorized:
          Series II; 500,000 shares authorized;
           19,396 and 21,507 shares issued and                        1,940                    2,200
           outstanding; aggregate liquidation
           preference of $19,396
          Series B; 500,000 shares authorized;
           14,548 and 15,915 shares issued and                        1,455                    1,600
           outstanding; aggregate liquidation
           preference of $14,548
          Series C; 50,000 shares authorized;
           31,215 and 15,357 shares issued and
           outstanding; aggregate liquidation
           preference of $3,121,500                                   3,121                    1,500
          Series D; 50,000 shares authorized;
           8,338 and 20,438 shares issued and
           outstanding; no liquidation preference                       834                    2,000
     Common stock; $.0001 par value; 150,000,000
       shares authorized; 5,097,749 and 3,447,554
       shares issued and outstanding                                    510                      400
     Additional paid-in capital                                   5,691,167                3,936,800
     Stock subscription notes receivable                           (785,000)                    --
     Accumulated deficit                                         (4,701,116)              (3,707,600)
                                                                -----------              -----------
          Total stockholders' equity                                212,911                  236,900
                                                                ===========              ===========
          Total liabilities and stockholders' equity            $   729,352              $   443,200
                                                                ===========              ===========

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

                                                                                                   1
</TABLE>
                                      
<PAGE>

                      U.S. Microbics Inc., and Subsidiaries
                     (formerly Global Venture Funding, Inc.)
                   Consolidated Condensed Statements of Operations
                                   (Unaudited)


                                                           For the Six
                                                      Months Ended March 31,
                                                  ----------------------------
                                                      1999            1998
                                                  -----------      -----------

Revenues ($175,000 from related parties)          $   176,728      $    --

Cost of revenues                                       17,744           --
                                                  -----------      -----------

Gross profit                                          158,984           --

Selling, general, and administrative
expenses                                            1,161,079          198,794
                                                  -----------      -----------

Loss from operations                               (1,002,095)        (198,794)

Other (income) expenses, net                           (8,579)          49,809
                                                  ===========      ===========

Net loss                                          $  (993,516)     $  (248,603)
                                                  ===========      ===========

Net loss per share:
           Basic and diluted                      $      (.31)     $      (.24)
           

Weighted average shares used in
    computing net loss per share:
           Basic and diluted                         3,220,511        3,674,965
           





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

                                                                               2

<PAGE>

                      U.S. Microbics Inc., and Subsidiaries
                     (formerly Global Venture Funding Inc.)
                 Consolidated Condensed Statements of Cash Flows
                                 (Unaudited)


                                                             For the Six
                                                         Months Ended March 31,
                                                        -----------------------
                                                          1999           1998
                                                        ---------     ---------

Cash flows from operating activities:
   Net income (loss)                                    $(993,516)    $(248,603)
   Depreciation                                            14,376          --
   Issuance of common stock and preferred
       stock in exchange for services                      87,050       229,403
   Adjustments to reconcile net income
      (loss) to net cash used in operating
      activities:
      Changes in operating assets and
        liabilities:
          Accounts receivable                            (128,074)        5,590
          Inventories                                    (139,519)       (2,475)
          Prepaid expenses, deposits and other            (79,249)       27,500
          Accounts payable and accrued expenses           353,728       (37,491)
          Net liabilities of discontinued           
              operations                                     --         (76,900)
                                                        ---------     ---------
   Net cash used in operating activities                 (885,204)     (102,976)
                                                        =========     =========

Cash flows from financing activities:
   Cash proceeds from issuance of common and
      preferred stock, net of placement fees              808,227       167,500
   Cash proceeds from exercise of stock options            15,250          --
   Cancellation of treasury stock                            --           1,000
   Repayments of long-term debt                              --         (50,400)
                                                        ---------     ---------

   Net cash provided by financing activities              823,477       118,100
                                                        =========     =========

Cash flows used in investing activities:
   Purchases of plant and equipment                      (235,213)       (1,592)
                                                        ---------     ---------

INCREASE (DECREASE) IN CASH                              (296,940)       13,532
CASH AT BEGINNING OF PERIOD                               316,600         1,700
                                                        ---------     ---------
CASH AT END OF PERIOD                                   $  19,660     $  15,232
                                                        =========     =========



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

                                                                               3

<PAGE>

                      U.S. Microbics Inc., and Subsidiaries
                     (formerly Global Venture Funding Inc.)
                 Consolidated Condensed Statements of Cash Flows
                                  (Unaudited)
                                  (Continued)


                                                             For the Six
                                                       Months Ended March 31,
                                                     --------------------------
                                          
                                                       1999             1998
                                                     --------        ----------
                                                  
Supplemental disclosures of non-cash
         investing and financing activities:

     Purchase of equipment under capital lease
         obligation                                  $  15,413       $      --

     Preferred stock issued for note receivable      $ 785,000       $      --

     Common stock options exercised in
          settlement of accrued expenses             $  59,000       $      --

Cash paid for:
          Interest                                   $    276        $      --
          Income taxes                               $   --          $      --


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


                                                                               4
<PAGE>

U.S. MICROBICS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL VENTURE FUNDING, INC.)

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED MARCH 31, 1999 AND 1998 (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, 1998.

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 March
31,  1999 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.

Revenues  and cost of  revenues  for the  first  six  months  of 1998  have been
adjusted from $259,124 and $193,  respectively, to zero  as previously  reported
consistent  with the reversal of such revenues and cost of revenues  effected in
the  Company's  annual  report on Form 10-KSB for the year ended  September  30,
1998.

Certain prior period  balances have been  reclassified to conform to the current
period presentation.

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.

Risks and Uncertainties

For the six months ended March 31, 1999 the Company has  generated  only limited
revenues of $176,728,  of which $175,000 represented related party transactions.
During this same  period,  the Company  incurred a net loss of $993,516  and had
negative  cash flows from  operations  of $885,204.  As of March 31,  1999,  the
Company has an accumulated  deficit of  $4,701,116.  The Company had no revenues




                                                                               5

<PAGE>

U.S. MICROBICS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL VENTURE FUNDING, INC.)

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED MARCH 31, 1999 AND 1998 (Unaudited)

during the fiscal years ended September 30, 1998 and 1997. The company  incurred
net losses of $1,411,800 in fiscal 1998 and $1,327,200 in fiscal 1997.

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 March 31, 1999, the Company has raised approximately $353,000, net
of issuance  costs,  pursuant to a private  placement  offering for its Series C
preferred stock at $100 per share.

3.    Inventories:

Inventories consist of the following:

                                          March 31,           
                                            1999              
                                         -----------          
                                         
         Raw materials                   $    12,181          
         Finished goods                      127,338          
                                         ===========          
                                         $   139,519          
                                         ===========          

4.  Related Party Transactions

During the first quarter of fiscal 1999, the Company entered into two Technology
Licensing  Agreements with certain  stockholders  of the Company.  Revenues from
these agreements totaled $175,000. As of March 31, 1999, $125,000 is included in
accounts receivable related to these revenues.

5.   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  periods.  During the six months ended March 31,1999 and 1998,  common
stock equivalents are not considered because they would be anti-dilutive.

6.   Commitments and Contingencies

Litigation

In March 1999,  the Company was served  with a  stockholder  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


                                                                               6

<PAGE>
U.S. MICROBICS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL VENTURE FUNDING, INC.)

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED MARCH 31, 1999 AND 1998 (Unaudited)


improperly issued to the President of the Company and to certain consultants for
services.  Prior to the initiation of the lawsuit,  the Company formed a special
independent  committee of the Board of Directors to investigate these claims and
the  committee  found the claims to be without  merit.  The  Company has engaged
outside  legal  counsel to  represent it in this matter and intends to vigorouly
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.

Purchase commitments

During the quarter ended March 31, 1999,  the Company  entered into an agreement
with a supplier to purchase certain inventories at a total cost of $194,000. The
Bio-RaptorsTM  are  scheduled  for  delivery in the third  quarter of the fiscal
year. The Company has made a deposit of $10,000 on this order.  The Company also
entered  into an  agreement  to use the  fermentation  facilities  of an outside
manufacturer  to produce its microbes.  The total estimated cost of the contract
is $61,600.  The Company made a 50% deposit on this contract totaling $30,800 in
March 1999. The  fermentation  process began in April 1999 and is expected to be
completed by the end of May 1999.

7.  Equity Financing

During the six months ended March 31, 1999, the Company  received cash proceeds,
net of  offering  costs,  totaling  $808,227  pursuant  to a  private  placement
offering  for its Series C preferred  stock at $100 per share.  The Company also
received cash proceeds totaling $15,250 from stock options exercised.

Non-cash  issuances of common and preferred  stock included common stock options
exercised in  settlement  of accrued  expenses  totaling  $59,000,  common stock
issued for  services  valued by the  Company at $10,000  and Series D  preferred
stock  issued as  compensation  to  certain  officers  valued by the  Company at
$22,800.


                                                                               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 Form 10-KSB for the year
ended   September  30,  1998  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   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

                                                                               8

<PAGE>

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

Through the six months ended March 31, 1999, the Company's efforts were directed
to  developing  biotechnology   previously  acquired,  fund  raising,   building
organizational  infrastructure,  and  continued  construction  of  manufacturing
facilities  for   production  and  shipment  of  microbes  for   remediation  of
hydrocarbons,   sewage  treatment  and  agriculture  applications  and  for  the
retrofitting and shipment of the Bio-RaptorTM.

Toward  these ends,  the  Company's  blending  area is now 90%  complete  and is
expected to provide  the  capability  of  producing  200,000  units per month of
microbial blends which can support potential monthly sales volumes from $600,000
to  $2,000,000  based on projected  unit sales prices  between  $3.00 and $10.00
depending on the application. The blending production staff has been trained and
is in a state of readiness.

An outside fermentation  facility,  with sufficient capacity to produce microbes
to support the next six to nine months of sales,  has been  contracted  with and
receipt of fermented "Bugs" has begun.

Preparations  are underway to establish an internal  capacity for the production
of microbes using in-house  fermentors.  The  microbiology lab setup is complete
using a 14 liter  fermentor  to  maintain a base supply of "Bugs." The 100 liter
fermentor is installed and is undergoing final testing with expected  production
to begin in June of 1999.  The Company  anticipates  that with the completion of
this in-house  fermentation  process,  production capacity can supply sufficient
microbes  to meet  sales  projections  for the next 6 to 9 months and it will no
longer be necessary to outsource the production of its microbes.

The  Company  does not have an  existing  backlog  of sales  orders  and has not
generated  significant  sales to date related to microbes.  The Company has also
not  produced  microbes  in  significant  quantities.  Further,  there can be no
assurance  that  projected  production and sales volumes or sales prices will be
achieved.

                                                                               9

<PAGE>


Future Plans - Fiscal Year Ending September 30, 1999

Projected revenues for the last half of fiscal 1999 include Bio-Raptor(TM) sales
and related microbial blends and consulting  services to support  Bio-Raptor(TM)
sales.  Projected  revenues of Bio-Raptor(TM)  products include new and existing
prospects, Soil Recycling Center Licenses, odor control and land fill operators.
Sales of  Bio-Raptors(TM)  will be limited by microbial blend  production  until
outsourcing and internal production can meet demand.

During  the first  quarter  of  fiscal  1999,  the  Company  continued  building
infrastructure   (people,   procedures,   systems)   and   setting   up  initial
manufacturing operations.  Sales consisted almost entirely of Technology License
Agreements to certain shareholders of the Company.

During the second quarter of fiscal 1999, the Company began adding  fermentation
capacity  and  continued  work  on its  manufacturing  operations  and  blending
capacity to meet future projected revenue goals.  Principal  projected  products
will include Bio-Raptor(TM), and microbial sewage and agricultural products from
internal  fermentation.  Results of field test data on animal waste, grease trap
and solvent grease  absorption  should be completed by June 1999. To provide for
maximum  operations of SSWM for land  bioremediation  projects and  organization
development,  the Company  intends to raise five  million  dollars.  Two million
dollars of projected proceeds would be used to purchase additional  fermentation
capacity and upgrade blending  operations,  and the remaining projected proceeds
of three million  dollars would be used for research and  development  costs and
working  capital to finance  projected  increases  in  accounts  receivable  and
inventories.   Revenues  are  projected  to  be  generated  from  Bio-Raptor(TM)
licenses, equipment sales, microbial blends and related consulting services.

During the third quarter of fiscal 1999,  the Company  intends to generate sales
of products  including  Bio-Raptors(TM)  and  microbial  sales for  agriculture,
sewage  and  golf  course   applications.   During  this  quarter,  the  Company
anticipates  reducing or  eliminating  reliance  upon  out-sourced  fermentation
capacity.

During the fourth  quarter of fiscal  1999,  based on the  Company's  ability to
raise additional financing,  manufacturing  capacity is projected to be expanded
and brought on line in-house.  Sales efforts in remediation of hydrocarbons  are
anticipated   to  result  in  sales  of  additional   Bio-Raptors(TM).   Sewage,
agriculture,  and golf course bugs are expected to comprise the remaining sales.
There can be no  assurance  that such  revenue or  production  capacity  will be
achieved in the time frame anticipated, if at all.

The Company expects to raise additional  capital to fund operations through June
30, 1999,  and  anticipates  that cash  generated  from private  placements  and
projected  revenues  during the fourth  quarter  will enable it to fulfill  cash
needs for fiscal 1999  operations.  There can be no  assurance  that the Company
will be able to raise such funds on terms acceptable to the Company,  if at all,
or to  generate  such  revenues.  Expected  capital  expenditures  for plant and
equipment total  $2,000,000.  Research and development costs are projected to be
under  $500,000 as many products have  previously  been  marketed.  Research and
development costs will be associated primarily with Bio-Raptor(TM) configuration
for specific applications. The Company plans to increase the number of employees
to  approximately  40 by the end of the fiscal 1999 in anticipation of increased
projected revenues.

                                                                              10

<PAGE>

Results of Operations

For the six months  ended March 31, 1999  compared to the six months ended March
31, 1998

The Company had revenues of $176,728 during the six months ended March 31, 1999,
as compared to no revenues for the same period in fiscal 1998.  Revenues for the
six  months  ended  March  31,  1999   consisted   primaarily   of  $175,000  of
non-refundable licensing fees sold to certain stockholders of the Company.

Selling,  general and administrative  ("SG&A") expenses for first half of fiscal
1999 totaled $1,161,079 compared to $198,794 for the same period in fiscal 1998.
SG&A expenses for the first half of fiscal 1999 consisted of occupancy, payroll,
accounting,  legal, consulting,  and public relations expenses including $87,050
of non-cash  compensation  cost related to common and preferred  stock and stock
options and warrants issued for certain services rendered.

The  Company  incurred  a net loss of  $993,516  and  negative  cash  flows from
operations of $885,204 for the six months ended March 31, 1999 compared to a net
loss of $248,603 and negative cash flows from operations of $102,976 for the six
months ended March 31, 1998. Basic and diluted net loss per share was $(.31) for
the six months ended March 31, 1999  compared to $(.24) for the six months ended
March 31, 1998.

In order to continue  implementing the Company's  strategic plan, the Company is
planning on raising an additional  $5,000,000 from private placements during the
last half of fiscal  1999.  The funds are  targeted  to expand the  fermentation
manufacturing  operation  and the staffing of sales  subsidiaries.  Although the
Company is expecting to increase  revenues  during the last half of fiscal 1999,
based on the current financial condition of the Company, additional capital will
be required in order for the Company to maintain its ongoing  operations.  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  $19,660 and  $316,600 at March 31, 1999 and
September 30, 1998,  respectively.  Net cash used in operations was $885,204 for
the six months  ended March 31, 1999,  compared to $102,976  for the  comparable
period  in  fiscal  1998.  In  preparing  for the  manufacture  and  sale of its
products,  the Company  purchased  equipment,  office  furniture  and  leasehold
improvements of approximately $250,626 in the first half of fiscal 1999 compared
to $1,592 in the same period of fiscal 1998.

During the six months ended March 31, 1999, the Company raised $808,227,  net of
placement fees of approximately  $110,000,  from private  placements of Series C
preferred  stock. As of March 31, 1999, the Company has negative working capital
of $176,916 compared to positive working capital of $120,300 as of September 30,
1998.  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  genereated  by  operations is sufficeint 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.

                                                                              11

<PAGE>


To date, the Company has financed its  operations  principally  through  private
placements  of equity  securities  and debt.  Subsequent  to March 31,  1999 the
Company has raised  approximately  $353,000,  net of placement fees. The Company
believes that it has sufficient cash to continue its operations through June 30,
1999, and anticipates  that cash generated from anticipated  private  placements
and projected  revenues during the third and fourth quarters of fiscal 1999 will
enable it to fulfill  cash needs for fiscal 1999  operations.  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 1999, the Company projects  capital  expenditures
for plant and equipment of approximately $2,000,000 and research and development
costs of less than  $500,000,  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 1999.

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.


Year 2000 Assessment

Beginning in the year 2000, computer systems and software need to accept 4 digit
entries to  distinguish  21st century  dates from 20th century  dates.  Computer
systems  and  software  that do not  properly  recognize 4 digit  entries  could
generate erroneous data or cause a system to fail. All of the Company's computer
systems and  software,  phone and security  systems and  machinery and equipment
have  been  purchased  within  the  past  12  months,  have  been  tested  where


                                                                              12

<PAGE>

applicable, and therefore are expected to accurately accept 4 digits and operate
properly into the 21st century. The Company has also contacted major vendors and
service  providers about their state of Year 2000  compliance and readiness.  In
the event that  significant  Year 2000 issues are identified  with such parties,
the Company will make contingency  plans such as the use of alternate vendors or
manual systems.

The Company's  current estimate is that no significant  additional costs will be
incurred in prepardness for the Year 2000.


                           PART II - OTHER INFORMATION

Item 1.     Legal Proceedings.

In March 1999,  the Company was served  with a  stockholder  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.  Prior to the initiation of the lawsuit,  the Company formed a special
independent  committee of the Board of Directors to investigate these claims and
the  committee  found the claims to be without  merit.  The  company has engaged
outside  legal  counsel to  represent it in this matter and intends to vigorouly
defend this action.

Item 2.     Changes in Securities and Used of Proceeds.

During the six months ended March 31, 1999, the Company raised $468,356,  net of
placement fees, from the issuance of shares of Series C Preferred Stock pursuant
to a private placement and 15,250 from the exercise of common stock options. 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.
            None

                                                                              13

<PAGE>

Item 6.     Exhibits and Reports on Form 8-K.


The Company filed a Current  Report on Form 8-K on March 12, 1999 as a result of
engaging Arthur Andersen LLP as its independent certifying accountant.



                                   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:  May 16, 1999                   By:  /s/ Robert C. Brehm
                                           -------------------------------------
                                           Robert C. Brehm, President and
                                           Chief Executive Officer

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

                                                                              14