UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-QSB
(Mark One)

x QARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 

For the quarter ended December 31, 1998

[ ] 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 incorporation or organization)
(IRS Employer Identification No.)

5922-B Farnsworth Court
Carlsbad, California 92008
(760) 915-1860

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 - 4,847,550 shares outstanding as 
of January 15, 1999. 

Documents Incorporated by Reference:  None.

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

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

CONSOLIDATED BALANCE SHEETS   
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998     

                                       December 31,       September 30, 
                                          1998                1998
ASSETS                                 (Unaudited)           (Audited) 

Current assets:                                                  
Cash and cash equivalents              $  685,746          $  316,600 
Accounts receivable (Note 2)              176,862                 --
Inventory (Note 3)                         21,390                 -- 
Prepaid expenses and other assets          12,764              10,000 
Total current assets                      896,761             326,600 

Property and equipment (Note 4)           242,591              99,100 
                                             
Deposits (Note 5)                          18,710              17,500 
                                                       
Deferred tax assets (Note 9)                  --                  -- 
                                       $1,158,062          $ 443,200 
                                                       
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                    
Current liabilities:                                        
Notes payable (Note 6)                 $     --             $      -- 
Accounts payable and accrued liabilities  410,448             206,300
Current portion of lease obligation         5,780                  -- 
Net liabilities of discontinued
 operation (Note 7)                          --                    -- 
Total current liabilities                 416,228             206,300 
                                             
Long term liabilities - lease 
 obligation less current
 portion (Note 11)                          8,593                  -- 

Commitments and contingencies (Note 12)
                                                       
Stockholders' equity (deficit) (Note 8)
Convertible preferred stock, $.10 par
 value; authorized 20,000,000 shares: 
Series II; authorized 500,000 shares;
 issued and outstanding 21,376 and 
 21,507 shares (aggregate liquidation
 preference of $21,376 and $21,507)          2,138              2,200  
Series B; authorized 500,000 shares;
 issued and outstanding 15,617 and
 15,915 shares (aggregate liquidation
 preference of $15,617 and $15,9155)         1,562              1,600 
Series C; authorized 50,000 shares;
 issued and outstanding 30,750 and
 15,357 shares (aggregate liquidation
 preference of $3,075,000 and $1,535,700)    3,075              1,500 
Series D; authorized 50,000 shares;
 issued and outstanding 8,938 and
 20,438 shares (no liquidation preference)     894              2,000
                                             7,668              7,300 
Common stock $.0001 par value; authorized
 150,000,000 shares; issued and outstanding
 4,735,362 and 3,447,554 shares                474                400 
Additional paid-in capital               4,227,184          3,068,000 
Stock subscribed                          (725,000)                -- 
Stock options and warrants               1,198,380            868,800  
Accumulated deficit                     (3,975,465)        (3,707,600) 
                                           733,241            236,900 
                                       $ 1,158,062          $ 443,200  
                                                       

The Notes to Consolidated Financial Statements are an integral part of 
these statements.  
===================================
U. S. MICROBICS, INC. AND SUBSIDIARIES                           
(FORMERLY GLOBAL VENTURE FUNDING, INC.) 
                                                      
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED           

                                                   For the Three       
                                             Months Ended December 31,       
                                              1998              1997

Revenues                                    $    176,728     $     -- 
Cost of revenues                                  17,895           -- 
Gross profit                                     158,833           -- 
                                                    
Selling, general and administrative expenses     430,784        52,760 
                                                       
Loss from operations                            (271,951)      (52,760)
                                                       
Other income (expense):                                          
 Interest Income                                   4,051            -- 
 Interest expense, related parties                    --         33,140 
 Interest expense                                     --            --
                                                   4,051         33,140 
                                                       
Net loss from continuing operations
 before taxes                                   (267,900)       (85,900)
Provision for income taxes (Note 9)                   --             -- 
                                                       
Net loss from continuing operations             (267,900)       (85,900)
                                                       
Discontinued operations (Note 7):                     --             -- 
                                                       
Net loss                                     $   (267,900)    $  (85,900)
                                                       
Net loss per common share (basic and diluted):                             
                         
Net loss from continuing operations                 (0.11)         (0.13)
Discontinued operations                                --             -- 

Net loss                                      $     (0.11)     $   (0.13)
                                                       
Weighted average common shares outstanding      2,392,409        665,137 
                                                       
==================================                                             
U.S. MICROBICS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL VENTURE FUNDING, INC.)
                                                       
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED           
                                        
                                                 For the Three       
                                             Months Ended December 31,
                                             1998                1997
Cash flows from operating activities:                                      
 Net loss                                  $  (267,900)     $  (85,900)
 Adjustments to reconcile net income to
  cash provided (used) by operating activities:   
 Depreciation and amortization                  89,945
 Stock, stock options and warrants in
 exchange for services                          32,800
 Loss on disposal of discontinued operation                  
 Decrease (increase) in:
  Accounts receivable                         (176,862)        (20,100)
  Inventory                                    (21,390)
  Prepaid expenses and other assets             (2,762)   
  Deposits                                      (1,210)      
 Increase (decrease) in:                           
  Accounts payable and accrued liabilities     118,043         (49,300)
  Current portion of lease contract              5,780 
  Net liabilities of discontinued operation         -          (76,900)
                                                       
 Net cash used in operating activities        (223,556)       (232,200)
                                                       
Cash flows from investing activities:                                      
 Purchase of property and equipment           (147,350)             -
                                                      
 Net cash used in investing activities        (147,350)             -
                                                       
Cash flows from financing activities:
 Proceeds from issuance of long-term debt
  to related parties
 Repayment of long-term debt to related parties  
 Increase in long-term portion of lease
  contracts                                       8,593             -
 Repayment of notes payable                         -          (56,900)
 Issuance of common stock, preferred stock, 
  and stock options in private placements       730,960        290,400 
 Exercise of stock options                          500             -
                                                       
Net cash provided by financing activities       740,053        233,500 
                                                       
Net increase (decrease) in cash and 
 cash equivalents                               369,146          1,300 
                                                       
Cash and cash equivalents, beginning of period  316,600          1,700 
                                                       
Cash and cash equivalents, end of period     $  685,746      $   3,000 
                                                       
Supplemental disclosure of cash flow information:                         
 Cash paid for income taxes                  $    -           $    -
                                                     
Cash paid for interest                       $    -           $    -
                                                       
Schedule of non-cash investing and
 financing activities:                        
  Stock issued in exchange for 
   extinguishment of debt                    $    -           $ (56,900)
                                                    
Conversion of preferred stock to
 common stock (Note 8)                       $  1,253         $    -
                                                       
==================================
U.S. MICROBICS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL VENTURE FUNDING, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED DECEMBER 31, 1998 AND 1997

1.   Basis of presentation and accounting policies: 

Organization and basis of presentation:

The Company 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").  The Company has been 
engaged in a variety of operations since inception. 

During August, 1997, the Company acquired the assets of Xyclonyx, a 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.  

During the year ended September 30, 1998, the Company created four sub-
sidiaries: West Coast Fermentation Center, Sub Surface Waste Management, Inc.,
Sol Tech Corporation, and Bio-Con Microbes.  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.  All four 
subsidiaries have entered into technology license agreements with Xyclonyx.
These agreements are ten years in length and call for license fees and 
royalties as specified in the agreement.

On November 20, 1998, the Company created an addition subsidiary, Applied 
Microbic Technologies, Inc. ("AMTI'). It is anticipated that this Company 
will enter into a technology licensing agreement with Xyclonyx.  AMTI 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.      

The Company has experienced losses from discontinued operations of $5,600 and 
$253,400, including a loss on disposal of $5,600 and $42,200 for the years 
ended September 30, 1998 and 1997, respectively, and has experienced losses
from continuing operations of $1,406,200 and $1,073,800 for the years ended 
September 30, 1998 and 1997, respectively.  For the quarter ended December 
31, 1998 the company incurred a loss of $267,900. 

The Company is planning on raising additional capital through the issuance of 
additional stock in a private placement or public offering.  The Company is 
also currently developing business opportunities and operations through its 
wholly-owned subsidiaries.  Based upon the current status of the Company, 
additional capital will be required in order for the Company to complete any
development or to maintain their ongoing operations.  These matters raise 
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the 
amount and classification of liabilities that might result from the outcome
of this uncertainty.

Consolidation:

The consolidated financial statements include the accounts of the Company and 
its wholly-owned subsidiaries.  All material inter-company transactions have
been eliminated in consolidation.   

Discontinued operations:

On December 30, 1997, the Company formally disposed of its Houston, Texas 
cellular phone product store.  The sale was effective as of October 31, 1997
with the buyer assuming all liabilities for products or services entered into
from November 1, 1997 and forward.  In accordance with the Financial 
Accounting Standards Board Emerging Issue Task Force 95-18, when the 
measurement date for a discontinued operation, as defined in APBO No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and  Extraordinary, Unusual and Infrequently 
Occurring Events and Transactions" occurs after the balance sheet date but
before the financial statements for the prior period have been issued, the 
estimated loss on disposal should be recognized and the segments operating 
results should be presented as a discontinued operation in the not yet 
released financial statements.  As such, the estimated loss on disposal was 
recognized and the operating results were presented as a discontinued 
operation in the September 30, 1997 financial statements.   

Cash and cash equivalents:

The Company considers highly liquid investments with maturities of three months
or less when purchased to be cash equivalents.  

Accounts receivable:
          
Accounts receivable are valued at their net realizable value after a provision 
for uncollectible amounts.  
          
Inventory:

Inventory is valued at the lower of cost or market using the first-in-first-out
method of inventory cost allocation.

Deferred financing costs:

Costs associated with obtaining financing are included in prepaid expenses and
other assets and are amortized over the term of the related debt using the 
straight-line method.  All such costs became fully amortized during the year
ended September 30, 1998.  

Property and equipment:

Property and equipment is stated at cost.  Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets.  

Income taxes:

The Company has implemented the provisions on SFAS No. 109, "Accounting for 
Income Taxes" (SFAS 109).   SFAS 109 requires that income tax accounts be 
computed using the liability method.  Deferred taxes are determined based
upon the estimated future tax effects of differences between the financial
reporting and tax reporting bases of assets and liabilities given the 
provisions of currently enacted tax laws.  

Net loss per common share:

During the year ended September 30, 1998, the Company adopted Financial 
Accounting Standard No. 128, "Earnings Per Share".  This statement replaces
primary earnings per share with basic earnings per share and generally 
requires dual presentation of basic and diluted earnings per share.  
Accordingly, the compilations of loss per common share has been computed in
accordance with this standard.  The net loss per common share for the year 
ended September 30, 1997 did not need to be adjusted to conform with this 
statement.  

Net loss per common share is computed by dividing net loss by the weighted 
average number of shares of common stock and dilutive common stock 
equivalents outstanding during the year.  Dilutive common stock equivalents
consist of shares issuable upon conversion of convertible preferred shares 
and the exercise of the Company's stock options and warrants (calculated 
using the treasury stock method).  During the quarters ended December 31,
1998 and 1997 respectively, common stock equivalents are not considered in 
the calculation of the weighted average number of common shares outstanding 
because they would be anti-dilutive, thereby decreasing the net loss per 
common share.

Pervasiveness of estimates:

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 those estimates. 

Fair value of financial instruments:

Based on the borrowing rates currently available to the Company, the carrying
value of notes payable at September 30, 1997 approximates fair value.

2.   Accounts receivable:

Accounts receivable consists of amounts due for technology licenses and 
microbe sale in December of 1998.  There were no accounts receivable as of
December 31, 1997.

3.   Inventory:

The inventory is comprised entirely of raw materials and manufacturing supplies
at December 31, 1998.  There was no inventory as of December 31, 1997.

4.   Property and equipment:

Property and equipment consisted of:

                                   December 31, 1998     September 30, 1998
Office furniture and equipment       $   84,732            $     57,400
Leasehold improvements                   39,198                   7,100     
Leased equipment                         21,221                     -
Manufacturing equipment                 102,854                  36,200 
                                        248,005                 100,700
Less accumulated depreciation            (5,414)                 (1,600)
                                      $ 242,591             $    99,100

Depreciation expense for the quarter ended December 31, 1998 was $3821.  
There was no depreciation expense for the quarter ended December 31, 1997.

5.   Deposits:

Deposits at December 31, 1998 consisted of a security deposit on the Company's 
building lease, a deposit with a consultant and a utility company deposit.

6.   Notes payable:

There were no Notes payable as of December 31, 1998 or December 31, 1997. Notes
payable at September 30, 1997 consisted of various unsecured notes due in 6 
months from the date of issuance and were bearing interest at 12%.  The 
maturities ranged from October, 1997 to March, 1998.  Several of these notes
were extinguished by the issuance of preferred stock during the year ended
September 30, 1998 (see Note 6) with the remaining notes being paid off in
cash.  

7.   Business acquisitions and discontinued operations:

Business acquisition:

On August 30, 1997, the Company completed the acquisition of Xyclonyx in a 
transaction accounted for in a manner similar to a purchase.  Xyclonyx became
a wholly-owned subsidiary of the Company through the exchange of 250,000 
shares of common stock for all of the outstanding stock of Xyclonyx.  
Xyclonyx was formed on August 14, 1997 and had no significant operations 
prior to its acquisition by the Company.   

Discontinued operation:

On October 31, 1997, the Company adopted a formal plan to sell its Houston,
Texas cellular phone products store.  The sale was effective as of October 
31, 1997 with the buyer assuming all liabilities for products or services 
entered into from November 1, 1997 forward.  The assets of this operation 
consisted of inventories, deposits and leasehold improvements.  

For the year ended September 30, 1997, the Company estimated a loss on disposal
of the discontinued operation of $42,220 (no income tax benefit) which 
included a provision for expected operating losses of $11,900 (no income tax
benefit) during the phase-out period.  The actual loss on the disposal of the
assets exceeded the estimate by $5,600 (no income tax benefit). Accordingly, 
the accompanying statement of operations for the year ended September 30, 
1998 includes an additional loss of $5,600. 

Net sales of the discontinued operation were $23,200 for the one month ended 
October 31, 1997 and $29,000 for the year ended September 30, 1997.  These 
amounts are not included in sales in the accompanying statement of operations
for these periods.  

Assets and liabilities of the discontinued operation consisted of the
following:

                                    October 31, 1997   September 30, 1997
Inventories                          $    2,200         $    2,600 
Deposits and other assets                 3,700              3,700 
Leasehold improvements                   14,800             14,800 
Total assets                             20,700             21,100 
Accounts payable and accrued expenses   103,200             98,000 
Net liabilities                      $  (82,500)        $  (76,900)

The disposal was completed upon the asset and liability exchange and the 
exchange of 80,000 shares of the Company's common stock in December, 1997.
As of December 31, 1998 all provisions for losses from the discontinued 
operation has been liquidated.

8.   Stockholders' equity (deficit):

On August  20, 1997, the Board of Directors authorized a one-for-twenty (1:20) 
reverse stock split of all shares of outstanding common and preferred stock.  
The effect was a reduction in the number of issued and outstanding common 
shares from 11,173,898 to 558,695 and preferred shares from 843,599 to 
42,180. All references in the accompanying financial statements to the
number of common and preferred shares and per share amounts have been 
restated to reflect the above reverse stock split.  

Preferred stock:
     
The Company's preferred stock may be divided into such series as may be 
established by the Board of Directors.  The Board of Directors may fix and
determine the relative rights and preferences of the shares of any series 
established.  All convertible preferred shares are non-cumulative, non-
participating and do not carry any voting privileges.   

In October, 1991, the Board of Directors authorized the issuance of 500,000 
shares of Series II Convertible Preferred Stock.  Each share of Series II 
preferred stock is entitled to preference upon liquidation of $1.00 per share
for any unconverted shares.  Each Series II preferred share may be converted 
to common stock after a specified holding period as follows:  after one year,
two shares of common stock; after two years, five shares of common stock; 
after three years, ten shares of common stock.  In November, 1996, the Board
of Directors changed the conversion schedule as follows: commencing January 
1, 1997, each shareholder shall be entitled to convert an initial amount of 
250 shares to 2,500 shares of common stock. The shareholder shall be entitled
to convert the balance of their Series II Preferred shares in increments of 
475 shares during each six-month period thereafter beginning July 1, 1997.  

In March, 1992, the Board of Directors authorized the issuance of 500,000 
shares of Series B Convertible Preferred Stock.  Each share of Series B 
preferred stock is entitled to preference upon liquidation of $1.00 per share
for any unconverted shares.  Each Series B preferred share may be converted 
to common stock after a specified holding period as follows: after one year,
two shares of common stock; after two years, five shares of common stock.  
In November, 1996, the Board of Directors changed the conversion schedule as
follows: Commencing January 1, 1997, each shareholder shall be entitled to 
convert an initial amount of 250 shares to 1,250 shares of common stock.  
The shareholder shall be entitled to convert the balance of  their Series B
Preferred shares in increments of 237.5 shares during each six-month period
thereafter beginning July 1, 1997. 

In June, 1992, the Board of Directors authorized the issuance of 50,000 shares 
of Series C Convertible Preferred Stock.  Each share of Series C preferred 
stock is entitled to preference upon liquidation of $100 per share for any 
unconverted shares, and the liquidation preference is junior only to that of
all previously issued preferred shares.  Each Series C preferred share may be
converted to 100 shares of common stock after a specified holding period of 
one year.  

In June, 1992, the Board of Directors authorized the issuance of 50,000 shares 
of Series D Convertible Preferred Stock.  The Series D preferred stock carries 
no liquidation preferences.  Each Series D preferred share may be converted to 
100 shares of common stock after a specified holding period of one year.  The 
Series D preferred stock is also subject to forfeiture at any time prior to 
conversion if the recipient thereof fails or refuses to perform such 
reasonable duties as may be assigned to them from time to time by the Board
of Directors.  The Series D preferred stock may not be sold, transferred, or
conveyed to any other person and is subject to redemption at a price of $.001
per share in the event of death, disability, or incompetency of the original 
holder or the attempted transfer or conveyance of the shares to any other 
person. 

The Company has reserved 17,500,000 shares of its $.0001 par value common 
stock for conversion of preferred stock issuances.  As of September 30, 1998,
there were 21,507 shares of Series II preferred stock, 15,915 shares of 
Series B preferred stock, 15,357 shares of Series C preferred stock and 
20,438 shares of Series D preferred stock issued and outstanding. Conversion
of all issued and outstanding convertible preferred stock to common stock 
would result in an additional 3,874,145 shares of common stock.

Preferred stock transactions:

All valuations of preferred stock issued for services were based upon the 
closing price of the Company's common stock on the date of the agreement.  
This amount was then multiplied by the applicable conversion rate and then 
discounted by management.  These discounts are based upon the restrictive 
nature of the stock, block size and other factors.  

Preferred stock transactions during the quarter ended December 31, 1998:

In December of 1998, the President of the Company converted 7,000 shares of 
Series D preferred stock into 700,000 shares of common stock.  The Chief 
Operating Officer converted 2,500 shares of Series D preferred stock into
250,000 shares of common stock and the Vice-President converted 3,200 shares
of Series D preferred stock into 320,000 shares of common stock.

In December of 1998, the President, Chief Operation Officer and Vice-President 
received a stock bonus as compensation for prior services in Series D 
preferred stock of 500 shares each for the President and Chief Operating
Officer and 200 shares for the Vice-President.  All shares were valued at
approximately $11 per share.  

During the quarter ended December, 31, 1998, certain stockholders exercised 
their preferred stock conversion rights and the Company issued 2,805 shares 
of common stock in exchange for cancellation of 131 shares of Series II 
preferred stock, and 299 shares of Series B preferred stock. 

Preferred stock transactions during the year ended September 30, 1998:

During October, 1997, the Company issued 2,000 shares of Series D preferred 
stock to the President of the Company in lieu of a cash salary payment and 
100 shares of Series D preferred stock to a consultant for services.  All 
exchanges were valued at approximately $5 per share.   

During November, 1997, the Company issued 7,000 shares of Series D preferred 
stock to the President of the Company and 7,000 shares of Series D preferred 
stock to the Chief Operating Officer of the Company in lieu of cash salary 
payments.  All transactions were valued at approximately $10 per share. 

During December, 1997, the Company issued 920 shares of Series C preferred 
stock to various creditors in exchange for debt owed by the Company in the 
mount of $52,800.  All exchanges were valued at approximately $57 per share.  

During May, 1998, the Company issued 500 shares of Series D preferred stock to 
the President of the Company, 500 shares of Series D preferred stock to the 
Chief Operating Officer of the Company, and 200 shares of Series D preferred
stock to the Vice President of the Company in lieu of cash salary payments. 
All transactions were valued at approximately $20 per share.  

Throughout the year ended September 30, 1998, certain stockholders exercised
their preferred stock conversion rights and the Company issued 1,526,625 
shares of common stock in exchange for cancellation of 1,012 shares of 
Series II preferred stock, 2,740 shares of Series B preferred stock, 1,028
shares of Series C preferred stock, and 14,000 shares of Series D preferred
stock.  

Throughout the year ended September 30, 1998, the Company sold 12,225 shares 
of Series C preferred stock pursuant to a private placement offering as 
permitted under Regulation D of the Securities Act of 1933 related to 
transactions not involving a public offering.  The net proceeds to the
Company after issuing costs  of $104,600 was $780,100.  In conjunction with a
5,000 shares issuance of Series C preferred stock to an individual, an option
to purchase 300,000 shares of common stock at prices ranging from $2.00 to 
$2.50 per share was granted to this individual. This individual is now on the
Company's Board of Directors.

Preferred stock transactions during the year ended September 30, 1997:

During November, 1996, the Company issued 112 shares of series C preferred stock
to three employees in lieu of cash salary payments and 13 shares of Series D 
preferred stock to a consultant for services.  All exchanges were valued at 
approximately $4 per share.  

Throughout the year ended September 30, 1997, certain stockholders exercised
their preferred stock conversion rights and the Company issued 119,736 shares
of common stock in exchange for the cancellation of 1,231 shares of Series II
preferred stock, 1,235 shares of Series B preferred stock and 1,000 shares of
Series D preferred stock.  

During April, 1997, the Company issued 125 shares of Series C preferred stock to
two employees in lieu of cash salary payments.  All exchanges were valued at 
approximately $4 per share.  

During July, 1997, the Company issued 12,500 shares of Series D preferred stock
to five employees in lieu of cash salary payments.  All exchanges were valued 
at approximately $1 per share.

During July and August, 1997, the Company issued 100 shares of Series C 
preferred stock and 4,600 shares of Series D preferred stock for finder's
fees related to assisting the Company in obtaining financing.  All exchanges
were valued at approximately $1 per share.   

Common stock transactions:

All valuations of common stock issued for services were based upon the closing 
price of the Company's common stock on the date of the agreement.  In the
event restricted common stock was issued, a discount was applied by 
management.  These discounts are based upon the restrictive nature of the
stock, block size, and other factors. 

Common stock transactions during the quarter ended December 31, 1998:

During December 1998, the Company issued 10,000 shares of common stock to a 
consultant in exchange for services.  The exchange was valued at $1 per share.

An option holder exercised their options and purchased 5,000 shares of common 
stock.  The transaction was valued at $500. 

Common stock transactions during the year ended September 30, 1998:

During December, 1997, the Company issued 320,000 shares of common stock in 
exchange for various services.  The exchanges were valued at approximately 
$.38 to $1.32 per share.

During April, 1998, the Company issued 23,000 shares of common stock in 
exchange for various services.  The exchanges were valued at approximately
$.75 to $1 per share. 

In July, 1998, the Company issued 150,000 shares of common stock in exchange 
for various services.  The exchanges were valued at approximately $1.25 per 
share.  

Common stock transactions during the year ended September 30, 1997:

During February, 1997, the Company sold 14,400 shares of common stock with 
warrants to purchase 9,350 shares of common stock at $60.00 per share 
pursuant to a private placement offering as permitted under Regulation D of
the Securities Act of 1933 related to transactions not involving a public 
offering.  The net proceeds to the Company after issuing costs was $225,600.

During July, 1997, the Company issued 40,000 shares of common stock for finder's
fees related to assisting the Company in obtaining financing.  All exchanges w
ere valued at approximately $.01 per share.

During July, 1997, the Company issued 250,000 shares of common stock to the 
President of the Company in exchange for prior services as a consultant to 
the Company.  The exchange was valued at approximately $.20 per share.  

During August, 1997, the Company issued 14,667 shares of common stock in 
exchanges for various services.  All exchanges were valued at approximately
$.50 per share.  

During August, 1997, the Company issued 60,000 shares of common stock to a 
creditor in exchange for debt owed by the Company in the amount of $54,111. 
The exchange was valued at approximately $.90 per share. 

During September, 1997, the Company issued 560,000 shares of common stock in 
exchange for various services.  All exchanges were valued at approximately 
$1.00 per share.  

Stock options and warrants:

The Company issued options and warrants during the years ended September 30, 
1998 and 1997 for consulting services, fees in connection with obtaining 
financing, and various other services.   

Activity of options and warrants granted is as follows:
Options and warrants outstanding
[CAPTION]
<TABLE>
<C>                                    <C>                    <C>
                                          Options and warrants outstanding     
                                                               Weighted
                                        Shares                  average
                                                                exercise
                                                                 price
-----------------------------------------------------
Balance, September 30, 1996             15,000                  $ 2.00
Granted                                270,500                    3.55 
Exercised                              (15,000)                   2.00 

Balance September 30, 1997             270,500                    3.55  
Granted                              2,523,000                    2.63  
Exercised                              (30,000)                   0.10 
Expired                                (38,150)                   0.43 

Balance September 30, 1998           2,725,350                    2.78  
Granted                              1,433,333                    1.44  
Expired                                   (450)                    .20  
Exercised                               (5,000)                    .10

Balance, December 31, 1998           4,153,233                 $  2.32
</TABLE>

The following is a summary of options and warrants outstanding at December 31,
1998:
CAPTION>
<TABLE>
<C>             <C>             <C>       <C>       <C>           <C>
Options and warrants outstanding               Options and warrants exercisable
=======================================
                                 Weighted
                                  average
                                remaining  Weighted               Weighted
                               contractual  average                average
   Range of          Number       life     exercise     Number     exercise
exercise prices   outstanding    (years)     price    exercisable    price
=======================================
$.10 - .50          147,550         1.98    $  0.23      147,550    $  0.23 
    1-5           3,883,333         3.84       2.62    3,883,333       2.62  
     10             103,000         4.97      10.00      103,000      10.00 
     20              10,000         2.50      20.00       10,000      20.00 
     60               9,350         1.00      60.00        9,350      60.00 
                  4,153,233         3.79    $  2.32    4,153,233    $  2.32 

</TABLE>
Options and warrants granted during the quarter ended December 31, 1998 
consisted of 1,100,000 options to officers and directors, and 333,333 
warrants in connection with a private placement offering.

The Company accounts for stock compensation under the provisions of Financial 
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based 
Compensation".  SFAS 123 provides that companies may elect to account for
employee stock options using a fair value-based method or continue to apply
the intrinsic value-based method prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25").  

Under the fair value-based method prescribed by SFAS 123, all employee stock 
option grants are considered compensatory.  Compensation cost is measured at 
the date of grant based on the estimated fair value of the options determined
using an option pricing model.  The model takes into account the stock price 
at the grant date, the exercise price, the expected life of the option, the
volatility of the stock, expected dividends on the stock and the risk-free 
interest rate over the expected life of the option.  Under APB 25, generally
only stock options that have intrinsic value at the date of grant are 
considered compensatory.  Intrinsic value represents the excess, if any, of
the market price of the stock at the grant date over the exercise price of
the options.  

As permitted by SFAS 123, the Company accounts for these employee stock options
under APB 25, under which no compensation cost has been recognized because the
exercise price of the options was equal to or exceeded the market price of 
the stock on the date of grant. 

The following table discloses the Company's proforma net income and net loss 
per share assuming compensation cost for employee stock options had been 
determined using the fair value-based method prescribed by SFAS 123 for the
quarter ended December 31, 1998:

Net loss:

As reported                                        $  (267,900)
Proforma                                            (1,287,900)

Net loss per common share (basic and diluted):

As reported                                         $    (0.11)
Proforma                                                  (.54)

There were no options granted to employees during the year ended September 
30, 1997.  

The fair value of each option and warrant is estimated on the date of grant 
using the Black-Scholes option pricing model.  The following assumptions were
used to estimate the fair value:

                                                   Qtr ended December 31
                                                   1998             1997
Expected stock price volatility                    240.96%        307.02%
Expected option/warrant lives                     1-5 years     1-5 years
Expected dividend yields                             --             -- 
Risk-free interest rates                          5.75-5.75     5.68-6.59
Weighted average fair value of
  options/warrants granted                           0.93         $0.16

9. Income taxes:

The benefit for income taxes from continuing operations is different than the
amount computed by applying the statutory federal income tax rate to net loss
before taxes.  A reconciliation of income tax benefit follows:
                                                    Year ended September 30,
                                                    1998                1997
Computed tax benefit at federal statutory rate     $  480,000     $  451,200 
Equity issuances for services                        (122,000)       (79,600)
Change in valuation allowance                        (358,000)      (371,600)
                                                   $    --        $    -- 

The provision for federal and state income taxes consisted of the following:

                                                  Year ended September 30,
                                                  1998                1997
Current                                          $  --               $ --
Deferred                                         $  --               $ -- 

The deferred tax asset consisted of the following:

Net operating loss carryforwards                 $ 1,186,300      $  828,300 
Valuation allowance                               (1,186,300)       (828,300)
Net deferred tax asset                           $    --          $    -- 

The Company has net operating loss carryforwards ("NOL's") for federal income 
tax reporting purposes of approximately $3,489,200.  The NOL's expire at 
various times through 2013.

Included in the above NOL's are net operating loss carryforwards which may be 
subject to substantial limitations in accordance with various provisions of 
the Internal Revenue Code.  The Company has not yet determined the amount and
nature of these limitations.

10. Related party transactions:

Licensing agreements:

During the quarter ended June 30, 1996, the Company entered into an agreement 
with Cellular 99, a Nevada corporation under the control of the President of 
the Company at the time, whereby it obtained an exclusive license to rent 
cellular phones in the State of Illinois, using the proprietary marketing 
technology of Cellular 99.  The Company exchanged 500 shares of Series D 
Preferred Stock for these licencing rights.  These rights were valued at 
$1,000 or $2 per share.  These shares were subsequently converted to 50,000
shares of common stock and returned to the Company as treasury stock during
the year ended September 30, 1997 as Illinois operations were never pursued.  

During the quarter ended December 31, 1996, the Company entered into a similar
agreement with Cellular 99 as previously described for licensing rights in the
state of Texas.  The company exchanged 500 shares of Series D preferred stock 
for these licensing rights.  These rights were valued at $1,000 or $2 per 
share.  These shares were subsequently converted to 50,000 shares of common
stock.  During the year ended September 30, 1997, 40,000 shares were returned
to the Company as treasury stock as only a portion of the state of Texas 
operations were pursued.   

During the quarter ended December 31, 1998, the Company entered into two 
Technology Licensing Agreements in the states of California and Arizona. 
The total revenue from these agreements was $175,000.  

Office space and computer usage:

During the year ended September 30, 1998, the Company was provided office space
and computer usage at a cost of $9,500 to the Company by the President of the 
Company. This arrangement ended when the Company occupied its leased 
facilities located at 5922-B Farnsworth Court, Carlsbad, CA 92008, in 
September of 1998. 

Notes payable to related party:

During the year ended September 30, 1997, the Company had notes payable to a 
related party.  These notes consisted of various notes payable to the past 
President of the Company, and corporations under the control of the past 
President.  The notes were unsecured, due in 18 months from the date of
issuance, and bear interest at 10%.  During August, 1997, the outstanding
balance on the notes was $263,700.  The Company issued 2,850 shares of 
Series C preferred stock in exchange for extinguishment of the liabilities.
All exchanges were valued at approximately $93 per share.  

Legal fees:

Certain stockholders of the Company are affiliated with firms who currently 
provide or have provided legal services to the Company in prior years.  
During the years ended September 30, 1998 and 1997, fees and other expenses
charged by these firms totaled approximately $24,400 and $23,100, respect-
ively.  As of September 30, 1998 and 1997, amounts due these firms totaled
$400 and $12,300, respectively.  As of December 31, 1998 a balance of $352
was owing to these firms.

11. Recently issued Financial Accounting Standards:

In June, 1997, the Financial Accounting Standards Board ("FASB") issued 
Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income".  SFAS 130 establishes standards for reporting and display of 
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general purpose financial statements.  This Statement 
requires that an enterprise (a) classify items of other comprehensive income
by their nature in a financial statement and (b) display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position.  SFAS 130 is effective for fiscal years beginning after December 
15, 1997.  Reclassification of financial statements for earlier periods 
provided for comparative purposes is required.  Management does not believe
the adoption of SFAS 130 will impact reporting of the Company's results of 
operations when implemented.  

In June, 1997, the FASB issued Financial Accounting Standards No. 131 ("SFAS 
131"), "Disclosures About Segments of an Enterprise and Related Information",
which redefines how public business enterprises report information about 
operating segments in annual financial statements.  It also establishes 
standards for related disclosures about products and services, geographical
areas, and major customers.  SFAS 131 is effective for financial statements
for periods beginning after December 15, 1997.  In the initial year of 
application, comparative information for earlier years is to be restated.
Management believes the adoption of SFAS 131 may result in additional 
disclosures regarding the Company's segments.  

12.Commitments and contingencies:

Employment contracts:

During July, 1997, the Company entered into a two-year employment contract with
its President. Base annual compensation during the first year is $90,000.  
Base annual compensation during the second year is $120,000.

On October 1, 1998, the Company entered into employment agreements with its 
President and Chief Operating Officer.  The new employment agreement with the
President supersedes the employment agreement entered into during July, 1997.
Both of the new agreements are for five years and provide for minimum salary 
levels, incentive bonuses, and specified benefits.  The aggregate commitment 
for future salaries, excluding bonuses and benefits, from these employment
agreements is $2,400,000.

Threatened litigation:

In December, 1998, the Company was notified in a demand letter that a stock-
holder is threatening to file a stockholder derivative lawsuit. The Company 
engaged outside legal counsel to investigate this matter.  As a result of 
this investigation, the Company believes no further action or investigation
is necessary.

Consulting contract:

During November, 1996, the Company entered into a one-year consulting contract 
with an individual to run operations at its Houston, Texas cellular phone 
products store.  Base annual compensation is $120,000.  Liabilities for these
services were extinguished as part of the sale of the operation as of October
31, 1997.  

Purchase commitment:

During December, 1996, the Company entered into a purchase agreement for a 
cellular calling card switch system.  The outstanding commitment of $76,100
as of September 30, 1997 was assumed by the buyer of the Houston, Texas 
cellular products store as of October 31, 1997. 

Store lease:

The Company leased a commercial facility for conducting its cellular phone 
products store operations.  The lease covered the period from December, 1996 
to November, 1997 with five one-year options to extend.  All liabilities 
relating to this lease from November 1, 1997 and forward were assumed by the
buyer of the operation.  

Technology license agreement:

Xyclonyx, a wholly-owned subsidiary of the Company, has a technology license 
agreement with three individuals including the Chief Operating Officer of the
Company.  The agreement is for seventeen years or the life of the patents, 
which ever is greater, and specifies royalties in the amount of six percent
of gross revenues subject to certain adjustments as specified in the 
agreement.   

Building lease:

The Company began leasing office and warehouse space under an operating lease
expiring in August, 2003 during the year ended September 30, 1998.  The 
Company has an option to extend the lease for five more years if it so 
desires.  Minimum future rental payments under this lease for each of the
next five years is as follows:

Year ending September 30,
1999                $ 183,700 
2000                  192,000 
2001                  199,300 
2002                  207,700 
2003                  197,500 
                     $980,200 

Rent expense totaled $47,026 during the quarter ended December 31, 1998.

The Company is a leasee of a forklift under a capital lease expiring in 2001.  
The asset and liability under the capital lease are recorded at the present 
value of the minimum lease payments.  The asset is depreciated over the 
estimated productive life.  Depreciation of this asset is included in 
depreciation expense.  The interest rate of the lease is approximately
7.75%.  Minimum payments under the lease are as follows: 1999 $5,780, 2000
$5,780 and in 2001 $5298.

Consulting services agreement:

During the year ended September 30, 1998 the Company entered into a consulting 
services agreement for various services.  In conjunction with this agreement, 
2,300 shares of Series D preferred stock were issued to the consultant.  
These shares were subsequently returned to the Company in February, 1999 as
the consultant failed to perform under the terms of the agreement. These 
shares are not treated as issued and outstanding in the accompanying 
consolidated financial statements and management believes no compensation is
due to the consultant under the terms of the agreement. 

13.  Subsequent events:

Private placement:

During the period from January 1, 1999 to January 31, 1999, the Company raised 
approximately $75,000, before issuing costs, pursuant to a private placement 
offering as permitted under Regulation  D of the Securities Act of 1933 
related to transactions not involving a public offering.  
                                                    
===============================                                             
                       PART I 
ITEM 2 - Managements'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 in the matters set forth under the caption
"Risk Factors" in the Company's Annual Report on Form 10-KSB 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, toxic
waste, water and soil contamination.  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, 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, for 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 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 Stock and/or debt and through the 
potential licensing of its developed business arrangements. There can be no
assurance that the Company will raise sufficient capital to fund its
proposed operations and the Company's failure to obtain adequate financing
may jeopardize its existence. See "Management's Discussion and Analysis or
Plan of Operation - Liquidity and Capital Resources."

The Company's principal office is located at 5922-B Farnsworth Court, Carlsbad,
California 92008, and its telephone number is (760) 918-1860.  The Company's 
home page on the Internet can be located at www.bugsatwork.com.

Overview

During the fiscal year ended September 30, 1997, the Company engaged in the 
operation and shutdown of its unprofitable cellular operations. Prior to
contemplating bankruptcy in July 1997, the Company hired Robert C. Brehm,
who had been acting as a consultant to the Board of Directors regarding 
potential turnaround alternatives, as the Company's Chief Executive Officer.
The Company implemented a one-for-twenty stock split, terminated its
cellular operations and acquired XyclonyX, a new biotech company with proven
technology. During the fiscal year ended September 30, 1998, the Company 
focused on capitalizing on the biotechnology assets that it had acquired,
fund raising, building organizational infrastructure and establishing its
manufacturing site for occupancy during September 1998.

Plan of Operations for the Fiscal Year Ending September 30, 1999

The Company intends to generate revenue during the fiscal year ending
September 30, 1999 by focusing on sales of Bio-Raptor tm products and related 
microbial blends and consulting services to support Bio-Raptor tm sales. USMX 
plans to sell its Bio-Raptor tm products to new and existing prospects for 
soil recycling center licenses, odor control and land fill operators. The 
Company's microbial blend production capacity will limit its sales of Bio-
Raptor's tm until outsourcing and internal production can meet demand. During
the first quarter of fiscal year 1999, the Company is building infrastructure
(i.e., personnel, procedures and systems) and establishing initial 
manufacturing operations.

During the second quarter of fiscal year 1999, the Company intends to add
fermentation capacity, fine tune its manufacturing operations and increase
blending capacity to meet anticipated sales goals during the summer months.
Principal microbial products will be Bio-Raptor tm, sewage and certain
agricultural products (from internal fermentation). USMX plans to ship 
completed Bio-Raptors tm during the second quarter of fiscal year 1999. The
Company believes that new product announcements will result from completed
field test data concerning animal waste, grease trap and solvent grease 
absorption should. To initiate SSWM's operations for land bioremediation
projects and complete organization development, the Company will need to 
raise approximately $5 million, $1 million of which will be used to purchase
additional fermentation capacity and upgrade blending operations. The Company
anticipates that revenues will be from Bio-Raptor tm licenses, equipment 
sales, microbial blends and related consulting services.

During the third quarter of fiscal year 1999, the Company intends to increase
its product delivery and sales, including Bio-Raptors tm, and to extend 
microbial sales for agriculture, sewage and golf course applications. During
this quarter, the Company intends to continue its reliance on outsourced
fermentation capacity, but also will order fermentors for on-site
installation over the following six months. The Company anticipates that
revenues will continue from Bio-Raptor tm related products, as well as
agricultural, sewage and golf course applications.

During the fourth quarter of fiscal year 1999, the Company will test and 
possibly bring on line its new manufacturing capacity. USMX projects that it
will increase its sales efforts and ship additional Bio-Raptors tm as well as 
products and services based on sewage, agricultural, and golf course
applications.

Results of Operations

For the Quarter ended December 31, 1998, Compared to the Quarter Ended December 
31, 1997 

The Company had revenues during the quarter ended December 31, 1998 of $176,728,
which consisted of Technology Licensing Agreements of $175,000 and the sale
of microbic product.  Cost of revenue was $17,895 leaving a gross profit of
$158,833.  There was no revenue for the quarter ended December 31, 1997.
 
Selling, general and administrative ("SG&A") expenses for first quarter of
fiscal year 1999 totaled $271,951 compared to $52,760 for the corresponding
quarter of fiscal year 1998. SG&A expenses for the first quarter of fiscal 
year 1999 consisted of accounting, legal, consulting, public relations, 
subsidiary startup and organization and fund raising expenses.  SG&A 
expenses also included non-cash charges from the issuance or future issuance
of stock and stock options in the approximate amount of $118,200 for the 
quarter ended December 31, 1998. There was no issuance of stock or options
for services in the quarter ended December 31, 1997. The remaining SG&A
expenses that required cash, amounted to approximately $149,700 for the
quarter ended December 31, 1998. The Company used stock in lieu of cash to
conserve its cash resources. 

There was no interest expense for the quarter ended December 31, 1998.Interest
expense totaled $33,140 for the corresponding quarter in fiscal year 1998.
The decreased expense resulted from retirement of debt in the first quarter
of fiscal year 1998. There was no provision for income taxes in either 
quarter ended December 31, 1998 or 1997, due to the losses sustained by the
Company. 

The Company incurred net losses of $267,900 and $85,900 for the quarters ended
December 31, 1998 and 1997, respectively. Net loss per share decreased from a
net loss per share of $0.13 for the quarter ended December 31, 1997, to a net
loss per share of $0.11 in the corresponding quarter of 1998, due primarily 
to the increased weighted average number of shares of Common Stock out-
standing at December 31, 1998.

In order to continue implementing the Company's strategic plan with its 
subsidiaries, the Company is planning on raising an additional $2.5 to 
$5,000,000 from a private placement during the second and third quarters of
fiscal year 1999.  The funds are targeted to establish the fermentation
manufacturing operation and the staffing of sales subsidiaries.  Although the
Company is expecting to increase revenues during the second quarter of fiscal
year 1999, based on the current status of the Company, additional capital will
be required in order for the Company to maintain its ongoing operations. 

Liquidity and Capital Resources. 

Cash and cash equivalents totaled $886,746 and $3,000 at December 31, 1998 and
1997, respectively.  Net cash used by operations was $223,556 for the quarter 
ended December 31, 1998 compared to $232,200 for the comparable quarter of 
1997.  In preparing for the manufacture and sale of its products the Company 
purchased office furniture and equipment of approximately $27,000 including 
computer systems, $123,500 of manufacturing equipment and leasehold 
improvements of  $32,600. 

During the quarter ended December 31, 1998, the Company raised $730,960 from a 
private placement, net of placement fees, from the issuance of Series C 
preferred stock.  As a result of these proceeds, the Company has working
capital (Current Assets less Current Liabilities) of $480,533 as of December
31, 1998, compared to a negative working capital of $6,400 as of December 31,
1997.   The Company raised an additional $66,000 during January of 1999, net 
of placement fees, from the private placement. 

To date, the Company has financed its operations principally through borrowings
and private placements of equity securities and debt.  During fiscal year 1998,
the Company raised $780,100 net of placement fees in a private placement in 
which shares of Series C Preferred Stock were issued.  The Company believes 
that it has sufficient cash to continue its operations through March 31, 1999,
and anticipates that cash generated from projected revenues and an anticipated
private placement during the second and third quarters of fiscal year 1999 
will enable it to fulfill its projected operational budget for fiscal year 
1999.  The Company will need additional capital to continue its operations 
and will endeavor to raise funds through the sale of shares, licenses and
revenues. There can be no assurances, however, that the Company can obtain
sufficient capital on acceptable terms, if at all. Failure to obtain such
capital likely would affect adversely the Company's ability to continue as
a going concern.

During fiscal year 1999, the Company projects capital expenditures for plant 
and equipment of approximately $1 million and R&D costs of  $500,000.  R&D 
costs will be associated primarily with Bio-Raptor(tm) delivery and config-
uration for specific applications.  The Company also plans to increase the 
number of its employees to approximately 40 by the end of fiscal year 1999.

The Company's working capital and other 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 public or private 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.

Non-cash investing and financing activities.

For the quarter ended December 31, 1998:
The Company issued 1,200 shares of Series D preferred stock to as compensation
of officers in lieu of cash.  The transaction was valued at $11.00 per share.

Human Resources
As of January 15, 1999, the Company had eight (8) full-time employees and 
fourteen (14) full-time and part-time consultants, for a combined total of 
twenty-two (22) employees and consultants.  The Company's personnel are 
employed as follows: eight (8) in administrative functions; six (6) in 
production support and manufacturing; six (6) in promotion;  and two (2) in
sales.   During fiscal year 1999, the Company intends to hire additional 
consultants and employees in the areas of human resources, manufacturing,
administration, customer support and research and development. In particular,
the Company must recruit qualified personnel for key position in its 
microbial manufacturing and sales operations, including qualified personnel
for product management, shift supervisions, laboratory and quality control 
functions, blending and fermentation, sales consultants, training 
coordinators and customer service staff.  The Company's failure to
effectively recruit, hire, train and manage qualified personnel could have a
material adverse effect on its business, financial condition and results of 
operations. 

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings.

From time to time, the Company has received certain correspondence threatening
litigation against the Company.  The Company evaluates potential claims and 
believes that all claims asserted to date are without merit.  The Company 
intends to defend any litigation filed against the Company.  There are no 
known legal proceedings to which the Company is a party to as of December 
31, 1998.

Item 2.   Changes in Securities.

During the quarter ended December 31, 1998, the Company raised $730,960, 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 6.   Exhibits and Reports on Form 8-K.

The Company filed a Current Report on Form 8-K with the Commission on 
November 24, 1998, relating to the reacquisition of the golf course 
applications license from Gran Verde Distribution, Inc. 

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused
this Report to be signed on its behalf by the undersigned, thereunto duly 
authorized.

                                          U.S. Microbics, Inc.     

Date:  February 15, 1999 By:                 /s/ Robert C. Brehm      
                                        Robert C. Brehm, President and
                                          Chief Executive Officer

                                              /s/ Conrad Nagel
                                        Conrad Nagel, Chief Financial Officer