<PAGE>

================================================================================

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

                                   FORM 10-QSB
(Mark One)

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

      For the quarter ended March 31, 2002

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

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

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

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

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

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

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

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

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

         Common Stock, $0.0001 par value per share - 30,693,573 shares
                         outstanding as of May 10, 2002

                   Documents Incorporated by Reference: None.
Transitional Small Business Disclosure Format (check one):  Yes [ ] No [X]

================================================================================

<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

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

<CAPTION>
                                                                           AS OF          AS OF
                                                                         MARCH 31,    SEPTEMBER 30,
                                                                           2002            2001
ASSETS                                                                 (Unaudited)      (Audited)
                                                                      -------------   -------------
<S>                                                                   <C>             <C>
CURRENT ASSETS:
     Cash and cash equivalents                                        $     22,411    $     50,600
     Accounts receivable                                                     8,370          22,100
     Costs and estimated profit in excess billings                          92,029              --
     Prepaid expenses and other assets                                      11,042          19,900
     Inventories (Note 3)                                                   24,888          24,900
                                                                      -------------   -------------
          Total current assets                                             158,740         117,500
PROPERTY AND EQUIPMENT, NET                                                162,004         235,800
DEPOSITS                                                                    28,779          28,700
                                                                      -------------   -------------
          Total assets                                                $    349,523    $    382,000
                                                                      =============   =============

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
     Accounts payable and accrued expenses                            $  1,362,013    $  1,196,700
     Current portion of capital lease obligation                                --             900
     Notes payable, related parties                                        150,500         253,100
                                                                      -------------   -------------
          Total current liabilities                                      1,512,513       1,450,700
CAPITAL LEASE OBLIGATION, NET OF CURRENT PORTION                                --              --
                                                                      -------------   -------------
          Total liabilities                                              1,512,513       1,450,700
                                                                      -------------   -------------

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
               6,708 shares issued and outstanding; aggregate
               Liquidation preference of $6,708 and $6,708                     671             700
          Series B; 500,000 shares authorized; 5,522 and
               5,522 shares issued and outstanding; aggregate
               Liquidation preference of $5,522 and $5,522                     552             600
          Series C; 50,000 shares authorized; 40,655 and
               45,563 shares issued and outstanding; aggregate
               Liquidation preference of $4,065,500 and $4,556,300           4,065           4,600
          Series D; 50,000 shares authorized; 40 and 5,400 shares
               Issued and outstanding; no liquidation preference                40             500
                                                                      -------------   -------------
                                                                             5,328           6,400
     Common stock; $.0001 par value; 150,000,000 shares authorized;
        29,814,926 and 19,557,231 shares issued and outstanding              2,982           2,000
     Additional paid-in capital                                         16,745,909      15,375,800
     Stock options and warrants                                          1,023,838         943,200
     Treasury stock                                                       (117,400)       (117,400)
     Stock subscriptions notes receivable                               (3,965,001)     (3,965,000)
        Deferred equity issuance costs                                    (595,000)       (595,000)
     Accumulated deficit                                               (14,263,646)    (12,718,700)
                                                                      -------------   -------------
          Total stockholders' deficit                                   (1,162,990)     (1,068,700)
                                                                      -------------   -------------
          Total liabilities and stockholders' deficit                 $    349,523    $    382,000
                                                                      =============   =============

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

                                       1
</TABLE>
<PAGE>

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

<CAPTION>
                                                        FOR THE SIX                     FOR THE THREE
                                                   MONTHS ENDED MARCH 31,          MONTHS ENDED MARCH 31,
                                               -----------------------------   -----------------------------
                                                   2002             2001            2002            2001
                                               -------------   -------------   -------------   -------------
<S>                                            <C>             <C>             <C>             <C>
Revenues                                       $     73,387    $     98,341    $     58,611    $     40,789
Cost of revenues                                     60,465         107,429           2,808          44,027
                                               -------------   -------------   -------------   -------------

Gross (loss) profit                                  12,922          (9,088)         55,803          (3,238)

Selling, general and administrative expenses      1,466,515       1,547,783         749,599         879,754
                                               -------------   -------------   -------------   -------------
Loss from operations                             (1,453,593)     (1,556,871)       (693,796)       (882,992)

Other income (expense):

Interest income                                          --             228              --              --

Interest expense                                    (91,338)        (16,591)         15,717          (5,422)
                                               ------------    ------------    ------------    ------------

Net loss                                       $ (1,544,931)   $ (1,573,234)   $   (678,079)   $   (888,414)
                                               =============   =============   =============   =============
Net loss per common share (basic and diluted
     (Note 4):
     Net loss from continuing operations       $       (.06)   $       (.13)   $       (.03)   $       (.07)

Weighted average common shares outstanding       23,836,997      11,954,007      25,952,201      12,214,022


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

                                                      2
</TABLE>
<PAGE>

<TABLE>
                      U.S. MICROBICS INC., AND SUBSIDIARIES

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<CAPTION>
                                                                          FOR THE SIX
                                                                    MONTHS ENDED MARCH 31,
                                                                 ---------------------------
                                                                     2002           2001
                                                                 ------------   ------------

<S>                                                              <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                      $(1,544,931)    (1,573,234)
   Adjustment to reconcile net loss to cash used in
        Operating activities:
   Depreciation                                                       27,216         27,971
   Loss on sale of asset                                               4,833             --
   Stock, stock options, and warrants in exchange for services       237,613        241,348
   Decrease (increase) in:
          Accounts receivable                                         13,730             --
          Costs and estimated profit in excess of billings           (92,029)            --
          Prepaid expense, deposits and other                          8,858         15,177
          Inventory                                                       --         (6,085)
   Increase (decrease) in:
          Accounts payable and accrued expenses                      474,481        569,959
                                                                 ------------   ------------
NET CASH USED IN OPERATING ACTIVITIES                               (870,229)      (724,864)
                                                                 ------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                 (3,285)            --
   Sale of property and equipment                                     45,000
                                                                 ------------   ------------
NET CASH USED IN INVESTING ACTIVITIES                                 41,715             --
                                                                 ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of preferred stock and stock options in private
         Placements                                                       --        504,400
   Issuance of stock and stock warrants through equity line          357,625             --
   Loan from related parties                                         538,600             --
   Repayment of notes payables                                       (95,000)        60,500
   Repayment long-term portion of lease contract                        (900)        (2,936)
                                                                 ------------   ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                            800,325        561,964
                                                                 ------------   ------------

DECREASE IN CASH                                                     (28,189)      (162,900)
CASH AT BEGINNING OF PERIOD                                           50,600        162,900
                                                                 ------------   ------------
CASH AT END OF PERIOD                                            $    22,411    $        --
                                                                 ============   ============


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

                                       3
</TABLE>
<PAGE>

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


                                                                FOR THE SIX
                                                          MONTHS ENDED MARCH 31,
                                                          ----------------------
                                                            2002          2001
                                                          ---------    ---------
Supplemental disclosures of non-cash
    Investing and financing activities:

Note payable converted to common stock                    $546,200     $     --

Accounts payable converted to common stock                $309,218     $     --

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

Common stock issued in exchange for services              $     --     $241,348

Common stock options exercised in settlement of
     Accrued expenses                                     $     --     $ 54,690

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


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

                                       4
<PAGE>

U.S. MICROBICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)


1. BASIS OF PRESENTATION AND GOING CONCERN

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
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, 2001.

In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments, consisting only of normal
recurring entries, necessary to present fairly its financial position at March
31, 2002 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.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has suffered
significant recurring losses from operations and has a not stockholders' deficit
at March 31, 2002. Additionally, the Company has significant delinquent payroll
tax liabilities and the Internal Revenue Service has issued intent to levy asset
notifications. These conditions raise substantial doubt about its ability to
continue as a going concern.

2. ORGANIZATION AND RISKS AND UNCERTAINTIES

ORGANIZATION

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

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

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

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

RISKS AND UNCERTAINTIES

For the six months ended March 31, 2002 the Company has generated revenues of
$73,387. During this same period, the Company incurred a net loss of $1,544,931
and had negative cash flows from operations of $870,229. As of March 31, 2002,
the Company has an accumulated deficit of $14,263,646. The Company had revenue
of $50,700 during the fiscal year ended September 30, 2001, and $18,900 during
the fiscal year ended September 30, 2000, and $66,900 during the fiscal year

                                       5
<PAGE>

U.S. MICROBICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)


ended September 30, 1999, and no revenues during the fiscal years ended
September 30, 1998 and 1997. The Company incurred net losses of $3,527,700 in
fiscal 2001, and $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 intends to raise additional
working capital through the sale of common stock through its equity line,
through private placements in its subsidiaries and through issuance of preferred
stock or debt and through third party technology licensing arrangements for
niche market or specific territory use. The Company is currently developing
business opportunities and operations through its wholly-owned subsidiaries
domestically and abroad. There can be no assurance that such additional equity
financing will be available on terms acceptable to the Company, if at all or
that such business opportunities will occur as planned, if at all. Based upon
the current financial condition of the Company, additional capital will be
required in order for the Company to continue its ongoing operations. These
matters raise substantial doubt about the Company's ability to continue as a
going concern.

Subsequent to March 31, 2002, the Company has borrowed approximately $50,000
from related parties, net of loan fees.


3. INVENTORIES:

Inventories consist of the following:

                                                                     MARCH 31,
                                                                       2002
                                                                  --------------
       Raw materials and supplies                                 $      24,888
       Finished goods                                                        --
                                                                  --------------
                                                                  $      24,888
                                                                  ==============


4. NET LOSS PER SHARE

Basic and diluted net loss per share is computed by dividing net loss by the
weighted average number of shares of common stock outstanding during the
reporting period. During the six months ended March 31, 2002 and 2001, 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. All required payments have been made to
the plaintiff and the lawsuit is terminated.

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 QUARTERS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED)


5. COMMITMENTS AND CONTINGENCIES (CONTINUED):

On November 19, 2001, a lawsuit was filed against the Company by Crosby, Heafey,
Roach and May, a professional legal corporation, for unpaid legal services
provided in the amount of $88,864, including attorneys' fees. The Company was
served with the lawsuit on January 7, 2002. The Company filed a response on
February 5, 2002, alleging among other things that the billings by the law firm
were excessive. The Company is currently in negotiations with the law firm to
settle the suit.


Purchase commitment:

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


6. EQUITY FINANCING

During the six months ended March 31, 2002, the Company received cash proceeds,
net of offering costs of $32,400, totaling $357,625 pursuant to a private
placement offering through the Swartz Equity Line.


7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

As of March 31, 2002, consist of the following.


           Accounts payable                                          $  404,374
           Accrued payroll taxes                                        912,314
           Other                                                         45,325
                                                                     -----------
                                                                     $1,362,013
                                                                     ===========

The Company is delinquent in paying payroll taxes, which is approximately
$900,000 at March 31, 2002. The Company has received notifications from the
Internal Revenue Service that they intend to levy certain assets of the Company.

                                       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, 2001 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") is building 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
breakdown various substances, including hydrocarbons, chlorinated solvents and
certain water and soil contaminants when combined with engineered application
solutions. The Company believes that it can build the foundation for the
international commercialization of proprietary products and services based on
the Microbial Technology for applications in the global bioremediation, water
cleanup and agricultural markets. 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 primary objective is to establish itself as a leading provider of
environmental technology and products to companies worldwide by utilizing a
"Pay-for-Performance" philosophy, specifying solutions that treat the source of
the problem, and concentrating on niche markets which offer above normal profit
potential. To achieve this objective, the Company intends to focus its strategy
on the following three elements: (i) developing core engineering and project
management services, microbe manufacturing and research and development services
that support all subsidiaries; (ii) validating the technology using actual
customer demonstration sites, approved governmental work plans, and third party

                                       8
<PAGE>

certified results showing solutions to be "better-faster-cheaper"; and (iii)
providing the technology and engineering services to direct customers or
licensing the use of the technology to third parties for use in specific niche
markets and territories.

Since September 1998 the Company has been in a development stage building its
manufacturing facility, acquiring technical and engineering staff, researching
market opportunities and validating its technology in field demonstrations.
During that time frame, the Company has raised over $13MM to finance its
operations in preparation for implementing a major paradigm shift in the soil
and groundwater cleanup market from the old 1980's philosophy of "best efforts,
time and materials billing, treat the symptoms of the problem and measure
progress over years," to the new millennium philosophy of "pay-for-performance,
eliminate the problem better-faster-cheaper -now". Customer interest in this new
philosophy runs high. Even the U.S. government is starting to adopt this new
philosophy in their contracting efforts. Field tests have shown that the
microbial technology and engineering solutions have significantly reduced the
time and cost to treat contaminated water, chlorinated solvents and MTBE from
years of little progress using 1980's technology, down to only weeks or months
using biotechnology based solutions. These results mean that parents and their
children may enjoy cleaner water, air and soil sooner rather than later and
corporations, governmental entities and taxpayers may be able to reduce the
expense of environmental cleanup in the future.

The efforts to implement the new philosophy revolve around alternate technology
validation, the politics of local jurisdictional and industry acceptance of
alternative technology for soil and groundwater cleanup and money for financing
the changeover logistics. By targeting key niche markets with high profit
potential, low changeover costs and minimal political resistance, U.S. Microbics
is becoming a revenue generating stage company in 2002 as measured by the
$646,540 of contracts awarded in the first quarter of the new fiscal year. Work
has commenced on one contract for $166,540 and performance bonds for contracts
for contract awards totaling $480,000 are being sought. Implementation has now
progressed from successful laboratory feasibility studies and customer field
demonstration and completed projects to more complex contracts with state
governments and private companies.

While these results are promising the Company's achievement of its objectives is
highly dependent, among other factors, on its ability to raise the necessary
capital to continue implementing its biotechnology solutions and obtaining
performance bonds or letters of credits where required. The Company intends to
raise additional working capital through the sale of common stock through its
equity line, through private placements in its subsidiaries and through issuance
of preferred stock or debt and through third party technology licensing
arrangements for niche market or specific territory use. 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

                                       9
<PAGE>

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 coordinates the deployment of the Microbial Technology to its
subsidiaries that in turn deliver engineered solutions to specific niche
markets.

The Company and its subsidiaries are described more fully below:


                              U.S. MICROBICS, INC.

The Company orchestrates the operations of its subsidiaries and provides
administrative functions at beneficial economies of scale. The Company continues
to raise the capital needed for successful implementation of the Microbial
technology by its subsidiaries. The Company allocates its resources among the
subsidiaries within the organizational structure. The Company provides to its
subsidiaries public relations, accounting, legal, human resources, capital
acquisition and merger and acquisition services.

In December 2001 U.S. Microbics was named one of the "Best companies to work for
in San Diego" for 2001. The San Diego Business Journal and the Ken Blanchard
Companies (One Minute Manager) made the announcement, which honors San Diego
businesses with a proven track record of providing an empowering environment to
their employees.

U.S. Microbics (BUGS) and its subsidiaries distinguished themselves as one of
the best employers in San Diego based on their ability to share power and
information throughout the organization; their employee empowerment and
involvement strategies; their altruistic vision; and their focus on customer
service and results.

BUGS' vision is to be the customer's choice for best value products and
services. The company's Pay-for-Performance strategy is an industry trendsetter
compared to the conventional time and materials, best-efforts practices of its
competitors. Another key part of its vision is to solve the customer's problem
rather than the symptoms of the problem using biotechnology solutions based upon
sound engineering practices; another first for its industry. The employees of
BUGS appreciate the opportunity in bringing a clean environment to people all
over the world.


                      WEST COAST FERMENTATION CENTER (WCFC)

WCFC manufactures microbial blends by using fermentation technology, powder
blending techniques and combinatorial liquefaction including microbial blends
for the Remediline(TM), Wasteline(TM) and Bi-Agra(TM) product lines.


                                    XYCLONYX

The XyclonyX mission is to research, develop, formulate, protect, apply,
acquire, license and transfer its technologies, consisting of patents,

                                       10
<PAGE>

proprietary knowledge, products, and processes for hydrocarbon impacted soil and
groundwater treatment and agricultural growth enhancement.

In May 2000 XyclonyX, at the request of its sole licensee of this technology
Sub-Surface Waste Management completed a successful pilot program that
demonstrated the efficiency 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. Sub-Surface Waste
Management's successful engineering 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. The
EPA has also endorsed the use of bioremediation for the cleanup of MTBE.

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 under direction and supervision of Sub-Surface Waste
Management who secured groundwater samples from a confidential major west coast
retailing petroleum company's Los Angeles area Terminal operations performed a
pilot project on the client's 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
Sub-Surface Waste Management below ground cleanup of MTBE contaminated soil and
groundwater through injection of microbes and above-ground applications where
contaminated soil is processed through U.S. Microbics' patented Bio-Raptor(TM)
treatment system as well as in the patent pending bioreactivation of granular
activated carbon filtration media precluding the need for off-site thermal
reactivation treatment.

XyclonyX has recently filed a patent application for the "Treatment of
Contaminated Activated Charcoal" with the United States Patent Office authored
by this breakthrough technology lead developer Behzad Mirzayi, MS, P.E. Chief
Engineer of Sub-Surface Waste Management. The new invention relates to the
treatment of carbon filtration systems and the use of micro-organisms for
removal of contaminating hydrocarbons from such systems. The patent application
follows from development sponsored and directed by Sub-Surface Waste Management
in successful field trials using the BAC(TM) and Bio-GAC(TM) bioreactivation
treatment systems to on-site "bio-recycle" spent granular activated carbon at
Petroleum Refineries, Petro-chemical Facilities, Manufacturing Facilities and
large Superfund Project cleanups.

                                       11
<PAGE>

The BAC(TM) and Bio-GAC(TM) system was developed in response to industry demand
for an economical alternative to offsite regeneration of spent carbon. Not only
is offsite regeneration expensive, it is time consuming, ties up additional
carbon inventory, and only 50 to 75% of the original carbon is returned from the
regeneration process. With the BAC(TM) system, costs for regeneration are
typically 50% less than offsite regeneration and nearly 100% of the carbon can
be regenerated to near virgin carbon standards. Bio-GAC(TM) is a new
breakthrough technology that can extend the life of "on-line" pump and treat
systems to eliminate such compounds as MTBE and other hydrocarbons from soil and
groundwater cleanups at retail service station sites nationwide. The typical
industries with direct potential beneficial use include:

    o    Local Potable water treatment companies, boards and districts
    o    Oil and Gas production, transportation, pipeline, bulking, refining,
         distribution, retail and gas stations
    o    Commercial and industrial facilities with waste water production and/or
         permit requirements to treat facility discharges
    o    Chemical and petrochemical facilities
    o    Groundwater remediation sites

XyclonyX sole licensee of this technology, Sub-Surface Waste Management plans to
capitalize on its patent and patent-pending technology by forming strategic
alliances and joint ventures with well-established leaders in the environmental
industry. Continued revenue streams are expected through licensing of the
technology with upfront fees, ongoing royalties, professional services billings
and microbial blend sales.

In October 2001 XyclonyX's bioaugmented granular activated carbon or Bio-GAC(TM)
was nominated for the UCSD Connect "2001 Most Innovative New Product Award".
Bio-GAC(TM) is a new breakthrough technology used to extend the life of
in-service carbon filtration systems to eliminate such compounds as MTBE and
other hydrocarbons in groundwater cleanup at retail service station sites
nationwide.


                   SUB SURFACE WASTE MANAGEMENT, INC. (SSWM)

SSWM is an environmental engineering solutions company using biotechnology to
clean up toxic waste better-faster-cheaper, and more profitably, than
conventional technology. The company competes by doing what the competition
doesn't! It eliminates the source of the contamination problem, works on a
Pay-for-Performance basis, and typically saves its customers 30 to 50% of the
cost and time to cleanup their mess.

To date SSWM has received $5MM from its parent company, U.S. Microbics. These
funds have been used for contract completion as well as identifying specific
niche markets, new business development, developing new application techniques
for bioremediation and procuring engineering resources. During their fiscal year
first quarter ending 12/31/01, SSWM was awarded cleanup contracts of $646,540.
Typical contracts range from 4 to 18 months duration and the company receives
payments as performance milestones are met. Projected contract revenue for the
12 months after projected successful completion of their $5,000,000 financing is
from $12,000,000 to $18,000,000. Over the past twelve months, 162 requests for
proposals were generated and 12 have resulted in work in progress or completions
- an award rate higher than the industry average.

                                       12
<PAGE>

SSWM management collectively has over 75 years of toxic waste cleanup and
project management experience and has been together as a team for over nine
years. At previous companies this team of professionals achieved annual revenue
rates exceeding $30MM and have also worked on projects over $100MM for several
of the major environmental consulting firms. The Company has three offices
nationwide, with employees holding advanced degreed engineers as well as a
registered geologist. They also utilize the business experience and
administration services of their parent company, U.S. Microbics.

SSWM has focused its efforts on new products for the MTBE, and dry-cleaning
fluids cleanup and carbon reactivation markets based upon the new industry
paradigm, "Pay-for-Performance" wherein the company is paid for achieving
project milestone results as opposed to industry-standard time and materials
billing where consultants are paid on a "best efforts" but no guaranteed results
basis. The industry interest for the Pay-for-Performance concept has been
greater than expected, yet SSWM still has to prove the capability of the
engineering group and the technology in specific customer applications.

Any innovative technology validation effort takes time and resources. With this
innovative biotechnology solution SSWM has achieved MTBE demonstration cleanups
in less than 30 days compared to typical industry results of over one year. SSWM
reduced dry-cleaning solvents to regulatory levels in six months compared to
years with little concentration change using conventional technology. SSWM has
also been able to reactivate spent carbon in less than a week to near virgin
levels, a first in the industry.

During 2001 SSWM performed demonstrations of the technology for confidential
Fortune 100 companies. SSWM believes those demonstrations will lead the adoption
of the new paradigm and the use of biotechnology solutions as an industry
standard for MTBE cleanup, dry cleaning fluid cleanup and carbon reactivation.
SSWM estimates the products and services sold into these markets to be greater
than $10 billion per year and SSWM is positioning itself to be a major
technology provider in this arena.

Much of the business development efforts in 2001 were dedicated to identifying
the market niches and products to serve them. SSWM considers its successful
field demonstrations and third party verification as validation of the
technology and is now ready for rollout in 2002 with additional financing which
is underway. After eighteen months the SSWM engineering group and technical
support staff and XyclonyX microbiologists have developed
"better-faster-cheaper" products, which comprise the BAC(TM) and Bio-GAC(TM)
product line. SSWM expects a bright future for this product line and its
contribution to bottom line profits.

SSWM plans to expand its revenue base subject to successful negotiations by
acquiring regional engineering service firms with existing revenue totaling $10
to $25MM. SSWM plans on spending $1-$2MM for its first acquisition which will
expand the engineering services capability, the revenue base and geographical

                                       13
<PAGE>

market area. At that point, SSWM biotechnology solutions will then enhance
profitability by introducing improved solutions that will reduce project cost
and time and increase profitability. SSWM could realize breakeven within 12 to
18 months and profitability after 18 months of closing its current financing
efforts.



RESULTS OF OPERATIONS

FOR THE SIX MONTHS ENDED MARCH 31, 2002 COMPARED TO THE SIX MONTHS ENDED MARCH
31, 2001.

The Company had revenues of $73,387 during the six months ended March 31, 2002,
as compared to $98,341 of revenues for the same period in fiscal 2001. Revenues
for the six months ended March 31, 2001 consisted primarily of bio-remediation
of hydro-carbons in contaminated soil for an oil company and sales of microbial
blends for grease trap remediation.

Selling, general and administrative ("SG&A") expenses for first two quarters of
fiscal year 2002 totaled $1,466,515 compared to $1,547,783 for the same period
in fiscal year 2001. SG&A expenses for the first two quarters of fiscal year
2002 consisted of occupancy, payroll, accounting, legal, consulting, and public
relations expenses.

The Company incurred a net loss of $(1,544,931) and had negative cash flows from
operations of $(870,229) for the six months ended March 31, 2002 compared to a
net loss of $(1,573,234) and negative cash flows from operations of $(724,864)
for the six months ended March 31, 2001. Basic and diluted net loss per share
was $(.06) for the six months ended March 31, 2002 compared to $(.13) for the
six months ended March 31, 2001. The decrease was due to the increase in
weighted average shares outstanding of 23,836,997 for the six months ended March
31, 2002 compared to 11,954,007 for the corresponding six months ended March 31,
2001.

Although the Company is expecting to increase revenues during the last half of
fiscal 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 an additional $5,000,000 from private
placements during the second and third quarters of fiscal 2002. The funds are
targeted to expand the fermentation manufacturing operation and the staffing of
sales subsidiaries. There can be no assurance that the Company will be able to
raise such capital on terms acceptable to the Company, if at all.

                                       14
<PAGE>

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 and services 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.


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

Cash and cash equivalents totaled $ 22,411 and $50,600 at March 31, 2002 and
September 30, 2001, respectively. Net cash used in operations was $870,229 for
the six months ended March 31, 2002, compared to $724,864 for the comparable
period in fiscal 2001.

During the six months ended March 31, 2002, the Company raised $357,625 net of
placement fees of approximately $32,400, from private placements through the
Swartz Equity Line. As of March 31, 2002, the Company has negative working
capital of $1,353,773 as compared to negative working capital of $1,527,034 as
of March 31, 2001, an improvement of $173,261. The Company will need to continue
to raise funds by various financing methods such as private placements to
maintain its operations until such time as cash generated by operations is
sufficient to meet its operating and capital requirements. There can be no
assurance that the Company will be able to raise such capital on terms
acceptable to the Company, if at all.

To date, the Company has financed its operations principally through private
placements of equity securities and debt. Subsequent to March 31, 2002 the
Company has borrowed from related parties $50,000, net of loan fees. The Company
believes that cash generated from anticipated private placements and projected
revenues during the third and fourth quarters of fiscal 2002 will enable it to
fulfill cash needs through fiscal 2003.

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

Under the terms of the investment agreement the company periodically may choose
to sell shares of its common stock to Swartz. If the company elects to sell
shares to Swartz, then the purchase price for such shares will be the lesser of
(i) ninety-two percent (92%) of the lowest closing bid price for the Company's
common stock during the thirty days following the date that the shares are
delivered to Swartz, or (ii) the market price minus $.10 per share. In no event
will the purchase price be less than the designated minimum share price set by
the Company. The number of shares that the Company can sell to Swartz is limited
by specified amounts based upon shares that have traded in the market during
specified periods prior to the sale. If the Company elects not to sell shares to
Swartz, then it may be obligated to pay fees to Swartz of up to $100,000 every
six months. If the investment agreement is terminated by the Company, then the
Company may be obligated to pay fees to Swartz of up $200,000. Each time that
the Company elects to sell shares to Swartz, the Company is obligated to issue
Swartz a warrant to purchase a number of shares equal to fifteen percent (15%)
of the shares sold in the transaction. The warrant is exercisable at one hundred
ten-percent (110%) if the market price for such shares.

                                       15
<PAGE>

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

During the quarter ended March 31, 2002, the Company elected to make sales of
stock to Swartz. In total, 937,500 shares of common stock and warrants to
purchase 140,625 shares of common stock at prices ranging from $.09 to $.25 per
share were issued. Net proceeds to the Company were $151,625.

On April 18, 2002, the Board of Directors authorized the Company to amend its
Articles of Incorporation to issue a new class of stock designated as Series E
Preferred Stock. The new Series Preferred Stock has a par value of $.10 and is
convertible into common stock one year after purchase at the rate of 500 shares
of common stock for each share of Series E Preferred Stock. Fifty thousand
shares of Series E Preferred stock have been authorized. The company may at any
time beginning one year after issuance but not later than three years after
issuance, call for redemption the stock from the holder for one hundred fifty
(150) per cent to two hundred fifty (250) percent of the original purchase price
paid, depending on the length of time the Stock is held. The Company will pay a
cumulative dividend at the rate of 10% per annum to the holders of Series E
Preferred Stock based on the price paid. The first dividend is to be paid at the
end of the first calendar quarter following a three month holding period by the
purchaser. Subsequent to March 31, 2002, the Company realized net proceeds from
the sale of 632.455 shares of Series E Preferred stock for proceeds of $50,000
net of placement fees.

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

During the last half of fiscal 2002, the Company projects expenditures for plant
and equipment of approximately $400,000 and research and development costs of
less than $250,000, assuming the Company raises the needed capital. Research and
development costs will be associated primarily with for specific engineered
field applications. The Company also plans to increase its number of employees
to approximately 30 by the end of fiscal year 2002.

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.

Since September 1998, the Company has raised approximately $13,000,000
principally through private placements of equity securities and debt. Subsequent
to March 31, 2002 the Company has borrowed from related parties $50,000. The
Company believes that it can generate sufficient cash through sources listed

                                       16
<PAGE>

above to continue its operations through September 30, 2002, and anticipates
that cash generated from planned private placements and projected revenues
during the next two quarters of fiscal 2002 will enable it to fulfill cash needs
through fiscal 2003 operations.

Although financing efforts are continuing, 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, may 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.

On November 19, 2001, a lawsuit was filed against the Company by Crosby, Heafey,
Roach and May, a professional legal corporation, for unpaid legal services
provided in the amount of $88,864, including attorneys' fees. The Company was
served with the lawsuit on January 7, 2002. The Company filed a response on
February 5, 2002, alleging among other things that the billings by the law firm
were excessive. The Company is currently in negotiations with the law firm to
settle the suit.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

In addition to the 937,500 shares issued to Swartz, to conserve cash, through
May 10, 2002, the Company pursuant to an S-8 filing has issued 1,517,959 shares
of common stock to employees in lieu of payroll and 560,367 shares to
consultants for services performed for the Company. Additionally, 3,787,754
shares of common stock were issued to officers in repayment of notes payable
totaling $371,200. An additional 1,003,667 shares of common stock were issued to
holders of 10,037 shares of Series C and D Preferred Stock which were converted
into common stock. Another 1,525,452 shares were issued to holders of notes
payable and 100,000 shares were issued to compensate a shareholder who provided
a letter of credit in lieu of a performance bond on a contract of
wholly-subsidiary Sub Surface Waste Management.

                                       17
<PAGE>


ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

        None


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        None


ITEM 5. OTHER INFORMATION.

SUBSEQUENT EVENTS:

To date, the Company has financed its operations principally through private
placements of equity securities and debt. Subsequent to March 31, 2002 the
Company has borrowed $50,000 from related parties.

On April 18, 2002, the Board of Directors authorized the Company to amend its
Articles of Incorporation to issue a new class of stock designated as Series E
Preferred Stock. The new Series Preferred Stock has a par value of $.10 and is
convertible into common stock one year after purchase at the rate of 500 shares
of common stock for each share of Series E Preferred Stock. Fifty thousand
shares of Series E Preferred stock have been authorized. The Company may at any
time beginning one year after issuance but not later than three years after
issuance, call for redemption the stock from the holder for one hundred fifty
(150) per cent or two hundred fifty (250) percent of the original purchase price
paid, depending on the length of time the Stock is held. The Company will pay a
cumulative dividend at the rate of 10% per annum to the holders of Series E
Preferred Stock based on the price paid. The first dividend is to be paid at the
end of the first calendar quarter following a three month holding period by the
purchaser. Subsequent to March 31, 2002, the Company realized net proceeds from
the sale of 632.455 shares of Series E Preferred stock for proceeds of $50,000
net of placement fees.

On April 25, 2002, Sub Surface Waste Management, Inc. (SSWM), a wholly owned
subsidiary, entered into a Know-How & License Agreement with MFG, Inc., a Tetra
Tech Company, located in Irvine California. MFG Inc. and its parent, Tetra Tech
Company (NASDAQ NM:TTEK) is a national environmental engineering firm who will
market Bio-GACTM and BACTM bio-reactivation carbon recycling system throughout
the U.S. and Mexico . It is anticipated that this Licensing Agreement will
provide immediate market visibility and distribution of the technology through a
leading resource management consultant and technical services provider with
access to both private and public sector clients.

In April, SSWM began installing its soil and groundwater cleanup system at the
Little Country Chevron site in South Carolina. The contract of $166,540 was
awarded in late 2001 by the South Carolina Department of Health & Environmental
Control under the State's on-going Underground Storage Tank rehabilitation
program. SSWM will employ its U.S. patented treatment system for the clean up of
hydrocarbon-based materials "in-situ" or under the ground.

In early May of 2002, SSWM received confirmation from the State of California
that its bio-reactivation recycling technology for activated carbon filtration
media, when used by a fully permitted facility, is exempt from permitting under
California's Hazardous Waste Control Law. This exemption opens the door for use
of the technology by the Petroleum, Chemical, Manufacturing, Pharmaceutical and
Environmental Cleanup Industry who have been hesitant to incorporate new

                                       18
<PAGE>

technology which could require extensive and expensive modifications to existing
permit conditions.

In connection with the Little Country Chevron contract award, a shareholder of
U.S. Microbics, Inc., provided an Irrevocable Letter of Credit ("IRC") in the
amount of $166,540 in favor of the State of South Carolina, in lieu of a SSWM
posting a performance bond. The shareholder was issued 100,000 shares of
restricted common stock as a fee for providing the IRC and also holds 10,000
shares of Series D Preferred Stock as collateral for the IRC during the contract
period. In the event that SSWM fails to successfully complete this contract, the
shareholder can convert the 10,000 shares of Series D Preferred stock held into
1,000,000 shares of common stock.


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

The Company filed a Current Report on Form 8-K on March 21, 2002 engaging Singer
Lewak Greenbaum & Goldstein LLP as its independent certifying accountant
effective March 20, 2002 dismissing Bradshaw, Smith & Co. LLP its prior
independent certifying accountant, as of the same date. The change in
independent certifying accountant was approved by the Board of Directors of
Registrant on March 20, 2002.


                                   SIGNATURES

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


                                                  U.S. MICROBICS, INC.


Date: May 20, 2002                    By:  /s/ Robert C. Brehm
                                         ---------------------------------------
                                         Robert C. Brehm, President and
                                         Chief Executive Officer

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

                                       19