<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 March 31, 2001

| |   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 Identification No.)
 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 - 12,385,839 shares
                      outstanding as of March 31, 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

                      U.S. MICROBICS INC., AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                   AS OF                AS OF
                                                                                                  MARCH 31,           SEPTEMBER 30,
                                                                                                    2001                 2000
                                                                                                 (Unaudited)           (Audited)
                                                                                                 -----------        ---------------
<S>                                                                                             <C>                <C>
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                                                  $          --       $       162,900
     Accounts receivable                                                                                   --                    --
     Prepaid expenses and other assets                                                                  5,023                20,200
     Inventories (Note 3)                                                                              34,885                28,800
                                                                                                --------------      ---------------
          Total current assets                                                                         39,908               211,900
PROPERTY AND EQUIPMENT, NET                                                                           263,203               287,500
DEPOSITS                                                                                               28,779                28,700
                                                                                                --------------      ---------------
          Total assets                                                                          $     331,890       $       528,100
                                                                                                ==============      ===============

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
     Accounts payable and accrued expenses                                                     $    1,452,089       $       882,500
     Current portion of capital lease obligation                                                        3,853                 4,900
     Notes payable, related parties                                                                   111,000                50,500
                                                                                                --------------      ---------------
          Total current liabilities                                                                 1,566,942               937,900
CAPITAL LEASE OBLIGATION, NET OF CURRENT PORTION                                                           --                   900

                                                                                                --------------      ---------------
          Total liabilities                                                                         1,566,942               938,800
                                                                                                --------------      ---------------

COMMITMENTS AND CONTINGENCIES (NOTE 6)                                                                     --                    --

STOCKHOLDERS' DEFICIT :
     Convertible preferred stock, $.10 par value; 20,000,000 shares authorized:
          Series II; 500,000 shares authorized; 6,958 and 8,421 shares issued                             696                   800
               and outstanding; aggregate liquidation preference of $6,958 and $8,421
          Series B; 500,000 shares authorized; 5,772 and 6,959 shares issued                              577                   700
               and outstanding; aggregate liquidation preference of $5,772 and $6,959
          Series C; 50,000 shares authorized; 47,035 and 39,342 shares issued                           4,703                 3,900
               And outstanding; aggregate liquidation preference of $4,703,500 and
               $3,934,200
          Series D; 50,000 shares authorized; 5,425 and 5,525 shares issued and                           543                   600
               Outstanding; no liquidation preference
                                                                                                --------------      ---------------
                                                                                                        6,519                 6,000
     Common stock; $.0001 par value; 150,000,000 shares authorized;                                     1,239                 1,100
          12,385,839 and 11,491,888 shares issued and outstanding
     Additional paid-in capital                                                                    11,718,924            10,723,300
     Stock options and warrants                                                                       929,880             1,130,900
     Treasury stock                                                                                        --                    --
     Stock subscriptions notes receivable                                                          (2,532,401)           (2,486,000)
       Deferred equity issuance costs                                                                (595,000)             (595,000)
     Accumulated deficit                                                                          (10,764,213)           (9,191,000)
                                                                                                --------------      ---------------
          Total stockholders' deficit                                                              (1,235,052)             (410,700)
                                                                                                --------------      ---------------
          Total liabilities and stockholders' deficit                                           $     331,890       $       528,100
                                                                                                ==============      ===============
</TABLE>

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


<PAGE>

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

<TABLE>
<CAPTION>

                                                                    FOR THE SIX                        FOR THE THREE
                                                               MONTHS ENDED MARCH 31,              MONTHS ENDED MARCH 31,
                                                        ------------------------------------- ---------------------------------
                                                               2001               2000             2001             2000
                                                        ------------------- ----------------- ---------------- ----------------
<S>                                                     <C>                 <C>               <C>              <C>
Revenues                                                  $        98,341    $      13,894     $      40,789     $        --

Cost of revenues                                                  107,429           38,638            44,027          44,065
                                                          ----------------- ----------------- ---------------- ----------------

Gross (loss)                                                       (9,088)         (24,744)           (3,238)        (44,065)

Selling, general and administrative expenses                    1,547,783        1,076,823           879,754         529,081
                                                          ----------------- ----------------- ---------------- ----------------

Loss from operations                                           (1,556,871)      (1,101,567)         (882,992)       (573,146)
Other income (expense):
   Interest income                                                    228           40,020               --           20,650

   Interest expense                                               (16,591)             --             (5,422)            --
                                                          ----------------- ----------------- ---------------- ----------------

Net loss                                                  $    (1,573,234)   $  (1,061,547)    $    (888,414)    $  (552,496)
                                                          ================= ================= ================ ================

Net loss per common share (basic and diluted - Note 4)    $          (.13)   $        (.16)    $        (.07)    $      (.08)

Weighted average common shares outstanding                     11,954,007        6,664,377        12,214,022       7,007,909
</TABLE>


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


<PAGE>


                      U.S. MICROBICS INC., AND SUBSIDIARIES

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
Caption
                                                                          FOR THE SIX                     FOR THE THREE
                                                                     MONTHS ENDED MARCH 31,           MONTHS ENDED MARCH 31,
                                                                ---------------------------------   -----------------------------
                                                                    2001               2000             2001             2000
                                                                --------------     --------------   -------------    ------------
<S>                                                            <C>                <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                    $   (1,573,234)        (1,061,547)   $   (888,414)   $    (552,496)
   Adjustment to reconcile net loss to cash used in
        Operating activities:
   Depreciation                                                        27,971             22,283          13,985           21,916
   Stock, stock options, and warrants in exchange for services        241,348             76,900         240,779           96,824
   Decrease (increase) in:
          Accounts receivable                                              --             (2,929)         52,512           24,561
          Prepaid expense, deposits and other                          15,177             (9,895)          1,488          (20,467)
          Inventory                                                    (6,085)            (3,916)         11,789              993
   Increase (decrease) in:
          Accounts payable and accrued expenses                       569,959           (112,146)        202,829         (120,276)
                                                                --------------     --------------   -------------    ------------
NET CASH USED IN OPERATING ACTIVITIES                                (724,864)        (1,091,250)       (365,032)        (548,945)
                                                                --------------     --------------   -------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                      --            (14,000)             --          (17,189)
                                                                --------------     --------------   -------------    ------------
NET CASH USED IN INVESTING ACTIVITIES                                      --            (14,000)             --          (17,189)
                                                                --------------     --------------   -------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of preferred stock and stock options in private
         Placements                                                   504,400            939,350         306,000          532,350
   Cancellation of treasury stock                                          --             33,300              --           33,300
   Exercise of stock options                                               --              7,200              --               --
   Loan from related parties                                           60,500                 --          60,500               --
   Repayment long-term portion of lease contract                       (2,936)                --          (1,468)             484
                                                                --------------     --------------   -------------    ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                             561,964            979,850         365,032          566,134
                                                                --------------     --------------   -------------    ------------

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

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


<PAGE>


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

<TABLE>
<CAPTION>

                                                                       FOR THE SIX                          FOR THE THREE
                                                                 MONTHS ENDED MARCH 31,                MONTHS ENDED MARCH 31,
                                                                2001                2000               2001              2000
<S>                                                      <C>                <C>                 <C>               <C>
Supplemental disclosures of non-cash
       Investing and financing activities:


Preferred stock issued for note receivable                $      50,000      $      100,000      $        --       $     100,000

Common stock issued in exchange for services              $     241,348      $       76,331      $     240,779     $      96,824

Common stock options exercised in settlement of
      accrued expenses                                    $      54,690      $       65,000      $      54,690     $        --

Cash paid for:
    Interest                                              $       2,639      $        3,007      $         --      $         170

</TABLE>



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


<PAGE>



U.S. MICROBICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 2001 AND 2000 (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 March 31, 2001 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.

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

<PAGE>

For the six months ended March 31, 2001 the Company has generated only
limited revenues of $98,341. During this same period, the Company incurred a
net loss of $1,573,234 and had negative cash flows from operations of
$724,864. As of March 31, 2001, the Company has an accumulated deficit of
$10,764,213. The Company had revenue of $18,900 during the fiscal year ended
September 30, 2000. The Company incurred a net loss of $2,550,900 in fiscal
2000.

For the quarter ended March 31, 2001 the Company has generated only limited
revenues of $40,789 compared to no revenue for the corresponding quarter of
the prior year. During the three monthsr ended March 31, 2001, the Company
incurred a net loss of $888,414 and had negative cash flows from operations
of $365,032 compared to $552,496 net loss and negative cash flows of $548,945
for the corresponding quarter of the prior year.

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, 2001, the Company has borrowed approximately $258,000
from related parties, net of loan fees.

3. INVENTORIES:

Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                                     2001
                                                            --------------------
<S>                                                        <C>
       Raw materials and supplies                           $             5,195
       Finished goods                                                    29,690
                                                            --------------------
                                                            $            34,885
                                                            ====================
</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 six months ended March 31, 2001 and 2000, 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. On May 15, 2001, the
         Company and the Plaintiff filed a stipulation of settlement

<PAGE>

5. COMMITMENTS AND CONTINGENCIES (CONTINUED):

       with the San Diego County Superior Court. As part of the stipulation, the
       Plaintiff has agreed to release and discharge all claims made against the
       Company. The Company has agreed to pay the Plaintiff $38,000 in
       attorneys' fees. The settlement agreement must be approved by the Court.

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

     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.


6. EQUITY FINANCING

During the six months ended March 31, 2001, the Company received cash
proceeds of $504,400, net of offering costs of $37,600, pursuant to a private
placement offering for its Series C preferred stock at $50 per share.

<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 that meets governmental standards, is
environmentally friendly, is easy to manufacture and apply

<PAGE>

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 from sales and/or equity/debt funding.

<PAGE>

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.


<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 SIX MONTHS AND QUARTER ENDED MARCH 31, 2001 COMPARED TO THE SIX
MONTHS AND QUARTER ENDED MARCH 31, 2000.

The Company had revenues of $98,341 during the six months ended March 31,
2001, as compared to $13,894 of revenues for the same period in fiscal 2000.
Revenues for the six months ended March 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. Revenues for the
quarter ended March 31, 2001 totaled $40,789 compared to no revenues for the
same quarter of the prior year.

Selling, general and administrative ("SG&A") expenses for first two quarters
of fiscal year 2001 totaled $1,547,783 compared to $1,076,823 for the same
period in fiscal year 2000. SG&A expenses for the first two quarters of
fiscal year 2000 consisted of occupancy, payroll, accounting, legal,
consulting, and public relations expenses. SG&A expenses for the second
quarter ended March 31, 2001, were $879,754 compared to $529,081 for the
corresponding quarter of the prior year. The increase in SG&A expenses in
both the 6 month and quarter ended March 31, 2001 was due primarily to the
addition of the Denver Colorado engineering office of the subsidiary SSWM and
an increase in consulting and legal fees related the shareholder derivative
lawsuit.

The Company incurred a net loss of $(1,573,234) and had negative cash flows
from operations of $(724,864) for the six months ended March 31, 2001
compared to a net loss of $(1,061,547) and negative cash flows from
operations of $(1,091,250) for the six months ended March 31, 2000. Basic and
diluted net loss per share was $(.13) for the six months ended March 31, 2001


<PAGE>

compared to $(.16) for the six months ended March 31, 2000. The decrease was
due to the increase in average shares outstanding of 11,954,007 for the six
months ended March 31, 2001 compared to 6,664,377 for the corresponding six
months ended March 31, 2000.

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 through is SSWM subsidiary, is planning on raising up-to an
additional $5,000,000 from private placements during the third and fourth
quarters of fiscal 2001. The funds are targeted to expand the staffing of
sales and engineering services of SSWM and expand the fermentation capacity
of WCFC.

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 March 31, 2001 and
September 30, 2000, respectively. The Company had net bank overdrafts of
$8,127 as of March 31, 2001. Net cash used in operations was $724,864 for the
six months ended March 31, 2001, compared to $1,091,250 for the comparable
period in fiscal 2000.

During the six months ended March 31, 2001, the Company raised $504,400 net
of placement fees of approximately $37,600, from private placements of Series
C preferred stock. As of March 31, 2001, the Company has negative working
capital of $1,527,034 as compared to negative working capital of $726,000 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 March 31, 2001 the
Company has borrowed from related parties $258,250. The Company believes that
it has sufficient cash after related party borrowings to continue its
operations through June 30, 2001, and anticipates that cash generated from
anticipated private placements and projected revenues during the third and
fourth quarters of fiscal 2001 will enable it to fulfill cash needs for
fiscal 2001 and fiscal 2002  operations.

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")

<PAGE>

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 $100,00 every six months. If the investment agreement
is terminated by the Company, then the Company may be obligated to pay fees
to Swartz of up $200,00. 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 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.

The investment agreement with Swartz Private Equity, LLC specifies that the
Company cannot sell equity securities for cash during the period from the
date of the agreement (March, 2000) until 90 days after the termination of
the agreement without written approval from Swartz. In February, 2000, the
Company entered into an agreement to sell 13,000 shares of Series C preferred
stock for $1,250,000 to an individual pursuant to a private placement. During
the period from July, 2000 to March 31, 2001 this individual assigned certain
of his rights to purchase this stock to other individuals and these
individuals purchased this stock. The total of these transactions was 12,584
shares and $1,089,500 before issuing costs. Additionally, during the period
for April 2000, to June, 2000 the Company sold 2,167 shares of Series C
preferred stock for $191,250 before issuing costs, pursuant to a private
placement. The Company does not believe any violation of the agreement have
occurred as the sales commitment transactions was entered into prior to the
investment agreement and the other sales pursuant to a private placement were
prior to the effective date (July, 2000) of the registration statement.

As of May 18, 2001, the Company had not made additional sales of stock to
Swartz other than the shares sold as described above. As such, in accordance
with the terms of the investment


<PAGE>

agreement, the Company could be obligated to pay fees in the amount of
approximately $95,000 to Swartz.

During the last half of fiscal 2001, the Company projects expenditures for
plant and equipment of approximately $750,000 and research and development
costs of less than $250,000, 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 30 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.

                           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. On May 15, 2001, the Company and the Plaintiff filed a
stipulation of settlement with the San Diego Superior Court. As part of the
stipulation, the Plaintiff has agreed to release and discharge all claims
made against the Company. The Company has agreed to pay the Plaintiff $38,000
in attorneys' fees. The settlement agreement must be approved by the Court.


<PAGE>

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.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS.

During the three months ended March 31, 2001, the Company raised $281,000 net of
placement fees, from the issuance of shares of Series C Preferred Stock pursuant
to a private placement. 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:

To date, the Company has financed its operations principally through private
placements of equity securities and debt. Subsequent to March 31, 2001 the
Company has borrowed $258,250 from related parties, net of loan fees.

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. On May 15, 2001, the Company and the Plaintiff filed a
stipulation of settlement with the San Diego County Superior Court. As part
of the stipulation, the Plaintiff has agreed to release and discharge all
claims made against the Company. The Company has agreed to pay the Plaintiff
$38,000 in attorneys' fees. The settlement agreement must be approved by the
Court.

Sub Surface Waste Management, Inc. signed a Letter of Intent on May 17th with
Deep Green, N. V. to provide its U.S. Patented Bio-Raptor(TM) bioremediation
treatment system as a captive operator to offset energy costs and treat
incoming waste streams impacted by petroleum hydrocarbons at Deep Green,
N.V.'s fully permitted facilities throughout North America.

<PAGE>


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: May 21, 2000                  By:   /s/ Robert C. Brehm
                                          -------------------------------------
                                          Robert C. Brehm, President and
                                          Chief Executive Officer

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