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 quarterly period ended June 30, 1998.

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

For the transaction period from                  To
                                ----------------     ----------------

Commission File Number       0-14213


                              U.S. MICROBICS, INC.
                     (Formally Global Venture Funding, Inc.)
                  -------------------------------------------
                 (Name of small business issuer in its charter)


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

             6965 El Camino Real, Suite 105-279, Carlsbad, CA 92009
             ------------------------------------------------------
                    (Address of principal executive offices)


                    Issuer's telephone number (760) 436-5485
                                               --------------


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  issuer was  required  to file such  report),  and (2) has been
subject to such filing requirements for the past 90 days. Yes   x     No
                                                              -----      -----


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.



          Class                                 Outstanding at July 31, 1998
----------------------------                   ----------------------------
Common Stock $.0001 par value                           3,423,980


<PAGE>
<TABLE>
<CAPTION>

                               U.S. Microbics Inc.
                                and Subsidiaries
                     (Formerly Global Venture Funding, Inc.)
                           Consolidated Balance Sheets
                   As of June 30, 1998 and September 30, 1997

                                     ASSETS
                                     ------
                                                                                 June 30,          September 30,
                                                                                  1998                 1997
                                                                                (unaudited)          (audited)
                                                                                -----------          ---------
<S>                                                                           <C>                  <C>  
Current assets:    
     Cash                                                                     $   549,819         $     1,700
     Accounts receivable - trade                                                      3,534                --
     Inventory                                                                        2,475                --
     Prepaid expenses and other assets                                              360,641              28,000
                                                                                -----------         -----------

          Total current assets                                                      916,469              29,700

Plant and equipment - Note 2                                                         39,887              36,200

Available for sale securities - Note 6                                               30,000                   _
                                                                                -----------         -----------

          Total assets                                                          $   986,355         $    65,900
                                                                                ===========         ===========


                                      LIABILITIES AND STOCKHOLDERS' EQUITY
                                      ------------------------------------

Current liabilities:
     Notes payable - Note 3                                                     $      --           $    75,400
     Accounts payable and accrued liabilities                                       107,656              88,300
     Net liabilities of discontinued operations                                        --                76,900
                                                                                -----------         -----------

          Total current liabilities                                                 107,656             240,600

Stockholders' equity (deficit) - Note 5:
     Convertible preferred stock, $.10 par value authorized 20,000,000 shares:
          Series II; authorized 500,000 shares; issured and outstanding
             21,809 and 22,519 (aggregate liquidation preference of
             $21,809 and $22,519                                                      2,181               2,300
          Series B; authorized 500,000 shares; issured and outstanding
             17,606 and 18,655 (aggregate liquidation preference of
             $17,606 and $18,655)                                                     1,761               1,900
          Series C; authorized 500,000 shares; issured and outstanding
             15,960 and 3,240 (aggregate liquidation preference of
             $1,596,000 and $324,000)                                                 1,596                 300
          Series D; authorized 500,000 shares; issured and outstanding
             20,513 and 17,138 (no liquidation preference)                            2,051               1,700
     Common stock $.0001 par value; authorized 150,000,000 shares;
          issured and outstanding 3,248,273 and 1,447,929                               325                 200
     Additional paid-in capital                                                   2,696,424           1,928,000
     Stock options                                                                  898,237             187,700
     Treasury stock                                                                    --                (1,000)
     Unrealized loss on investment                                                 (220,000)               --
     Accumulated deficit                                                         (2,503,875)         (2,295,800)
                                                                                -----------         -----------

          Total stockholders' equity (deficit)                                      878,699            (174,700)
                                                                                -----------         -----------

          Total liabilities and stockholders' equity (deficit)                  $   986,355         $    65,900
                                                                                ===========         ===========

                                                         1


</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                   U.S. Microbics Inc.
                                                    and Subsidiaries
                                          (Formerly Global Venture Funding, Inc.)
                                          Consolidated Statements of Income
                                 For the Nine Months and Quarters Ended June 30, 1998 and 1997


                                                        For the Nine                      For the Three
                                                    Months ended June 30,              Months ended June 30,
                                                  ----------------------------      ----------------------------
                                                     1998             1997              1998             1997
                                                  -----------      -----------      -----------      -----------
<S>                                               <C>              <C>              <C>              <C>      
Revenues                                          $   259,124      $     1,385      $      --        $      --

Cost of revenues                                          193            3,000             --               --
                                                  -----------      -----------      -----------      -----------

Gross margin                                          258,931           (1,615)            --               --

Selling, general and
         administrative expenses                      412,364          337,857          138,763              404
                                                  -----------      -----------      -----------      -----------

Income (loss) from operations                        (153,433)        (339,472)        (138,763)            (404)
                                                  -----------      -----------      -----------      -----------

Other expenses:
         Interest related parties                        --             25,906             --               --
         Interest expense                              54,642             --              4,833
         Depreciation                                    --                302             --               --
                                                  -----------      -----------      -----------      -----------

Net income (loss) from continuing
         operations before taxes                     (208,075)        (365,680)        (143,596)            (404)

Provision for income taxes                                --               --               --               --
                                                  -----------      -----------      -----------      -----------


Net profit (loss) from continuing                    (208,075)        (365,680)        (143,596)            (404)
         operations

Discontinued operations                                   --               --               --               --
                                                  -----------      -----------      -----------      -----------

Net income (loss)                                 $ (208,075)      $  (365,680)     $  (143,596)     $      (404)
                                                  ===========      ===========      ===========      ===========

Basic earnings per share
Net income (loss) per common share                $     (0.12)     $     (0.09)     $     (0.08)     $      Nil


Weighted average common shares                      1,785,348        3,909,645        1,785,348        3,909,645




                                                          2

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                        U.S. Microbics Inc.
                                                          and Subsidiaries
                                               (Formerly Global Venture Funding, Inc.)
                                                 Consolidated Statements of Cash Flows
                                      For the Nine Months and Quarters Ended June 30, 1998 and 1997


                                                                               For the Nine                 For the Three
                                                                          Months ended June 30,            Months ended June 30,
                                                                     ----------------------------     -----------------------------
                                                                         1998            1997              1998           1997
                                                                     -----------      -----------      -----------      -----------
Cash flows from operating activities:
<S>                                                                  <C>              <C>              <C>              <C>         
      Net income (loss)                                              $  (208,075)     $  (365,680)     $  (143,596)     $  (109,889)
      Depreciation                                                          --                302             --                302
      Adjustments to reconcile net income
           (loss) to net cash (used( by
           opetating activities:
           (Increase) decrease in:
               Accounts receivable - trade                                (3,534)            --            250,000             --
               Inventory                                                  (2,475)            --               --               --
               Stock options exercised                                    20,000           30,000           20,000
               Prepaids, deposits and other assets                      (332,641)           1,059         (360,141)             130
           Increase (decrease) in:
               Notes payable                                             (75,400)            --            (25,000)            --
               Acccounts payable and accrued liabilities                  19,393           69,488           56,884           40,771
               Net liabilities of discontinued operations
               Common stock subscriptions payable
                                                                     -----------      -----------      -----------      -----------

           Net cash flows by operating activities                       (582,732)        (264,831)        (201,853)         (68,686)

Cash flows from financing activities:
      Issuance of common stock and preferred stock
           in exchange for services                                      619,337           27,191          391,834             --
      Proceeds from issuance of common and preferred
           stock net of placement fees                                   518,402           76,620          350,902             --
      Proceeds from issuance of long-term debt                              --            136,856             --            141,953
      Exchange of common stock for note payable                           25,799             --             25,799             --
      Cancellation of treasury stock                                       1,000             --               --
      Repayments of Notes payable                                           --             (6,156)            --            (63,123)
                                                                     -----------      -----------      -----------      -----------

      Net cash flows from financing activities                         1,164,538          234,511          768,535           78,830

Cash flows from investing activities
      Purchase of leasehold improvements and equipment                    (3,687)         (18,107)          (2,095)         (18,107)
      Increase in investments net of unrealized loss                     (30,000)            --            (30,000)            --
                                                                     -----------      -----------      -----------      -----------

      Net csh flows from investing activities                            (33,687)         (18,107)         (32,095)         (18,107)

INCREASE (DECREASE) IN CASH FLOWS                                        548,119          (48,427)         534,587           (7,963)
CASH AT BEGINNING OF PERIOD                                                1,700           49,800           15,232            9,336
                                                                     -----------      -----------      -----------      -----------

CASH AT END OF PERIOD                                                $   549,819      $     1,373      $   549,819      $     1,373
                                                                     ===========      ===========      ===========      ===========





                                                         3
</TABLE>

<PAGE>



1. Basis of presentation and accounting policies:

     Organization and basis of presentation:

     Global Venture  Funding,  Inc. (the "Company" or "GVF") was incorporated in
     Colorado on December 7, 1984 under the name of Venture Funding Corporation.
     The  Company  was formed for the  purpose of  acquiring  or merging  with a
     privately held business.  The Company completed its registered  offering on
     form S-18 on October 17, 1985. The stock was traded in the OTC market.

     On May 8, 1992, a "Certificate of Assumed or Trade Name" was filed with the
     Colorado  Secretary  of State to record the trade  name of "Global  Venture
     Funding, Inc." On June 18, 1993, the Articles of Incorporation were amended
     and the name of the Company was changed to Global Venture Funding,  Inc. In
     April of 1998, the Articles of  Incorporation  were amended and the name of
     the company was changed to U.S.  Microbics,  Inc.,  (USMX),  the name under
     which the company now transacts business.

     From May 1996 to  October  1997,  USMX was  pursuing  opportunities  in the
     prepaid  cellular  communications  business via an acquired  subsidiary  in
     Atlanta,  a  national  support  center  in Las  Vegas,  and a retail  store
     operation in Houston,  TX. The Atlanta operation was closed in 1996 and the
     national  support  center in 1997.  The Houston  operation  was sold to its
     existing  management in December 1997 with an effective date of October 31,
     1997.

     On July 17, 1997,  Robert Brehm became CEO and changed the direction of the
     company.  The Board of Directors  authorized a one for twenty reverse split
     of all classes of the stock effective on August 20, 1997. USMX has a fiscal
     year  ending  in  September  and is  currently  building  an  environmental
     conglomerate based upon the microbial technology acquired from XyclonyX.

     On August 30, 1997, USMX acquired XyclonyX,  a microbial technology company
     with  headquarters in La Jolla,  CA. XyclonyX was acquired to capitalize on
     the prior  commercial  success of the existing  management  with  microbial
     technology applications in oil recovery,  environmental cleanup,  hazardous
     waste management and agricultural applications. USMX operates XyclonyX as a
     separate  profit  center with its own  management  and  technology.  During
     fiscal  1998,  USMX created  another  subsidiary,  West Coast  Fermentation
     Center,  to  cultivate  microbial  cultures  that are  sold to third  party
     licensees and other  subsidiaries  of USMX. In November  1997,  USMX formed
     Sub-Surface Waste Management, a wholly owned subsidiary whose purpose is to
     manufacture  and sell the patented  Bio-RaptorTM  technology  licensed from
     XyclonyX.  During the second quarter, USMX also formed Sol Tech Corporation
     and  Bio-Con  Microbes  as wholly  owned  subsidiaries  to reach the sewage
     treatment and agriculture markets.

     The Company is in the process of arranging and obtaining private and public
     financing  for  additional  equity to provide  working  capital for current
     overhead  costs as well as to  finance  start-up  costs  of its West  Coast
     Fermentation  Center,  XyclonyX,  Bio-Con  Microbes,  and Sub-Surface Waste
     Management operating subsidiaries.

     Consolidated Subsidiaries:
     The consolidated  financial statements include the accounts U.S. Microbics,
     the  parent  company,  and  the  wholly  owned  subsidiaries  of  XyclonyX,
     Sub-Surface Waste Management,  Inc., West Coast  Fermentation  center,  and
     Bio-Con  Microbes.   All  material  intercompany   transactions  have  been
     eliminated in consolidation.

     Income taxes:
     The Company has implemented the provisions on SFAS No. 109, "Accounting for
     Income  Taxes." SFAS No. 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.  The adoption of this provision by the Company
     has not required any adjustment to the financial statements presented.

     Net earnings per common share:
     Net  earnings  per common share is computed by dividing net earnings 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  (calculated  using the
     treasury stock method).
                                       4

<PAGE>
     In February 1997, the Financial Accounting Standards Board issued Financial
     Accounting  Standards  No. 128 ("SFAS 128"),  Earnings Per Share,  which is
     effective for periods  ending after  December 15, 1997.  At that time,  the
     Company  will be  required to change the method  currently  used to compute
     earnings  per  share  and to  restate  all  prior  periods.  Under  the new
     requirements  for  calculating  primary  earnings per share,  which will be
     referred  to as basic  earnings  per share,  the  dilutive  effect of stock
     options and warrants will be excluded. Diluted earning per share as defined
     in SFAS 128 is similar to fully  diluted  earnings  per share as defined in
     APBO No. 15 "Earnings Per Share". The impact of SFAS 128 on the calculation
     of basic and diluted  earnings  per share for 1997 and 1996 is not expected
     to be material.

     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 any long-term debt, to related parties  approximates fair
     value.

2. Property and Equipment

     Property and  equipment  consists  principally  of a fermentor  and related
     accessories  that were  acquired as part of the  Company's  acquisition  of
     XyclonyX.  As of June,  1998,  the assets had not been placed in service in
     service and no depreciation has been taken.

3. Notes Payable

     Notes payable consists of one unsecured note, to a related party,  that was
     converted to equity in May 1998.

4. Business acquisition and discontinued operations:

     On August 30, 1997, the Company  completed the acquisition of XyclonyX in a
     transaction  accounted for in a manner similar to a purchase. In accordance
     with accounting principles associated with a transaction where the acquired
     company is  considered  a promoter in the founding  and  organizing  of the
     business, the acquired business assets were recorded at the historical cost
     basis of the predecessor.  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.

     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.

     5. Stockholders' Surplus:

     The authorized  capital stock of the Company consists of 150,000,000 shares
     of Common Stock,  $.0001 par value and 20,000,000  shares Preferred Stock ,
     $.10 par value.

     Common Stock

     As  of  June  30,  1998,   there  are  3,248,273  shares  of  Common  Stock
     outstanding.  Holders  of Common  Stock are  entitled  to one vote for each
     share  held  of  record  on  all  matters   submitted  to  a  vote  of  the
     stockholders.  Holders of Common Stock are entitled to receive ratably such
     dividends as may be declared by the Board of Directors out of funds legally
     available therefor.  In the event of a liquidation,  dissolution or winding
     up of the Company, holders of Common Stock are entitled to share ratably in
     all assets  remaining  after  payment of  liabilities  and the  liquidation
     preference of any then outstanding  Common stock, if any. Holders of Common
     Stock  have  no  right  to  convert  their  Common  Stock  into  any  other
     securities.  The  Common  Stock  has no  preemptive  or other  subscription
     rights.  There are no redemption or sinking fund  provisions  applicable to
     
                                       5
<PAGE>



     the Common  Stock.  All  outstanding  shares of Common  Stock are,  and the
     Common Stock to be  outstanding  upon  completion of this Offering will be,
     duly authorized, validly issued, fully paid and nonassessable.

     Preferred Stock

     The Board of Directors has the  authority,  without  further  action of the
     stockholders, to issue up to 20,000,000 shares of Preferred Stock, $.10 par
     value, as follows as of June 30, 1998:

     As of June 30, 1998,  500,000 shares have been designated as Series II, and
     of which  21,809  shares of  Series  II are  currently  issued  and  remain
     outstanding.  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 250 shares (or 5%) of each 5,000
     share  unit to 2,500  shares  of common  stock.  The  shareholder  shall be
     entitled to convert the balance of each unit of Series II Preferred  shares
     at the  conversion  rate of 475 shares of each unit during  each  six-month
     period thereafter beginning July 1, 1997.

     As of June 30, 1998,  500,000 shares have been  designated as Series B, and
     of  which  17,606  shares  of  Series B are  currently  issued  and  remain
     outstanding.  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 250 shares
     (or 5%) of each  5,000  share  unit to 1,250  shares of common  stock.  The
     shareholder shall be entitled to convert the balance of each unit of Series
     B Preferred shares at the conversion rate of 475 shares of each unit during
     each six-month period thereafter beginning July 1, 1997.

     As of June 30, 1998, 50,000 shares have been designated as Series C, and of
     which 15,960 shares of Series C are currently issued.  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.

     As of June 30, 1998, 50,000 shares have been designated as Series D, and of
     which  20,513  shares  of  Series  D  are   currently   issued  and  remain
     outstanding.   The  Series  D  preferred   stock  carries  no   liquidation
     preferences and is subject to forfeiture prior to conversion. Each Series D
     preferred  share may be  converted  to 100 shares of Common  stock  after a
     specified holding period of one year.

     The Company has reserved  17,500,000  shares of its $.0001 par value Common
     stock for  conversion  of  Preferred  stock and  exercise of stock  options
     assuming  the maximum  number of shares of each class of  preferred  shares
     were issued and converted.  Based upon the issued and outstanding preferred
     shares as of June 30, 1998,  the  equivalent  number of common shares which
     can be converted from preferred  shares by class is as follows:  Class II -
     218,092, Class B - 88,030, Class C - 1,596,000, Class D - 2,051,300.

     The Board of  Directors  of the  Company  has  authority  to issue all or a
     portion  of the  authorized  but  unissued  preferred  stock in one or more
     series and to fix the  rights,  preferences,  privileges  and  restrictions
     thereof, including dividend rights, conversion rights, voting rights, terms
     of   redemption,   liquidation   preferences   and  the  number  of  shares
     constituting any series or the designation of such series.  The issuance of
     Preferred  Stock  could  adversely  affect the  voting  power of holders of
     Preferred  Stock  and  could  have the  effect of  delaying,  deferring  or
     preventing a change in control of the Company.

6. Revaluation of Investment Stock
     The Company  revalued its investment in restricted  Common Stock  Available
     for Sale to the market  value as of June 30, 1998.  The original  value was
     $250,000 and the value at June 30, 1998 was $30,000 resulting in a $220,000
     unrealized  charge to  shareholders'  equity  of the  Company.  The  actual
     realized  gain or loss to the company will be  determined  upon the sale or
     other  disposition of the investment.  This accounting entry did not effect
     the company's income statement or cash flows.


                                       6
<PAGE>


     Stock Options:
     --------------

     For the period beginning June 30, 1998 and ending June 30, 1997:

     Stock  options were granted to various  consultants  involved  with capital
     raising,  marketing,  technical support, and investor relations.  The stock
     options were issued at various  exercise prices ranging from $.75 to $1.50.
     Several  officers of the company were granted  options with exercise prices
     ranging  from $2.00 to $10.  Steve  Hopkins was granted  options of 200,000
     shares  at  $2.00  and  50,000  shares  at  $2.50  as part of his  $500,000
     investment. An existing shareholder exercised $20,000 of options at $75 per
     share and was issued 267 shares of Series C Preferred Stock


     For the period beginning June 30, 1997 and ending June 30, 1998:

     The Company issued options during the year for consulting services, fees in
     connection with obtaining financing and various other services to employees
     and non-employees.

         Stock options and warrants summary information:

     Activity of options and warrants granted is as follows:

                                                  Options and warrants
                                                     outstanding
                                              -------------------------------
                                                                 Weighted
                                                                  average
                                            Shares             exercise price
                                          ---------            --------------
       Balance, December 31, 1995                 0                    0
       Granted                               25,000                $6.20
       Balance December 31, 1996             25,000                $6.20
       Granted                            1,480,400                $2.59
       Exercised                           (15,000)                $2.00
       Balance December 31, 1997          1,490,400                $2.77
       Granted                               26,700                $0.75
       Expired                            (247,900)                $0.72
       Balance March 31, 1998             1,269,200                $3.15
       Exercised                           (26,700)                $0.75
       Granted                            1,250,000                $3.10
       Balance June 30, 1998              2,492,500                $3.14
       Exercisable, June 30, 1998         2,452,500                $3.19

     The following is a summary of options and warrants  outstanding at June 30,
1998:
<TABLE>
<CAPTION>

                        Options and warrants outstanding                            Options and warrants exercisable
                        --------------------------------                            --------------------------------
     
         Range of            Number        Weighted average   Weighted average           Number        Weighted average
      exercise prices      outstanding         remaining       exercise price          exercisable      exercise price
                                           contractual life
                                                (years)
     --------------------------------------------------------------------------------------------------------------------
<S>             <C>        <C>                <C>                <C>                <C>                  <C>  
          $ .10 - .75        195,000            1.28               0.55               155,000              $0.66
                $1.00        325,000            4.22               1.00               325,000               1.00
                $1.50        550,000            0.97               1.50               550,000               1.50
                $2.00        475,000            4.65               2.00               475,000               2.00
                $2.50         50,000             4.9               2.50                50,000               2.50
                $3.00        225,000            4.37               3.00               225,000               3.00
                $4.00        225,000            4.37               4.00               225,000               4.00
                $5.00        225,000            4.37               5.00               225,000               5.00
               $10.00        203,150            4.43              10.00               203,150              10.00
               $20.00         10,000            2.54              20.00                10,000              20.00
               $60.00          9,350            1.23              60.00                 9,350              60.00
                           2,492,500            3.41         $     3.14             2,452,500              $3.19

</TABLE>
                                                        7
<PAGE>


     The Company  accounts for stock  compensation  to  non-employees  under the
     provisions  of FAS  123,  "Accounting  for  Stock-Based  Compensation."  As
     allowed  by FAS  123,  the  company  has  elected  to  continue  to  follow
     Accounting Principals Board Opinion No. 25, "Accounting For Stock Issued To
     Employees"  (APB 25) in  accounting  for its employee  stock option  plans.
     Under APB 25, the company does not  recognize  compensation  expense on the
     issuance of its stock  options  because the option  terms are fixed and the
     exercise price equals the market price, or greater, of the underlying stock
     on the grant date.

     As  required  by  FAS  123,  the  company  has   determined  the  pro-forma
     information  as if the company had  accounted  for stock  options under the
     fair value method of FAS 123. Had the fair value method of accounting  been
     applied to the company's stock option plan, the  tax-effected  impact would
     be as follows:

                           Nine Months ending 6/30/98
                           --------------------------
           
           Net Income as reported                             $(208,075)
           Estimated   fair   value  of  the                  $(916,700)
           option grants, net of tax
           Net Income Adjusted                               $(1,124,775)
           Adjusted net income per share                           $(.63)
           weighted average common outstanding of 1,785,348 shares)

     The fair value of each  option and warrant is  estimated  as of the date of
     the grant using the  Black-Sholes  option  pricing model with the following
     assumptions:

         Expected stock price volatility               274.4
         Expected option/warrant lives            .5-5 years
         Expected dividend yields                        --
         Risk-free interest rates                 5.00-5.50%

     The weighted average fair value of options/warrants granted was $.73.

6. Related party transactions:

     Office space and administrative support:

     Since  July,   1997,  the  Company  is  provided  office  space  and  other
     administrative  support  services  at a cost of $750 per  month by  various
     corporations under the control of the president of the Company, a principal
     stockholder.


                                       8



<PAGE>
                                 PART I - Item 2

Management's Discussion and Analysis of Financial Condition
 and Results of Operations
--------------------------------------------------------------------------------

Overview
During the quarter  ended June 30, 1998,  the Company  efforts were  directed to
fund  raising,  building  organizational  infrastructure,   and  finalizing  the
manufacturing  site for  occupancy  during the fourth  quarter.  Buildout of the
facility is expected to be  complete by the end of the  calendar  year,  however
blending  operations  should  commence within the fourth quarter thus generating
revenue for the company.

Results of Operations
---------------------

Quarter Ended June 30, 1998 compared to the June 30, 1997.
During the quarter  ended June 30, 1997 the  Company was  developing  its retail
store  strategy in Houston and had no revenues and an operating  loss of $(404).
During  the  quarter  ended  June 30,  1998,  the  Company  was  developing  its
manufacturing  plans, raising capital and orchestrating a strategic plan for its
subsidiaries.  The Company  incurred a net operating  loss for the quarter ended
June 30,  1998 of  $143,596.  Selling,  general  and  administrative  (S, G & A)
expenses  for the quarter  ending on June 30,  1997  totaled  $404 as  operating
activity had ceased.  S, G & A expenses for the period ending June 30, 1998 were
comprised of accounting,  legal, public relations,  and expenses associated with
the new subsidiaries startup and organization.

There was no interest  expense for related parties during the quarter ended June
30, 1997 and 1998 respectively. Interest expense for the quarter ending June 30,
1998,  was  $4,833  and  consisted  of  interest   associated  with  notes  from
consultants that were settled with stock and cash payments during the quarter.

There  was no  provision  for  income  taxes in  either  1997 or 1998 due to the
existence  of net  operating  loss  carry  forwards  from prior  years,  and the
likelihood of the Company  being able to utilize  these net operating  losses in
the future.  Net loss per share  increased from a loss of $0.01 to $0.12 in June
30, 1998 compared to 1997  primarily due to the increased  activity in preparing
for  fully  scale   operating   activity  in  the   marketing,   production  and
administrative  sections  of the  Company.  Manufacturing  is  expected to began
during  the final  quarter  of  fiscal  1998 as the  Company  begins to fill its
letters of intent for Bio-Raptors(TM).

The Company is also seeking new business  opportunities  that may be acquired or
developed  internally.  Based on the current  status of the Company,  additional
capital  will be  required in order for the  Company to  complete  any  business
acquisitions or development, or to maintain their ongoing operations.

Liquidity and Capital Resources
-------------------------------
Cash and equivalents  totaled $549,819 and $1,700 at June 30, 1998 and September
30, 1997 respectively. During the quarter ending June 30, 1998, net cash used by
operating  activities totaled $201,853 compared to $68,686 in the same period in
1997.  Operating  activities  includes  payments for accounting,  legal fees and
professional   services.  Net  Working  Capital  (Current  Assets  less  Current
Liabilities)  was $878,699 as of June 30, 1998.  As of September  30, 1997,  net
working  capital  was $ (174,700)  The  company  was able to convert  most notes
payable  and much of the  accounts  payable to stock at values of  approximately
$1.00 per share during  fiscal 1998.  Additional  working  capital was generated
from Private Placement Equity sales.

To date the Company has financed its operations  principally  through borrowings
and private  placements of equity  securities and debt. During the third quarter
of 1998,  the  Company  raised  $518,402,  net of  placement  fees in a  private
placement for which Common stock and series C and D, Preferred stock was issued.
The Company  will need  additional  capital to continue its  existence  and will
endeavor to raise sufficient funds through the sale of shares, licensee fees, or
other means.

Non-cash investing and financing activities
-------------------------------------------
For the quarter ending June 30, 1998:
Preferred  shareholders  exercised  their right to convert  Series II  Preferred
stock and Series B Preferred  stock to common stock.  Under the  conversion  950
shares of Series II preferred  were  converted to 475 shares of common stock and
7,000  shares of Series B  preferred  stock were  converted  to 1,750  shares of
common stock.

                                       9

<PAGE>


During the quarter,  14,000 shares of Series D preferred stock, held by officers
of the company,  were  converted to restricted  common stock.  A consultant  was
issued 2,300 shares of Series D preferred stock under the terms of a performance
consulting agreement that provides for stock cancellation for non-performance.

The company  converted  the $25,000 note plus interest to 344 shares of Series C
Preferred stock.

For the period ending June 30, 1997:
During the quarter  ended June 30,  1997,  3,876  shares of Series II  preferred
stock and 4,825 shares of Series B preferred  stock were  converted  into 62,885
shares of common stock.

Future Funding Requirements
---------------------------
The Company's  working  capital and other capital  requirements  during the next
year or more will vary based on a number of factors, including the rate at which
microbial  products  are shipped and  generate  profits,  the level of sales and
marketing activities for environmental  products, and the level of effort needed
to  develop  additional   distribution  channels  to  the  point  of  commercial
viability.

Employees
---------
As of June 30, 1998,  the Company had 3 full-time  employees  and many part time
consultants.  By  September  30,  1998,  the  Company  expects to  significantly
increase  the  number  of  employees,  principally  in  microbial  manufacturing
operations,  and  sales  and  marketing  through  operating  subsidiaries.   The
Company's  employees  are not  represented  by a  labor  union  and the  Company
believes its employee relations are good.

Factors Affecting Future Performance
------------------------------------
From time to time, in reports filed with the Securities and Exchange Commission,
in press releases,  and in other communications to shareholders or the investing
public,  the Company may comment on anticipated  future  financial  performance.
Such  forward  looking  statements  are  subject  to  risks  and  uncertainties,
including but not limited to, the impact of  competitive  products and services,
technological  changes in the Company's industry,  the ability of the Company to
develop and successfully  deploy it's products  through a distribution  network,
the Company's ability to attract and retain customers, product demand and market
acceptance risks, reliance on key strategic alliances, fluctuations in operating
results, delays in development of highly complex products and services and other
risks  detailed  from  time to time in USMX's  filing  with the  Securities  and
Exchange  Commission.  These risks could cause the company's  actual results for
1998 and beyond to differ materially from those expressed in any forward looking
statements made by, or on behalf of, the Company.

Although the environmental technology opportunities are numerous and the Company
enjoys Letters of Intent for its products,  and the company has shipped products
and has licensed its technology,  the ability to finance,  build and manufacture
the  microbial  blends has not yet commenced  although  plans to startup a pilot
plant  operation  indicate  such a plant could be in  operation  as soon as June
1998. The Company's failure to operate such a plant in a profitable manner could
materially  effect the financial  results and the amount of capital  required to
operate the business in the future.



                                       10

<PAGE>


                                     PART II
Item 1 - Legal Proceedings
--------------------------

There are no known legal  proceedings to which the Company is a party as of June
30, 1998

Item 2 - Changes In Securities
------------------------------

None

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
----------------------------------------------

A  registration  Statement on Form S-8 respecting  the  registration  of 150,000
shares of the Common  stock of the Company  issued  under the  employee  benefit
plans was filed with the Securities Exchange Commission on July 20, 1998.

The company  entered into a lease for 22,000 square feet of office and warehouse
space at a lease rate of $15,250 pre month for 60 months.

On July 1, 1998 Stephen Hopkins was appointed a Director.

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

     (a)  None

     (b)  Reports on Form 8-K - Steve Hopkins, New Director filed July 24, 1998.

     (c)  None.

     (d)  Subsidiaries of Registrant as of June 30, 1998 -XyclonyX - 100% owned,
          Sub-Surface  Waste Management,  Inc. - 100% owned.  Bio-Con Microbes -
          100% owned,  West Coast  Fermentation  Center - 100%  owned,  Sol Tech
          Corporation - 100 % owned.

                                   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:   08/14/98                         By:   /s/  Robert C. Brehm
                                               ---------------------------------
                                               Robert C. Brehm, President

                                       11