<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 June 30, 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
 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 - 14,203,309 shares
outstanding as of August 16, 2001

                   Documents Incorporated by Reference: None.

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

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

PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                                     U.S. MICROBICS INC. AND SUBSIDIARIES
                                     CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>

                                                                                              AS OF               AS OF
                                                                                             JUNE 30,         SEPTEMBER 30,
                                                                                               2001               2000
ASSETS                                                                                      (Unaudited)         (Audited)
                                                                                           -------------      -------------
<S>                                                                                        <C>                <C>
CURRENT ASSETS:
     Cash and cash equivalents                                                             $      1,036       $    162,900
     Accounts receivable                                                                         41,135                 --
     Prepaid expenses and other assets                                                            3,425             20,200
     Inventories (Note 3)                                                                        34,885             28,800
                                                                                           -------------      -------------
          Total current assets                                                                   80,481            211,900
PROPERTY AND EQUIPMENT, NET                                                                     249,218            287,500
DEPOSITS                                                                                         28,779             28,700
                                                                                           -------------      -------------
          Total assets                                                                     $    358,478       $    528,100
                                                                                           =============      =============

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
     Accounts payable and accrued expenses                                                 $  1,118,037       $    882,500
     Current portion of capital lease obligation                                                  2,408              4,900
     Notes payable, related parties                                                             577,564             50,500
                                                                                           -------------      -------------
          Total current liabilities                                                           1,698,009            937,900
CAPITAL LEASE OBLIGATION, NET OF CURRENT PORTION                                                     --                900
                                                                                           -------------      -------------
          Total liabilities                                                                   1,698,009            938,800
                                                                                           -------------      -------------

COMMITMENTS AND CONTINGENCIES (NOTE 5)                                                               --                 --

STOCKHOLDERS' DEFICIT :
     Convertible preferred stock, $.10 par value; 20,000,000 shares authorized:
          Series II; 500,000 shares authorized; 6,708 and 8,421 shares issued
               and outstanding; aggregate liquidation preference of $6,708 and $8,421               671                800
          Series B; 500,000 shares authorized; 5,772 and 6,959 shares issued
               and outstanding; aggregate liquidation preference of $5,772 and $6,959               577                700
          Series C; 50,000 shares authorized; 46,370 and 39,342 shares issued
               And outstanding; aggregate liquidation preference of $4,637,000 and
               $3,934,200                                                                         4,637              3,900
          Series D; 50,000 shares authorized; 5,425 and 5,525 shares issued and
               Outstanding; no liquidation preference                                               543                600
                                                                                           -------------      -------------
                                                                                                  6,428              6,000
     Common stock; $.0001 par value; 150,000,000 shares authorized;
          13,948,086 and 11,491,888 shares issued and outstanding                                 1,395              1,100
     Additional paid-in capital                                                              12,826,890         10,723,300
     Stock options and warrants                                                                 929,880          1,130,900
     Stock subscriptions notes receivable                                                    (2,532,401)        (2,486,000)
     Deferred equity issuance costs                                                            (595,000)          (595,000)
     Accumulated deficit                                                                    (11,976,723)        (9,191,000)
                                                                                           -------------      -------------
          Total stockholders' deficit                                                        (1,339,531)          (410,700)
                                                                                           -------------      -------------
          Total liabilities and stockholders' deficit                                      $    358,478       $    528,100
                                                                                           =============      =============

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

</TABLE>
                                                      1
<PAGE>
<TABLE>

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

                                                            FOR THE NINE                         FOR THE THREE
                                                       MONTHS ENDED JUNE 30,                 MONTHS ENDED JUNE 30,
                                                       ---------------------                 ---------------------
                                                      2001                2000              2001               2000
                                                      ----                ----              ----               ----
<S>                                               <C>                <C>                <C>                <C>
Revenues ($9,298 from related parties in the
three months ended  June 30, 2001)                $    141,971       $     26,348       $     43,630       $     12,454

Cost of revenues                                       160,077             23,337             52,648                 --
                                                  -------------      -------------      -------------      -------------
                                                       (18,106)             3,011             (9,018)            12,454
Gross (loss) profit

Selling, general and administrative expenses         2,719,314          1,639,681          1,171,531            547,557
                                                  -------------      -------------      -------------      -------------
                                                    (2,737,420)        (1,636,670)        (1,180,549)          (535,103)
Loss from operations

Other income (expense):

Interest income                                            228             40,020                 --                 --

Interest expense                                       (48,552)                --            (31,961)                --
                                                  -------------      -------------      -------------      -------------

Net loss                                          $ (2,785,744)      $ (1,596,650)      $ (1,212,510)      $   (535,103)
                                                  =============      =============      =============      =============
Net loss per common share (basic and diluted)
  (Note 4):                                       $       (.23)      $       (.22)      $       (.09)      $       (.06)

Weighted average common shares outstanding          12,299,445          7,273,159         12,990,320          8,490,723


                                 The notes to consolidated condensed financial
                             statements are an integral part of these statements.
</TABLE>
                                                      2
<PAGE>
<TABLE>

                                     U.S. MICROBICS INC. AND SUBSIDIARIES

                                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                                  (UNAUDITED)
<CAPTION>

                                                                          FOR THE NINE                   FOR THE THREE
                                                                      MONTHS ENDED JUNE 30,           MONTHS ENDED JUNE 30,
                                                                      ---------------------           ---------------------
                                                                      2001            2000            2001            2000
                                                                  ------------    ------------    ------------    ------------
<S>                                                               <C>              <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                       $(2,785,744)     (1,596,650)    $(1,212,510)    $  (535,103)
   Adjustment to reconcile net loss to cash used in
        operating activities:
   Depreciation                                                        41,957          34,174          13,985          11,891
   Stock, stock options, and warrants in exchange for services      1,292,129         333,449       1,050,781         256,549
   Decrease (increase) in:
          Accounts receivable                                         (41,135)        (15,868)        (41,135)        (12,939)
          Prepaid expense, deposits and other                          16,775          (7,771)          1,598           2,124
          Inventory                                                    (6,085)         (3,210)             --             706
   Increase (decrease) in:
          Accounts payable and accrued expenses                       235,537        (107,683)       (334,422)          4,463
                                                                  ------------    ------------    ------------    ------------
NET CASH USED IN OPERATING ACTIVITIES                              (1,246,566)     (1,363,559)       (521,702)       (272,309)
                                                                  ------------    ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                      --         (30,441)             --         (16,441)
                                                                  ------------    ------------    ------------    ------------
NET CASH USED IN INVESTING ACTIVITIES                                      --         (30,441)             --         (16,441)
                                                                  ------------    ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of preferred stock and stock options in private
         Placements                                                   561,650       1,228,100          57,250         288,750
   Cancellation of treasury stock                                          --          33,300              --              --
   Exercise of stock options                                               --           7,200              --              --
   Loans from related parties                                         527,064              --         466,564              --
   Repayment of capital lease obligation                               (4,012)             --          (1,076)             --
                                                                  ------------    ------------    ------------    ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                           1,084,702       1,268,600         522,738         288,750
                                                                  ------------    ------------    ------------    ------------

DECREASE IN CASH                                                     (161,864)       (125,400)          1,036              --
CASH AT BEGINNING OF PERIOD                                           162,900         125,400              --              --
                                                                  ------------    ------------    ------------    ------------
CASH AT END OF PERIOD                                             $     1,036     $        --     $     1,036     $        --
                                                                  ============    ============    ============    ============

                                 The notes to consolidated condensed financial
                             statements are an integral part of these statements.
</TABLE>
                                                      3
<PAGE>
<TABLE>

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

                                                              FOR THE NINE                          FOR THE THREE
                                                           MONTHS ENDED JUNE 30,                 MONTHS ENDED JUNE 30,
                                                         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      $     315,001       $           --    $    215,001
Common stock issued in exchange for services       $   1,292,129      $      35,650       $    1,050,781    $         --

Common stock options issued in settlement of       $      54,690      $     165,000       $           --    $    100,000
     accrued expenses

Cash paid for:
    Interest                                       $       2,639      $       3,614       $           --    $        607
    Income taxes                                   $         --       $          --       $           --    $         --

                                 The notes to consolidated condensed financial
                             statements are an integral part of these statements.
</TABLE>
                                                      4
<PAGE>

U.S. MICROBICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS AND THREE MONTHS ENDED JUNE 30, 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 June
30, 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 Microbics 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 Microbes' parent company.

                                       5
<PAGE>

U.S. MICROBICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS AND THREE MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED)


RISKS AND UNCERTAINTIES

For the nine months ended June 30, 2001 the Company has generated only limited
revenues of $141,971 which included $9,298 from related parties. During this
same period, the Company incurred a net loss of $2,785,744 and had negative cash
flows from operations of $1,246,566. As of June 30, 2001, the Company has an
accumulated deficit of $11,976,723. The Company had no revenues during the
fiscal years ended September 30, 1998 and 1997. The Company incurred net losses
of $2,550,900 in fiscal 2000, $2,932,500 in fiscal 1999 and $1,411,800 in fiscal
1998.

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 June 30, 2001, the Company has borrowed approximately $170,000
from related parties, net of loan fees.

3.         INVENTORIES:

Inventories consist of the following:

                                                         JUNE 30,
                                                           2001
                                                     -----------------
       Raw materials and supplies                    $          5,195
       Finished goods                                          29,690
                                                     -----------------
                                                     $         34,885
                                                     =================


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 nine months ended June 30, 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. 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 July 5, 2001, the Company reached a
court approved settlement, agreeing to reimburse the plaintiff $38,000 in legal
fees payable over a period of 150 days. To date the scheduled payments of
$20,000 have been made.

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

                                       6
<PAGE>

U.S. MICROBICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS AND THREE MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED)



5.       COMMITMENTS AND CONTINGENCIES (CONTINUED):

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 nine months ended June 30, 2001, the Company received cash proceeds,
net of offering costs of $37,600, totaling $561,650 pursuant to a private
placement offering for its Series C preferred stock at $25 to $50 per share.

                                       7
<PAGE>

                                     PART I


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

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY
UNCERTAIN AS THEY ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS CONCERNING
FUTURE EVENTS OR FUTURE PERFORMANCE OF THE COMPANY. READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH ARE ONLY
PREDICTIONS AND SPEAK ONLY AS OF THE DATE HEREOF. FORWARD-LOOKING STATEMENTS
USUALLY CONTAIN THE WORDS "ESTIMATE," "ANTICIPATE," "BELIEVE," "EXPECT," OR
SIMILAR EXPRESSIONS, AND ARE SUBJECT TO NUMEROUS KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES. IN EVALUATING SUCH STATEMENTS, PROSPECTIVE INVESTORS SHOULD
CAREFULLY REVIEW VARIOUS RISKS AND UNCERTAINTIES IDENTIFIED BELOW, AS WELL AS
THE MATTERS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON 10-KSB FOR THE YEAR
ENDED SEPTEMBER 30, 2000 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
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.

                                       8
<PAGE>

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.

                                       9
<PAGE>

                         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.

                                    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

                                       10
<PAGE>

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.

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 NINE MONTHS ENDED JUNE 30, 2001 COMPARED TO THE NINE MONTHS ENDED JUNE
30, 2000.

The Company had revenues of $141,971 which include $9,298 from related parties
during the nine months ended June 30, 2001, as compared to $26,348 of revenues
for the same period in fiscal 2000. Revenues for the nine months ended June 30,
2000 consisted primarily of bio-remediation of hydro-carbons in contaminated
soil for and oil company and sales of microbial blends for grease trap
remediation.

Selling, general and administrative ("SG&A") expenses for first three quarters
of fiscal year 2001 totaled $2,719,314 compared to $1,639,681 for the same
period in fiscal year 2000. SG&A expenses for the first three quarters of fiscal
year 2001 consisted of occupancy, payroll, accounting, legal, consulting, and
public relations expenses.

                                       11
<PAGE>

The Company incurred a net loss of $(2,785,744) and had negative cash flows from
operations of $(1,246,566) for the nine months ended June 30, 2001 compared to a
net loss of $(1,596,650) and negative cash flows from operations of $(1,363,559)
for the nine months ended June 30, 2000. Basic and diluted net loss per share
was $(.23) for the nine months ended June 30, 2001 compared to $(.22) for the
nine months ended June 30, 2000. The increase was due to the increase in average
shares outstanding of 12,299,445 for the nine months ended June 30, 2001
compared to 7,273,159 for the corresponding nine months ended June 30, 2000.

Although the Company is expecting to increase revenues during the last quarter
of fiscal 2001, and for the fiscal year ended 2002, based on the current
financial condition of the Company, additional capital will be required in order
for the Company to maintain its ongoing operations. In order to continue
implementing the Company's strategic plan, the Company is planning on raising
up-to $15,000,000 from private placements through its subsidiary Sub Surface
Waste Management, Inc., during the fourth quarter of fiscal 2001 and the first
quarter of fiscal 2002. The funds are targeted primarily for the acquisition of
Companies which will increase technical services capability on a nationwide
basis ($8,000,000), purchase capital equipment ($1,500,000) and for working
capital ($3,000,000). There can be no assurance that the Company will be able to
raise such capital on terms acceptable to the Company, if at all.

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 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.

LIQUIDITY AND CAPITAL RESOURCES.
--------------------------------

Cash and cash equivalents totaled $ 1,036 and $162,900 at June 30, 2001 and
September 30, 2000, respectively. Net cash used in operations was $1,246,566 for
the nine months ended June 30, 2001, compared to $1,363,559 for the comparable
period in fiscal 2000.

                                       12
<PAGE>

During the nine months ended June 30, 2001, the Company raised $561,650 net of
placement fees of approximately $37,600, from private placements of Series C
preferred stock. As of June 30, 2001, the Company has negative working capital
of $1,617,528 as compared to negative working capital of $726,000 as of June 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 June 30, 2001 the
Company has borrowed from related parties $170,000, net of loan fees. The
Company believes that it has sufficient cash to continue its operations through
September 30, 2001, and anticipates that cash generated from anticipated private
placements and projected revenues during the fourth quarter of fiscal 2001 will
enable it to fulfill cash needs for fiscal 2001 and through fiscal 2003
operations.

In January 2000 the Company signed a term sheet with Swartz Private Equity, LLC
of Atlanta, Georgia for up to a $35 million equity line. The term sheet calls
for a private equity line for the purchase of the Company's Common Stock,
subject to registration and certain other conditions and limited to a percentage
of dollar trading volume. On January 27, 2000, the Company issued a Warrant to
Swartz for the purchase of up to 250,000 shares of Common Stock in connection
with the proposed equity line. Of the warrants issued, 100,000 shares of Common
stock will be exercisable upon the end of the final document review period,
75,000 shares will be exercisable upon the execution of the equity line
documents, and 75,000 shares shall be exercisable upon the earlier of (i) July
10, 2000 or (ii) the date on which the related registration is declared
effective. The warrant's exercise price will equal the lesser of (i) the lowest
closing bid price for the five trading days prior to January 10, 2000, as
subject to an exercise price adjustment set forth in the warrant or (ii) the
lowest closing bid price for five trading days prior to the date of execution of
all of the equity line documents. On March 14, 2000 the Company completed the
investment agreement with Swartz Private Equity, LLC for the equity line up to
$35 million.

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 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.

                                       13
<PAGE>

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 July 5, 2001, the Company reached a court approved settlement,
agreeing to reimburse the plaintiff $38,000 in legal fees payable over a period
of 150 days. To date the scheduled payments of $20,000 have been made.

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


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

During the nine months ended June 30, 2001, the Company raised $561,650 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.


ITEM 5.  OTHER INFORMATION.

                                       14
<PAGE>

SUBSEQUENT EVENTS:

To date, the Company has financed its operations principally through private
placements of equity securities and debt. Subsequent to June 30, 2001 the
Company has borrowed $170,000 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 July 5, 2001, the Company reached a court approved settlement with
the, agreeing to reimburse the plaintiff $38,000 in legal fees payable over a
period of 150 days. To date all scheduled payments have been made.


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

The Company filed a Current Report on Form 8-K on December 10, 1999, as amended
on Form 8-K/A on December 21, 1999, as a result of re-engaging Bradshaw Smith &
Company 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: August 17, 2001         By:         /s/ Robert C. Brehm
                                 -----------------------------------------------
                                          Robert C. Brehm, President and
                                          Chief Executive Officer

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

                                       15