U S LABORATORIES INC, SB-2/A, 1999-01-08

U S LABORATORIES INC
SB-2/A, 1999-01-08
TESTING LABORATORIES

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<PAGE>

As filed with the Securities and Exchange Commission on January 8, 1999
File Number 333-66173

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933

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

U.S. LABORATORIES INC.
(Name of small business issuer as specified in its charter)

Delaware 8734 33-0586167
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

7895 Convoy Court, Suite 18
San Diego, California 92111
(619) 715-5800
(Address and telephone number of principal executive offices)

Dickerson Wright, Chief Executive Officer
U.S. Laboratories Inc.
7895 Convoy Court, Suite 18
San Diego, California 92111
(619) 715-5800
(Name, address, and telephone number of agent for service)

Copies to:

Evelyn Arkebauer, Esq. Thomas R. Blake, Esq.
Joseph Lesko, Esq. Camner, Lipsitz & Poller, P.A.
Foley & Lardner 550 Biltmore Way, Suite 700
402 W. Broadway, Suite 2300 Coral Gables, Florida 33134

<PAGE>

San Diego, California 92101 (305) 442-4994
(619) 234-6655

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering under
Rule 462(b) under the Securities Act of 1933, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed under Rule 462(c) under the
Securities Act of 1933, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [ ]

If this Form is a post-effective amendment filed under Rule 462(d) under the
Securities Act of 1933, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [ ]

If delivery of the prospectus is expected to be made under Rule 434, please
check the following box. [ ]

<PAGE>

SUBJECT TO COMPLETION DATED JANUARY 8, 1999

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

<PAGE>

U.S. LABORATORIES INC.
1,100,000 UNITS

[LOGO]
1,100,000 SHARES OF COMMON STOCK AND
REDEEMABLE WARRANTS TO PURCHASE 1,100,000 SHARES
OF COMMON STOCK
$6.00 PER UNIT

U.S. Laboratories Inc.
7895 Convoy Court, Suite 18
San Diego, California 92111
Telephone number (619) 715-5800

THE OFFERING

<TABLE>
<CAPTION>
PER UNIT TOTAL
----------- ------------
<S> <C> <C>
Public Price $ 6.00 $ 6,600,000
Underwriting discounts $ .60 $ 660,000
Proceeds to U.S. Labs $ 5.40 $ 5,940,000
</TABLE>

The Underwriters have the option to purchase an additional 165,000 Units,
subject to certain terms and conditions. See "Underwriting."

We are an engineering services holding company that offers engineering and
design services, project management, construction quality control, geotechnical
engineering, structural engineering and design, environmental engineering, and
inspection and testing.

This is our initial public offering (the "Offering"), and no public market
currently exists for our Units, the underlying shares of Common Stock, or the
Warrants. The offering price may not reflect the market price of our shares of
Common Stock or Warrants after the Offering.

Proposed Trading Symbols Nasdaq SmallCap Market
Common Stock--USLB
Warrants--USLBW

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

THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE UNITS
ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. PROSPECTIVE UNIT
BUYERS SHOULD CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 9.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------

[CARDINAL CAPITAL MANAGEMENT, INC.]

JANDA & GARRINGTON LLC

[FAS WEALTH MANAGEMENT SERVICES, INC.]

January , 1999

<PAGE>

Inside Cover Page

We started as an engineering services holding company with three
principal subsidiaries nationwide, one of which opened as a separate business
over 50 years ago. We offer engineering and design services, construction
quality control, structural engineering and design, construction materials
inspection and testing, and nondestructive inspection and testing.

Our mission is to be a nationally recognized, highly profitable,
full-service engineering, inspection, and testing firm. Our growth strategy
is to increase market share and growth by acquiring regional engineering
services firms; and to continue the growth of existing operating units.

Our client list contains many major national accounts. Private sector
clients include Wal-Mart, Disney, Home Depot, Walgreens, Nordstrom, and
Marriott. Public sector clients include the U.S. Military, the City of San
Diego, the New Jersey Turnpike Authority, and numerous universities, school
districts, and hospitals.

The cornerstones of our business are superior quality, competitive
pricing, an aggressive acquisition strategy, and procuring national accounts.
We seek to build upon our successful track record and to attain ever-greater
successes in the future.

A PICTURE OF FLORIDA PANTHER ARENA, SUNRISE, FLORIDA - WITH THE NAME AND
LOCATION UNDERNEATH THE PICTURE.

A PICTURE OF QUALCOMM STADIUM, SAN DIEGO, CALIFORNIA - WITH THE NAME AND
LOCATION UNDERNEATH THE PICTURE.

A PICTURE OF PRINCETON STADIUM, PRINCETON, NEW JERSEY - WITH THE NAME
AND LOCATION UNDERNEATH THE PICTURE.

2
<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
MORE DETAILED INFORMATION AND OUR FINANCIAL STATEMENTS (INCLUDING THE NOTES
THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE
INDICATED, ALL INFORMATION CONTAINED IN THIS PROSPECTUS (I) GIVES EFFECT TO A
20,324-FOR-ONE SPLIT OF OUR COMMON STOCK, PAR VALUE $.01 PER SHARE (THE
"COMMON STOCK"), AND A ONE-FOR-0.8413 REVERSE STOCK SPLIT OF THE COMMON STOCK
AND (II) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
THESE STOCK SPLITS WERE UNDERTAKEN IN ORDER TO FACILITATE THE OFFERING. YOU
SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK
FACTORS."

THE COMPANY

U.S. Laboratories Inc. (the "Company" or "U.S. Labs") is a Delaware
corporation that offers engineering and design services, project management,
construction quality control, geotechnical engineering, structural
engineering and design, environmental engineering, and inspection and
testing. These services are provided on a "start to finish" basis designed to
guide clients through each phase of a construction project. We become an
integral part of the client's project team and offer comprehensive quality
control programs. Value is further created by delivering quality control and
problem solving in a cost-effective manner to meet clients' time and budget
requirements.

Since 1993, we have implemented a strategy designed to establish a
national infrastructure of offices and diversify our service offerings. We
believe that we are achieving these strategic and structural objectives by
pursuing strategic acquisitions, targeting premium national accounts,
increasing infrastructure accounts, balancing public sector and private
sector services, and expanding our geographic markets.

A key component of our growth is based on our belief that the industry
for engineering services is fragmented and that there are opportunities to
acquire local engineering services companies. We estimate that there are
3,500 companies whose businesses are complementary to ours and believe that
the expertise we have developed in identifying, completing, and integrating
acquisitions provides us with a competitive advantage in entering new
geographical markets. We plan to apply our expertise in assimilating acquired
companies' personnel and branch operations into our existing infrastructure
and expanding acquired companies' service and product offerings to existing
clients. This will strengthen our position as an industry consolidator
through acquisitions that meet our operating, financial, and geographic
criteria. Although we frequently investigate potential acquisitions in the
industry, we are not currently engaged in material negotiations nor do we
have any agreements to acquire another business.

THE OFFERING

Units Offered ......................1,100,000 Units at $6.00 per Unit, each Unit
consisting of one share of Common Stock and
one warrant to purchase one share of Common
Stock for $7.80 per share

Common Stock Offered................1,100,000 shares

Common Stock to be
outstanding after the Offering......3,300,000 shares(1)

</TABLE>

<PAGE>

Warrants Offered....................1,100,000 (the "Warrants")

Exercise Terms......................Exercisable, at any time, each to purchase
one share of Common Stock at a price of
$7.80, subject to adjustment in certain
circumstances. See "Description of
Securities."

Expiration Date.....................January __, 2004 (five years following the
date of this Prospectus)

Redemption..........................The Warrants are redeemable by us at any
time, upon notice of not less than 30 days,
at a price of $.01 per Warrant, if the
closing bid quotation of the Common Stock on
all 20 trading days ending on the third
trading day prior to the day on which we
give notice (the "Call Date") has been at
least 200% (currently $12, subject to
adjustment) of the public offering price.
The Warrants will be exercisable until the
close of business on the date fixed for
redemption. See "Description of Securities."

Use of Proceeds.....................Repay lines of credit, current and long-term
portions of notes payable, acquisitions, and
working capital. See "Use of Proceeds."

Nasdaq SmallCap
Symbol..............................USLB for the Common Stock and USLBW for the
Warrants

</TABLE>
- ----------------

(1) Based on shares outstanding as of December 31, 1998. Excludes (i) 1,100,000
shares of Common Stock issuable upon the exercise of the Warrants issued
to the purchasers of the Units in the Offering at an exercise price of
$7.80; (ii) 110,000 shares of Common Stock underlying the Warrants
comprising a portion of the Units and 110,000 shares of Common Stock
comprising a portion of the Units, which Units are issuable upon the
exercise of the Underwriters' Warrants at an exercise price equal to 120%
of the initial public offering price of the Common Stock offered hereby;
(iii) 165,000 warrants issued to our various employees, exercisable at
$6.00 per share; and (iv) 395,000 shares of Common Stock subject to
outstanding options under our 1998 Stock Option Plan, exercisable at
$6.00 or $6.60 per share. See "Capitalization" and "Description of
Securities."

RISK FACTORS

The Units involve a high degree of risk and you should carefully
consider the factors described under the heading "Risk Factors."

<PAGE>

SUMMARY FINANCIAL INFORMATION

We have set forth in the table, for the periods and at the dates
indicated, certain of our summary financial information. This data is derived
from, and you should read it in conjunction with, our financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.

STATEMENT OF OPERATIONS DATA:

Years Ended December 31, Nine Months Ended
September 30,
(unaudited)
--------------------------------------------- ---------------------------
Pro Forma
1996 1997 1997(1) 1997 1998
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue................................... $4,963,090 $7,766,414 $10,968,403 $5,507,806 $8,478,329
Cost of goods sold........................ 2,635,263 4,476,952 6,158,775 3,158,483 4,432,509
------------ ------------ ------------- ------------ ------------
Gross profit.............................. 2,327,827 3,289,462 4,809,628 2,349,323 4,045,820
Selling, general & administrative
expenses................................ 1,853,318 2,531,770 3,811,161 1,804,547 3,215,256
------------ ------------ ------------- ------------ ------------
Income from operations.................... 474,509 757,692 998,467 544,776 830,564
------------ ------------ ------------- ------------ ------------
Interest expense.......................... (84,390) (130,605) (160,026) (90,520) (118,814)
Interest income........................... 8,430 7,277 7,277 4,371 9,252
Forgiveness of note receivable............ (9,976) --- --- 1,738 ---
Gain (loss) on sale of fixed asset........ (3,873) 4,912 16,912 --- ---
Rental income............................. 4,598 25,160 25,160 20,918 13,048
Gain on sale of minority interest......... --- 25,229 25,229 25,229 ---
Income before provision for income taxes,
minority interest and extraordinary
item.................................... 389,298 689,665 913,019 506,512 734,050
Provision for income taxes................ 202,921 305,056 341,702 224,345 308,301
------------ ------------ ------------- ------------ ------------
Income before minority interest and
extraordinary item...................... 186,377 384,609 571,317 282,167 425,749
Minority interest......................... (33,664) (80,253) --- (62,851) ---
------------ ------------ ------------- ------------ ------------
Income before extraordinary item.......... $152,713 $304,156 $571,317 $219,316 $425,749
============ ============ ============= ============ ============
Extraordinary gain, less applicable
income taxes of $40,200............... --- 59,800 59,800 59,800 ---
------------ ------------ ------------- ------------ ------------
Net income.............................. $152,713 $364,156 $631,117 $279,116 $425,749
============ ============ ============= ============ ============
Basic income per share:
Income before extraordinary item...... 0.07 0.14 0.26 0.10 0.19
Extraordinary item.................... --- 0.03 0.03 0.03 ---
Net income............................ $ 0.07 $ 0.17 $ 0.29 $ 0.13 $ 0.19
============ ============ ============= ============ ============
============ ============ ============= ============ ============
Diluted income per share:
Income before extraordinary item...... 0.07 0.14 0.26 0.10 0.19
Extraordinary item.................... --- 0.03 0.03 0.03 ---
Net income............................ $ 0.07 $ 0.17 $ 0.29 $ 0.13 $ 0.19

------------ ------------ ------------- ------------ ------------
Weighted average shares outstanding..... 2,200,000 2,200,000 2,200,000 2,200,000 2,200,000
============ ============ ============= ============ ============
</TABLE>

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

(1) Pro Forma Statement of Operations Data presents the accounts of U.S.
Laboratories Inc. and Wyman Testing Laboratories, Inc. as if the
acquisition took place on January 1, 1997 and as if the purchase of the
minority interest took place on January 1, 1997. See "The
Company--Recent Developments."

<PAGE>

CONSOLIDATED BALANCE SHEET DATA:

Actual As Adjusted (1)
-------------- --------------------
<S> <C> <C>
Cash..................................................... $ 144,991 $3,548,331
Working capital.......................................... 375,366 4,767,366
Total assets............................................. 6,216,205 9,619,545
Total long-term debt..................................... 1,493,790 473,790
Retained earnings........................................ 695,161 695,161
Total stockholders' equity............................... $1,687,413 $7,099,413
- --------------------
</TABLE>

(1) This gives effect to the sale of 1,100,000 Units offered hereby at the
offering price of $6.00 per Unit and the application of the net proceeds
therefrom, after deducting the underwriting discount and estimated
offering expenses payable by the Company. See "Use of Proceeds."

<PAGE>

THE COMPANY

BACKGROUND

U.S. Laboratories Inc. (the "Company" or "U.S. Labs") was
incorporated on October 12, 1993 in Delaware. We are an engineering services
holding company that offers engineering and design services, project
management, construction quality control, structural engineering and design,
environmental engineering, and inspection and testing.

The Company believes that the engineering services industry is
fragmented and that there are opportunities to acquire local engineering
services companies. We estimate that there are 3,500 companies whose
businesses are complementary to ours, and we believe our expertise in
identifying, completing, and integrating acquisitions provides us with a
competitive advantage in entering new geographical markets. Through
acquisitions, we plan to apply our expertise in assimilating acquired
companies' personnel and branch operations into our existing infrastructure
and expanding acquired companies' service and product offerings to existing
clients. This will strengthen our position as an industry consolidator
through acquisitions that meet our operating, financial, and geographic
criteria.

U.S. Labs currently services the northeast, southwest, and southeast
regional engineering and building construction inspection markets through its
subsidiaries. In California, we operate San Diego Testing Engineers, Inc., a
Delaware corporation, incorporated on October 16, 1996 ("TESD"), which
recently merged with another of our subsidiaries, Wyman Testing Laboratories,
Inc., a Delaware corporation, incorporated on March 25, 1998 ("Wyman
Testing"). In Florida, we operate Professional Engineering & Inspection
Company, Inc., a Florida corporation incorporated on March 4, 1987 ("PEICO").
In New Jersey, we operate U.S. Engineering Laboratories, Inc., a Delaware
corporation, incorporated on October 12, 1993 ("USEL"). We wholly own all our
subsidiaries reflected in the table below. See "The Company - Recent
Developments."

[A TABLE REFLECTING THE COMPANY AND ITS SUBSIDIARIES.]

Our principal executive office is located at 7895 Convoy Court, Suite
18, San Diego, California 92111 and our telephone number is (619) 715-5800.

RECENT DEVELOPMENTS

On January 1, 1998, we purchased all of the remaining issued and
outstanding stock of PEICO, TESD, and USEL held by certain of our employees
and managers of our subsidiaries in exchange for shares of our Common Stock.
As a result of these transactions, 439,664 of our shares of Common Stock were
issued to these employees and managers, and we increased of our percentage
ownership of PEICO, TESD, and USEL to 100%.

On March 25, 1998, one of our subsidiaries, Wyman Testing, acquired
substantially all the assets and certain liabilities of Wyman Enterprises,
Inc., an engineering inspection and testing business in Southern California,
for a purchase price of $830,620.

On May 30, 1998, Wyman Testing merged into TESD, with each share of
Wyman Testing stock being converted into 1/2 share of TESD stock.

On May 30, 1998, we split our Common Stock by converting the 100
shares of Common Stock that were issued and outstanding prior to the purchase
into 2,032,400 shares of Common Stock. In addition, on November 9, 1998, we
effected a one-for-0.8413 reverse stock split. The purpose of these stock
splits was to adjust the capitalization of the Company to have 2,200,000
shares outstanding in order to facilitate the Offering of 1,100,000 Units.
The outstanding options and warrants were replaced by new options and
warrants in connection with the stock splits.

<PAGE>

Finally, our directors and stockholders approved an amended and restated
Certificate of Incorporation, increasing the number of authorized shares of
our Common Stock from 3,000 shares to 50,000,000 shares and authorizing
5,000,000 shares of "blank-check" preferred stock. The preferred stock may be
issued without your approval and any issuance may adversely affect the voting
rights of the holders of the Common Stock. Additionally, the Board may issue
preferred stock to prevent the sale of our company even if the sale is favored
by the stockholders. See "Description of Securities."

<PAGE>

RISK FACTORS

YOUR PURCHASE OF THE UNITS INVOLVES A SIGNIFICANT AND SUBSTANTIAL NUMBER
OF SIGNIFICANT RISKS, WHICH YOU SHOULD CONSIDER PRIOR TO MAKING A DECISION TO
PURCHASE THE UNITS. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS,
AS WELL AS OTHER RISK FACTORS IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS SPECIFIED IN THE
FORWARD-LOOKING STATEMENTS BECAUSE OF CERTAIN FACTORS, INCLUDING THOSE
SPECIFIED IN THE FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS. YOU
MUST BE PREPARED FOR THE POSSIBLE LOSS OF YOUR ENTIRE INVESTMENT IN OUR
COMPANY.

GROWTH AND ACQUISITION RISKS

One of our primary strategies is to pursue the acquisition of other
companies or assets that either complement or expand our existing business.
We completed three acquisitions in the first half of 1998 and one acquisition
in 1996. We also had preliminary acquisition discussions with, or have
evaluated the potential acquisition of, numerous other companies over the
past several years. We cannot predict the likelihood of a material
acquisition being completed in the future. If we cannot identify and complete
acquisitions in the future, this may have an adverse affect on our future
operations and financial results. If we proceed with an acquisition for cash,
we may use a portion of the proceeds we receive from the Offering to
consummate the transaction. See "Use of Proceeds." We may also finance
acquisitions through additional debt or equity financing.

We anticipate that one or more potential acquisition opportunities,
including those that would be material, may become available in the near
future. If appropriate acquisition opportunities become available, we intend
to pursue them actively. Although we have successfully completed several
acquisitions, there can be no assurance that we will identify, acquire, or
profitably manage additional companies or successfully integrate these
additional companies into our operations without substantial costs, delays,
or other problems. Although we frequently investigate potential acquisitions
in the industry, we are not currently engaged in material negotiations nor do
we have any agreements to acquire another business.

In addition, we cannot assure you that acquisitions will be profitable
at the time of the acquisition or will achieve sales and profitability that
justify the investment. Acquisitions may involve a number of special risks,
including adverse effects on our reported operating results, diversion of our
management's attention, dependence on retention and hiring of key personnel,
risks associated with unanticipated problems or legal liabilities, and
amortization of acquired intangible assets, some or all of which could have a
material adverse effect on our operations and financial performance.

Our expansion of operations, whether through acquisitions or internal
growth, may place substantial burdens on our management resources and
financial controls. The increased burdens on our management resources and
financial controls may have an adverse effect on our operations.

POTENTIAL LIABILITY AND INSURANCE

We perform a wide range of engineering advisory services. Due to the
nature of our services, we are exposed to a risk of professional liability
for structural failure, property damage, personal injury, or economic loss
that may substantially exceed the fees derived from these services.

<PAGE>

We have secured a claims made professional liability insurance
policy covering a two-year term. The policy includes contractor's pollution
liability coverage, with a two-year, per-claim, and an aggregate limit of $2
million and a deductible of $20,000. Increased limits may be obtained on a
specific endorsement basis to meet the needs of particular clients or
contracts. A claims made policy only insures against claims filed during
the period in which the policy is in effect. This policy covers both errors
and omissions and products/completed operations.

We also carry occurrence claims general liability insurance in the amount
of $2 million with a $5 million umbrella. Our policy has been renewed in each of
the last several years. The relatively low dollar amount of the policy limit
currently offered, the possible future unavailability or modification of this
insurance, or any significant increase in insurance rates could have a material
adverse effect on our operations. Further, because customers may require that we
maintain liability insurance, the possible future unavailability of this
insurance could adversely affect our ability to compete effectively. We
currently have no professional liability claims pending and we are unaware of
any other claims that will have a material adverse effect on our operations or
financial condition. Although various claims have been made in the past against
our professional liability policy, to date no such claim has ever resulted in an
insured loss.

9
<PAGE>

ATTRACTION AND RETENTION OF PROFESSIONAL PERSONNEL

Our ability to attract and retain qualified engineers, scientists, and
other professionals, either through direct hiring or acquisition of other firms
employing such professionals, will be an important factor in determining our
future success. There is significant competition for employees with the skills
required to perform the services we offer. We cannot assure you that we will be
successful in attracting a sufficient number of highly skilled employees in the
future, or that we will successfully train, retain, and motivate employees.

Our inability to attract, train, and retain skilled employees or our
employees' inability to achieve expected levels of performance could impair our
ability to adequately manage and complete our existing projects and to bid for
or obtain new projects, which could have an adverse effect on our business,
financial condition, and results of operations.

FIXED-PRICE CONTRACTS AND OTHER PROJECT RISKS

In 1997, approximately 15% of our revenue was generated on a
fixed-price, fixed-delivery-schedule ("fixed-price") basis, rather than on a
time and materials basis. This percentage may significantly change from time
to time in the future. If we fail to accurately estimate the resources
required for a fixed-price project or fail to complete our contractual
obligations in a manner consistent with the project plan upon which its
fixed-price contract was based, then our results of operations, and business
and financial condition, could be adversely affected.

We may be required to commit unanticipated additional resources to complete
certain projects, which may negatively affect the profitability generated on
such projects. We may have to revise project plans during the project or change
project managers to ensure projects are completed on schedule. Failure to
anticipate these needs could have a material adverse effect on our business,
financial condition, and results of operations. In addition, we may establish a
price before the design specifications are finalized, which could result in a
fixed price that turns out to be too low and therefore adversely affects our
business, financial condition, and results of operations.

We have, and may in the future, undertake projects in which we guarantee
performance based upon defined operating specifications or guaranteed
delivery dates or both. Unsatisfactory performance or unanticipated
difficulties in completing these projects may result in client
dissatisfaction and a reduction in payment to, or payment of damages by, us,
any of which could have a material adverse effect on our business, financial
condition, and results of operations. Certain contracts involving government
agencies are priced at cost or agreed upon labor rates plus overhead. Our
overhead rates are subject to audit and could result in price reductions
associated with disallowed overhead costs of methods used to derive overhead
rates.

COMPETITION

The engineering consulting industries in which we operate are subject to
intense competition. In addition to the thousands of small consulting and
testing firms operating nationally, we compete with several national engineering
and consulting firms including Law Company Group, Inc.; Harding Lawson
Associates Group, Inc.; Dames & Moore, Inc.; and Professional Service
Industries, Inc.

Many of our competitors may have greater financial, technical, and
personnel resources than us. We cannot predict the extent of competition that we
will encounter in the future as the engineering services industry continues to
mature and consolidate. Historically, competition has been based primarily on
the quality, timeliness, and costs of services. Our success will depend upon our
marketing efforts, our ability to accurately estimate costs, the quality of the
work we perform, and our ability to hire and train qualified personnel.

10
<PAGE>

DEPENDENCE ON KEY PERSONNEL

We depend on the efforts and abilities of our senior management,
particularly those of Dickerson Wright and the key officers at our subsidiaries.

The loss of any of these key officers could have a material adverse affect on
our business.

We believe that all commercially reasonable efforts have been made to
minimize the risk attendant with such dependence on key personnel and the loss
or departure of key personnel. We obtained key person life insurance policies on
Mr. Wright and the key officers of our subsidiaries; however, the proceeds from
such policies might not fully compensate us for the loss of these officers.

LIMITED UNDERWRITING HISTORY

Cardinal Capital Management, Inc. has not participated in any firm
commitment underwritten offerings. You should consider the Underwriters' lack of
experience in considering an investment in the Company's Units. See
"Underwriting."

SEASONAL FACTORS

RISK OF LIMITATION ON ACQUISITION AND CHANGE IN CONTROL

Our corporate documents authorize our Board of Directors to issue shares of
preferred stock and to establish the preferences and rights of that preferred
stock without stockholder approval. If the Board issues preferred stock, it
could have the effect of delaying or preventing a change in control of our
company, even if a change in control were in your best interests.

ADDITIONAL FINANCING MAY BE REQUIRED

We believe that there will be adequate funds available from the proceeds of
the Offering and from our operating cash to fund our business operations and
obligations at least through the next twelve months. We cannot assure you that
additional funds will be available when we need them; and, if not available, we
may not be able to conduct our operations effectively. The proceeds from the
Units' sale are expected to be sufficient for our purposes. However, additional
financing may be acquired by additional securities offerings or from bank
financing. If additional shares of our Common Stock are issued to obtain
financing, you will suffer a dilutive effect on your percentage ownership of our
Common Stock.

INFORMATION SYSTEMS AND THE YEAR 2000

We assessed our management information systems and we do not currently
expect to make any material expenditure in connection with these systems.
Moreover, we recently implemented or are in the process of implementing new
systems that are already Year 2000 compliant. We do not believe that the
total cost of any potential modification of management information systems
will be material. We cannot assure you that we or our vendors will be able to
successfully modify on a timely basis our or their respective management
information systems to comply with Year 2000 requirements. See "Business -
Information Systems and the Year 2000."

11
<PAGE>

LIMITED PUBLIC MARKET

Prior to the Offering, there has been no public trading market for our
securities and we cannot assure you that a liquid market will develop or be
sustained after the closing of the Offering.

DETERMINATION OF OFFERING PRICE

We determined the Units' purchase price by mutual agreement with our
Underwriters after consideration of a number of objective and subjective
factors, and that price does not necessarily relate to our assets, book
value, results of operations, or other established criteria of our value.
Among the factors considered in determining the initial public offering price
were our future prospects and our business in general, sales, earnings, our
capital requirements, certain other of our financial and operating
information in recent periods, and the price-earnings ratios, price-sales
ratios, market prices of securities, and certain other financial and
operating information of companies engaged in activities similar to ours. We
did not prepare a valuation or appraisal for our business or our potential
business expansion.

POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS

We may redeem the Warrants, at any time, upon notice of not less than 30
days, at a price of $.01 per Warrant, provided that the closing bid quotation
of the Common Stock on all 20 trading days ending on the third trading day
prior to the Call Date has been at least 200% (currently $12, subject to
adjustment) of the public offering price. The Warrants will be exercisable
until the close of business on the date fixed for redemption. Since we
presently intend to call the Warrants at the earliest possible date, you
should assume that we would call the Warrants for redemption if the criteria
were met. This right will, if exercised, force you to either exercise your
Warrants at a possibly unfavorable time or to lose the benefits that may
accrue to them as a result of the increase, if any, in the market price of
our Common Stock. See "Description of Securities."

CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE WARRANTS

We have undertaken to maintain a current registration statement that will
permit the public sale of the Common Stock underlying the Warrants upon
exercise of the Warrants. The maintenance of a current registration statement
could result in substantial expense to us. We cannot assure you that we will
maintain a current prospectus covering the shares of Common Stock underlying
the Warrants. You will have the right to exercise the Warrants for the
purchase of shares of Common Stock only if a current prospectus relating to
such shares is then in effect and only if the shares are qualified for sale
under the securities laws of the applicable state or states.

Although we intend to qualify the shares of Common Stock underlying the
Warrants for sale in those states where the securities are offered (except when
to do so would require us to qualify as a foreign corporation), there is no
assurance that we will obtain these qualifications. Moreover, even if such
qualifications are obtained, if you subsequently move to a state in which shares
of Common Stock underlying the Warrants are not qualified, you may not have the
right to exercise the Warrants. Consequently, you may be deprived of any value
if a current prospectus covering the shares underlying the Warrants is not kept
effective or if such underlying shares are not or cannot be registered in the
applicable states.

<PAGE>

USE OF PROCEEDS

After deducting the underwriting discounts, commissions, and all the
Offering's expenses, we expect to receive approximately $5,409,000 from the
Offering.

We have two lines of credit and a note payable from two separate lenders
with commitments in the aggregate of $2,200,000. We have a $500,000 demand loan
with North County Bank that is due in May 1999.

We also owe $1,180,000 on a note payable to North County Bank that is due
over five years beginning in January 1999. The proceeds from this loan were used
to repay two separate credit facilities in the amount of $1.55 million, and the
balance was used for working capital. We also have a line of credit with Bank of
America of $500,000 that is due July 2000. All of the borrowings accrue interest
at prime rate.

We will use the Offering's proceeds to repay outstanding balances on these
borrowings. We estimate that at the closing of the Offering the outstanding
balances owed on these borrowings will be $1,190,000.

The Company will also use the proceeds to repay $245,000 of the debt
that was incurred in connection with the acquisition of substantially all of
the assets and certain liabilities of Wyman Enterprises, Inc. Of this amount,
we owe $37,500 to Donald Alford, who is an officer and director.
Approximately $170,000 of these notes mature the earlier of October 1, 1999
or 30 days following the Offering. The balance is due in four equal annual
payments of $75,000 beginning in March 1999. These notes are non-interest
bearing.

Pending application of the proceeds, we intend to invest the net proceeds
in short-term, interest-bearing securities, including money market funds.

In general, the net proceeds will be used as described below.

<TABLE>
<CAPTION>
Use Dollar Amount Percentage
--- ------------- ----------
<S> <C> <S>
Lines of credit $ 725,000 14%
Notes payable $ 1,425,000 26%
Acquisitions $ 2,500,000 46%
Working capital $ 759,000 14%
----------- ---
Total $ 5,409,000 100%
========== ====
</TABLE>

Although we frequently investigate potential acquisitions in the industry,
we are not currently engaged in material negotiations nor do we have any
agreements to acquire another business.

13
<PAGE>

DIVIDEND POLICY

We have never declared or paid dividends on our capital stock. We do not
anticipate paying any cash dividends in the foreseeable future. Payments of
future dividends, if any, will be at the discretion of our Board of Directors
after taking into account various factors, including our financial condition,
operating results, current and anticipated cash needs, and plans for expansion.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

CAPITALIZATION

The following table sets forth, at September 30, 1998, (i) our actual
capitalization and (ii) as adjusted to give effect to our sale of 1,100,000
Units offered hereby, at an offering price of $6.00 per Unit and the
application of the estimated net proceeds therefrom after deducting the
estimated underwriting discounts and commissions and other estimated offering
expenses. See "Use of Proceeds."

You should read this table in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and related notes included elsewhere in this Prospectus.

September 30, 1998
----------------------------------------
Actual As Adjusted
------------------ ------------------
<S> <C> <C>
Lines of credit........................................................... $ 583,660 $ 0

Current portion of notes payable.......................................... 423,993 18,993

Notes payable, net of current portion..................................... 1,245,000 225,000
---------- ----------

Stockholders' equity
Preferred Stock, $0.01 par value; 5,000,000 shares authorized, none
issued and outstanding, actual or as adjusted......................... --- ---
Common Stock, $0.01 par value, 50,000,000 shares authorized; 2,200,000
actual shares issued and outstanding; 3,300,000 as adjusted shares
issued and outstanding(1)............................................. 22,000 33,000
Additional paid-in capital............................................ 970,252 6,371,252
Retained earnings..................................................... 695,161 695,161
Total stockholders' equity............................................ 1,687,413 7,099,413
---------- ----------
Total capitalization...................................................... $3,940,066 $7,343,406
========== ==========
</TABLE>

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

(1) Based on shares outstanding as of December 31, 1998. Excludes (i)
1,100,000 shares of Common Stock issuable upon the exercise of the
Warrants issued to the purchasers of the Units in the Offering at an
exercise price of $7.80; (ii) 110,000 shares of Common Stock underlying
the Warrants comprising a portion of the Units and 110,000 shares of
Common Stock comprising a portion of the Units, which Units are issuable
upon the exercise of the underwriters' warrants at an exercise price equal
to 120% of the initial public offering price of the Units offered
hereby; (iii) 165,000 warrants issued to our various employees,
exercisable at $6.00 per share; and (iv) 395,000 shares of Common Stock
subject to outstanding options under our 1998 Stock Option Plan,
exercisable at $6.00 or $6.60 per share.

14
<PAGE>

DILUTION

Our net tangible book value as of September 30, 1998 was $132,526, or $0.06
per share. Net tangible book value per share of Common Stock represents the
amount of our total tangible assets less our total liabilities divided by the
number of shares of the Common Stock outstanding.

After giving effect to the sale of the 1,100,000 shares of the Common Stock
underlying the Units offered hereby at a public offering price of $6.00
per Unit, and after deducting underwriting discounts and commissions and
estimated offering expenses payable by us, our net tangible book value as of
September 30, 1998 was $5,544,526 or $1.68 per share of Common Stock. This
represents an immediate increase in net tangible book value per share of Common
Stock of $5,412,000 or $1.62 per share to existing stockholders and immediate
dilution in net tangible book value of $4.32 per share to you. The following
table illustrates the per share dilution:

<TABLE>
<CAPTION>
<S> <C> <C>
Initial public offering price per share............................................... $6.00
Net tangible book value per share of Common Stock at September 30, 1998........... $0.06
Increase per share attributable to new investors.................................. $1.62
-----
Net tangible book value per share of Common Stock after the Offering.................. $1.68
-----
Dilution per share to new investors(1)................................................ $4.32
=====
</TABLE>

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

(1) If the Underwriters' over-allotment option is exercised in full, dilution
per share to new investors would be $4.14.

The following table summarizes, as of September 30, 1998, the number of
shares of Common Stock purchased from us, the total consideration paid and the
average price per share paid by the existing stockholders and by you (before
deduction of underwriting discounts and commissions and estimated offering
expenses):

<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------------------ -----------------------------
Average Price
Number Percent Amount Percent per Share
--------------- ------------ -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Existing stockholders 2,200,000 67% $ 992,252 13% $0.45
New investors..... 1,100,000 33% $ 6,600,000 87% $6.00
--------------- ------------ -------------- ----------- -----------------
Total 3,300,000 100% $ 7,592,252 100%
=============== ============ ============== ===========
</TABLE>

All of the above computations assume no exercise of 1,100,000 shares of
Common Stock issuable upon the exercise of the Warrants issued to the
purchasers of the Units in the Offering at an exercise price of $7.80 and
110,000 shares of Common Stock underlying the warrants comprising a portion
of the Units and 110,000 shares of Common Stock comprising a portion of the
Units, which Units are issuable upon the exercise of the underwriters'
warrants at an exercise price equal to 120% of the initial public offering
price of the Units offered hereby. All of the above computations also
assume no exercise of outstanding options or warrants to purchase Common
Stock. As of September 30, 1998, options to purchase 395,000 shares of Common
Stock were outstanding at a weighted average exercise price of approximately
$6.22 per share under our 1998 Stock Option Plan and 165,000 employee
warrants were outstanding at an exercise price of $6.00 per share. If any
options or warrants become vested and are exercised, you will suffer further
dilution.

15
<PAGE>

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

OVERVIEW

U.S. Laboratories Inc. (the "Company" or "U.S. Labs") is a Delaware
corporation that offers engineering and design services, project management,
construction quality control, geotechnical engineering, structural engineering
and design, environmental engineering, and inspection and testing. These
services are provided on a "start to finish" basis designed to guide clients
through each phase of a construction project. We become an integral part of the
client's project team and offer comprehensive quality control programs. Value is
further created by delivering quality control and problem solving in a
cost-effective manner to meet clients' time and budget requirements.

The engineering services industry is highly fragmented. There are usually
several small to mid-sized private firms serving each major city in the United
States. We identify and acquire profitable regional companies with excellent
client relationships. Since inception, our primary growth in market share and
earnings has been due to our ability to successfully acquire profitable regional
engineering services firms. The immediate financial objective of each
acquisition has been, and continues to be, to increase revenues and earnings per
share. Although we frequently investigate potential acquisitions in the
industry, we are not currently engaged in material negotiations nor do we have
any agreements to acquire another business.

U.S. Labs intends to continue to grow through internal expansion and
acquisitions. We acquire businesses that have a history of positive
performance and have experienced key management personnel operating the
business. This allows us to obtain a foothold in the marketplace and add
competent professionals to our staff. After an acquisition, we immediately
provide executive administrative support in the area of sales, human
resources, and accounting functions. In some cases, the acquisition is
integrated into another of our operating units. Historically, our
acquisitions have contributed increased sales volume, and in many cases, the
acquisitions have not increased our fixed costs. This has resulted in
substantial increases in our incremental profit margin.

In addition to growing through acquisitions, we plan to continue to grow
internally by increasing our market share in different geographical areas of the
United States and by balancing the percentage of our services provided between
the government sector and private industry. With this diverse geographical
market and customer base, we attempt to insulate ourselves against economic
downturns.

On June 6, 1998, the President signed the Transportation Equity Act for
the 21st Century (the "TEA-21"), which authorized approximately $204 billion
for transportation infrastructure projects over the next six years. Of this
amount, approximately $165 billion has been earmarked for highway
improvements. Management estimates that approximately 3% percent of this $165
billion, or $4.9 billion, will be spent on engineering services. We
understand that there is some risk that the Congress may not appropriate the
funds designated in the TEA-21, but the legislation contains provisions that
are designed to prevent future Congresses from not spending the funds
authorized in the TEA-21. Additionally, the amount appropriated may change
due to fluctuations in revenue flow into the Highway Trust Fund.

Management believes that the Company will receive additional work from
the approximately $165 billion authorized under the TEA-21 for highway
construction and related services. We have a strong presence in California,
which expects to receive $2.5 billion in funds over the next six years, or
$800 million more than under the previous legislation. Additionally, our
laboratories in California and New Jersey are certified by the American
Association of State Highway & Transportation Officials. This certification
is often required to bid on larger projects. See "Business Description of
Engineering Services -Infrastructure Engineering Services."

16
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, information
derived from our Consolidated Statement of Operations, expressed as a percentage
of revenue. We cannot assure you that the trends in revenue growth or operating
results shown below will continue in the future.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEARS ENDED DECEMBER 31, (UNAUDITED)
------------------------------------------ ---------------------------
PRO FORMA
1996 1997 1997 1997 1998
----------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Revenue.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold....................... 53.1 57.6 56.2 57.3 52.3
----------- ------------ ----------- ---------- -----------
Gross profit............................. 46.9 42.4 43.8 42.7 47.7
Selling, general & administrative
expenses............................... 37.3 32.6 34.7 32.8 37.9
----------- ------------ ----------- ---------- -----------
Income from operations................... 9.6 9.8 9.1 9.9 9.8
Interest expense......................... 1.7 1.7 1.5 1.6 1.4
Interest income.......................... .2 .1 .1 -- 0.1
Forgiveness of note receivable........... (.2) -- -- -- --
Gain (loss) on sale of fixed asset ...... (.1) .1 .2 -- --
Rental income............................ .1 .3 .2 0.4 0.1
Gain on sale of minority interest........ -- .3 .2 0.5 --
Income before provision for income taxes,
minority interest and extraordinary
item................................... 7.9 8.9 8.3 9.2 8.6
Provision for income taxes............... 4.1 3.9 3.1 4.1 3.6
Income before minority interest and
extraordinary item..................... 3.8 5.0 5.2 5.1 5.0
Minority interest........................ .7 1.0 -- 1.1 --
----------- ------------ ----------- ---------- -----------
Income before extraordinary item......... -- 4.0 5.2 4.0 --
----------- ------------ ----------- ---------- -----------
Extraordinary gain, less applicable
income taxes of $40,200................ -- .7 .5 1.1 --
----------- ------------ ----------- ---------- -----------
Net income............................... 3.1% 4.7% 5.7% 5.1% 5.0%
=========== ============ =========== ========== ===========
</TABLE>

AMORTIZATION OF GOODWILL

On January 1, 1998, we issued 439,664 shares of our Common Stock to
minority interest holders in exchange for all of their shares in our
subsidiaries. In connection with this purchase, we recorded additional
goodwill of $194,924.

On March 25, 1998, we acquired all of the assets and certain liabilities of
Wyman Enterprises, Inc. for $830,620. We recorded $511,200 in excess of cost
over fair value of net assets acquired, which is being amortized on a
straight-line basis over fifteen years.

The net affect of these two transactions is to increase the amortization of
goodwill, which is a non-cash charge, and which will reduce future net income
after depreciation and amortization by $47,075 annually over the next fifteen
years.

17
<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

REVENUE. Revenue for the nine months ended September 30, 1998 was
$8,478,329, an increase of 54% over the same period last year. The increase was
primarily attributable to internal growth and marketing, and to a lesser extent,
to the acquisition of Wyman Enterprises, Inc. in late March 1998.

GROSS PROFIT. Gross profit for the nine months ended September 30,
1998 was $4,045,820, an increase of 72% over the same period last year, a
portion of which was attributable to the acquisition of Wyman Enterprises,
Inc., and the balance of which as due to increased volume through internal
growth and marketing. Our gross margins were up for the nine months ended
September 30, 1998 as a result of the economies associated with the higher
sales volume.

INCOME BEFORE PROVISION FOR INCOME TAXES, MINORITY INTEREST AND
EXTRAORDINARY ITEM. Income before provision for income taxes, minority interest
and extraordinary item for the nine months ended September 30, 1998 was
$734,050, up 45% from the same period last year. The income before provision for
income taxes, minority interest and extraordinary item was 8.6% of sales versus
9.2% for the same period in the prior year. This percentage became more
favorable during the summer and fall months before dropping off again in the
holiday season.

INTEREST EXPENSE. Interest expense was $118,814 for the nine months ended
September 30, 1998 or a 31% increase over the same period in the prior year.
This increase was due primarily to increased debt associated with business
acquisitions and the use of operating lines of credit.

NET INCOME. Net income for the nine months ended September 30, 1998 was
$425,749, a 53% increase over the same period ended September 30, 1997. The
increase was due primarily to the higher sales volume and the associated
efficiencies. A portion of the increase in sales volume was attributable
to the acquisition of Wyman Enterprises, Inc.

YEARS ENDED 1997 AND 1996

REVENUE. Revenue for the year ended 1997 was $7.77 million, an increase of
56% over 1996. This increase of revenues was due primarily to the recognition of
a full year's revenues of TESD in 1997, which was acquired in late 1996. Other
factors contributing to the increase in revenues were internal growth through
marketing efforts and the favorable business climate.

GROSS PROFIT. Gross profit for the year ended 1997 was $3.3 million, an
increase of 41% over 1996. This increase in gross profit was due primarily to
the recognition of revenues from TESD in 1997. The gross profit margin was down
approximately 4% as a percentage of sales due to more aggressive marketing and
pricing tactics employed in 1997 as well as costs associated with the startup of
new operations in Florida. Although the gross margins were down as a result of
these tactics, the operating income was up as a percentage of sales due to the
economies of scale associated with the increased volume.

INCOME BEFORE PROVISION FOR INCOME TAXES, MINORITY INTEREST AND
EXTRAORDINARY ITEM. Income before provision for income taxes, minority
interest and extraordinary item in 1997 was $689,665, an increase of 77%
over 1996. The increase in profits was due primarily to the economies
associated with the higher sales volume as well as to the recognition of
revenues from TESD for the full year in 1997.

INTEREST EXPENSE. Interest expense was $130,605 in 1997, an increase of 55%
over 1996. This increase was due primarily to increased debt associated with
business acquisitions and the use of operating lines of credit.

NET INCOME. Net income for 1997 was $364,156, an increase of 138% over
1996. The increase was due primarily to the recognition of net income from TESD
for the full year in 1997 and to the greater sales volume and the resulting
economies of scale.

18
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

During the nine months ended September 30, 1998, our net cash provided by
operating activities was $392,901, an increase of 39% over the same period in
1997. In 1997, our net cash provided by operating activities was $267,586, an
increase of 400% over 1996. The increase in cash provided by operations in the
nine months ended September 30, 1998, compared to the same period in 1997 was
due primarily to our higher earnings and improved working capital. The increase
in fiscal 1997 compared to 1996 was due primarily to the same factors. The
improved working capital primarily reflected an improvement in the days sales
held in receivables, including collections of retentions on certain federal
projects nearing completion, and, to a lesser extent, higher trade payables.

We entered into a $1.7 million line of credit with North County Bank in May
1998. In October 1998, the $1.7 million line of credit was refinanced into a
$1,200,000 note payable and a $500,000 line of credit. The $500,000 line of
credit expires in May 1999. The note payable is due over a sixty-month period,
beginning in January 1999, with principal reductions scheduled at the rate of
$20,000 per month. At December 31, 1997, we had borrowings under other lines of
credit that were paid in full with this new line of credit in May 1998. There
was approximately $180,000 available to us under the new line of credit as of
September 30, 1998.

This new credit agreement is personally guaranteed by Dickerson Wright
and his spouse, and secured by our assets, including our accounts receivable.
The maximum amount of the loan may not exceed 75% of our accounts receivable
that are less than 90 days old. Interest on the loan is payable on a monthly
basis at the prime rate. Further, the loan provides that we must meet certain
covenants relating to, among other things, financial performance and the
maintenance of certain financial ratios.

We also have a line of credit with Bank of America in the amount of
$500,000. Dickerson Wright and his spouse guarantee this line of credit. It is
an unsecured note that is all due in July 2000. The note bears interest at the
prime rate. There is $235,000 available on this line as of September 30, 1998.

As set forth in "Use of Proceeds," we plan to pay down our interest-bearing
lines of credit to zero. This will reduce our interest expense by approximately
$125,000 annually, which will positively impact income before provision for
income taxes.

We also have commercial debt that is collateralized by certain equipment in
the amount of $203,258 and $351,598 at December 31, 1997 and September 30, 1998,
respectively.

During the nine months ended September 30, 1998, we invested $830,620 in
cash and notes and in the purchase of capital assets, including acquisitions. We
did not purchase any capital assets or make any acquisitions in 1997. We
invested $62,500 in the purchase of capital assets, including acquisitions, in
1996.

During the nine months ended September 30, 1998, our net cash provided by
financing activities was $193,426, which primarily consisted of drawing down an
operating line of credit. For the same period in 1997, we used net cash of
$19,246 for financing activities, which primarily consisted of repaying an
operating line of credit. In 1997, we used net cash of $123,947 for financing
activities, which again primarily consisted of repaying an operating line of
credit. Our net cash provided by financing activities was $67,422 in fiscal
1996, which primarily consisted of drawing down an operating line of credit.

Accounts receivable as a percentage of sales increased from December 31,
1997 to September 30, 1998 due to the acquisition of Wyman Enterprises, Inc.
Generally accepted accounting principles (GAAP) required us to add the accounts
receivable for Wyman Enterprises, Inc., but did not allow us to add the sales of
Wyman Enterprises, Inc. The allowance for doubtful accounts decreased from
December 31, 1997 to September 30, 1998 due to the write-off of certain accounts
early in this fiscal year.

We currently intend to use approximately $2.5 million of the proceeds to
fund acquisitions. Additionally, we intend to make acquisitions through other
financing mechanisms such as notes and other instruments. Historically, we have
been able to make acquisitions with approximately 20-50% of the purchase price
in cash and the balance in non-interest bearing purchase notes over extended
time frames.

19
<PAGE>

We believe that our available cash and cash equivalents as well as cash
generated from operations and our available credit line will be sufficient to
meet our cash requirements for at least the next twelve months. During 1999, we
intend to actively continue our search for acquisitions to expand our
geographical representation and enhance our technical capabilities.

YEAR 2000 COMPLIANCE

We believe that the software packages we currently use and expect to
use, and those used by our vendors prior to the year 2000, are Year 2000
compliant. We do not expect the financial impact of required modifications to
this software will be material to our financial position, cash flows, or
results of operations.

INFLATION

Inflation does not currently affect our operations, and we do not expect
inflation to affect them in the foreseeable future.

Any forward-looking statements of our management contained in this
Prospectus have been compiled on the basis of assumptions of our management
considered reasonable. Our future operating results, however, are impossible to
predict and you should not infer any representation or warranty regarding our
future operating results from any forward-looking statements contained in this
Prospectus.

20
<PAGE>

BUSINESS
OVERVIEW

U.S. Laboratories Inc. (the "Company" or "U.S. Labs") is a Delaware
corporation that offers a wide range of engineering, inspection, construction
materials testing, documentation, building inspections, and design services
to clients. Our core service groups are construction materials testing and
engineering, infrastructure engineering, and geotechnical engineering and
consulting. We offer other non-core services, including building condition
surveys, construction management services, and environmental assessment
services.

U.S. Labs provides services on an integrated "start to finish" basis
designed to guide clients through each phase of a construction project. We
become an integral part of the client's project team, offer a comprehensive
quality control program, and create value by delivering quality control and
problem solving in a cost-effective manner to meet clients' time and budget
requirements.

We provide services for a full range of residential development projects;
commercial buildings; government facilities; and the transportation network
including highways, bridges, piers, tunnels, and airports; dams, drainage
basins, and storm water facilities; waste treatment facilities; and utility
transfer systems.

Generally, before construction, we evaluate construction sites, building
plans, and designs to assure compliance with the approved construction
documents for the proposed project. We also perform site assessments,
including soils engineering, materials engineering, and environmental
assessments to detect any potential problems with the proposed site that
could prevent or complicate the successful completion of the project. In
addition, the onsite building conditions are evaluated and recommendations
are made regarding optimum methods and materials for building foundations,
site preparation, and excavation. During construction, we inspect each phase
of the construction project, including excavation, foundations, structural
framing, mechanical heating and air conditioning systems, electrical systems,
underground utilities, and roofing. Where applicable, we may use additional
methods to test materials and work quality.

When a project is complete, an evaluation report of the project is
prepared and we certify the inspections for the client. We also perform final
inspections to determine the moisture resistance of windows, doors,
foundations, and roofing. After construction of buildings, periodic
inspection services are offered to assure that the building is being
maintained in accordance with applicable building codes to assure maximum
building life. We may also perform indoor air and water quality tests during
this period.

Since 1993, we have followed a strategy of controlled growth through
acquisitions to build the current infrastructure and to broaden our range of
technical services. We have created this infrastructure through the
completion of five acquisitions since the fall of 1993, and we have also
expanded our service mix by adding building condition surveys, construction
administrative services, and environmental assessment services.

INDUSTRY OVERVIEW

Numerous specialty services are provided to the construction and the
related engineering and architectural design industries. We provide services in
the areas of construction materials testing and engineering, geotechnical
engineering and consulting services, and infrastructure engineering services,
and to a lesser extent, environmental assessment services.

Construction of a significant structure or building improvement represents
a major permanent investment for any owner, whether commercial or governmental.
The primary driver for materials testing, inspection services,
and geotechnical services (soil and earth analysis) is an owner's concern to
protect his or her investment through quality construction materials and
workmanship that meet design specifications. Government agencies, architects,
and engineering firms require that the quality of construction materials and
on-site soil conditions be monitored in order to verify compliance with the
project design conditions.

21
<PAGE>

Government agencies, owners, contractors, architects, and engineers hire
materials testing and geotechnical consultants to test materials such as
concrete, structural and reinforcing steel, and soil and aggregate both prior to
commencing design and during the construction phase of a project. The quality of
materials and their ability to conform to design specifications are critical to
the future life and constructability of the facility. Three common types of
construction materials and geotechnical tests are (i) soil tests for moisture
content and compaction density, (ii) concrete tests for compressive strength,
and (iii) structural and reinforcing steel tests for tensile strength and
connection strength.

The construction materials testing and engineering industry is driven
by national and local economic conditions. Most of the construction materials
testing and engineering services that we provide are for projects generally
within 100 miles of the office. Geotechnical engineering and consulting
services are less sensitive to geographical constraints. Construction
activities can develop from commercial, industrial, institutional, and
governmental entities. Construction materials testing and engineering
services and geotechnical engineering and consulting services are considered
mature markets, and a project award is generally based on service,
reputation, price, client relationship, and local competition. Delivery of
services on a national basis through a network of offices is a factor
considered by national clients. Expansion of construction materials testing
and engineering services and geotechnical engineering and consulting services
to new markets can be achieved through the acquisition of local service
firms.

In general, independent third party materials testing and inspection
services and geotechnical engineering and consulting services for
construction projects are required by owners on all new commercial and public
construction projects over $1 million. Frequently, testing and inspection
requirements also apply to renovation and repair projects as well. Select
markets in the United States are experiencing strong growth in commercial,
residential, and government construction. In particular, Southern California
and Florida are currently experiencing an annual growth in construction
spending in excess of 20%. Since 1992, total construction revenues have
increased by 9% annually. This growth is expected to continue with total
construction having been forecast for 1998 at $355.7 billion. Typically,
testing, inspection, and geotechnical services equate to approximately 2% of
total construction costs, or $7 billion.

The infrastructure market includes public projects in numerous areas,
including the construction or remediation of highways, public transportation
systems, railroads, bridges, dams, and airports. We currently offer
infrastructure engineering services to highway construction and remediation
projects. Local, state, and federal government spending heavily influence the
market for engineering services in the infrastructure sector.

On June 6, 1998, the President signed the Transportation Equity Act for the
21st Century (the "TEA-21"), which authorized approximately $204 billion for
transportation infrastructure projects over the next six years. Of this amount,
approximately $165 billion has been earmarked for highway improvements. We
estimate that approximately 3% percent of this $165 billion, or $4.9 billion,
will be spent on engineering services. We understand that there is some risk
that the Congress may not appropriate the funds designated in the TEA-21, but
the legislation contains provisions that are designed to prevent future
Congresses from not spending the funds authorized in the TEA-21. Additionally,
the amount appropriated may change due to fluctuations in revenue flow into the
Highway Trust Fund.

Demand for environmental services is currently driven by economic and
liability management considerations. Asset preservation, liability, and
health related considerations have increasingly driven demand in the
environmental services industry, while regulation has decreased as a factor.
As a result of these market dynamics, environmental administration has become
an integral component of day-to-day property management activities. Today
many companies insist that environmental improvement expenditures not only
satisfy regulatory compliance, but also be justifiable on other grounds, such
as protecting assets, increasing workplace safety, reducing health risks,
improving public relations, minimizing waste, preventing pollution, and
reducing financial liabilities. Management believes that the Company will
benefit from certain rapidly growing sectors of the approximately $16 billion
environmental services industry. In addition, this industry segment is highly
fragmented and management believes that the industry presents many favorable
opportunities for growth through acquisitions.

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<PAGE>

BUSINESS STRATEGY

Our strategic goal is to be a leading provider of construction materials
testing and engineering services, geotechnical engineering and consulting
services, and infrastructure engineering services through the consolidation of
independent companies and internal growth. We achieve our business objectives
through strategic acquisitions, emphasis on premium national accounts, expansion
of infrastructure engineering services, the balance of public sector and private
industry clients, expansion of international services, and expansion of domestic
geographic markets.

PURSUE STRATEGIC ACQUISITIONS. We believe that the industry for engineering
services is fragmented and that there are opportunities to acquire local
engineering services companies. We estimate that there are 3,500 companies whose
businesses are complementary to ours. We further believe that our existing
infrastructure provides a platform for "tuck in" acquisitions of regional and
local companies. A "tuck in" acquisition is one in which we integrate the
acquisition with our existing regional management.

We believe our expertise in identifying, completing, and integrating
acquisitions provides us with a competitive advantage in entering new
geographical markets. We plan to apply our expertise in assimilating acquired
companies' personnel and branch operations into our existing infrastructure and
expanding acquired companies' service and product offerings to existing clients.
This will strengthen our position as an industry consolidator through
acquisitions that meet our operating, financial, and geographic criteria.

For example, in 1998, we made a "tuck in" acquisition in Jupiter, Florida.
The net acquisition cost $35,000 in return for a client base that management
anticipates will generate in excess of $500,000 in annual sales. Additionally,
we secured the services of a key employee to run that satellite operation. In
New Jersey, we made an acquisition of two satellite offices from a national
competitor in May 1998. We estimate that the client base acquired in this
transaction should generate in excess of $750,000 in annual sales and annual net
profits of $75,000 to $110,000.

In analyzing new acquisitions, we normally pursue acquisitions that either
provide the critical mass to function as a profitable, stand-alone operation, or
are geographically situated so that they can be integrated into our existing
locations. If we acquire a stand-alone operation, it must possess an experienced
management team thoroughly committed to going forward with us. We also must
identify how the profitability of a new acquisition can be improved as part our
operations through the integration of the new personnel into our management
systems as well as the expansion of the service and product offerings to
existing clients. We believe we can improve the operations of our acquisitions
by providing superior marketing and sales support, customer service, cash
management, financial controls, and human resources support.

Since 1993, we have implemented this strategy, the key elements of which
are designed to establish a national infrastructure of branch office
locations and diversify our service offerings. We currently operate
facilities serving San Diego, Riverside, San Bernardino, Orange, and Los
Angeles counties in Southern California; the New York City metropolitan area
and northern New Jersey; Atlantic City and central New Jersey; Philadelphia
and southwest New Jersey; and Miami, Fort Lauderdale, Palm Beach, Jupiter,
and Orlando, Florida.

TARGET PREMIUM NATIONAL ACCOUNTS. As a result of our acquisition strategy,
we expanded our service offerings and client base. This has resulted in our
ability to attract premium national accounts such as Home Depot, Marriott,
Target, Wal-Mart, Disney, and Nordstroms. We expect these opportunities to
continue at an accelerated rate.

INCREASE INFRASTRUCTURE ACCOUNTS. The successful implementation of
strategies designed to increase service offerings has resulted in our ability to
capitalize on certain high-growth market opportunities. We believe that we are
well positioned to take advantage of the approximately $165 billion authorized
under the TEA-21 for highway construction and related services. Our advantages
include a strong presence in California, which expects to receive $2.5 billion
in funds over the next six years, or $800 million more than under the previous
legislation.

BALANCE PUBLIC SECTOR AND PRIVATE INDUSTRY SERVICES. We continue to
successfully maintain a balance between business from the public sector and
private industry clients. The private industry sector allows us to take
advantage of increases in private construction during times of economic
expansion. The public sector clients provide us a continued revenue source
during times of economic slowing because public sector projects are not as
sensitive to downturns in the economy as private industry projects.

23
<PAGE>

EXPAND GEOGRAPHIC MARKETS. We are targeting ten geographical areas for
expansion. We believe that one key executive can efficiently manage an
operation with $10 million in annual sales. Additionally, as each operating
division grows, it will continue to reduce overhead as a percentage of sales.
Further, because we provide ancillary administrative support necessary to run
each division, our division level executives are encouraged to manage these
operations in a more decentralized fashion. Consequently, our division level
managers can react to regional business practices and traditions. We are
committed to future expansion and have targeted the West Coast and the
Mid-Atlantic regions for expansion.

DESCRIPTION OF ENGINEERING SERVICES

Our service to clients begins before an actual construction project
commences. We evaluate construction sites, building plans, and designs to
assure compliance with the approved construction documents for the proposed
facility. Our licensed engineers perform structural evaluations with a
licensed engineer. We perform site assessments, including soils engineering,
materials engineering, and environmental assessments to detect any potential
problems with the proposed site that could prevent or complicate the
successful completion of the project. In addition, we evaluate the onsite
building conditions and recommend optimum methods and materials for building
foundations, site preparation, and excavation.

When construction commences, we begin onsite consulting by monitoring
construction quality control. We visually inspect each phase of the construction
project, including excavation, foundations, structural framing, mechanical
heating and air conditioning systems, electrical systems, underground utilities,
and roofing. Where applicable, we may use additional methods to test materials
and work quality. Testing of the metals, concrete, and other materials used in
construction continues through each phase of the project. We are comprehensively
involved during the construction phase to assure compliance with the design
specifications and to monitor the overall quality of work.

During construction, we actively maintain contact with client project
managers. Problems detected or anticipated are identified, and we assist clients
in determining appropriate, cost effective solutions. We periodically provide
construction progress inspections and assessment reports. When a project is
complete, we prepare an evaluation report of the project and certify the
inspections for the client. We will also perform final inspections to determine
the moisture resistance of windows, doors, foundations, and roofing. After
construction, we offer periodic building inspection services to assure that the
building is being maintained in accordance with applicable building codes to
assure maximum building life. We may also perform indoor air and water quality
tests during this period.

CONSTRUCTION MATERIALS TESTING AND ENGINEERING SERVICES. We provide testing
and client representative services related to concrete and steel materials used
in the construction industry. From the preconstruction stage of evaluating
materials to the completion of the project, our range of services supporting
construction projects include quality assurance and quality control,
construction specifications, test evaluations, materials performance
documentation, and problem solving. We conduct these services in our
laboratories prior to and during construction, in the fabrication plant, and at
the construction site.

Our expertise in these areas provide valuable assistance to clients in the
construction of major buildings of all types and sizes including industrial,
office, retail, medical, school, military, and governmental, as well as
highways, railroads, dams, bridges, transmission towers, airports runways, water
supply facilities, wastewater treatment facilities, dock and waterway
facilities, solid waste landfills, power plants, and many other structures.
Potential clients include architects, engineers, contractors, commercial
developers, local, state, and federal government agencies, corporations, and
other user-owners.

We provide testing of concrete and structural and reinforcing steel through
proven systematic methods and procedures of quality control management. We
customize project work to meet our clients' specific needs. We deliver materials
testing services on-site for the duration of a construction project, giving us a
competitive advantage over other providers. Concrete is tested during and after
placement to measure the consistency and strength of concrete. Architects or
engineers develop specifications for the design of the structure or foundation,
and we verify them during construction.

24
<PAGE>

We also test steel structures for compliance. While many steel tests and
inspections are performed at the project site, tests and inspections are also
done at the steel fabrication plant, where the process can be monitored and
imperfections can be corrected before shipment to the project. Concrete and
steel samples collected in the field are transported back to our local
laboratory for analysis. Field representatives are deployed to the job site
from the nearest area office providing these services. Typically, a 100-mile
radius is the most economically feasible distance for providing these
services. Therefore, we only provide these services in areas with
construction activities to support the necessary operational resources.
Periodically, field offices are established to accommodate large projects.

All our field personnel work directly under the supervision of licensed
civil/geotechnical engineers. These engineers actively participate in American
Society of Civil Engineers, American Council of Independent Laboratories,
American Public Works Association, and other similar professional groups in
order to remain current with changes in the industry. As members of the
International Conference of Building Officials, our personnel receive
notification of all code changes. All field personnel must maintain and renew
licenses in their respective areas of inspection. All laboratories are inspected
biannually by the Cement and Concrete Reference Laboratory (CCRL) of the
National Institute of Standards and Measures. Additionally, our laboratories
participate in proficiency programs conducted by CCRL and the American
Association of State Highway & Transportation Officials.

INFRASTRUCTURE ENGINEERING SERVICES. We provide inspection and testing
services similar to those provided to our construction materials testing and
engineering services and geotechnical engineering services clients. These
services are provided to support the planning and construction of the
transportation network including highways, bridges, piers, tunnels, airports,
and other similar structures; dams, drainage basins, and storm water
facilities; waste treatment facilities; and utility transfer systems. One
advantage we have is that our laboratories in California and New Jersey have
been certified by the American Association of State Highway & Transportation
Officials. This AASHTO certification is often required in order to bid on
infrastructure projects, especially the larger projects. We believe that
demand for these services will increase in the future as the country repairs
its deteriorating infrastructure and as funding becomes available as a result
of Congress' recent TEA-21 funding package authorizing approximately $165
billion for highway and infrastructure improvements. As we have become active
in providing infrastructure engineering services, management believes the
Company will receive additional work from the substantially increased
expenditures projected for transportation construction.

GEOTECHNICAL ENGINEERING AND CONSULTING SERVICES. Our geotechnical
engineering and consulting services involve the analysis of soil data and design
of structures supported on or within the earth. Geotechnical services begin with
the project planning and design phase of a project, extend through construction,
and often continue through the service life of a structure. Geotechnical
engineers, geologists, and earth scientists conduct geotechnical, subsurface
explorations to ascertain the behavior of soil, rock, and groundwater as
affected by existing geologic features and new construction activities. Our
professionals have expertise in soil and rock mechanics, geophysics, and
earthquake engineering. The design of a subsurface program requires familiarity
with local geology and a thorough knowledge of economical construction methods.
Our offices are staffed by professionals with local expertise in a wide variety
of soil conditions.

Soil tests are performed to determine soil compaction characteristics both
before foundation design and after excavation or soil placement have taken
place. The purpose of these tests is to determine the stability and load-bearing
characteristics of a soil before, during, and after construction. We use the
expertise of our geotechnical engineers, geologists, and experienced field
drilling personnel to design a field exploratory program. The field data and
samples are brought to our soil laboratories for further testing and evaluation.
The information obtained during the field exploration and laboratory testing is
used to provide the client with cost-effective designs for high-rise building
foundations, site improvements, tunnels, dams, manufacturing facilities,
landfills, bridges, and many other structures. We also provide specific
recommendations to avoid delays and cost overruns during construction,
particularly in the weather-dependent site preparation phase of a project. An
engineering report is prepared under the direction and review of a licensed
professional engineer familiar with the particular geologic conditions and
engineering requirements for the project.

25
<PAGE>

OTHER SERVICES AND PRODUCTS

In addition to the core services described above, we maintain specialized
services that can be integrated with the overall needs of our clients. This is
part of our overall business strategy to build and maintain client relationships
while adjusting to the market demand for professional services. Most of these
services have either developed within the last five years or been obtained
through recent acquisitions. The following is a description of some of the
non-core services we offer to complement our core business.

BUILDING CONDITION SURVEYS. As part of our integrated service strategy for
commercial and industrial clients, we also offer building condition surveys. As
a general rule, building condition surveys involve an evaluation of the
facility's heating, ventilation, and lighting systems, water services, roofing
system, and structural or architectural construction or both. This service is
frequently associated with the purchase of real estate where the purchaser
requires an evaluation of operation and maintenance exposures of property prior
to closing. These services are also integrated with our other commercial and
industrial project services such as Phase I and Phase II environmental
assessments, asbestos assessments, and indoor air quality consulting. We are in
the process of promoting and developing building condition surveys on a national
level.

CONSTRUCTION ADMINISTRATIVE SERVICES. Our services also include
construction administrative services. These services range from acting as the
client's field representative during construction to overall responsibility
for the project's quality issues. The client representative assures that the
construction is done according to the plans and specifications developed by
either the architect or engineer. These services are typically billed on
either daily rates or hourly rates plus expense reimbursement.

An example of these services is a recent long-term contract to act as the
Orange County, Florida's school district field representative for all of its new
construction and building maintenance. In the case of this school district,
which encompasses the entire city of Orlando, we act like a building department:
reviewing plans, conducting inspections, and certifying compliance with codes.

ENVIRONMENTAL ASSESSMENT SERVICES. The majority of our project activities
within this segment focus on identifying potential environmental hazards and
risk exposures. We provide environmental consulting services to corporate and
governmental clients. Many of these clients are large regional and national
corporations with multi-site consulting needs. Client relationships and quality
of service delivery primarily drive the market for these services.

CONTRACTUAL ARRANGEMENTS

We often provide services for our major clients under arrangements
involving continuing service agreements. These arrangements are usually on a
"time-and-materials," "cost-plus-fixed-fee," or a "fixed-price" basis, and are
usually terminable on advance notice by either party. In 1997, approximately 60%
of our projects were on a time-and-materials basis, under which we billed our
clients at fixed hourly rates plus subcontracted services and materials used. In
1997, an additional 25% of our work was performed under cost-plus-fixed-fee
agreements where we and the client agreed to a budgeted contract, but the client
covered overruns and was credited for any savings realized under budget.

Fixed-price arrangements, under which we perform a stated service for a
set price regardless of the time and materials cost involved, represented
approximately 15% of our business in 1997. Although this type of contract
does carry the risk that the cost to us for performing the agreed-upon
services may exceed the set price, a fixed-price also has the benefit of
potentially higher profit created by all savings under the contract amount.
With military projects, we have used fixed-price contracts very successfully
where very detailed project plans and specifications are available. When
quoting a fixed-price contract, our marketing personnel provide detailed
breakdowns of all phases of the work specified including man-hours, tests,
and construction schedule assumptions. The fixed-price contract is thus based
upon a clearly defined scope of work and contract duration. During the course
of the project this scope of work and contract duration is constantly
monitored, and any expansion of the scope of work or contract duration is
billed as an extra to the contract.

26
<PAGE>

MARKETING AND SALES

We provide our professional consulting, engineering, and testing services
in the construction industry to Fortune 500 companies, ENGINEERING NEWS RECORD
(ENR) top 400 contractors and construction engineering firms, small companies,
real estate property owners and managers, and federal, state, and local
governments. Our contracts are obtained by our sales staff through relationship
building followed by proposals and bidding. The current sales staff consists of
one to two sales representatives in each of our locations, and estimators as
well as clerical staff back up these sales personnel. Referrals from existing
and former clients, architects, and engineers are a significant source of
contract leads. Clients are often interested in more than one of our services.
We have been able to sell construction materials testing and engineering
services, geotechnical services, and environmental services, to the same
clients.

We presently market our services through our subsidiaries. Direct marketing
is accomplished by technical sales representatives, technical personnel, and
management personnel who routinely call on prospective clients. We also utilize
government and industry publications to identify potential services and requests
for project proposals for submission of competitive bids.

Recent trends in the engineering and consulting market require that a
service provider commit considerable resources toward maintaining and developing
client relationships. This shift from project-specific to long-term client
relationship partnering requires a service provider to dedicate both technical
and marketing resources toward tailoring services for a client. It also requires
the provider to maintain a broad range of responsive, quality services. The
rewards of this client relationship partnering and quality, service-focused
programs are continued revenues from repeat customers and, in many instances,
sole source solicitation and award of work to the firm.

KEY CLIENTS AND PROJECTS

Our services and products are applicable to a full range of business,
manufacturing, institutional, and government sectors. However, based on
demand for our services, existing relationships, and revenue generation
potential, we target real estate management and development firms, large
general contracting firms, large construction management firms, national
corporate owners/users, state transportation agencies, municipalities, public
school systems, public housing authorities, and the U.S. Department of
Defense as key client sectors for development.

<PAGE>

Our client list is comprised of hundreds of different customers. We serve
the private commercial market, the public sector, and a variety of "public
interest" or non-profit organizations. In 1998, no single customer accounted for
more than 5% of our revenues. The following is a representative list of our
clients.

<TABLE>
<S> <C>
PRIVATE COMMERCIAL CLIENTS
Wal-Mart Nordstroms
Neiman Marcus Home Depot
Saks Fifth Avenue Circuit City
Lord & Taylor Marriott
Hilton Hotels Walt Disney
Claridge Casino Atlantic City Bally's Park Place
Sea World San Diego Universal Studios Orlando
Lockheed Martin Sports Authority
Rite-Aid Target Stores

PUBLIC INTEREST CLIENTS
Giants Meadowlands California State Universities
San Diego Qualcomm Stadium Princeton University
Florida Panthers Ice Hockey University of California

PUBLIC SECTOR CLIENTS
New Jersey Turnpike Authority Port Authority New York
New Jersey Transit Authority Port Authority New Jersey
New Jersey Sports & Expositions CalTrans
City of Los Angeles City of San Diego
San Diego County Los Angeles County
United States Navy Port Authority of San Diego
</TABLE>

One marketing and operational goal we have worked towards is an equal
balance between private industry and public sector work. We have maintained this
goal although the percentage breakdown in the three regional areas we serve has
varied. In Southern California, the split between private industry and public
sector work has been evenly split. In the New Jersey area, approximately 25% of
the work has been private industry and 75% public sector. In Florida, our market
has been approximately 75% private industry and 25% public sector.

<PAGE>

The following is a representative list of the projects for which we have
provided engineering services.

<TABLE>
<CAPTION>
NEW JERSEY FLORIDA SOUTHERN CALIFORNIA
<S> <C> <C>
OFFICE BUILDINGS/HIGH-RISES
Hoffman-LaRoche IBM Sony
Merck & Company Motorola Uniden
Liberty Plaza Kemper Insurance Johnson & Johnson

REGIONAL SHOPPING MALLS
Monmouth Mall Plantation Fashion Mall Fashion Valley Mall
Sheridan Plaza Hollywood Mall Horton Plaza
Garden State Plaza Sawgrass Mills Mall Seaport Village
Paramus Park Pembroke Lakes Mall University Towne Centre
Jersey Garden Mall North County Fair

HOTELS/AMUSEMENT PARKS
Bally's Park Place Universal Studios Sea World
Caesar's Hotel/Casino Disney World Marriott Towers
Six Flags Great Adventure Marriott Inns Hyatt Regency Aventine
Claridge Hotel & Casino Loew's Miami Beach Sheraton Torrey Pines

UNIVERSITIES
Princeton University Palm Beach College California State University
Farleigh Dickenson University Broward Community College University of California
Rutgers University Florida Atlantic University University of San Diego

GOVERNMENT/MUNICIPALITIES/SCHOOL DISTRICTS
FAA Homestead Air Force Base MCAS Miramar
Casino Development Authority Florida Department of Transportation NAS North Island
New Jersey Transit Orange County Schools MCS Camp Pendleton
New Jersey Veterans Administration Ft. Lauderdale Museum San Diego Unified Schools
New Jersey Water District Miami/Dade County Schools Coronado Schools
Plantation City Hall
Kravis Center Performing Arts

HOSPITALS
Englewood Hospital Kendall Reg. Center Children's Hospital
Hackensack University Hospital Holy Cross Cancer Kaiser Hospital
Passaic General Hospital Sunrise Medical Center Scripps Clinic
Palisades General Hospital Holy Redeemer Hospital UCSD Hospital
Morristown Memorial Hospital Balboa Naval Hospital
Scripps Memorial Hospital

PUBLIC FACILITIES
Princeton Stadium Florida Panther Arena San Diego Qualcomm Stadium
Giants Meadowlands Stadium San Diego Convention Center
</TABLE>

<PAGE>

EXAMPLE OF CLIENT ENGAGEMENT

One of our recent high profile projects was the expansion and redevelopment
of Fashion Valley Regional Shopping Mall, a $200 million, two-year project in
San Diego. The client was the owner of the shopping center, a partnership
between Lend Lease Development, an international real estate conglomerate, and
Equitable Life. We provided geotechnical services, and construction materials
inspections and testing for seven parking structures and the construction of a
second retail level over the existing shopping mall. Geotechnical services
involved compaction testing for foundations and footings, trenches, and
driveways. The parking structures were poured in place concrete and precast
concrete panel construction over driven concrete piles. Not only were concrete
quality control inspection and compression testing required, but masonry and
structural steel inspections were also needed. The second story mall was of
steel frame construction, and therefore sophisticated welding and structural
steel inspections were required as well as concrete, masonry, fireproofing,
roofing, and waterproofing inspection and testing.

Because the existing business within the mall remained open for business
during construction, much of the concrete and structural steel work was
completed between 10:00 p.m. and when the stores opened the following morning.
In addition to providing services for the parking structures and the mall
expansion, we also contracted with Nordstroms to provide similar services for
the reconstruction of this anchor tenant. Our total fees on the project
approached one million dollars. All work was performed on a time and materials
basis at negotiated rate levels and estimated budgets. On peak activity days as
many as eight of our inspectors or technicians worked at Fashion Valley
supported by the engineering and laboratory staffs.

INFORMATION SYSTEMS AND THE YEAR 2000

Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than two years, computer systems or software or both may need to be upgraded to
comply with "Year 2000" requirements. We have assessed our management
information systems and do not currently expect that any material expenditure
will be required in connection with the modifications that will be required for
these systems. Moreover, we have recently implemented or are in the process of
implementing new systems that are already Year 2000 compliant and we do not
believe that the total cost of any potential modification of such management
information systems will be material. There can be no assurance that we or our
vendors will be able to successfully modify on a timely basis our or their
respective management information systems to comply with Year 2000
requirements.

We are currently converting our accounting and management information
systems to a system consisting of new hardware and packaged software recently
purchased from a large recognized industry vendor, State of the Art (MAS 90),
who has represented that these systems are Year 2000 compliant. Our remaining
operations are generally dependent only on personal computers and off-the-shelf
commercial word processing, drafting, spreadsheet, and engineering software.
Year 2000 compliant versions of these systems are currently available, and we
will convert to these compliant systems over the next year and a half as we
upgrade our operational personal computer systems in the ordinary course to the
most recently issued software releases.

We have expanded substantially over the past several years, primarily as
a result of acquisitions. The process of integrating acquired businesses has
placed significant demands on our management information systems. To address
these demands, we are in the process of upgrading and replacing our
management information systems. This process of upgrading and replacing our
management information systems has required, and will continue to require,
substantial attention from members of senior management. We are within 90
days of completing systems upgrades to our management information systems,
and the upgrade is 60% complete, but no assurance can be given that such
system upgrade will be completed successfully. Our failure to successfully
upgrade our management information systems could have a material adverse
effect on our results of operations.

<PAGE>

OFFICE AND SUPPORT SERVICES

We operate through eight offices located in three states. The office is our
basic economic and functional unit through which all services are provided.
Personnel located in each office are experienced in developing and implementing
solutions, which meet the requirements of local regulations. We monitor all
offices through a subsidiary president. Each of our subsidiaries is responsible
for introducing new services to customers, managing projects within budget, and
meeting pre-established quality control standards. Each subsidiary also has
dedicated sales and marketing staff. We provide each subsidiary with accounting,
administration, and human resources support.

BACKLOG

Backlog includes anticipated revenue from services on major long-term
contracts or continuing service agreements that provide for authorization of
funding on a task or fiscal period basis. Excluded from backlog are anticipated
revenues from smaller projects done without long-term contracts or service
agreements. At September 30, 1998, we had approximately $7.2 million of gross
revenue backlog compared to $4.2 million at September 30, 1997. The September
30, 1997 backlog figure includes the backlog of Wyman Enterprises, Inc.
before our acquisition of all of its assets and certain of its liabilities.

We bill for our services monthly for work completed during the previous
month. All billing is done on the regional level, and all accounts receivable
responsibilities are also handled on the regional level with overall supervision
from our headquarters. Collection periods for our receivables range between 70
and 75 days. An allowance for doubtful accounts is typically established
equivalent to one percent of gross revenues.

SEASONAL FACTORS

Due primarily to more holidays and inclement weather conditions, our
operating results during January, February, and December are generally lower in
comparison to other months. Because all field and most lab personnel are paid on
an hourly basis, we can reduce expenses for direct labor as the workload
decreases. Historically enough work exists during the slow months to retain the
hourly work force at reduced levels until volume increases after the winter
months.

COMPETITION

The services that we provide are subject to intense competition. In
addition to the thousands of small consulting and testing firms operating in the
United States, we compete with several national engineering and consulting firms
including Law Companies Group, Inc.; Harding Lawson Associates Group, Inc.;
Dames & Moore, Inc.; and Professional Service Industries, Inc.

Certain of our present and future competitors may have greater
financial, technical, and personnel resources than us. We cannot predict the
extent of competition that we will encounter in the near future as
construction materials testing and engineering, infrastructure, geotechnical,
and environmental services industries continue to mature and consolidate.
Historically, competition has been based primarily on the quality,
timeliness, and costs of services. Our ability to compete successfully will
depend upon our marketing efforts, our ability to accurately estimate costs,
the quality of the work we perform, our ability to hire and train qualified
personnel, and the availability of insurance.

ORGANIZATION

We were established in 1993 to acquire regional engineering services firms.
Currently, we are comprised of four operating units and the holding company.

PEICO was founded in 1984 and is located in South Florida. PEICO's core
business is to provide geo-technical engineering, construction testing and
inspection, structural engineering and design services. Over the past ten years
PEICO has successfully provided professional services on over 2,000 projects
with construction budgets from $500,000 to $200,000,000. U.S. Labs acquired
PEICO in 1994.

31
<PAGE>

USEL has three locations in New Jersey and was founded 1993 to provide
construction engineering, inspection, and testing services to northeast clients.
At present USEL is one of the largest operations of its type serving the
Metropolitan New York, New Jersey, and Philadelphia region.

TESD was founded in 1946 and has provided engineering and consulting
services to the Southern California construction industry for over 50 years.
TESD was acquired by us in 1996 and provides engineering, testing, and
inspection services identical to those provided by PEICO and USEL. Wyman
Enterprises, Inc. was founded in 1973, and currently serves the Southern
California and Mexican border market and is licensed in Nevada. Substantially
all the assets and certain of the liabilities of Wyman Enterprises, Inc. were
acquired by Wyman Testing, a subsidiary of ours, in 1998, and Wyman Testing was
subsequently merged into the operations of TESD.

In August 1998, we formed another subsidiary, Los Angeles Testing
Engineers, Inc., for a new office in Irvine, California. This subsidiary has not
made a material contribution to our results of operations.

INSURANCE

We have a claims made professional liability insurance policy, which
includes contractor's pollution liability coverage. The professional
liability insurance policy has a one-year term, ending in November 1999,
which is subject to annual renewal, with a per-claim and aggregate limit of
$2 million, and a deductible of $20,000 per claim. Increased limits have been
obtained on a specific endorsement basis to meet the needs of particular
clients or contracts. A claims made policy only insures against claims filed
during the period in which the policy is in effect. This policy covers both
errors and omissions. To date no insured losses have been experienced.

We also carry an occurrence basis general liability insurance policy in the
amount of $2 million, with a $5 million umbrella. This coverage includes
products/completed operations. The general liability insurance policy has a
one-year term, ending in January 2000 and is subject to annual renewal. Our
policies have been renewed in each of the years that they have been in effect.

In addition, we have secured a claims made directors and officers'
liability insurance policy with an aggregate limit of $2 million, which will
increase to $6 million at the initial public offering. This policy has a
one-year term that expires in October 1999. We can make no assurance that
insurance coverage will continue to be renewed or available in the future or
offered at rates similar to those under the current policies.

In August 1998, we obtained key person life insurance policies on the
lives of Dickerson Wright, Martin Lowenthal, Mark Baron, Christopher
O'Malley, and Gary Elzweig. According to the provisions of those policies,
our company is the beneficiary in the amount of $2,650,000, $650,000,
$300,000, $300,000, and $1,000,000, on the lives of Messrs. Wright,
Lowenthal, Baron, O'Malley, and Elzweig, respectively.

GOVERNMENT REGULATION

Except for state licensure requirements for the engineering component,
there is limited regulation of the construction materials testing and
engineering or geotechnical consulting service industries. Industry standards
are set by agencies, including the American Society of Testing Material, the
American Association of State Highway & Transportation Officials, the American
Concrete Institute, and the American Welding Society. State and local building
codes, the stringency of which varies by location, however, govern construction
projects themselves.

<PAGE>

PERSONNEL

We employ approximately 200 regular, full-time employees, including 170
engineers, inspectors, and field lab technicians and 30 administrative
personnel. None of our employees are presently represented by a labor union.
We believe that relations with our employees are good.

FACILITIES

We own no real estate, and all of our locations are leased from independent
third parties as follows:

<TABLE>
<CAPTION>
LOCATION FOOTAGE LEASE EXPIRATION
- -------- ------- ----------------
<S> <C> <C>
South Coast Florida Office: 7,600 July 2000
4350 West Sunrise Boulevard
Plantation, Florida

Central Coast Florida Office: 1,600 June 2000
1001 Jupiter Park Drive
Jupiter, Florida

Central Florida Office: 3,000 Month-to-month
6220 South Orange Blossom Trail
Orlando, Florida

North New Jersey Office: 7,000 June 1999
903 E. Hazelwood Avenue
Rahway, New Jersey

New Jersey Coast Office: 2,000 March 1999
2511 Fire Road
Egg Harbor, New Jersey

South New Jersey Office: 3,700 May 2001
443 Commerce Lane
West Berlin, New Jersey

Southern California Offices: 11,000 May 2003
7895 Convoy Court
San Diego, California

17905 Skypark Circle 3,200 August 2001
Irvine, California
</TABLE>

LEGAL PROCEEDINGS

As of the date of this Prospectus, we are not a party to any material legal
proceedings. Notwithstanding this, from time to time, we may be involved in
material litigation.

<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Our directors, executive officers, and key employees and their ages and
positions held with us are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Dickerson Wright(1)........................ 52 Chief Executive Officer, President, and Chairman of the
Board of Directors
Gary H. Elzweig............................ 43 Executive Vice President and Director
Donald C. Alford........................... 54 Executive Vice President and Director
Mark Baron................................. 43 Executive Vice President and Director
Martin B. Lowenthal........................ 42 Executive Vice President and Director
James D. Wait.............................. 45 Chief Financial Officer, Secretary, and Director
Thomas H. Chapman.......................... 68 Director *
James L. McCumber(2)....................... 51 Director
Robert E. Petersen(1)(2) .................. 52 Director
Noel Schwartz(1)........................... 71 Director
Irving Fuchs............................... 72 Director
</TABLE>

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

*Mr. Chapman is a vice president of TESD, one of our subsidiaries.

(1) Member of Compensation Committee
(2) Member of Audit Committee

Each of our directors is elected at the annual meeting of stockholders
and serves until the next annual meeting and until his or her successor is
elected and qualified, or until his or her earlier death, resignation, or
removal. The Underwriters have the right to observe Board meetings for a
period of five years following the Offering.

Dickerson Wright, P.E., is our founder and has served as our Chairman of
the Board of Directors and President since our incorporation in October 1993.
Mr. Wright is a registered professional engineer with a history of building and
managing engineering service companies and over 25 years experience in the
independent testing and inspection industry. From September 1990 to September
1993, he was the co-owner and Executive Vice President of American Engineering
Laboratories. Mr. Wright also served as President and Chief Executive Officer of
Western State Testing, as National Group Vice President of United States Testing
Company, and as Executive Vice President of Professional Service Industries
during this period of time.

Gary H. Elzweig, P.E., is a co-founder of PEICO and has served as President
of PEICO since its incorporation in March 1987. Mr. Elzweig has served as our
Executive Vice President and director since May 1998. He is a registered
professional engineer with over 20 years of experience in engineering, design,
and testing. Mr. Elzweig earned his Bachelor's Degree from Columbia University,
School of Engineers in 1977. Mr. Elzweig also serves as Chairman of Broward
County's Board of Rules and Appeals Foundations Subcommittee, and Building
Envelope Subcommittee.

Donald C. Alford has served as our Executive Vice President and director
since May 1998. Mr. Alford was an owner of Wyman Enterprises, Inc. and served
as a Vice President and Chief Financial Officer from April 1996 until its
acquisition by U.S. Labs. Mr. Alford continued to work for U.S. Labs as an
officer of Wyman Testing after the acquisition of Wyman Enterprises, Inc.
Mr. Alford was co-founder of Cornerstone Development, a real estate company
that developed approximately 20 major projects in the San Diego area from
1983 to 1991. From October 1991 to June 1994, Mr. Alford served as President
of Procom Supply Corporation, a wholesale distributor of telephone equipment.
Mr. Alford also served as Managing Partner of S.A. Assets, LLC, a real estate
development company, from July 1994 to September 1996.

34
<PAGE>

Mark Baron has been President and director of TESD since May 1998 and
has served as our Executive Vice President and director since May 1998. Mr.
Baron also was employed in the position of Manager of Business Development
with Professional Service Industries from November 1989 to October 1996. He
has over 20 years experience in the construction industry. Mr. Baron is a
certified OSHPD Class A Construction Inspector.

Martin B. Lowenthal is President and a director of USEL and has served as
our Executive Vice President and director since May 30, 1998. Mr. Lowenthal has
served as President and director of USEL since November 1994 and as Secretary of
USEL since its incorporation in October 1993. Mr. Lowenthal has 16 years of
management experience in the engineering and testing industry. He has overseen
engineering and testing operations in six states, including New Jersey, New
York, Delaware, Pennsylvania, Maryland, and Virginia.

James D. Wait has served as our Chief Financial Officer, Vice President -
Finance and Treasurer and director since May 1998. Prior to joining us, Mr. Wait
served as President of Tayside Development, a real estate consulting firm, from
January 1993 to December 1996. Mr. Wait also served as Treasurer of Horizon
Communities, Inc., a real estate development company, from December 1996 to
October 1997 and as Treasurer of The Encinas Group, a real estate development
company, from November 1997 to April 1998. Prior to 1993, Mr. Wait acted as the
Chief Financial Officer and Treasurer for 16 years for R.B. McComic, Inc. and
The Gentry Company. Mr. Wait is a Certified Public Accountant, licensed in the
State of California since 1981.

Thomas H. Chapman, R.C.E., has served as a director of TESD since March
1997 and has served as one of our directors since May 1998. Mr. Chapman
previously served as President of TESD from March 1997 to May 1998 and has been
employed by TESD since May 1997. Mr. Chapman originally joined the predecessor
to TESD in 1968 and eventually left TESD in 1989 when he went to work for Law
Engineering. He served as the Office Manager for Law Engineering until he
rejoined TESD in 1997. Mr. Chapman has been involved in several notable projects
in San Diego, including the San Diego Convention Center, the Hyatt Regency
Hotel, the City Front Terrace, and One Harbor Drive. Mr. Chapman earned his
degree in Civil Engineering from San Diego State University and is a California
Registered Civil Engineer.

James L. McCumber is the Chairman, Chief Executive Officer, and founder of
McCumber Golf, an internationally recognized firm noted for the design and
construction of landmark golf courses. McCumber Golf was founded in 1971. Mr.
McCumber has been one of our directors since May 1998. Additionally, he serves
as a senior official with the Professional Golf Association.

Robert E. Petersen has served as one of our directors since May 1998. Mr.
Petersen has served as President of Asset Management Group, a retail and
industrial property management firm, since October 1983. Mr. Petersen has also
served as Senior Vice President and Chief Financial Officer of Collins
Development Co. and Vice President of La Jolla Development Co., both of which of
are real estate development companies, since October 1983.

Noel Schwartz is a registered professional engineer (retired). Mr.
Schwartz has been one of our directors since July 1998. Mr. Schwartz has
served in the engineering and research industry since 1952. Between 1952 and
his retirement in 1988, Mr. Schwartz held positions with United States
Testing Company such as Consumer Research Division Manager, Director of
Research, Vice President of Operations-Laboratory Group, Senior Vice
President-Laboratory Services Division and finally, President-Laboratory
Services Division. During his tenure at United States Testing Company, a
publicly traded corporation, he was a member of the Board of Directors.

35
<PAGE>

Irving Fuchs is a registered professional engineer (retired). Mr. Fuchs has
been one of our directors since July 1998. Mr. Fuchs has served in the
engineering and research industry since the early 1950's. Before his retirement
in 1992, Mr. Fuchs held several positions with United States Testing Company,
including Division Manager-Engineering Services, Division Manager-Commercial
Engineering and Testing, Senior Vice President-Engineering Services Group, and
President-Engineering Services Group. During his tenure at United States Testing
Company, a publicly traded corporation, he was a member of the Board of
Directors.

DIRECTOR COMPENSATION

We reimburse our directors for all reasonable and necessary travel and
other incidental expenses incurred in connection with their attendance at
meetings of the Board. Beginning December 1998, the Company began
compensating all non-employee directors $500 for each board meeting attended.
However, under the 1998 Stock Option Plan each non-employee director who is
first elected to the Board will automatically receive an option to purchase
5,000 shares of Common Stock for the first year of the director's Board term.
The Board has not yet determined the number of option shares that each
director will receive for each additional year the director remains on the
Board. These options will have an exercise price equal to 100% of the fair
market value of the Common Stock on the grant date.

COMMITTEES OF THE BOARD OF DIRECTORS

We have a standing Compensation Committee currently composed of Messrs.
Wright, Petersen, and Schwartz. The Compensation Committee reviews and acts on
matters relating to compensation levels and benefit plans for our executive
officers and key employees, including salary and stock options. The Committee is
also responsible for granting stock awards, stock options, stock appreciation
rights, and other awards to be made under our existing incentive compensation
plans. We also have a standing Audit Committee composed of Messrs. McCumber and
Petersen. The Audit Committee assists in selecting our independent auditors and
in designating services to be performed by, and maintaining effective
communication with, those auditors.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

Our Amended and Restated Certificate of Incorporation provides that our
directors will not be personally liable to us or you for monetary damages for
breach of fiduciary duty as a director except for liability (i) for any breach
of the director's duty of loyalty to us or you, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law (relating
to unlawful payment of dividends or unlawful stock purchase or redemption) or
(iv) for any transaction from which the director derived any improper personal
benefit.

Our Amended and Restated Certificate of Incorporation also provides that
we will indemnify our directors, officers, employees, and agents to the
fullest extent permitted by Section 145 of the Delaware General Corporation
Law. Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to directors, officers,
and controlling persons of the Company pursuant to the foregoing provisions,
or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.

36
<PAGE>

EMPLOYMENT AGREEMENTS

We have entered into employment agreements with Messrs. Wright, Elzweig,
Alford, Baron, Lowenthal, and Wait. Each of these agreements has a term of three
years, and provides that we may terminate any of the agreements with or without
cause. These employment agreements also provide for 12 months of severance pay
at the rate of 50% of the applicable executive's compensation in the event the
executive is terminated other than for cause prior to the end of the three-year
term.

Mr. Wright's employment agreement provides salary in the amount of
$175,000 per annum and if the Company reports at least $1,200,000 in pre-tax
profit for the 1998 calendar year then Mr. Wright will be entitled to a bonus
of 7% of the Company's pre-tax profit. If the Company earns $1,200,000 in
pre-tax profit in 1998, Mr. Wright will be entitled to $84,000. Mr. Elzweig's
employment agreement provides salary in the amount of $125,000 per annum and
if PEICO has at least pre-tax profits of $450,000 for the 1998 calendar year,
then Mr. Elzweig will be entitled to a bonus of 3% of the pre-tax profit for
the Company. If the Company earns $450,000 in pre-tax profit in 1998, Mr.
Elzweig will be entitled to $36,000. Additionally, if PEICO meets its
business goals for 1998, then PEICO will be entitled to a bonus pool of up to
5% of its pre-tax profit, which will be distributed at Mr. Elzweig's
discretion.

EXECUTIVE COMPENSATION

The following table sets forth certain information concerning
compensation paid or accrued for the fiscal year ended December 31, 1998 by
us to or for the benefit of our Chief Executive Officer and our only other
executive officer whose total annual compensation for 1998 exceeded $100,000
(the "Named Executive Officer").

SUMMARY COMPENSATION TABLE(1)

LONG-TERM
COMPENSATION
ANNUAL COMPENSATION --------------------
NAME AND ------------------- SECURITIES UNDERLYING
PRINCIPAL POSITION SALARY ($) OPTIONS AND WARRANTS
- ------------------ ---------- --------------------
<S> <C> <C>
Dickerson Wright
Chief Executive Officer......... $175,000 170,000

Gary H. Elzweig
Executive Vice President(2)..... $171,567 65,000
</TABLE>

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

(1) In accordance with Instruction to Item 402(b) of Regulation S-B promulgated
by the Securities and Exchange Commission (the "Commission"), information
with respect to fiscal years prior to 1998 has not been included because we
were not a reporting company under Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, and the information has not been
previously reported to the Commission in response to a filing requirement.

(2) Until July 1998, Mr. Elzweig was not our employee, but provided management
services to us as an independent contractor. Of the $171,567 reflected
in the above table, Mr. Elzweig received 5% of the net sales of PEICO,
or $106,664, in exchange for these management services.

STOCK OPTION PLAN. On May 30, 1998, our Board of Directors adopted the U.S.
Laboratories Inc. 1998 Stock Option Plan (the "1998 Stock Option Plan"), under
which the Board or the Compensation Committee may issue incentive stock options
and non-qualified stock options to purchase an aggregate of 500,000 shares of
Common Stock. Options may be issued under the plan to our employees, officers,
directors, advisors, or consultants. The Company will only grant stock options
with an exercise price at least equal to the fair market value of the Common
Stock on the date of grant. The Compensation Committee administers the 1998
Stock Option Plan.

On November 10, 1998, the Board of Directors authorized the issuance, under
the terms of the 1998 Stock Option Plan, of: (a) incentive stock options to
purchase an aggregate of 145,000 shares of Common Stock for an exercise price of
$6.60 to Dickerson Wright and Gary Elzweig; (b) incentive stock options to
purchase an aggregate of 205,000 shares of Common Stock for an exercise price of
$6.00 to certain of our officers and employees; and (c) non-qualified stock
options to purchase an aggregate of 45,000 shares of Common Stock for an
exercise price of $6.00 to certain of our non-employee directors and certain
other non-employees who have provided services to us. All of these stock options
are subject to vesting schedules described in stock option agreements between us
and the recipients of the stock options. These option grants replaced the
previous grants made on May 30, 1998, which were cancelled.

37
<PAGE>

WARRANTS. On November 10, 1998, the Board of Directors authorized the
issuance to certain of our officers and employees of warrants to purchase an
aggregate of 165,000 shares of Common Stock for an exercise price of $6.00
per share. These grants replaced the previous grants made on May 30, 1998,
which were cancelled.

The repricing of the above options and warrants was undertaken to
facilitate the Offering. All outstanding options and warrants were repriced
in the same manner.

The following table provides the specified information concerning grants
of options and warrants to purchase the Company's Common Stock made during
the year ended December 31, 1998 to the persons named in the Summary
Compensation Table.

<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SH) DATE
---- ------ ----------- ------ ----
<S> <C> <C> <C> <C>
Dickerson Wright 170,000 31.2% $5.00 - $5.50 5/30/08 (1)
170,000 31.2% $6.00 - $6.60 11/10/08

Gary H. Elzweig 65,000 11.9% $5.00 - $5.50 5/30/08 (1)
65,000 11.9% $6.00 - $6.60 11/10/08
</TABLE>

- ---------
(1) These options and warrants were cancelled in connection with the
recapitalization of the Company in preparation for the Offering.

The followng table provides information concerning exercises of options
and warrants to purchase the Company's Common Stock in the fiscal year ended
December 31, 1998, and unexercised options and warrants held at fiscal year
end by the persons named in the Summary Compensation Table.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AND WARRANTS AT AND WARRANTS AT
ACQUIRED DECEMBER 31, 1998 DECEMBER 31, 1998 (1)
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dickerson Wright 0 0 75,151 98,849 $ 0 $ 0
Gary H. Elzweig 0 0 45,151 19,849 $ 0 $ 0
</TABLE>

(1) Calculated by determining the difference between the initial public
offering price of $6.00 per Unit and the exercise price of the options
and warrants.

38
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of our Common Stock as of December 31, 1998, and as adjusted to
reflect the sale of the Units offered by us, by (i) each person who is known to
own beneficially more than 5% of the outstanding shares of our Common Stock,
(ii) each of our directors, (iii) the Named Executive Officer, and (iv) all our
directors and executive officers as a group:

<TABLE>
<CAPTION>
Name and Address of Number of Prior to After
Beneficial Owner(1) Shares Offering Offering
- ------------------- ------ -------- --------
<S> <C> <C> <C>
Dickerson Wright....................... 1,772,389(2) 71.8% 49.7%
Gary H. Elzweig........................ 360,638(3) 14.6% 10.1%
Martin B. Lowenthal.................... 82,192(4) 3.3% 2.3%
Donald C. Alford....................... 77,144(5) 3.1% 2.2%
Mark Baron............................. 60,318(6) 2.4% 1.7%
Thomas H. Chapman...................... 45,727(7) 1.9% 1.3%
James D. Wait.......................... 26,666(8) 1.1% *
James L. McCumber...................... 5,000(9) * *
Robert E. Petersen..................... 5,000(10) * *
Noel Schwartz.......................... 5,000(11) * *
Irving Fuchs........................... 5,000(12) * *

All current directors and officers as
a group (11 persons)................... 2,445,074(13) 99.0% 68.5%
</TABLE>

- ---------------------
* Represents less than 1%

(1) These persons have sole voting and investment power with respect to all
shares of Common Stock shown as being beneficially owned by them, subject
to community property laws, where applicable, and the information contained
in the footnotes to this table. The address of all stockholders is care of
U.S. Laboratories Inc., 7895 Convoy Court, Suite 18, San Diego, California
92111.

(2) Includes 15,151 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 awarded to Mr. Wright under our 1998 Stock
Option Plan and 60,000 shares issuable upon exercise of warrants
exercisable within 60 days of December 31, 1998 granted by us to Mr.
Wright. See "Management - Executive Compensation."

(3) Includes 15,151 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 awarded to Mr. Elzweig under our 1998 Stock
Option Plan and 30,000 shares issuable upon exercise of warrants
exercisable within 60 days of December 31, 1998 granted by us to Mr.
Elzweig. See "Management - Executive Compensation."

(4) Includes 16,666 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 awarded to Mr. Lowenthal under our 1998 Stock
Option Plan and 10,000 shares issuable upon exercise of warrants
exercisable within 60 days of December 31, 1998 granted by us to Mr.
Lowenthal. See "Management - Executive Compensation."

39
<PAGE>

(5) Includes 16,666 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 awarded to Mr. Alford under our 1998 Stock
Option Plan and 10,000 shares issuable upon exercise of warrants
exercisable within 60 days of December 31, 1998 granted by us to Mr.
Alford. See "Management - Executive Compensation."

(6) Includes 16,666 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 awarded to Mr. Baron under our 1998 Stock
Option Plan and 10,000 shares issuable upon exercise of warrants
exercisable within 60 days of December 31, 1998 granted by us to Mr.
Baron. See "Management - Executive Compensation."

(7) Includes 16,666 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 awarded to Mr. Chapman under our 1998 Stock
Option Plan and 5,000 shares issuable upon exercise of warrants exercisable
within 60 days of December 31, 1998 granted by us to Mr. Chapman. See
"Management - Executive Compensation."

(8) Includes 16,666 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 awarded to Mr. Wait under our 1998 Stock
Option Plan and 10,000 shares issuable upon exercise of warrants
exercisable within 60 days of December 31, 1998 granted by us to Mr. Wait.
See "Management - Executive Compensation."

(9) Includes 5,000 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 awarded to Mr. McCumber under our 1998 Stock
Option Plan. See "Management - Executive Compensation."

(10) Includes 5,000 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 awarded to Mr. Petersen under our 1998
Stock Option Plan. See "Management - Executive Compensation."

(11) Includes 5,000 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 awarded to Mr. Schwartz under our 1998 Stock
Option Plan. See "Management - Executive Compensation."

(12) Includes 5,000 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 awarded to Mr. Fuchs under our 1998 Stock
Option Plan. See "Management - Executive Compensation."

(13) Includes 268,632 shares issuable upon exercise of options and warrants
exercisable within 60 days of December 31, 1998.

RELATED TRANSACTIONS

All ongoing present and future transactions with our affiliates have been,
and will continue to be, on terms no less favorable to us than could have been
obtained from unaffiliated parties, and will be approved by a majority of no
less than two of our independent directors. These independent directors will not
have an interest in those transactions and will have access, at our expense, to
our counsel, or independent legal counsel.

At December 31, 1997 and September 30, 1998, we owed Dickerson Wright, the
Chief Executive Officer and majority stockholder, $584,281 and $97,499,
respectively. The amounts are non-interest bearing and are payable upon demand.
Mr. Wright loaned these amounts to us through the use of his personal line of
credit that was personally guaranteed by Mr. Wright and his spouse. In May 1998,
we repaid a portion of that line of credit by borrowing under a new $1,700,000
line of credit that is also personally guaranteed by Mr. Wright and his spouse.

In October 1998, the $1,700,000 line of credit was refinanced into a
$1,200,000 note payable and a $500,000 line of credit, both of which are
guaranteed by Mr. Wright and his spouse. In July 1998, we also entered into a
$500,000 line of credit that is personally guaranteed by Mr. Wright and his
spouse. We used this $500,000 line of credit to repay in full to the bank the
$480,000 loan made to us through the use of Mr. Wright's personal line of
credit.

40
<PAGE>

As part of the consideration for the acquisition of Wyman Enterprises,
Inc.'s assets, we issued a non-interest-bearing note payable to Donald C. Alford
in the principal amount of $150,000. The note payments are due in four equal
annual installments of $37,500 beginning in March 1999.

During the years ended December 31, 1997 and 1996 and the nine months ended
September 30, 1998 and 1997, we paid $181,067, $169,594, $137,063, and $92,052,
respectively, in management fees to Gary Elzweig. The management fees were based
on 5% of net sales of a subsidiary.

On January 1, 1998, we issued (a) 315,488 shares of our Common Stock to
Gary H. Elzweig in exchange for 100 shares of the common stock of PEICO; (b)
55,526 shares of our Common Stock to Martin B. Lowenthal in exchange for 18.5
shares of the common stock of USEL; (c) 33,652 shares of our Common Stock to
Mark Baron in exchange for 1.67 shares of the common stock of TESD; and (d)
24,061 shares of our Common Stock to Thomas H. Chapman in exchange for 5.67
shares of the common stock of TESD.

On January 1, 1998, we issued 10,937 shares of our Common Stock to
Christopher O'Malley, Vice President of USEL under the terms of a restricted
stock agreement containing restrictions on the disposition of the Common
Stock. The Common Stock was issued in exchange for a capital contribution
made by Mr. O'Malley to USEL.

On April 1, 1998, we issued 50,478 shares of our Common Stock to Donald C.
Alford in exchange for 25 shares of the common stock of Wyman Enterprises, Inc.

<PAGE>

UNDERWRITING

Under the terms and subject to the conditions of the Underwriting
Agreement ("Underwriting Agreement") Cardinal Capital Management, Inc.; Janda
& Garrington LLC; and FAS Wealth Management Services, Inc. (the
"Underwriters"), have agreed to purchase from us, and we have agreed to sell
to the Underwriters, 1,100,000 Units (the "Firm Units"). Each Unit consists
of one share of Common Stock and one Warrant to purchase one share of Common
Stock at $7.80 per share. We granted the Underwriters an overallotment option
to purchase an additional 165,000 Units (the "Option Units"), subject to
certain terms and conditions, some of which are specified below.

The Underwriters are committed to take and pay for all of the Firm Units,
if any are taken. The Underwriters have advised us that they propose to offer
the Units to the public at the initial public offering price of $6.00 per Unit.
The Underwriters will purchase the Units at a concession (discount) of 10%. The
Underwriters initially propose to offer part of the Units directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus and part to certain dealers at a price that represents a concession
not in excess of 6.5% of the initial public offering price. The Underwriters may
change the initial public offering price, concession, and discount to dealers
after the Units are released for sale to the public.

The Underwriters have informed us that they do not intend to confirm sales
to any account over which they exercise discretionary authority.

We will also pay the Underwriters a 3% non-accountable expense allowance,
of which $40,000 has been paid to date.

Upon completion of the Offering, we will grant to the Underwriters
warrants to purchase 110,000 Units (10% of the Firm Units). These
underwriters' warrants will entitle the Underwriters to purchase Units at a
price equal to 120% of the offering price to the public for a period
commencing one year after the effective date of the registration statement
and ending five years after that date. The Units offered to the Underwriters
will contain warrants to purchase Common Stock on terms identical to the
Warrants issued to the public except that the warrants underlying the
Underwriters' Units are not subject to redemption. These underwriters'
warrants may not be transferred except to the Underwriters' officers and
employees who are also stockholders of the Underwriters or by will, under the
laws of descent and distribution, or by the operation of law. The exercise
price of these warrants may not be reduced after the effective date of the
registration statement except in accordance with the terms of a stock
dividend; stock split; or merger, consolidation, reclassification,
reorganization, recapitalization, or a sale of the Company's assets. We have
agreed to pay all costs and expenses incident to the registration and
qualification of the Units with the Commission, the NASD, and such state
securities regulatory agencies as the Underwriters may reasonably request.

We agreed to use Cardinal Capital Management, Inc. and Janda &
Garrington LLC as our non-exclusive financial advisers until November 2, 2000
for any future mergers, acquisitions, or strategic partnership transactions
that we enter into with entities introduced to the Company by them. We will
compensate them based on the "Lehman formula." The Lehman Formula provides
for payment based on a percentage of a transaction's value. We will pay 5% of
the first one million dollars of a transaction's value and one less
percentage point for each million dollars of value until the percentage is
reduced to 1%. At that point, we will pay 1% of the balance of a
transaction's value. We paid Janda & Garrington LLC $22,500 in fees for
services rendered in the acquisition of Wyman Enterprises, Inc.

We have filed an application with the NASD to obtain a SmallCap Market
listing for the Common Stock and the Warrants.

The Underwriting Agreement provides that the obligations of the Underwriter
to pay for and accept delivery of the Units are subject to the approval of
certain legal matters by counsel and to certain other conditions.

In connection with the Offering, the Underwriters may engage in certain
transactions that stabilize the price of the Common Stock. These transactions
consist of bids or purchases for the purpose of pegging, fixing, or maintaining
the price of the Common Stock.

42
<PAGE>

If the Underwriters create a short position in the Common Stock in
connection with the Offering, the Underwriters may reduce that short position by
purchasing Common Stock in the open market. The Underwriters may also elect to
reduce any short position by exercising all or part of the overallotment option.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.

Neither the Underwriters nor we make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the Units. Also, neither we nor any of the Underwriters
make any representation that the Underwriters will engage in such transaction or
that such transactions, once commenced, will not be discontinued without notice.

We granted the Underwriters, for a period of 45 days following the
effective date of the registration statement, an overallotment option to
purchase any or all of the Option Units at the initial public offering price
set forth on the cover page hereof, less underwriting discounts and
commissions. The Underwriters may exercise this option to purchase solely for
the purpose of covering over-allotments, if any, incurred in the sale of the
Units.

We determined the Units' purchase price by mutual agreement with the
Underwriters. The offering price has no direct relationship to any established
criteria of value, such as book value or earnings per share or any combination
thereof. The Units' price does not necessarily indicate current market value for
our assets. We did not prepare a valuation or appraisal for our business or our
potential business. We agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Act.

The Underwriters may impose a penalty bid on certain underwriters and
selling group members. This means that if the Underwriters purchase Units in the
open market to reduce the Underwriters' short position or to stabilize the price
of the Units, they may reclaim the amount of the selling concessions from the
underwriters and the selling group members who sold those Units in the Offering.

Certain persons participating in the offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock or
the Warrants, including over-allotment, stabilizing and short-covering
transactions in such securities.

DESCRIPTION OF SECURITIES

UNITS

Each Unit we offer consists of one share of Common Stock, $.01 par value
per share, and one redeemable Warrant to purchase one share of Common Stock at
an exercise price of $7.80. The Common Stock and the Warrant comprising each
Unit will be separately transferable upon issuance.

COMMON STOCK

We are authorized to issue up to 50,000,000 shares of Common Stock, par
value $.01 per share. As of the date of this Prospectus, there were 2,200,000
shares of Common Stock issued and outstanding, held of record by ten
stockholders. You are entitled to one vote for each share held of record on each
matter submitted to a vote at a meeting of stockholders. Except as provided by
resolutions of our Board of Directors providing for the issuance of any class or
series of preferred stock, the exclusive voting power for all purposes is vested
in the holders of Common Stock.

Subject to the preferential rights of holders of preferred stock as
provided by resolutions of our Board of Directors authorizing the issuance of
any class of Preferred Stock, you are entitled to receive your pro rata share,
based upon the number of shares held by you, of such dividends or other
distributions as may be declared by the Board of Directors. In the event of our
liquidation, dissolution, or winding up, you are entitled to share ratably in
all assets remaining after the payment or provision of our debts and other
liabilities and the liquidation preference of any outstanding preferred stock.
You have no preemptive rights and have no rights to convert your Common Stock
into any other securities. The outstanding shares of Common Stock are, and the
shares of Common Stock offered hereby will be, when issued, validly issued,
fully paid, and nonassessable.

43
<PAGE>

After completion of the Offering, 3,300,000 shares of Common Stock will be
issued and outstanding (assuming no exercise of the Underwriters' overallotment
option, the Warrants, the Underwriters' Warrant and other outstanding rights to
acquire the Common Stock).

WARRANTS

GENERAL. The following is a brief summary of certain provisions of the
Warrants included in the Units offered hereby. This summary does not purport to
be complete and is qualified in all respects by reference to the actual terms
and provisions of the Warrant Agency Agreement between us and North American
Transfer Co. (the "Warrant Agent"). A copy of the Warrant Agreement is filed
as an exhibit to the Registration Statement of which this Prospectus is a
part. See "Additional Information."

EXERCISE PRICE AND TERMS. Each Warrant entitles you to purchase at any time
over a five-year period commencing on the effective date of the Registration
Statement of which this Prospectus is a part, one share of Common Stock at a
price of $7.80, subject to adjustment in accordance with the anti-dilution and
other provisions referred to below. The exercise price of the Warrants bears no
relation to any objective criteria of value, and should in no event be regarded
as an indication of any future market price of the securities offered hereby.
You have the right to exercise your Warrants for the purchase of shares of
Common Stock only if a current prospectus relating to such shares is then in
effect and only if such shares are qualified for sale, or deemed to be exempt
from qualification, under applicable state securities laws. We will use our best
efforts to maintain a current prospectus relating to such shares of Common Stock
at all times when the market price of the Common Stock exceeds the exercise
price of the Warrants until the expiration date of the Warrants, although there
can be no assurance that we will be able to do so.

In order to exercise the Warrants, you must surrender the Warrant
certificate evidencing the Warrants, complete, execute and deliver to the
Warrant Agent the exercise form on the reverse side of the Warrant certificate,
together with payment to us of the exercise price with respect to the Warrants
then being exercised and an amount equal to any applicable transfer tax and, if
requested by us, any other taxes or governmental charges which we may be
required by law to collect. Payment of the exercise price and other amounts may
be made in cash, or by certified or official bank check to the order of U.S.
Laboratories Inc. No adjustment will be made for any cash dividends, whether
paid or declared, on any securities issuable upon exercise of a Warrant. If you
exercise fewer than all of the Warrants evidenced by the Warrant certificate,
the Warrant Agent will deliver to the registered holder a new Warrant
certificate evidencing the number of Warrants not exercised.

ANTI-DILUTION ADJUSTMENTS. If we issue a stock dividend, engage in a stock
split or reverse stock split, or reclassify the Common Stock, the number of
shares of Common Stock purchasable upon exercise of the Warrant will be adjusted
so that you will be entitled to receive the same number of securities that you
would have been entitled to receive if the Warrant had been exercised before the
stock dividend, stock split or reverse stock split, or reclassification. No
adjustment will be made, however, unless the adjustment would result in a 1%
change in the number of shares of Common Stock issuable under the Warrant. If an
adjustment is made, the exercise price of the Warrant will be adjusted so that
the total price for exercising the Warrant will be the same after the adjustment
as it was before the adjustment.

For example, if the anti-dilution adjustment increases the number of shares
issuable under the Warrant from one share to two shares, the exercise price will
decrease from $7.80 per share to $3.90 per share. Whenever the number of shares
of Common Stock issuable under the Warrants is adjusted as described above, we
will file with the Warrant Agent a certificate of certain of our officers
setting forth the adjusted number of shares purchasable and adjusted per share
purchase price, certifying compliance with the terms of the Warrant Agreement
and setting forth a brief description of the adjustments. After filing such
certificate, we or the Warrant Agent will deliver a brief summary of the
adjustments to you.

REDEMPTION PROVISIONS. We have the option to redeem the outstanding
Warrants in whole at any time or in part from time to time, on not more than 60
days' nor less than 30 days' written notice to you at a price equal to $0.01 per
Warrant so long as the closing price for the Common Stock on Nasdaq exceeds 200%
of the public offering price of Units under the Offering for 20 consecutive
trading days ending on the third trading day prior to the day on which we give
notice of redemption. You will have the right to exercise the Warrants under the
terms described above until the redemption date. On the redemption date, if you
are the registered holder of unexercised Warrants, you are entitled to payment
of the redemption price upon surrender of the redeemed Warrants to us at the
stock transfer office of the Warrant Agent. If we redeem fewer than all of the
outstanding Warrants, we will designate those Warrants to be redeemed pro rata
or by lot.

After the redemption date, all your rights except the right to receive the
redemption price terminates, but only if (a) on or prior to the redemption date
we have irrevocably deposited with the Warrant Agent a sufficient amount to pay
the redemption price for all Warrants called for redemption, and (b) the notice
of redemption has stated the name and address of the Warrant Agent and our
intention to deposit this amount with the Warrant Agent on or before the
redemption date.

44
<PAGE>

PREFERRED STOCK

Our corporate documents authorize the Board of Directors to provide by
resolution for the issuance from time to time of up to 5,000,000 shares of
preferred stock in one or more class or series, with such special rights and
preferences, including but not limited to dividend or liquidation
preferences, voting rights and redemption rights, anti-dilution rights or
conversion rights, as the Board may specify. The Company will not issue
preferred stock to its promoters except on the same terms as it is offered to
all other of its existing stockholders or new stockholders, or unless the
issuance of preferred stock is approved by a majority of the Company's
independent directors who did not have an interest in the transaction and who
have access, at the Company's expense, to the Company's or independent legal
counsel.

As of the date of this prospectus, the Board of Directors has not
authorized the issuance of any class or series of preferred stock and no shares
of preferred stock are issued or outstanding.

TRANSFER AGENT

The transfer agent and registrar for the Common Stock is North American
Transfer Co.

SHARES ELIGIBLE FOR FUTURE SALE

After the Offering, we will have 3,300,000 shares of Common Stock
outstanding (assuming no exercise of options, warrants, Underwriters'
overallotment option, or other convertible securities or issuances of Common
Stock subsequent to September 30, 1998). The 1,100,000 shares of Common Stock
sold in the Offering will be freely tradable without restriction or further
registration under the Act, except that any shares purchased by our
"affiliates," as that term is defined in Rule 144 under the Act
("Affiliates"), may generally be sold only in compliance with certain
limitations of Rule 144 described below.

The remaining 2,200,000 shares of Common Stock are deemed "Restricted
Shares" under Rule 144. None of the Restricted Shares are eligible for sale in
the public market immediately after the Offering under Rule 144(k) under the
Act. Restricted Shares in the amount of 1,697,238 may be eligible for sale
in the public market in accordance with Rule 144 under the Act beginning
90 days after the date of this Prospectus.

The holders of these Restricted Shares have agreed not to sell or otherwise
dispose of any of these shares for a period of 18 months after the date of this
Prospectus without the prior written consent of Cardinal Capital Management,
Inc. Cardinal may, in its sole discretion, and at any time without notice,
release all or any portion of the securities subject to lock-up agreements.

Additionally, these holders have agreed to sign an agreement with several
of the states not to sell or otherwise dispose of any of these shares for a
period of 12 months after the date of this Prospectus, and they have agreed not
to sell more than 2.5% of their shares in each quarter for the period from 12
months to 24 months after the date of this Prospectus.

45
<PAGE>

Upon expiration of the various lock-up agreements, 1,772,389 shares
of Common Stock (including shares issued or issuable upon the exercise of
vested options and warrants outstanding as of December 31, 1998) will become
available for sale in the public market; the remaining 891,394 shares
(including shares issued or issuable upon the exercise of vested options and
warrants outstanding as of December 31, 1998) will become eligible for sale
under Rule 144 at various dates thereafter as the holding period provisions
of Rule 144 are satisfied.

Under Rule 144, beginning approximately 90 days after the effective date of
the Registration Statement of which this Prospectus is a part, a stockholder,
including an Affiliate, who has beneficially owned his or her restricted
securities (as that term is defined in Rule 144) for at least one year from the
later of the date such securities were acquired from us or an Affiliate, is
entitled to sell, within any three-month period the greater of:

(1) 1% of the then outstanding shares of Common Stock
(approximately 33,000 immediately after the Offering) or

(2) the average weekly trading volume in the Common Stock
during the four calendar weeks preceding the date on which
notice of such sale was filed under Rule 144.

These sales may occur only if certain requirements concerning availability of
public information, manner of sale and notice of sale are satisfied.

In addition, under Rule 144(k), if a period of at least two years has
elapsed between the later of the date restricted securities were acquired from
us or (if applicable) the date they were acquired from one of our Affiliates, a
stockholder who is not one of our Affiliates at the time of sale and has not
been one of our Affiliates for at least three months prior to the sale is
entitled to sell the shares immediately without compliance with the foregoing
requirements under Rule 144.

Securities issued in reliance on Rule 701 (such as shares of Common Stock
that may be acquired under the exercise of certain options granted prior to the
Offering) are also restricted securities and, beginning 90 days after the date
of this Prospectus, may be sold by stockholders other than one of our Affiliates
subject only to the manner of sale provisions of Rule 144 and by one of our
Affiliates under Rule 144 without compliance with its one-year holding period
requirement.

Prior to the Offering, there has been no public market for the Common Stock
or the Warrants. We cannot predict the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price of
the Common Stock or the Warrants prevailing from time to time. We cannot
estimate the number of shares that may be sold in the public market under Rule
144, since this will depend on the market price of the Common Stock, the
personal circumstances of the sellers, and other factors. Nevertheless, sales of
significant amounts of our Common Stock in the public market could adversely
affect the market price of the Common Stock or the Warrants and could impair our
ability to raise capital through an offering of equity securities.

EXPERTS

Our consolidated financial statements at December 31, 1996 and 1997 and for
each of the two years in the period ended December 31, 1997 appearing in this
Prospectus and the Registration Statement have been audited by Singer Lewak
Greenbaum Goldstein LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement and are
included in reliance upon this report given upon the authority of this firm as
experts in accounting and auditing.

The financial statements of Wyman Testing Laboratories, Inc. at December
31, 1997 and for the year then ended appearing in this Prospectus and the
Registration Statement have been audited by Singer Lewak Greenbaum Goldstein
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein and in the Registration Statement and are included in reliance
upon this report given upon the authority of this firm as experts in accounting
and auditing.

46
<PAGE>

LEGAL MATTERS

On our behalf, Foley & Lardner, San Diego, California and Chicago,
Illinois will pass upon the validity of the issuance of the securities being
offered by this Prospectus. Camner, Lipsitz & Poller, P.A., Coral Gables,
Florida will pass upon certain legal matters for the Underwriters.

ADDITIONAL INFORMATION

We have filed a Registration Statement on Form SB-2 under the Securities
Act with the Commission in Washington, D.C. with respect to the securities
offered hereby. This Prospectus, which is part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto. For further information about us and the
securities offered hereby, you should refer to the Registration Statement and
the exhibits and schedules filed as a part thereof. Statements contained in this
Prospectus as to the contents of any agreement or any other document referred to
are not necessarily complete, and in each instance, if such agreement or
document is filed as an exhibit, you should refer to the copy of the agreement
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by reference to the exhibit.

The Registration Statement, including exhibits and schedules thereto, may
be inspected and copied at the principal office of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, New York, New York 10048, and
Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661.
Copies of material may also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, we are required to file electronic versions of these
documents with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. The Commission maintains a
World Wide Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Prior to this Offering, the Company was
not a reporting company under the Securities Exchange Act of 1934, as amended.

<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
U.S. LABORATORIES INC. AND SUBSIDIARIES
<S> <C>
Report of Singer Lewak Greenbaum Goldstein LLP, Independent Auditors.......................................F-2

Consolidated Balance Sheets at December 31, 1997 and
at September 30, 1998 (unaudited)..........................................................................F-3

Consolidated Statements of Operations for the years ended December 31, 1997
and 1996 and the nine months ended September 30, 1998 and 1997 (unaudited).................................F-5

Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997 and 1996 and the nine months ended September 30, 1998 (unaudited)........................F-6

Consolidated Statements of Cash Flows for the years ended December 31, 1997
and 1996 and the nine months ended September 30, 1998 and 1997 (unaudited).................................F-7

Notes to Consolidated Financial Statements................................................................F-10

WYMAN TESTING LABORATORIES, INC.

Report of Singer Lewak Greenbaum Goldstein LLP, Independent Auditors......................................F-24

Balance Sheet at December 31, 1997........................................................................F-25

Statement of Operations for the year ended December 31, 1997..............................................F-27

Statement of Stockholders' Equity for the year ended December 31, 1997....................................F-28

Statement of Cash Flows for the year ended December 31, 1997..............................................F-29

Notes to Financial Statements.............................................................................F-31

UNAUDITED PRO FORMA FINANCIAL INFORMATION

Pro Forma Balance Sheet...................................................................................F-39

Pro Forma Statement of Operations.........................................................................F-41

Note to Pro Forma Financial Statements....................................................................F-42
</TABLE>

F-1

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholder
U.S. Laboratories Inc.

We have audited the accompanying consolidated balance sheet of U.S. Laboratories
Inc. and subsidiaries as of December 31, 1997, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
two years in the period ended December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of U.S. Laboratories
Inc. and subsidiaries as of December 31, 1997, and the consolidated results of
their operations and their consolidated cash flows for each of the two years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 4, 1998 (except for
Note 7, as to which the date
is October 21, 1998)

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

F-2

<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND SEPTEMBER 30, 1998 (UNAUDITED)

ASSETS

<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ -------------
(unaudited)
<S> <C> <C>
Current assets
Cash ............................................................. $ 94,132 $ 144,991
Accounts receivable, net of allowances for doubtful
accounts of $40,927 and $57,755, respectively...................... 1,719,120 2,936,439
Work-in-process........................................................ 181,772 263,615
Prepaid expenses and other current assets.............................. 47,414 65,323
--------------- ----------------

Total current assets.......................................... 2,042,438 3,410,368

Furniture and equipment, net of accumulated depreciation
of $564,217 and $718,873, respectively................................. 395,711 762,846
Excess cost over fair value of net assets acquired, net
of accumulated amortization of $331,725 and $422,109,
respectively .......................................................... 939,147 1,554,887
Deferred offering costs..................................................... - 317,825
Other assets .......................................................... 154,411 170,279
--------------- ----------------

Total assets.............................................. $ 3,531,707 $ 6,216,205
=============== ================
</TABLE>

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

F-3

<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
DECEMBER 31, 1997 AND SEPTEMBER 30, 1998 (UNAUDITED)

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ -------------
(unaudited)
<S> <C> <C>
Current liabilities
Book overdraft......................................................... $ 9,390 $ 16,741
Lines of credit........................................................ 484,335 583,660
Current portion of long-term debt...................................... 84,526 109,617
Current portion of capitalized lease obligations....................... - 10,285
Current portion of notes payable....................................... - 423,993
Accounts payable....................................................... 273,620 422,019
Accrued payroll and payroll taxes...................................... 115,214 221,430
Other accrued expenses................................................. 14,612 -
Due to stockholder..................................................... 584,281 97,499
Deferred income tax.................................................... 678,749 678,749
Income tax payable..................................................... 162,708 471,009
--------------- ---------------

Total current liabilities.......................................... 2,407,435 3,035,002

Long-term debt, net of current portion...................................... 118,732 241,981
Capitalized lease obligations, net of current portion....................... - 6,809
Notes payable, net of current portion....................................... - 1,245,000
--------------- ---------------

Total liabilities............................................. 2,526,167 4,528,792
--------------- ---------------

Minority interest .......................................................... 338,128 -
--------------- ---------------

Commitments and contingencies

Stockholders' equity
Preferred stock, $0.01 par value
5,000,000 shares authorized
none issued and outstanding........................................ - -
Common stock, $0.01 par value
50,000,000 shares authorized
1,709,858 and 2,200,000 shares issued and outstanding.............. 17,099 22,000
Additional paid-in capital............................................. 380,901 970,252
Retained earnings...................................................... 269,412 695,161
--------------- ---------------

Total stockholders' equity.................................... 667,412 1,687,413
--------------- ---------------

Total liabilities and stockholders' equity................ $ 3,531,707 $ 6,216,205
=============== ===============
</TABLE>

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

F-4

<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)

Cost of goods sold.......................... 4,476,952 2,635,263 4,432,509 3,158,483
--------------- ---------------- --------------- ----------------

Gross profit................................ 3,289,462 2,327,827 4,045,820 2,349,323

Selling, general, and administrative
expenses................................. 2,531,770 1,853,318 3,215,256 1,804,547
--------------- ---------------- --------------- ----------------

Income from operations...................... 757,692 474,509 830,564 544,776
--------------- ---------------- --------------- ----------------

Other income (expense)
Interest expense......................... (130,605) (84,390) (118,814) (90,520)
Interest income.......................... 7,277 8,430 9,252 4,371
Forgiveness of note receivable........... - (9,976) - 1,738
Gain (loss) on sale of fixed asset....... 4,912 (3,873) - -
Rental income............................ 25,160 4,598 13,048 20,918
Gain on sale of minority interest........ 25,229 - - 25,229
--------------- ---------------- --------------- ----------------

Total other income (expense)........... (68,027) (85,211) (96,514) (38,264)
---------------- ---------------- -------------- ----------------

Income before provision for income
taxes, minority interest and
extraordinary item....................... 689,665 389,298 734,050 506,512

Provision for income taxes.................. 305,056 202,921 308,301 224,345
--------------- ---------------- --------------- ----------------

Income before minority interest
and extraordinary item................... 384,609 186,377 425,749 282,167
Minority interest........................... (80,253) (33,664) - (62,851)
--------------- ---------------- --------------- ----------------

Income before extraordinary item............ 304,356 152,713 425,749 219,316
Extraordinary gain, less applicable
income taxes of $40,200 (NOTE 14)........ 59,800 -- -- 59,800
--------------- ---------------- --------------- ----------------

Net income.................................. $ 364,156 $ 152,713 $ 425,749 $ 279,116
=============== ================ =============== ================
Basic income per share......................
Income before extraordinary item......... 0.14 0.07 0.19 0.10
Extraordinary item....................... 0.03 -- -- 0.03
--------------- ---------------- --------------- ----------------
Net income............................... $ 0.17 $ 0.07 $ 0.19 $ 0.13
=============== ================ =============== ================

Diluted income per share
Income before extraordinary item......... 0.14 0.07 0.19 0.10
Extraordinary item....................... 0.03 -- -- 0.03
--------------- ---------------- --------------- ----------------
Net income............................... $ 0.17 $ 0.07 $ 0.19 $ 0.13
=============== ================ =============== ================

Weighted Average shares outstanding......... 2,200,000 2,200,000 2,200,000 2,200,000
=============== ================ =============== ================
</TABLE>

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

F-5

<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)

[CAPTION]
<TABLE>
Retained
Additional Earnings
Common Stock Paid-In (Accumulated
Shares Amount Capital Deficit) Total
--------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Balance, December
31, 1995................ 1,709,858 $ 17,099 $ 380,901 $ (247,457) $ 150,543

Net income................. 152,713 152,713
--------------- --------------- ---------------- --------------- ----------------
Balance, December
31, 1996................ 1,709,858 17,099 380,901 (94,744) 303,256
Net income................. 364,156 364,156
--------------- --------------- ---------------- --------------- ----------------
Balance, December
31, 1997................ 1,709,858 17,099 380,901 269,412 667,412
Issuance of common
stock in exchange
for shares held by
minority interest
holders (unaudited)..... 490,142 4,901 589,351 594,252
Net income (unaudited)..... 425,749 425,749
--------------- --------------- ---------------- --------------- ----------------
Balance, September 30,
1998 (unaudited) ....... 2,200,000 $ 22,000 $ 970,252 $ 695,161 $ 1,687,413
=============== =============== ================ =============== ================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)

<TABLE>
<CAPTION>
For the Years Ended For the Nine Months Ended
December 31, September 30,
--------------------------------- ---------------------------------
1997 1996 1998 1997
--------------- ---------------- --------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income............................... $ 364,156 $ 152,713 $ 425,749 $ 279,116
Adjustments to reconcile net income
to net cash provided by operating
activities
Amortization......................... 84,724 84,724 90,384 63,543
Depreciation......................... 181,552 145,980 182,240 142,756
Loss (gain) on sale of fixed asset... (4,912) 3,873 - -
Forgiveness of debt.................. (100,000) - - (100,000)
Minority interest.................... 80,253 33,664 - 62,851
Distributions to minority interests.. (20,000) (251,327) - -
Gain on sale of subsidiary stock..... 9,771 - - 9,771
Deferred income tax.................. 275,918 109,551 - -
(Increase) decrease in
Accounts receivable.................... (750,149) (325,311) (639,638) (577,868)
Work in process........................ 24,826 (21,344) (81,843) 99,704
Prepaid expenses....................... 21,008 7,571 12,076 27,500
Other assets........................... (63,486) (34,300) (15,868) (8,893)
Increase (decrease) in
Accounts payable....................... 49,476 (2,965) 93,679 (10,523)
Accrued payroll and payroll taxes...... 46,362 41,447 33,606 31,168
Other accrued expenses................. (1,251) 15,863 (15,785) (1,498)
Income tax payable..................... 69,338 93,370 308,301 264,545
--------------- ---------------- --------------- ----------------
Net cash provided by operating
activities.................................. 267,586 53,509 392,901 282,172
--------------- ---------------- --------------- ----------------
Cash flows from investing activities
Purchase of furniture and equipment...... (83,798) (93,142) (189,838) (60,293)
Proceeds from sale of fixed assets....... 34,291 4,801 - -
Investment in the San Diego division
of CH&A Corporation.................... - (62,500) - -
Investment in Wyman Enterprises,
Inc., net of cash acquired............. - - (296,730) -
Investment in Professional Services
Industries, Inc........................ - - (13,900) -
Investment in Jupiter, Division of Fraser
Engineering & Testing, Inc............. - - (35,000) -
--------------- ---------------- --------------- ----------------

Net cash used in investing activities....... (49,507) (150,841) (535,468) (60,293)
--------------- ---------------- --------------- ----------------

</TABLE>

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

F-7
<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)

<TABLE>
<CAPTION>
For the Years Ended For the Nine Months Ended
December 31, September 30,
--------------------------------- ---------------------------------
1997 1996 1998 1997
--------------- ---------------- --------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from financing activities
Increase (decrease) in book
overdraft.............................. $ (69,095) $ 46,792 $ 7,351 $ (78,485)
Line of credit, net...................... 322,229 162,106 (98,176) 293,582
Due to stockholders, net................. (130,421) 161,443 (486,782) (11,014)
Payments on long-term debt............... (97,660) (64,919) (95,130) (74,329)
Payments on capitalized lease
obligations............................ - - (10,005) -
Payments on notes payable................ (149,000) (238,000) - (149,000)
Deferred offering costs.................. - - (317,825) -
Increase in notes payable................ - - 1,218,993 -
Due from Wyman Testing
Laboratories, Inc...................... - - (25,000) -
--------------- ---------------- --------------- ----------------
Net cash provided by (used in)
financing activities ...................... (123,947) 67,422 193,426 (19,246)
--------------- ---------------- --------------- -----------------
Net increase (decrease) in cash............. 94,132 (29,910) (50,859) 202,633
Cash, beginning of period................... - 29,910 94,132 -
--------------- ---------------- --------------- ----------------
Cash, end of period......................... $ 94,132 $ - $ 144,991 $ 202,633
=============== ================ =============== ================
Supplemental disclosures of cash flow
information
Interest paid............................ $ 130,605 $ 84,390 $ 118,814 $ 90,520
=============== ================ =============== ================
Income taxes paid........................ $ 2,000 $ 1,380 $ 135 $ 1,000
=============== ================ =============== ================
</TABLE>

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

F-8
<PAGE>

Supplemental schedule of non-cash investing and financing activities

During the years ended December 31, 1997 and 1996 and the nine months ended
September 30, 1998 and 1997, the Company acquired an automobile and trucks of
$124,469, $105,679, $213,685, and $124,449, respectively, under note payable
agreements.

During the year ended December 31, 1997 and the nine months ended September 30,
1997, the Company forgave debt in the amount of $100,000 (Note 14).

On January 1, 1998, the Company issued 490,142 shares of the Company's Common
Stock to minority interest holders in exchange for all of their shares in the
subsidiaries. In connection with the purchase, the Company recorded additional
goodwill of $194,924.

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

F-9
<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
(The information with respect to the nine months ended September 30, 1998
and 1997 is unaudited.)

NOTE 1 - ORGANIZATION AND BUSINESS

U.S. Laboratories Inc. and subsidiaries (collectively the "Company") offers
engineering and design services, project management, construction quality
control, structural engineering and design, environmental engineering and
inspection and testing. The Company has facilities in California, New
Jersey, and Florida and grants credit to customers in those states.

Acquisitions
On October 18, 1996, the Company acquired substantially all the furniture
and equipment of the San Diego division of CH&A Corporation. The purchase
price of the assets was $67,500 which was paid on the closing date.

On January 1, 1998, the Company purchased all of the shares held by
minority stockholders in its subsidiaries for $533,052. The Company issued
an aggregate of 439,664 shares of Common Stock in exchange for the purchase
price. The shares were valued using a method similar to previous Company
acquisitions. The Company recorded $194,924 in excess of cost over fair
value of net assets acquired which is being amortized on a straight-line
basis over fifteen years.

On March 25, 1998, Wyman Testing Laboratories, Inc. ("Wyman"), a
majority-owned subsidiary of U.S. Laboratories Inc., acquired certain
assets and liabilities of Wyman Enterprises, Inc. The purchase price for
the assets was $830,620. The purchase price was paid as follows: (i)
$300,000 cash paid upon the closing, (ii) $468,993 notes payable issued to
the stockholders of Wyman Enterprises, Inc., and (iii) 50,478 shares of US
Labs Common Stock issued to a stockholder of Wyman Enterprises, Inc. valued
at $61,200, using a method similar to previous company acquisitions. Wyman
recorded $511,200 in excess of cost over fair value of net assets acquired
which is being amortized on a straight-line basis over fifteen years. For
financial statement purposes, the acquisition occurred on March 31, 1998.
The assets acquired were as follows:

<TABLE>
<S> <C>
Cash $ 22,690
Accounts receivable 577,681
Prepaids 29,985
Furniture and equipment 96,952
Goodwill 511,200
Liabilities (407,888)
----------------
TOTAL $ 830,620
================
</TABLE>

In May 1998, Wyman merged into San Diego Testing Engineers, Inc., a
majority-owned subsidiary of the Company, which is the surviving
corporation. Each share of Wyman was converted into one-half share of the
surviving corporation.

In May 1998, the Company acquired certain equipment of Professional
Services Industries, Inc. ("PSI") for a purchase price of $13,900 which has
been paid.

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

F-10
<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
(The information with respect to the nine months ended September 30, 1998
and 1997 is unaudited.)

NOTE 1 - ORGANIZATION AND BUSINESS (CONTINUED)

In May 1998, the Company acquired certain equipment of Jupiter, Division of
Fraser Engineering & Testing, Inc. ("Jupiter") for a purchase price of
$35,000 which has been paid.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of U.S.
Laboratories Inc. and its subsidiaries. All material intercompany accounts
and transactions have been eliminated.

Cash and Cash Equivalents/Book Overdraft

For purposes of the statements of cash flows, the Company considers all
highly-liquid investments purchased with original maturities of three
months or less to be cash equivalents. Book overdraft represents the
bank balance at period end, plus deposits in transit, less outstanding
checks.

Furniture and Equipment

Furniture and equipment, including equipment under capital leases, are
recorded at cost, less accumulated depreciation and amortization.
Depreciation and amortization are provided using the straight-line method
over the estimated useful lives as follows:

<TABLE>
<S> <C>
Automobile and trucks 3 to 5 years
Furniture and fixtures 5 to 7 years
Office hardware and software 5 years
Machinery and equipment 5 to 7 years
Leasehold improvements 5 years
</TABLE>

Maintenance, repairs, and minor renewals are expensed as incurred.
Expenditures for additions and major improvements are capitalized. Gains
and losses on disposals are included in the statements of operations.

Intangibles

Intangibles consist of goodwill which is being amortized over a
fifteen-year period. The Company continually evaluates whether events or
circumstances have occurred that indicate the remaining estimated value of
goodwill may not be recoverable. When factors indicate that the value of
goodwill may be impaired, the Company estimates the remaining value and
reduces the goodwill to that amount.

Deferred Offering Costs

Amounts paid for costs associated with an anticipated initial public
offering ("IPO") are capitalized and will be recorded as a reduction to
additional paid-in capital upon the completion of the IPO. In the event
that the IPO is not successful, the deferred offering costs will be charged
to expense.

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

F-11
<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition

Revenue from services performed, including fixed-price and unit-price
contracts, is recorded as earned over the lives of the contract. Revenue
from services is recognized when services have been performed and
accepted. At the time a loss or a contract becomes known, the entire
amount of the estimated ultimate loss is recognized in the financial
statements. The Company has not experienced any material losses on these
contracts.

Advertising

The Company expenses advertising costs as incurred. Advertising costs for
the years ended December 31, 1997 and 1996 and the nine months ended
September 30, 1998 and 1997 were $15,699, $29,047, $36,140, and $12,305,
respectively.

Income Taxes

The Company utilizes Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized for
the tax consequences in future years of differences between the tax bases
of assets and liabilities and their financial reporting amounts at each
year-end based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized. The provision for income
taxes represents the tax payable for the period and the change during the
period in deferred tax assets and liabilities.

Interim Unaudited Financial Information

The unaudited financial information furnished herein reflects all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of management, are necessary to fairly state the Company's
financial position, the results of operations, and cash flows for the
periods presented. The results of operations for the nine months ended
September 30, 1998 are not necessarily indicative of results for the entire
fiscal year ending December 31, 1998.

Stock Split

Effective May 30, 1998, the Company effected a 20,324-for-one stock split
and on November 9, 1998, effected a one-for-0.8413 reverse stock split. The
options and warrants to acquire Common Stock were unaffected by the reverse
stock split. All share and per share data have been retroactively restated
to reflect the stock split.

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

F-12
<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 disclosures of contingent assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.

Fair Value of Financial Instruments

For certain of the Company's financial instruments including cash, accounts
receivable, accounts payable, and other accrued expenses, the carrying
amounts approximate fair value due to their short maturities. The amounts
shown for long-term debt and capital lease obligations also approximate
fair value because current interest rates and terms offered to the Company
for similar long-term debt and capital lease obligations are substantially
the same.

Concentrations of Risk

The Company sells products and provides contract services to construction
companies and the military, primarily in California, New Jersey, and
Florida. It also extends credit based on an evaluation of the customer's
financial condition, generally without requiring collateral. Exposure to
losses on receivables is principally dependent on each customer's financial
condition. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses.

Net Income Per Share

For the year ended December 31, 1997, the Company adopted SFAS No. 128,
"Earnings per Share." Basic earnings per share is computed by dividing net
income to common stockholders by the weighted-average number of common
shares outstanding.

Diluted earnings per share is computed similar to basic earnings per share
except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were
dilutive.

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

F-13
<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently Issued Accounting Pronouncements SFAS No. 130, "Reporting
Comprehensive Income," is effective for financial statements with fiscal
years beginning after December 15, 1997. SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components in a
full set of general-purpose financial statements. The Company does not
expect adoption of SFAS No. 130 to have a material effect, if any, on its
financial position or results of operations.

SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," is effective for financial statements with fiscal years
beginning after December 15, 1997. This statement establishes standards for
the way that public entities report selected information about operating
segments, products, and services, geographic areas, and major customers in
interim and annual financial reports. The Company does not expect adoption
of SFAS No. 131 to have a material effect, if any, on its financial
position or results of operations.

NOTE 3 - CASH

The Company maintains cash deposits at banks located in California,
Florida, and New Jersey. Deposits at each bank are insured by the Federal
Deposit Insurance Corporation up to $100,000. As of December 31, 1997 and
September 30, 1998, uninsured portions of balances held at banks aggregated
to $27,026 and $0, respectively. The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant credit
risk on cash.

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

F-14
<PAGE>

NOTE 4 - FURNITURE AND EQUIPMENT

Furniture and equipment consisted of the following:

<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
--------------- ----------------
<S> <C> <C>
Automobile and trucks...................................... $ 465,614 $ 609,022
Furniture and fixtures..................................... 237,798 283,189
Office hardware and software............................... 35,666 80,645
Machinery and equipment.................................... 202,313 408,977
Leasehold improvements..................................... 18,537 99,886
--------------- ----------------
959,928 1,481,719
Less accumulated depreciation and amortization............. 564,217 718,873
--------------- ----------------

TOTAL.................................................. $ 395,711 $ 762,846
=============== ================
</TABLE>

Depreciation and amortization expense for the years ended December 31, 1997
and 1996 and the nine months ended September 30, 1998 and 1997 was
$181,552, $145,980, $182,240, and $142,756, respectively.

NOTE 5 - LINES OF CREDIT

<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ -------------
<S> <C> <C>
The Company has a $800,000 line of credit from
a bank with interest payable on a monthly basis at the
30-day Commercial Paper Rate (5.75% at December 31,
1997) plus 3.15%. The line of credit is secured by
substantially all of the Company's assets and
personally guaranteed by the majority stockholder.
Subsequent to year end, amounts were repaid .......... $ 484,335 $ -

</TABLE>

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

F-15
<PAGE>

<TABLE>
<CAPTION>
NOTE 5 - LINES OF CREDIT (CONTINUED)

December 31, September 30,
1997 1998
------------ -------------
<S> <C> <C>
In May 1998, the Company entered into a $1,700,000 line of
credit with a bank, maturing on May 1, 1999. Interest is
payable on a monthly basis at prime (8.5% at December 31,
1997). The maximum advance rate is 75% of accounts
receivable aged 90 days or less. The line is guaranteed by
a UCC-1 financing statement, covering a majority of the
Company's assets, dated May 27, 1998, and personally
guaranteed by the majority stockholder. Subsequent to
year-end, the Company refinanced the line of credit into a
$1,200,000 note payable (see Note 7) and remaining
$500,000 as a line of credit with the above
terms................................................ $ - $ 318,660

In July 1998, the Company entered into a $500,000 line of
credit with a bank, payable upon demand, but no later than
July 1, 2000. Interest is payable on a monthly basis at
the bank's reference rate. A portion of the line is
guaranteed by the majority stockholder and the majority of
the Company's
assets............................................... - 265,000
------------ -------------

TOTAL............................................. $ 484,335 $ 583,660
============ =============
</TABLE>

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

F-16

<PAGE>

NOTE 6 - LONG-TERM DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ -------------
<S> <C> <C>
Notes payable to Toyota Motor Credit Corporation,
collateralized by applicable equipment. The notes are
currently due in aggregate monthly payments of $355
including interest at 9.19%
per annum.............................................. $ 5,788 $ 3,215

Notes payable to General Motors Credit Corporation,
collateralized by applicable equipment. The notes are
currently due in aggregate monthly payments of $2,167
including interest from 7.95% to 9.7% per
annum.................................................. 78,869 99,954

Notes payable to Barnett Bank, collateralized by applicable
equipment. The notes are currently due in aggregate
monthly payments of $4,644 including interest from 9.29%
to 14.5% per
annum.................................................. 68,099 85,380

Notes payable to Ford Motor Credit Corporation, collateralized
by applicable equipment. The notes are currently due in
aggregate monthly payments of $1,969 including interest
from
7.99% to 10.25% per annum.............................. 50,502 163,049
------------ -------------

203,258 351,598
Less current portion....................................... 84,526 109,617
------------ -------------

Long-term portion................................. $ 118,732 $ 241,981
============ =============
</TABLE>

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

F-17

<PAGE>

NOTE 6 - LONG-TERM DEBT (CONTINUED)

The following is a schedule by years of future maturities of long-term
debt:

<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<C> <C>
1998 $ 84,526
1999 66,577
2000 28,880
2001 20,250
2002 3,025
----------------

TOTAL $ 203,258
================
</TABLE>

Subsequent to year end, the Company entered into five note payable
agreements and assumed two note payable agreements upon the acquisition of Wyman
Enterprises, Inc. The notes are currently due in aggregate monthly payments of
$4,173 including interest from 8.75% to 13.5% per annum.

NOTE 7 - NOTES PAYABLE

Notes payable consisted of the following at September 30, 1998. (All
balances were zero at December 31, 1997.):

<TABLE>
<S> <C>
Note payable to stockholder of Wyman Enterprises, Inc. in
connection with the acquisition. The amount is to be paid in
four annual installments of $37,500 beginning March 25, 1999............... $ 150,000

Note payable to stockholder of Wyman Enterprises, Inc. in
connection with the acquisition. The amount is to be paid
in four annual installments of $37,500 beginning March 25,
1999 with one lump sum payment of $150,000 due at the
earlier of October 1, 1999 or the 30 days following the IPO................ 300,000

Note payable to stockholders of Wyman Enterprises, Inc. in
connection with the acquisition. The amount is payable upon
demand and non-interest bearing............................................ 18,993
</TABLE>

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

F-18

<PAGE>

NOTE 7 - NOTES PAYABLE (CONTINUED)

<TABLE>
<S> <C>
Note payable to bank starting January 1999. The note is interest only
through December 31, 1998 at the prime rate (8.5% at December 31, 1997).
The amount is to be paid in monthly installments of $20,000 plus interest
at the prime. The note is secured by substantially all of the Company's
assets and personally guaranteed by the majority stockholder................... $ 1,200,000
----------------

1,668,993
Less current portion........................................................... 423,993
----------------

Long-term portion..................................................... $ 1,245,000
================
</TABLE>

NOTE 8 - RELATED PARTY TRANSACTIONS

Due to Stockholder

At December 31, 1997 and September 30, 1998, the Company had amounts due
to the majority stockholder of $584,281 and $97,499, respectively. The
amounts are non-interest bearing and are payable upon demand.

Stockholder Management Fees

During the year ended December 31, 1997 and 1996 and the nine months ended
September 30, 1998 and 1997, the Company expensed $181,067, $169,594,
$137,063, and $92,052, respectively, in management fees to a stockholder.
The management fees are based upon 5% of net sales of a subsidiary.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Leases

The Company has entered into non-cancelable operating leases for its
corporate offices and facilities in California, New Jersey, and Florida.
The Company has the option to extend certain leases.

Future minimum rental commitments under lease agreements with initial or
remaining terms of one year or more at December 31, 1997 are as follows:

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

F-19
<PAGE>

NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

Leases (continued)

<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1998 $ 195,622
1999 76,504
2000 38,946
2001 214,608
----------------

525,680
Less sublease 19,390
----------------
Total $ 506,290
================
</TABLE>

Rent expense was approximately $316,685, $153,250, $230,156, and $251,391
for the years ended December 31, 1997 and 1996 and the nine months ended
September 30, 1998 and 1997, respectively.

Capitalized Lease Obligations

Upon the acquisition of Wyman Enterprises, Inc., the Company assumed three
capitalized lease obligations. The agreements are payable in aggregate
monthly payments of principal and interest of $1,477, expiring through May
2002. The agreements are collateralized by applicable equipment.

Litigation

The Company is involved in certain legal proceedings and claims which arise
in the normal course of business. Management does not believe that the
outcome of these matters will have a material adverse effect on the
Company's consolidated financial position or results of operations.

Lease Commitments

In May 1998, the Company entered into a non-cancelable operating lease
agreement for its facilities in California that expires in April 2003. The
agreement initially requires monthly payments of $8,230 with annual
increases.

In May 1998, upon the acquisition of PSI, the Company assumed PSI's lease
obligation in New Jersey. PSI will pay the monthly lease through November
30, 1998, and the Company will be responsible for the monthly lease
payments of $1,700 from December 1, 1998 to May 30, 2001.

In May 1998, upon the acquisition of Jupiter, the Company assumed Jupiter's
lease obligation in Florida. The Company is responsible for the monthly
lease payments of $1,198 through June 2000.

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

F-20

<PAGE>

NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

Employment Agreements

In May 1998, the Company entered into three-year employment agreements
with certain key employees of the Company. The agreements require
aggregate monthly payments of approximately $59,000.

Incentive Programs

In July 1998, the Company entered into incentive program agreements with
certain members of Company management. The agreements call for bonuses of
3% and 7% of pre-tax profits based upon the Company's performance.
Additionally, up to 5% of individual subsidiary pre-tax profits may be
distributed to employees based on performance of those subsidiaries.

NOTE 10 - PROFIT SHARING PLAN

The Company has a voluntary profit sharing plan which covers substantially
all eligible full-time employees who meet the plan requirements. Annual
employer contributions are based on a years of service vesting schedule.
Employer contributions for the years ended December 31, 1997 and 1996 were
$26,900 and $11,700, respectively.

NOTE 11 - INCOME TAXES

A reconciliation of the expected income tax computed using the federal
statutory income tax rate to the Company's effective income tax rate for
the years ended December 31 is as follows:

<TABLE>
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
Income tax computed at federal statutory tax rate.............. 34.0% 34.0%
State taxes, net of federal benefit............................ 6.5 9.9
Non-deductible goodwill amortization and other................. 3.2 8.0
--------------- --------------

Total................................................... 43.7% 51.9%
============= ==============
</TABLE>

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

F-21

<PAGE>

NOTE 11 - INCOME TAXES (CONTINUED)

Significant components of the Company's deferred tax assets and liabilities
for income taxes for the year ended December 31, 1997 consisted of the
following:

<TABLE>
<S> <C>
Deferred tax assets
Accrued payroll and other expenses.................... $ 90,275
Other................................................. 1,400
----------------

91,675
----------------
Deferred tax liabilities
Accounts receivable................................... 667,648
Work-in-progress...................................... 72,708
Other................................................. 30,068
----------------

770,424
----------------

Net deferred tax liability....................... $ (678,749)
================
</TABLE>

The components of the income tax provision for the years ended December
31 are as follows:

<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
Current
Federal............................................... $ 24,938 $ 79,365
State................................................. 4,200 14,005
--------------- ----------------

29,138 93,370
--------------- ----------------
Deferred
Federal............................................... 214,302 93,118
State................................................. 61,616 16,433
--------------- ----------------

275,918 109,551
--------------- ----------------

Total attributable to income before
extraordinary item............................. $ 305,056 $ 202,921
--------------- ----------------

Current
Federal............................................... 34,000
State................................................. 6,200
--------------- --------------
Total attributable to extraordinary item........ 40,200
--------------- --------------

Total.................. $ 345,256 $ 202,921
=============== ==============
</TABLE>

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

F-22

<PAGE>

NOTE 12 - STOCK OPTION PLAN

In July 1998, the Board of Directors adopted and approved the 1998 Stock
Option Plan (the "Option Plan") under which a total of 500,000 shares of
Common Stock have been reserved for issuance. Options under this plan may
be granted to employees, officers, and directors and consultants of the
Company. The exercise price of the options is determined by the Board of
Directors, but the exercise price may not be less than 100% of the fair
market value on the date of grant. Options vest over periods not to exceed
5 years. In July 1998, the Company had 395,000 stock options outstanding
at an exercise price ranging from $5.00 to $5.50 per share, of which
261,360 stock options were exercisable. The Board of Directors also
approved the grant of an additional 70,000 options to various employees
under the plan.

NOTE 13 - WARRANTS

In July 1998, the Board of Directors approved the grant of 165,000 stock
warrants to certain employees of the Company. The warrants entitle the
holder to purchase Company Common Stock at a price of $5.00 per share. The
warrants are exercisable the earlier of (i) the date on which the closing
price of a share of the Company's Common Stock as reported on the NASDAQ
Small-Cap Market is greater than $12.00 or (ii) the date on which the
audited consolidated earnings for the fiscal year ending December 31, 1998,
or any fiscal year thereafter, are at least twice the base period earnings
of $841,041. The warrants expire upon termination or November 1, 2001.

NOTE 14 - FORGIVENESS OF DEBT

On January 31, 1994, U.S. Laboratories, Inc. purchased 80% of Professional
Engineering & Inspection Company, Inc. ("PEICO") for a purchase price of
$1,500,000. The purchase price was paid as follows: $750,000 cash paid upon
the closing, and the remaining $750,000 payable $250,000 per year starting
January 31, 1995. In 1997, certain liabilities arose after the sale of
PEICO, which were paid by U.S. Laboratories, Inc. on behalf of the sellers.
Therefore, the final payment due to the sellers was reduced by $100,000.
This resulted in an extraordinary gain of $100,000 ($0.03 per share) net of
related income taxes of $40,200.

NOTE 15 - SUBSEQUENT EVENTS (UNAUDITED)

Stock Option Plan and Warrants

In November 1998, the Company cancelled all of its outstanding options
and warrants.

In November 1998, the Board of Directors approved the grant of 395,000
stock options at an exercise price ranging from $6.00 to $6.60 per share,
of which 261,360 stock options are exercisable. The Board of Directors
also approved the grant of an additional 70,000 options to various
employees under the plan.

In November 1998, the Board of Directors approved the grant of 165,000
stock warrants to certain employees of the Company. The warrants entitle
the holder to purchase Company Common Stock at a price of $6.00 per share.
The warrants are exercisable the earlier of (i) the date on which the
closing price of a share of the Company's Common Stock as reported on the
NASDAQ Small-Cap Market is greater than $12.00 or (ii) the date on which
the audited consolidated earnings for the fiscal year ending December 31,
1998, or any fiscal year thereafter, are at least twice the base period
earnings of $841,041. The warrants expire upon termination or November 9,
2001.

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

F-23
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
Wyman Testing Laboratories, Inc.

We have audited the accompanying balance sheet of Wyman Testing Laboratories,
Inc. as of December 31, 1997, and the related statements of operations,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wyman Testing Laboratories,
Inc. as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
April 29, 1998

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

F-24

<PAGE>

WYMAN TESTING LABORATORIES, INC.
BALANCE SHEET
DECEMBER 31, 1997

ASSETS

<TABLE>
<S> <C>
Current assets
Cash..................................................................................... $ -
Accounts receivable....................................................................... 716,173
Prepaid assets............................................................................ 46,818
----------------

Total current assets.................................................................. 762,991

Furniture and equipment, net of accumulated depreciation
and amortization of $244,913.............................................................. 68,508
----------------

Total assets................................................................. $ 831,499
================
</TABLE>

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

F-25

<PAGE>

WYMAN TESTING LABORATORIES, INC.
BALANCE SHEET (CONTINUED)
DECEMBER 31, 1997

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<S> <C>
Current liabilities
Book overdraft............................................................................ $ 37,778
Revolving lines of credit................................................................. 197,501
Accounts payable.......................................................................... 38,488
Accrued payroll and payroll taxes......................................................... 40,114
Accrued stockholder's salaries............................................................ 48,375
Other accrued expenses.................................................................... 21,786
Due to stockholder........................................................................ 70,000
Deferred taxes............................................................................ 86,078
Current portion of long-term debt......................................................... 5,552
Current portion of capitalized lease obligations.......................................... 4,243
----------------

Total current liabilities............................................................. 549,915

Long-term debt, less current portion........................................................... 24,740
Capitalized lease obligations, less current portion............................................ 1,572
----------------

Total liabilities................................................................ 576,227
----------------

Commitments

Stockholders' equity
Common stock, no par value
3,000 shares authorized
100 shares issued and outstanding..................................................... 108,000
Stock subscription receivable............................................................. (1,000)
Retained earnings......................................................................... 148,272
----------------

Total stockholders' equity............................................................ 255,272
----------------

Total liabilities and stockholders' equity................................... $ 831,499
================
</TABLE>

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

F-26

<PAGE>

WYMAN TESTING LABORATORIES, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<S> <C>
Net sales...................................................................................... $ 3,201,989

Cost of sales.................................................................................. 1,681,823
----------------

Gross profit................................................................................... 1,520,166

Selling, general, and administrative expenses.................................................. 1,232,316
----------------

Income from operations......................................................................... 287,850
----------------

Other income (expense)
Interest expense............................................................................ (29,421)
Gain on sale of fixed asset................................................................. 12,000
----------------

Total other income (expense).............................................................. (17,421)
----------------

Income before provision for income taxes....................................................... 270,429

Provision for income taxes..................................................................... 36,646
----------------

Net income..................................................................................... $ 233,783
================

Basic income per share......................................................................... $ 2,337.83
================

Diluted income per share....................................................................... $ 2,337.83
================

Weighted-average shares outstanding............................................................ 100
================
</TABLE>

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

F-27

<PAGE>

WYMAN TESTING LABORATORIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
Retained
Common Stock Stock Earnings
--------------------------------- Subscription (Accumulated
Shares Amount Receivable Deficit) Total
--------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>

Balance, December
31, 1996................ 100 $ 8,000 $ (1,000) $ (85,511) $ (78,511)

Capital contribution....... 100,000 100,000

Net income................. 233,783 233,783
--------------- --------------- ---------------- --------------- ----------------

Balance, December
31, 1997................ 100 $ 108,000 $ (1,000) $ 148,272 $ 255,272
=============== =============== ================ =============== ================
</TABLE>

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

F-28

`<PAGE>

WYMAN TESTING LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>

<S> <C>
Cash flows from operating activities
Net income.................................................................................. $ 233,783
Adjustments to reconcile net income to net cash
used in operating activities..............................................................
Depreciation and amortization........................................................... 18,526
Gain on sale of fixed asset............................................................. (12,000)
Deferred taxes.......................................................................... 35,846
(Increase) decrease in
Accounts receivable....................................................................... (353,933)
Prepaid expenses.......................................................................... (8,741)
Increase (decrease) in
Accounts payable.......................................................................... (62,812)
Accrued payroll and payroll taxes......................................................... (26,796)
Accrued stockholder's salaries............................................................ (4,500)
Accrued management fee.................................................................... (64,286)
Other accrued expenses.................................................................... 5,821
----------------

Net cash used in operating activities.......................................................... (239,092)
----------------

Cash flows from investing activities
Purchase of property and equipment.......................................................... (12,069)
----------------

Net cash used in investing activities.......................................................... (12,069)
----------------

Cash flows from financing activities
Book overdraft.............................................................................. 37,778
Revolving lines of credit, net.............................................................. 130,000
Payments on long-term debt.................................................................. (37,312)
Payments on capitalized lease obligations................................................... (8,668)
Increase in capital contributions........................................................... 100,000
Due to stockholder, net..................................................................... 25,000
----------------

Net cash provided by financing activities...................................................... 246,798
----------------
</TABLE>

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

F-29

<PAGE>

WYMAN TESTING LABORATORIES, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>

<S> <C>
Net increase (decrease) in cash............................. $ (4,363)

Cash, beginning of period................................... 4,363
----------------

Cash, end of period......................................... $ -
----------------
----------------

Supplemental disclosures of cash flow information

Interest paid ........................................... $ 29,421
----------------
----------------

Income taxes paid ....................................... $ 800
----------------
----------------

</TABLE>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

During the year ended December 31, 1997, the Company acquired an automobile
of $38,000 under note payable agreements.

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

F-30

<PAGE>

WYMAN TESTING LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997

NOTE 1 - ORGANIZATION AND BUSINESS

Wyman Testing Laboratories, Inc. (the "Company"), a Delaware corporation,
was incorporated in March 1998. The Company is engaged in testing for the
commercial construction industry.

Acquisition

On March 25, 1998, Wyman Testing Laboratories, Inc., a majority-owned
subsidiary of U.S. Laboratories Inc., acquired certain assets and
liabilities of Wyman Enterprises, Inc. The purchase price for the assets
was $830,620. Wyman Testing Laboratories, Inc. recorded $511,200 in excess
of cost over fair value of net assets acquired which is being amortized on
a straight-line basis over fifteen years. The assets acquired were as
follows:

<TABLE>
<S> <C>
Cash $ 22,690
Accounts receivable 577,681
Prepaids 29,985
Furniture and equipment 96,952
Excess of cost over fair value of net assets acquired 511,200
Liabilities (407,888)
-------------

Total $ 830,620
-------------
-------------
</TABLE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents/Book Overdraft

For purposes of the statement of cash flows, the Company considers all
highly-liquid investments purchased with original maturities of three
months or less to be cash equivalents. Book overdraft represents the
bank balance at period end, plus deposits in transit, less outstanding
checks.

Furniture and Equipment

<TABLE>
<S> <C>
Automobile and trucks 3 to 5 years
Furniture and fixtures 7 years
Office hardware and software 5 years
Machinery and equipment 5 to 7 years
</TABLE>

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

F-31

<PAGE>

WYMAN TESTING LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition

Revenue from services performed is recorded as earned over the lives of the
contract. Revenue from services is recognized when services have been
performed and accepted.

Advertising/Marketing

The Company expenses advertising costs as incurred. Advertising costs for
the year ended December 31, 1997 were $14,421.

Income Taxes

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
disclosures of contingent assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the Company's
financial instruments including cash, accounts receivable, accounts
payable, and accrued expenses, the carrying amounts approximate fair value
due to their short maturities. The amounts shown for long-term debt and
capital lease obligations also approximate fair value because current
interest rates and terms offered to the Company for similar debt and lease
agreements are substantially the same.

Concentrations of Risk

The Company sells products and provides contract services to construction
companies and the military, primarily in the San Diego area. It also
extends credit based on an evaluation of the customer's financial
condition, generally without requiring collateral. Exposure to losses on
receivables is principally dependent on each customer's financial
condition. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses.

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

F-32

<PAGE>

WYMAN TESTING LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Net Income Per Share

For the year ended December 31, 1997, the Company adopted SFAS No. 128,
"Earnings per Share." Basic earnings per share is computed by dividing net
income by the weighted-average number of common shares outstanding. Diluted
earnings per share is computed similar to basic earnings per share except
that the denominator is increased to include the number of additional
common shares that would have been outstanding if potential common shares
such as options had been issued and if the additional common shares were
dilutive. Since the Company has no stock options and warrants outstanding,
there are no dilutive common shares. Therefore, basic earnings per share
and diluted earnings per share are the same.

Recently Issued Accounting Pronouncements

SFAS No. 130, "Reporting Comprehensive Income," is effective for financial
statements with fiscal years beginning after December 15, 1997. SFAS No.
130 establishes standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements.
The Company does not expect adoption of SFAS No. 130 to have a material
effect, if any, on its financial position or results of operations.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1997 consisted of the following:

<TABLE>
<S> <C>
Automobile and trucks........................................................ $ 108,894
Furniture and fixtures....................................................... 22,597
Office hardware and software................................................. 16,891
Machinery and equipment...................................................... 151,148
Leased equipment............................................................. 13,891
----------------

313,421
Less accumulated depreciation and amortization............................... 244,913
----------------

Total.................................................................... $ 68,508
----------------
----------------
</TABLE>

Total depreciation and amortization expense for the year ended December
31, 1997 was $18,526.

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

F-33

<PAGE>

WYMAN TESTING LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997

NOTE 4 - RELATED PARTY TRANSACTIONS

Due to Stockholder

At December 31, 1997, the Company had amounts due to a stockholder of
$70,000 for operating advances which are non-interest bearing and payable
upon demand. Amounts were repaid subsequent to December 31, 1997.

Accrued Stockholder Salaries

At December 31, 1997, the Company owed a stockholder $48,375 in salaries.
Amounts were repaid subsequent to December 31, 1997.

Stockholder Salaries and Management Fee

During the year ended December 31, 1997, the Company expensed $186,215 in
salaries and management consulting fees to two stockholders.

Capital Contribution

During the year ended December 31, 1997, one stockholder made an additional
capital contribution of $100,000.

NOTE 5 - REVOLVING LINES OF CREDIT

The Company has available two unsecured $100,000 revolving lines of credit
from a bank with interest payable on a monthly basis at the bank's index
rate (9.75% at December 31, 1997) plus 2.25%. The lines are guaranteed by a
first trust deed on vacant land owned by the majority stockholder and a
commercial security agreement dated September 3, 1996 which includes a
UCC-1 financing statement. The lines of credit matured on April 1, 1998. At
December 31, 1997, the amount drawn against the lines of credit were
$197,501. Subsequent to December 31, 1997, the amount was repaid.

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

F-34

<PAGE>

WYMAN TESTING LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997

NOTE 6 - LONG-TERM DEBT

Notes payable at December 31, 1997 consisted of the following:

<TABLE>
<S> <C>
Note payable - bank, collateralized by an
automobile, payable in monthly installments of
$93 including interest at 11.9% per annum.................................. $ 1,340

Note payable - financial institution, collateralized by an
automobile, payable in monthly installments of $434 including
interest at
13.5% per annum............................................................ 19,251

Note payable - financial institution, collateralized
by an automobile, payable in monthly installments
of $278 including interest at 11.99% per annum............................. 9,701
-----------

30,292
Less current portion.......................................................... 5,552
-----------

Long-term portion....................................................... $ 24,740
-----------
-----------
</TABLE>

The following is a schedule by years of future maturities of long-term
debt:

Year Ended
December 31,
------------
<S> <C>
1998 $ 5,552
1999 4,734
2000 5,105
2001 5,900
2002 3,895
Thereafter 5,106
-----------

Total $ 30,292
-----------
-----------

</TABLE>

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

F-35

<PAGE>

WYMAN TESTING LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997

NOTE 7 - COMMITMENTS

Lease Commitments

The Company leases certain office equipment under non-cancelable capital
lease arrangements.

Future minimum payments under its non-cancelable capital leases with
initial or remaining terms of one year or more at December 31, 1997 are as
follows:

Year Ended
December 31,
------------
<S> <C>
1998 $ 5,088
1999 1,672
2000 -
-------------

6,760
Less amount representing interest 945

5,815
Less current portion 4,243
-------------
Long-term portion $ 1,572
-------------
-------------

</TABLE>

Rent expense for the year ended December 31, 1997 was $49,368.

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

F-36

<PAGE>

WYMAN TESTING LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997

NOTE 8 - INCOME TAXES

A reconciliation of the expected income tax computed using the federal
statutory income tax rate to the Company's effective income tax rate for
the year ended December 31, 1997 is as follows:

<TABLE>
<CAPTION>
<S> <C>
Income tax computed at federal statutory tax rate....................... 34.0%
State taxes, net of federal benefit..................................... 5.8
Valuation allowance..................................................... (26.8)
-----------------

Total............................................................... 13.0%
=================
</TABLE>

Significant components of the Company's deferred tax assets and liabilities
for income taxes for the year ended December 31, 1997 consisted of the
following:

<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets
Net operating loss carryforward..................................... $ 144,827
Accounts payable and accrued expenses............................... 54,893
Other............................................................... 16,455
---------------

Total deferred tax assets................................... 216,175
---------------

Deferred tax liability
Accounts receivable................................................. 286,469
Prepaid expenses and other.......................................... 14,984
---------------

Total deferred tax liability................................ 301,453
---------------

Net deferred tax liability.............................. $ 85,278
===============
</TABLE>

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

F-37

<PAGE>

WYMAN TESTING LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997

NOTE 8 - INCOME TAXES (CONTINUED)

The components of the income tax provision are as follows:

<TABLE>
<S> <C>
Current
Federal............................................................. $ -
State............................................................... 800
-------------

800
-------------
Deferred
Federal............................................................. 18,262
State............................................................... 17,584
-------------

35,846
-------------
Total....................................................... $ 36,646
=============
</TABLE>

The Company has net operating losses available to carry forward to future
periods for reduction of taxable income of approximately $393,000 for
federal income tax purposes and $127,000 for state income tax purposes.
These carryforwards begin to expire in 2020 and 2001 for federal and state
income taxes, respectively. Upon the acquisition, the Company will lose the
net operating loss carryforwards of Wyman Enterprises, Inc.

The valuation allowance has been decreased by approximately $72,000 during
the year ended December 31, 1997.

NOTE 9 - EMPLOYEE PROFIT SHARING PLAN

The Company established a 401(k) profit sharing plan covering substantially
all employees who meet the eligibility requirements of the plan. The
Company may match up to 10% of the employee contributions up to a total of
15% of the contributions which vest over six years. During the year ended
December 31, 1997, the Company made matching contributions of $1,958.

NOTE 10 - SUBSEQUENT EVENTS (UNAUDITED)

Capitalized Lease Obligation

The Company entered into a non-cancelable capital lease agreement. The
agreement is payable in monthly installments of $1,053, expiring in May
2000.

Employment Agreement

In March 1998, the Company entered into a two-year employment agreement
to pay an annual salary of $60,000 plus other benefits.

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

F-38

<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES/
WYMAN TESTING LABORATORIES, INC.
PRO FORMA BALANCE SHEET
DECEMBER 31, 1997

ASSETS
<TABLE>
<CAPTION>
U.S. Wyman
Laboratories Testing
Inc. and Enterprises,
Subsidiaries Inc. Adjustments Total
------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Current assets
Cash .................................. $ 94,132 $ - $ - $ 94,132
Accounts receivable...................... 1,719,120 716,173 - 2,435,293
Work-in-process.......................... 181,772 - - 181,772
Prepaid expenses and other current
assets................................. 47,414 46,818 - 94,232
------------- ------------- -------------- ------------

Total current assets................. 2,042,438 762,991 - 2,805,429

Furniture and equipment, net................ 395,711 68,508 - 464,219
Excess cost over fair value of net
assets acquired, net..................... a 511,200
939,147 - c 194,924 1,645,271
Other assets................................ 154,411 - - 154,411
------------- ------------- --------------- ------------

Total assets....................... $ 3,531,707 $ 831,499 $ 706,124 $ 5,069,330
============= ============= ============== ============
</TABLE>

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

F-39

<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES /
WYMAN TESTING LABORATORIES, INC.
PRO FORMA BALANCE SHEET (CONTINUED)
DECEMBER 31, 1997

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
U.S. Wyman
Laboratories Testing
Inc. and Enterprises,
Subsidiaries Inc. Adjustments Total
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Current liabilities
Book overdraft........................... $ 9,390 $ 37,778 $ - $ 47,168
Lines of credit.......................... 484,335 197,501 - 681,836
Current portion of long-term debt........ 84,526 5,552 - 90,078
Current portion of capitalized lease
obligations............................ - 4,243 - 4,243
Current portion of notes payable......... - - a 480,272 480,272
Accounts payable......................... 273,620 38,488 - 312,108
Accrued payroll and payroll taxes........ 115,214 40,114 - 155,328
Accrued stockholders' salaries........... - 48,375 - 48,375
Other accrued expenses................... 14,612 21,786 - 36,398
Due to stockholder....................... 584,281 70,000 - 654,281
Deferred income tax...................... 678,749 86,078 - 764,827
Income tax payable....................... 162,708 - - 162,708
--------------- ---------------- --------------- ----------------

Total current liabilities............ 2,407,435 549,915 480,272 3,437,622

Long-term debt, net of current portion...... 118,732 24,740 - 143,472
Capitalized lease obligations, net of
current portion........................ - 1,572 - 1,572
Notes payable, net of current portion....... - - a 225,000 225,000
--------------- ---------------- --------------- ----------------

Total liabilities.................... 2,526,167 576,227 705,272 3,807,666
--------------- ---------------- --------------- ----------------

Minority interest........................... 338,128 - c (338,128) -
--------------- ---------------- --------------- ----------------

Stockholders' equity
Preferred stock.......................... - - -
Common stock............................. a (108,000)
a 504
17,099 108,000 c 4,397 22,000
Stock subscription receivable............ - (1,000) a 1,000 -
Additional paid-in capital............... a 60,696
380,901 - c 528,655 970,252
Retained earnings........................ 269,412 148,272 a (148,272) 269,412
--------------- ---------------- --------------- ----------------

Total stockholders' equity........... 667,412 255,272 338,980 1,261,664
--------------- ---------------- --------------- ----------------

Total liabilities and
stockholders' equity............. $ 3,531,707 $ 831,499 $ 706,124 $ 5,069,330
=============== ================ =============== ================
</TABLE>

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

F-40

<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES /
WYMAN TESTING LABORATORIES, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997

Cost of goods sold.......................... 4,476,952 1,681,823 - 6,158,775
--------------- ---------------- --------------- ----------------

Gross profit................................ 3,289,462 1,520,166 - 4,809,628

Selling, general, and administrative........
expenses................................. b 34,080
................................... 2,531,770 1,232,316 d 12,995 3,811,161
--------------- ---------------- -------------- ----------------

Income from operations...................... 757,692 287,850 (47,075) 998,467
--------------- ---------------- --------------- ----------------

Other income (expense)
Interest expense......................... (130,605) (29,421) - (160,026)
Interest income.......................... 7,277 - - 7,277
Gain on sale of fixed asset.............. 4,912 12,000 - 16,912
Rental income............................ 25,160 - - 25,160
Gain on sale of minority interest........ 25,229 - - 25,229
--------------- ---------------- --------------- ----------------

Total other income (expense)........... (68,027) (17,421) - (85,448)
---------------- ---------------- --------------- -----------------

Income before provision for income
taxes, minority interest
and extraordinary item................... 689,665 270,429 (47,075) 913,019

Provision for income taxes.................. 305,056 36,646 - 341,702
--------------- ---------------- --------------- ----------------

Income before minority interest
and extraordinary item................... 384,609 233,783 (47,075) 571,317

Minority interest........................... (80,253) - e 80,253 -
--------------- ---------------- -------------- ----------------
Income before extraordinary item............ 304,356 233,783 33,178 571,317

Extraordinary gain, less applicable
income taxes of $40,200 (NOTE 14)........ 59,800 --- --- 59,800
--------------- ---------------- --------------- ----------------
Net income.................................. $ 364,156 $ 233,783 $ 33,178 $ 631,117
=============== ================ =============== ================
Basic income per share:
Income before extraordinary item......... 0.14 0.26
Extraordinary item....................... 0.13 0.03
--------------- ----------------
Net income............................... $ 0.27 $ 0.29
=============== ================
Diluted income per share:
Income before extraordinary item......... 0.14 0.26
Extraordinary item....................... 0.13 0.03
--------------- ----------------
Net income............................... $ 0.27 $ 0.29
=============== ================
Weighted-average shares
outstanding.............................. 2,200,000 2,200,000
=============== ================
</TABLE>

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

F-41

<PAGE>

U.S. LABORATORIES INC. AND SUBSIDIARIES /
WYMAN TESTING LABORATORIES, INC.
NOTE TO PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1997

NOTE 1 - BASIS OF PRESENTATION

The accompanying pro forma balance sheet presents the accounts of U.S.
Laboratories Inc. and subsidiaries ("US Labs") and Wyman Testing
Laboratories, Inc. ("Wyman") as if the acquisition of the assets of Wyman
by US Labs occurred on December 31, 1997, and the pro forma statement of
operations presents the accounts of US Labs and Wyman as if the acquisition
took place on January 1, 1997.

If U.S. Labs actually acquired Wyman on December 31, 1997, the purchase
price would have been $766,472. The purchase price was paid as follows: (i)
$300,000 cash paid upon the closing, (ii) $405,272 notes payable issued to
the stockholders of Wyman Enterprises, Inc., and (iii) 50,478 shares of
U.S. Labs Common Stock issued to a stockholder of Wyman Enterprises, Inc.,
valued at $61,200, using a method similar to previous Company acquisitions.

The fair value of the assets acquired on December 31, 1997, which
approximates the book value were as follows:

<TABLE>
<S> <C>
Accounts receivable $716,173
Prepaids 46,818
Furniture and equipment 68,508
Goodwill 511,200
Liabilities (576,227)
----------
$766,472
</TABLE>

See NOTE 1 in U.S. Laboratories Inc. and subsidiaries consolidated
financial statements for actual purchase price and assets acquired on March
23, 1998.

a) To record purchase price allocation adjustment and corresponding note
payable in consideration of the assets acquired. In connection with
the purchase, the Company recorded $511,200 in excess of cost over
fair value of net assets acquired and issued 50,478 shares of US Labs
Common Stock.

b) To record amortization of excess of cost over fair value of net assets
acquired, which is being amortized on a straight-line basis over
fifteen years.

In addition, the accompanying pro forma balance sheet presents the purchase
of the minority interest by of US Labs as if the purchase of minority
interest occurred on December 31, 1997, and the pro forma statement of
operations as if the purchase of the minority interest took place on
January 1, 1997.

c) To record purchase of all of the shares held by minority stockholders
in the subsidiaries of US Labs for $533,052. In connection with the
purchase of the minority interest, the Company issued an aggregate
of 439,664 shares of Common Stock in exchange for the purchase
price and recorded $194,924 in excess of cost over fair value of
net assets acquired.

d) To record amortization of excess of cost over fair value of net assets
acquired, which is being amortized on a straight-line basis over
fifteen years.

e) To eliminate minority interest expense.

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

F-42
<PAGE>

The upper-right hand corner has the Company's logo, which consists of the
Company's name in the outer circle and a picture of a skyline in the inner
circle.

A picture of the Yacht Club at Highland Beach, Florida with a label underneath.

A picture of the Raymond F. Kravis Center, West Palm Beach, Florida with a label
underneath.

A picture of the San Diego Convention Center, San Diego, California with a label
underneath.

A picture of the San Diego skyline with the following caption "The current
management team of U.S. Laboratories has been responsible for the testing and
inspection of over 85% of the major structures in this photo."

PRIVATE COMMERCIAL CLIENTS

Wal-Mart Walt Disney
Saks Fifth Avenue Lord & Taylor
Hilton Hotels Nordstrom
Sea World San Diego Lockheed Martin
Rite-Aid Claridge Casino Atlantic City
Home Depot Circuit City
Marriott Neiman Marcus
Bally's Park Place Universal Studios Orlando
Sports Authority Target Stores

PUBLIC INTEREST CLIENTS

Scripps Memorial Hospital Broward City Community College
Orange County Florida California State Universities
Princeton University University of California
Florida Atlantic University San Diego Convention Center

PUBLIC SECTOR CLIENTS

City of Los Angeles New Jersey Transit Authority
United States Navy New Jersey Sports & Expositions
San Diego County New Jersey Turnpike Authority
Port Authority of New York Miami/Dade County

CalTrans City of San Diego

Los Angeles County Port Authority of San Diego

<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES TO WHICH IT RELATES, OR AN
OFFER TO OR A SOLICITATION OF ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER
OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................... 3
The Company............................................................... 7
Risk Factors.............................................................. 9
Use of Proceeds........................................................... 13
Dividend Policy........................................................... 14
Capitalization............................................................ 14
Dilution.................................................................. 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 16
Business.................................................................. 21
Management................................................................ 34
Principal Stockholders.................................................... 39
Related Transactions...................................................... 40
Underwriting.............................................................. 42
Description of Securities................................................. 43
Shares Eligible for Future Sale........................................... 45
Experts................................................................... 46
Legal Matters............................................................. 47
Additional Information.................................................... 47
Index to Financial Statements............................................. F-1
</TABLE>

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

UNTIL FEBRUARY , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

1,100,000 UNITS

U.S. LABORATORIES INC.

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

[LOGO]

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

[CARDINAL CAPITAL MANAGEMENT, INC.]

JANDA & GARRINGTON LLC

[FAS WEALTH MANAGEMENT SERVICES, INC.]

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law (the "Delaware Act")
provides that subject to such standards and restrictions, if any, as are set
forth in its Certificate of Incorporation, a Delaware corporation has the power
to indemnify any person who is a party to a civil, criminal, administration or
investigative proceeding by reason of the fact that the person was a director,
officer, employee or agent of the corporation if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful.

The Company's Amended and Restated Certificate of Incorporation also
provides that the Company will indemnify the Company's directors, officers,
employees and agents to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law.

The Company's Amended and Restated Certificate of Incorporation also
provides that directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law (relating
to unlawful payment of dividends or unlawful stock purchase or redemption) or
(iv) for any transaction from which the director derived any improper personal
benefit.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

<TABLE>
<S> <C>
Securities and Exchange Commission filing fee................................................ $ 4,684
NASD filing fee.............................................................................. 1,200
Blue sky fees and expenses................................................................... 12,000
Printing and engraving expenses.............................................................. 35,000
Accountants' fees and expenses............................................................... 110,000
Nasdaq Listing Application Fee............................................................... 45,000
Legal fees and expenses...................................................................... 323,000
Transfer Agent Fees.......................................................................... 1,000
Miscellaneous fees and expenses.............................................................. --
--------
Total................................................................... $531,884
========
</TABLE>

The Company will pay all of the fees, costs and expenses set forth above.
Other than the SEC filing fee, all fees and expenses are estimated.

<PAGE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

On January 1, 1998, in reliance on an exemption under Section 4(2) of
the Securities Act of 1993 (the "Act"), the Company issued a total of 439,664
shares of the Company's common stock (the "Common Stock") to four executive
officers of the Company or its subsidiaries in exchange solely for common
stock of the Company's subsidiaries. No cash compensation was paid for the
shares and no commissions were paid to any person in connection with the
transaction. Specifically, the Company issued (a) 315,488 shares of Common
Stock to Gary H. Elzweig, Executive Vice President of the Company, in
exchange for 100 shares of the common stock of PEICO; (b) 55,526 shares of
Common Stock to Martin B. Lowenthal, Executive Vice President of the Company
in exchange for 18.5 shares of the common stock of USEL; (c) 33,652 shares of
Common Stock to Mark Baron, Executive Vice President of the Company, in
exchange for 1.67 shares of the common stock of TESD; and (d) 24,061 shares
of Common Stock to Thomas H. Chapman, Vice President of TESD, in exchange for
5.67 shares of the common stock of TESD.

Each of the above exchanges was completed under the terms of a Share
Exchange Agreement that, during the period beginning on the date of issuance and
ending on the effective date of the Offering, prohibited the transfer of the
Common Stock without the Company's prior written consent and granted the Company
an option to purchase the restricted Common Stock for the fair market value of
such shares as determined by the Company's independent public accountants. Each
Share Exchange Agreement also contained representations from the executive
officer that the officer was not acquiring the Common Stock with a view toward
any distribution or resale of such shares to any person except in accordance
with the provisions of the Act and applicable state securities laws
(collectively. the "Securities Laws"). The shares of Common Stock issued to the
executive officers bear a legend setting forth that the shares have not been
registered under the Securities Laws and may not be sold, transferred or
otherwise disposed of except under registration, exemption from registration, or
operation of law.

On January 1, 1998, in reliance on an exemption under Section 4(2) of the
Act, the Company also issued 10,937 shares of Common Stock to Christopher
O'Malley, Vice President of U.S. Engineering Laboratories, Inc., under the terms
of a Restricted Stock Agreement containing restrictions on the disposition of
the Common Stock and representations of Mr. O'Malley that are similar to those
described above in the Share Exchange Agreements. The issues issued to Mr.
O'Malley also bear a restrictive legend similar to that described above.

On April 1, 1998, in reliance on an exemption under Section 4(2) of
the Act, pursuant to a Share Exchange Agreement, the Company issued 50,478
shares of Common Stock to Donald C. Alford, Executive Vice President of the
Company, in exchange for 25 shares of the common stock of Wyman.

II-2

<PAGE>

ITEM 27. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
<C> <S>
*1.1 Form of Underwriting Agreement
*1.2 Form of Agreement Among Underwriters
*1.3 Form of Selected Dealers Agreement
*2.1 Asset Purchase Agreement between the Company and Wyman Enterprises, Inc.
**3.1 Amended and Restated Certificate of Incorporation of the Registrant
**3.2 Amended and Restated by-laws of the Registrant
*4.1 Form of Warrant
**4.2 Form of Underwriters' Warrant
**4.3 Form of Warrant Agency Agreement
*5.1 Opinion of Foley & Lardner regarding legality
*10.1 Bank Loan Agreement between North County Bank and the Company
*10.2 Bank Loan Agreement between Bank of America, Dickerson Wright, and the Company
*10.3 Lease for San Diego, California facility
10.4 Employment Agreement of Dickerson Wright
10.5 Employment Agreement of Gary Elzweig
10.6 U.S. Laboratories Inc. 1998 Stock Option Plan
*10.7 Form of Incentive Stock Option Agreement
*10.8 Form of Non-Qualified Stock Agreement
10.9 Share Exchange Agreement between the Company and Gary H. Elzweig
10.10 Share Exchange Agreement between the Company and Martin B. Lowenthal
10.11 Share Exchange Agreement between the Company and Mark Baron
10.12 Share Exchange Agreement between the Company and Thomas H. Chapman
10.13 Share Exchange Agreement between the Company and Donald C. Alford
*10.14 Employment Agreement of James D. Wait
*10.15 Employment Agreement of Mark Baron
*10.16 Employment Agreement of Martin B. Lowenthal
**21 List of Subsidiaries
*23.1 Consent of Foley & Lardner (included in Exhibit 5.1)
23.2 Consents of Singer Lewak Greenbaum & Goldstein, LLP.
**24.1 Power of Attorney relating to subsequent amendments
27 Financial Data Schedule
</TABLE>

*To be filed by amendment.

** Filed with the registration statement on Form SB-2 filed with the Securities
and Exchange Commission on October 29, 1998.

II-3
<PAGE>

ITEM 28. UNDERTAKINGS

The undersigned small business issuer hereby undertakes as follows:

(a) The small business issuer will:

(1) file, during any period in which offers or sales of
securities are being made, a post-effective amendment to this Registration
Statement to:

(i) Include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;

(ii) Reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. (Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
a prospectus filed with the Commission under Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in the
maximum offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement.); and

(iii) Include any additional or changed material information
with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement.

(2) For the purpose of determining any liability under the
Securities Act of 1933, treat each post-effective amendment as a new
Registration Statement of the securities offered, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering.

(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.

(b) The small business issuer will provide to the Underwriter at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.

(c) The Company's Amended and Restated Certificate of Incorporation
provides that the small business issuer will indemnify its directors, officers,
employees and agents to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the small business issuer under the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the small business of expenses
incurred or paid by a director, officer or controlling person of the small
business issuer in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the small business issuer will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against pubic policy as expressed in the Securities Act
of 1933 and will be governed by the final adjudication of such issue.

II-4

<PAGE>

(d) The small business issuer will:

(1) For determining any liability under the Securities Act,
treat the information omitted from the form of prospectus filed as part of the
Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the small business issuer under Rule 424(b)(1),
or (4) or 497(h) under the Securities Act as part of this Registration
Statement as of the time the Commission declared it effective.

(2) For determining any liability under the Securities Act,
treat each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration Statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.

II-5

<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this pre-effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on this 28th day of December, 1998.

U.S. LABORATORIES INC.

By: /S/ DICKERSON WRIGHT
----------------------------------

Dickerson Wright, Chief Executive Officer,
President, and Chairman of the Board

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/S/ DICKERSON WRIGHT Chief Executive Officer, President, and Chairman of December 28, 1998
- --------------------------------------------------- the Board
Dickerson Wright

/S/ * Executive Vice President and Director December 28, 1998
- ---------------------------------------------------
Gary Elzweig

/S/ * Executive Vice President and Director December 28, 1998
- ---------------------------------------------------
Donald C. Alford
</TABLE>

S-1

<PAGE>

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/S/ * Executive Vice President and Director December 28, 1998
- ---------------------------------------------------
Mark Baron

/S/ * Executive Vice President and Director December 28, 1998
- ---------------------------------------------------
Martin B. Lowenthal

/S/ * Chief Financial Officer, Secretary, and Director December 28, 1998
- --------------------------------------------------- (Chief Financial and Accounting Officer)
James D. Wait

/S/ * Director December 28, 1998
- ---------------------------------------------------
Thomas H. Chapman

/S/ * Director December 28, 1998
- ---------------------------------------------------
James L. McCumber

/S/ * Director December 28, 1998
- ---------------------------------------------------
Robert E. Petersen

/S/ * Director December 28, 1998
- ---------------------------------------------------
Noel Schwartz

/S/ * Director December 28, 1998
- ---------------------------------------------------
Irving Fuchs

* By: /S/ DICKERSON WRIGHT
---------------------------------------------
Dickerson Wright
Attorney-in-fact
</TABLE>

S-2

<PAGE>

Exhibit 10.4

[U.S. LABORATORIES' LETTERHEAD]

July 14, 1998

Mr. Dickerson Wright
Chief Executive Officer
U.S. LABORATORIES, INC.
7895 Convoy Court, Suite 18
San Diego, California 92111

RE: COMPENSATION/INCENTIVE PROGRAM

Dear Dickerson,

I am writing to set forth the terms of your compensation and incentive
agreement with U.S. Engineering Laboratories, Inc. If we are in agreement
regarding the terms as stated below, please state so by signing in the
signature space provided.

Effective July 1, 1998, your compensation will be paid on the first day of
each month and will be paid at the rate of $14,584 per month ($175,000 per
annum). In addition, if the collective group of the U.S. Laboratories, Inc.
companies achieves or is in excess of $1,200,000 in pre-tax profit for the
1998 calendar year then you will be entitled to a bonus of 7% of the pre-tax
collective pre-tax profit.

Please call with any questions or comments regarding this document. If you
are in agreement, this letter is intended to be your written confirmation of
your compensation package.

Sincerely, Agreed and acknowledged:

/s/ JIM WAIT /s/ DICKERSON WRIGHT
CFO CEO, U.S. Laboratories, Inc.

<PAGE>

Exhibit 10.5

[U.S. LABORATORIES' LETTERHEAD]

July 14, 1998

Mr. Gary Elzweig
President
PROFESSIONAL ENGINEERING AND INSPECTION CO., INC.
4350 West Sunrise Blvd., Suite 103D
Plantation, Florida 33313

RE: COMPENSATION/INCENTIVE PROGRAM

Dear Gary,

I am writing to set forth the terms of your compensation and incentive
agreement with U.S. Engineering Laboratories, Inc. and PEICO. If we are in
agreement regarding the terms as stated below, please state so by signing in
the signature space provided.

Effective July 1, 1998, your compensation will be paid on the last day of
each month and will be paid at the rate of $10,417 per month ($125,000 per
annum). If PEICO achieves or exceeds pre-tax profits of $450,000 then you
will be entitled to a bonus of 3% of the collective pre-tax profit for all of
the U.S. Laboratories, Inc. entities combined. In addition to your personal
incentive, if PEICO meets its business goals for 1998, then PEICO will be
entitled to a bonus pool of up to 5% of its pre-tax profit to be distributed
to its employees as you see fit. This agreement is an annual agreement to be
applied to the 1998 calendar year and business plan.

Please call with any questions or comments regarding this document. If you
are in agreement, this letter is intended to be your written confirmation of
your compensation package.

Sincerely, Agreed and acknowledged:

/s/ JIM WAIT /s/ GARY ELZWEIG
CFO President, PEICO

<PAGE>
EXHIBIT 10.6

U.S. LABORATORIES INC.
1998 STOCK OPTION PLAN

SECTION 1. PURPOSE

The purpose of the U.S. Laboratories Inc. 1998 Stock Plan (the
"Plan") is to promote the best interests of U.S. Laboratories Inc., a
Delaware corporation (the "Company"), its subsidiaries and its shareholders
by providing for the acquisition of an equity interest in the Company by
officers, directors, employees, and consultants and advisors who perform
valuable services for the Company or its subsidiaries and to enable the
Company and its subsidiaries to attract and retain the services of such
individuals upon whose judgment, interest, skills, and special effort the
successful conduct of its operation is largely dependent.

SECTION 2. EFFECTIVE DATE

The Plan shall be effective as of May 30, 1998, subject to
approval by the shareholders of the Company within twelve (12) months after
the date of adoption of the Plan by the Board of Directors of the Company
(the "Board").

SECTION 3. ADMINISTRATION

The Plan shall be administered and interpreted by the
Compensation Committee of the Board, consisting of not less than two members
of the Board (the "Committee"). If at any time the Committee shall not be in
existence, the Board shall administer the Plan and all references to the
Committee herein shall include the Board. The Board may, in its discretion,
delegate to another committee of the Board or to one or more senior officers
of the Company any or all of the authority and responsibility of the
Committee.

Subject to the provisions of the Plan and applicable law, the
Committee shall have complete power and authority to (i) interpret and
administer the Plan and any instrument or agreement relating to, or made under,
the Plan; (ii) make factual determinations; (iii) establish, amend, suspend, or
waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; (iv) select those
individuals who shall receive awards under the Plan; (v) determine the terms,
conditions, restrictions and other provisions of awards; and (vi) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan. The Committee's decisions and
determinations under the Plan need not be uniform and may be made selectively
among participants, whether or not they are similarly situated. A majority of
the members of the Committee shall constitute a quorum and all determinations of
the Committee shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or meeting of the
Committee by a writing signed by a majority of the Committee members.

<PAGE>

SECTION 4. ELIGIBILITY AND PARTICIPATION

Participants in the Plan shall be selected by the Committee
from among those officers, employees and directors of the Company and its
subsidiaries, and from among those advisors and consultants providing
valuable services to the Company and its subsidiaries, as the Committee may
designate from time to time. The Committee shall consider such factors as it
deems appropriate in selecting participants and in determining the type and
amount of their respective awards. The Committee's designation of a
participant in any year shall not require the Committee to designate such
person to receive an award in any other year.

SECTION 5. STOCK SUBJECT TO PLAN

5.1 NUMBER. Subject to adjustment as provided in Section 5.3,
the total number of shares of common stock, $.01 par value, of the Company
("Stock"), which may be issued under the Plan shall be 500,000. The shares to
be delivered under the Plan may consist, in whole or in part, of authorized but
unissued Stock or treasury Stock.

5.2 UNUSED STOCK; UNEXERCISED RIGHTS. If, after the effective
date of the Plan, any shares of Stock subject to an award granted under the Plan
are forfeited or if an award otherwise terminates, expires or is canceled prior
to the delivery of all of the shares of Stock or of other consideration issuable
or payable pursuant to such award, then the number of shares of Stock counted
against the number of shares available under the Plan in connection with the
grant of such award, shall again be available for the granting of additional
awards under the Plan to the extent determined to be appropriate by the
Committee.

5.3 ADJUSTMENT IN CAPITALIZATION. In the event that the
Committee shall determine that any dividend or other distribution (whether in
the form of cash, Stock, other securities or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of Stock or other
securities of the Company, issuance of warrants or other rights to purchase
Stock or other securities of the Company, or other similar corporate transaction
or event affects the Stock such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee may, in such manner as it may deem equitable, adjust any or
all of: (i) the number and type of shares of Stock subject to the Plan and
which thereafter may be made the subject of awards under the Plan; (ii) the
number and type of shares of Stock subject to outstanding awards; and (iii) the
grant, purchase or exercise price with respect to any award, or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
award; PROVIDED, HOWEVER, in each case, that with respect to awards of incentive
stock options no such adjustment shall be authorized to the extent that such
authority would cause such options to cease to be treated as incentive stock
options; and PROVIDED FURTHER, HOWEVER, that the number of shares of Stock
subject to any award payable or denominated in Stock shall always be a whole
number.

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<PAGE>

SECTION 6. TERM OF THE PLAN

No award shall be made under the Plan after May 30, 2008.
However, unless otherwise expressly provided in the Plan or in an applicable
award agreement, any award theretofore granted may extend beyond such date
and, to the extent set forth in the Plan, the authority of the Committee to
amend, alter, adjust, suspend, discontinue or terminate any such award, or to
waive any conditions or restrictions with respect to any such award, and the
authority of the Board to amend the Plan, shall extend beyond such date.

SECTION 7. STOCK OPTIONS

7.1 GRANT OF OPTIONS. Options may be granted to participants
at any time and from time to time as shall be determined by the Committee. The
Committee shall have complete discretion in determining the number, terms and
conditions of options granted to a participant. The Committee also shall
determine whether an option is to be an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or a nonqualified stock option. If an option fails at any time to meet
the requirements for an incentive stock option under Section 422 of the Code,
such option shall be treated as a nonqualified stock option. Only individuals
who are employees of the Company or one of its subsidiaries at the time of grant
may receive grants of incentive stock options.

7.2 EXERCISE PRICE. The exercise price of each option granted
under the Plan shall be established by the Committee or shall be determined by a
method established by the Committee at the time the option is granted; except
that, unless otherwise determined by the Committee, the exercise price shall not
be less than one hundred percent (100%) of the fair market value of a share of
Stock as of the Pricing Date, as determined under Section 7.5 (the "Fair Market
Value"). For purposes of the preceding sentence, the "Pricing Date" shall be
the date on which the option is granted, except that the Committee may provide
that: (i) the Pricing Date is the date on which the recipient is hired or
promoted (or similar event) if the grant of the option occurs not more than
90 days after the date of such hiring, promotion or other event; and (ii) if an
option is granted in tandem with, or in substitution for, an outstanding award,
the Pricing Date is the date of grant of such outstanding award. In the case of
the grant of an incentive stock option, the exercise price shall equal one
hundred percent (100%) of the Fair Market Value of a share of Stock on the date
of grant; PROVIDED, HOWEVER, that if an incentive stock option is granted to any
employee who, at the time of grant, owns shares of Company stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company (a "10% Stockholder"), the exercise price per share shall
not be less than 110% of the Fair Market Value of a share of Stock on the date
of grant.

7.3 TERM AND EXERCISE OF OPTIONS. Incentive stock options will
be exercisable over not more than ten (10) years after the date of grant (or
five (5) years in the case of a 10% Stockholder) and shall terminate not later
than three (3) months after termination of employment for any reason other than
death or disability, as determined by the Committee, except as otherwise
provided by the Committee. If the participant should die while employed or
within

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<PAGE>

three (3) months after termination of employment, then the right of the
participant's successor in interest to exercise an incentive stock option
shall terminate not later than twelve (12) months after the date of death,
except as otherwise provided by the Committee. In all other respects, the
terms of any incentive stock option granted under the Plan shall comply with
the provisions of Section 422 of the Code (or any successor provision
thereto) and any regulations promulgated thereunder. Nonqualified stock
options will be exercisable as determined by the Committee and shall
terminate at such time as the Committee shall determine and specify in the
option agreement. Incentive stock options and nonqualified stock options
shall be subject to such vesting schedules (if any) as determined by the
Committee and as specified in the option agreement.

7.4 OPTION AGREEMENT. Each option shall be evidenced by an
option agreement that shall specify the type of option granted, the date of
grant, the exercise price, the duration of the option, the vesting schedule (if
any) for the option, the number of shares of Stock to which the option pertains
and such other conditions and provisions as the Committee shall determine.

7.5 FAIR MARKET VALUE. The Fair Market Value of a share of
Stock shall be as reasonably determined by the Committee pursuant to such
methods or procedures as shall be established from time to time by the
Committee.

7.6 PAYMENT. Subject to the following provisions of this
Section 7.6, the full exercise price for shares of Stock purchased upon the
exercise of any option shall be paid at the time of such exercise (except that,
in the case of an exercise arrangement approved by the Committee and described
in clause (b) of this Section 7.6, payment may be made as soon as practicable
after the exercise). The Committee shall determine the methods and the forms
for payment of the exercise price of options, including (a) by effective receipt
of cash or, to the extent permitted by the Committee, other mature shares of the
Company (as defined by U.S. Generally Accepted Accounting Principles) having a
then Fair Market Value equal to the exercise price of such shares, or any
combination thereof; or (b) by authorizing a third party to sell shares of Stock
(or a sufficient portion of the shares) acquired upon exercise of the option and
remit to the Company a sufficient portion of the sale proceeds to pay the entire
exercise price and any tax withholding resulting from such exercise. Shares of
Stock tendered shall be duly endorsed in blank or accompanied by stock powers
duly endorsed in blank. Upon receipt of the payment of the entire exercise
price for the shares so purchased, certificates for such shares will be
delivered to the participant.

7.7 LIMITS ON INCENTIVE STOCK OPTIONS. Each incentive stock
option shall provide that to the extent the aggregate fair market value of the
Stock on the date of grant with respect to which incentive stock options are
exercisable by a participant for the first time during any calendar year under
the Plan or any other plan of the Company exceeds $100,000, then such option as
to the excess shall be treated as a nonqualified stock option.

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<PAGE>

SECTION 8. OTHER AWARDS

8.1 OTHER STOCK-BASED AWARDS. Other awards, valued in whole or
in part by reference to, or otherwise based on, shares of Stock, may be granted
either alone or in addition to or in conjunction with any option under the Plan
in such amounts and having such terms and conditions as the Committee may
determine.

8.2 OTHER BENEFITS. The Committee may provide types of
benefits under the Plan in addition to those specifically listed if the
Committee believes that such benefits would further the purposes for which the
Plan was established.

SECTION 9. TRANSFERABILITY

Each award granted under the Plan shall be exercised only by the
participant during his lifetime and shall not be transferable other than by will
or the laws of descent and distribution, except that a participant may, to the
extent allowed by the Committee and in a manner specified by the Committee,
(a) designate in writing a beneficiary to exercise the award after the
participant's death; or (b) transfer an award. An incentive stock option shall
not, in any case, be transferable other than by will or the laws of descent and
distribution.

SECTION 10. RIGHTS OF EMPLOYEES

Nothing in the Plan shall interfere with or limit in any way the
right of the Company and its subsidiaries to terminate any participant's
employment at any time nor confer upon any participant any right to continue in
the employ of the Company or its subsidiaries.

SECTION 11. CHANGE OF CONTROL

In order to preserve a participant's rights under an award in the
event of any sale of assets, merger, consolidation, combination or other
corporate reorganization, restructuring or change of control of the Company
("Change of Control"), the Committee in its discretion may, at the time an award
is made or at anytime thereafter, take one or more of the following actions:
(i) provide for the acceleration of any time period relating to the exercise or
realization of the award; (ii) provide for the purchase of the award upon the
participant's request for an amount of cash or other property that could have
been received upon the exercise or realization of the award had the award been
currently exercisable or payable; (iii) adjust the terms of the award in the
manner determined by the Committee to reflect the Change of Control; (iv) cause
the award to be assumed, or new right substituted therefor, by another entity;
or (v) make such other provision as the Committee may consider equitable and in
the best interests of the Company.

Notwithstanding anything contained in this Section 11, the
Committee may, in its sole and absolute discretion, amend, modify or rescind the
provisions of this Section 11 if it determines that the operation of this
Section 11 may prevent a transaction in which the Company or any affiliate is a
party from being accounted for on a pooling-of-interests basis, or prevent the
Change of Control from receiving desired tax treatment, including without
limitation requiring

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<PAGE>

that each participant shall receive a replacement or substitute award issued
by the surviving or acquiring corporation.

SECTION 12. AMENDMENT, MODIFICATION AND TERMINATION OF PLAN

12.1 AMENDMENTS AND TERMINATION. The Board may, at any time,
amend, alter, suspend, discontinue or terminate the Plan; PROVIDED, HOWEVER,
that shareholder approval of any amendment of the Plan shall be obtained if
otherwise required by (a) the Code or any rules promulgated thereunder (in order
to allow for incentive stock options to be granted under the Plan), or (b) the
listing requirements of the principal securities exchange or market on which the
Stock is then traded (in order to maintain the listing or quotation of the Stock
thereon). To the extent permitted by applicable law, and subject to such
shareholder approval as may otherwise be required, the Committee may also amend
the Plan, PROVIDED that any such amendments shall be reported to the Board.
Termination of the Plan shall not affect the rights of participants with respect
to awards previously granted to them, and all unexpired awards shall continue in
force and effect after termination of the Plan except as they may lapse or be
terminated by their own terms and conditions. The Committee, subject to the
same shareholder approval requirements set forth above, may amend an award
agreement at any time; PROVIDED that no amendment may, in the absence of written
consent to the change by the affected participant (or, if the participant is not
then living, the affected beneficiary), adversely affect the rights of any
participant or beneficiary under any award granted under the Plan prior to the
date such amendment is adopted.

12.2 WAIVER OF CONDITIONS. The Committee may, in whole or in
part, waive any conditions or other restrictions with respect to any award
granted under the Plan.

SECTION 13. TAXES

No later than the date as of which an amount first becomes
includable in the gross income of a participant for federal income tax purposes
with respect to any award under the Plan, the participant shall pay to the
Company, or make arrangements satisfactory to the Company regarding the payment
of, any federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. If approved by the Committee, withholding
obligations arising with respect to awards granted to participants under the
Plan may be settled with shares of Stock previously owned by the participant;
PROVIDED, HOWEVER, that the participant may not settle such obligations with
Stock that is received upon exercise of the option that gives rise to the
withholding requirement. The obligations of the Company under the Plan shall be
conditioned on such payment or arrangements, and the Company and any subsidiary
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the participant. The Committee may establish
such procedures as it deems appropriate for the settling of withholding
obligations with shares of Stock.

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<PAGE>

SECTION 14. MISCELLANEOUS

14.1 STOCK TRANSFER RESTRICTIONS. (a) Shares of Stock purchased
under the Plan may not be sold or otherwise disposed of except (i) pursuant to
an effective registration statement under the Securities Act of 1933, as amended
(the "Act"), or in a transaction which, in the opinion of counsel for the
Company, is exempt from registration under the Act; and (ii) in compliance with
state securities laws. Further, as a condition to issuance of any shares of
Stock under the Plan, the participant or his heirs, legatees or legal
representatives, as the case may be, may be required to execute and deliver to
the Company a restrictive stock transfer agreement in such form, and subject to
such terms and provisions, as shall be reasonably determined or approved by the
Committee, which agreement, among other things, may impose certain restrictions
on the sale or other disposition of any shares of Stock acquired under the Plan.
The Committee may waive the foregoing restrictions, in whole or in part, in any
particular case or cases or may terminate such restrictions whenever the
Committee determines that such restrictions afford no substantial benefit to the
Company.

(b) All certificates for shares delivered under the Plan
pursuant to any award or the exercise thereof shall be subject to such stock
transfer orders and other restrictions as the Committee may deem advisable under
the Plan or any applicable restrictive stock transfer agreement and any
applicable federal or state securities laws, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
references to such restrictions.

14.2 OTHER PROVISIONS. The grant of any award under the Plan
may also be subject to other provisions (whether or not applicable to the
benefit awarded to any other participant) as the Committee determines
appropriate, including, without limitation, provisions for (a) the participant's
agreement to abide by any restrictions as specified in the participant's award
agreement; (b) one or more means to enable participants to defer recognition of
taxable income relating to awards or cash payments derived therefrom; (c) the
purchase of Stock under options in installments; or (d) the financing of the
purchase of Stock under the options in the form of a promissory note issued to
the Company by a participant on such terms and conditions as the Committee
determines.

14.3 AWARD AGREEMENT. No person shall have any rights under any
award granted under the Plan unless and until the Company and the participant to
whom the award was granted shall have executed an award agreement in such form
as shall have been approved by the Committee.

14.4 NO FRACTIONAL SHARES. No fractional shares or other
securities shall be issued or delivered pursuant to the Plan, and the Committee
shall determine (except as otherwise provided in the Plan) whether cash, other
securities or other property shall be paid or transferred in lieu of any
fractional shares or other securities, or whether such fractional shares or
other securities or any rights thereto shall be canceled, terminated or
otherwise eliminated.

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<PAGE>

SECTION 15. LEGAL CONSTRUCTION

15.1 REQUIREMENTS OF LAW. The granting of awards under the Plan
and the issuance of shares of Stock in connection with an award, shall be
subject to all applicable laws, rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required.
To the extent required by applicable law, the Company will provide to
participants, within a reasonable period of time after the end of each fiscal
year of the Company, a copy of the financial statements of the Company for the
year, in such form as shall be determined by the Board.

15.2 GOVERNING LAW. The Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the laws of the State of
[Delaware] [California].

15.3 SEVERABILITY. If any provision of the Plan or any award
agreement or any award is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person or option, or would
disqualify the Plan, any award agreement or any award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering the intent
of the Plan, any award agreement or the award, such provision shall be stricken
as to such jurisdiction, person or award, and the remainder of the Plan, any
such award agreement and any such award shall remain in full force and effect.

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<PAGE>

EXHIBIT 10.9

SHARE EXCHANGE AGREEMENT

THIS SHARE EXCHANGE AGREEMENT, effective as of January 1, 1998, is
entered into by and between Gary H. Elzweig ("Stockholder") and U.S.
Laboratories Inc., a Delaware corporation ("US Labs").

RECITALS:

A. Stockholder is presently a minority stockholder in Professional
Engineering & Inspection Company, Inc., a Florida corporation ("Subsidiary").
The majority stockholder of Subsidiary is US Labs.

B. US Labs desires to purchase the shares held by Stockholder in
Subsidiary (the "Subsidiary Shares") to make such Subsidiary a wholly-owned
subsidiary of US Labs, and Stockholder desires to sell the Subsidiary Shares
to US Labs. Such purchase and sale shall be effected through an exchange of
the Subsidiary Shares for shares in US Labs, as set forth in this Agreement.

NOW THEREFORE, for good and valuable consideration as herein provided,
the parties agree as follows:

1. SALE OF SUBSIDIARY SHARES. US Labs hereby agrees to purchase and
Stockholder hereby agrees to sell, all of the Subsidiary Shares held by
Stockholder.

2. PURCHASE PRICE. The aggregate purchase price for the Subsidiary
Shares shall be equal to Three Hundred Seventy-Five Thousand (375,000) shares
of US Labs common stock (the "Exchange Shares").

3. EFFECTUATION OF SHARE EXCHANGE. Contemporaneously with the
execution of this Agreement:

(a) Stockholder has delivered to US Labs original certificates for
the Subsidiary Shares, each duly endorsed for transfer, or duly executed
affidavits of loss.

(b) US Labs has delivered to Stockholder original certificates for
the Exchange Shares.

4. REPRESENTATIONS AND WARRANTIES OF US LABS. US Labs represents and
warrants to Stockholder that:

(a) Upon consummation of the transactions contemplated by this
Agreement, the Exchange Shares will be duly authorized, validly issued,
fully paid and nonassessable.

(b) US Labs is a Delaware corporation validly existing and in good
standing.

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<PAGE>

(c) The Exchange Shares are sold and issued to Stockholder free and
clear of all liens, encumbrances and restrictions on transfer except those
imposed by federal and state securities laws and by this Agreement.

5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder represents
and warrants to US Labs that:

(a) Stockholder has good and marketable title to the Subsidiary
Shares, free and clear of all liens, encumbrances and restrictions on
transfer. Stockholder has not granted to any third person any options,
warrants or other contractual rights to purchase the Subsidiary Shares.
Stockholder has not provided to any third person a proxy with respect to
the voting of the Subsidiary Shares.

(b) Stockholder has the right, power, legal capacity, and authority
to enter into and perform his obligations under this Agreement, and this
Agreement constitutes the valid and legally binding obligation of
Stockholder enforceable in accordance with its terms.

(c) Stockholder has received adequate information to make an informed
investment decision with respect to the exchange of the Subsidiary Shares
for the Exchange Shares, that he has knowledge and experience in business
and financial matters sufficient to enable him to make such investment
decision, and has obtained such investment, legal, tax and other advice as
he considers necessary to make such decision.

(d) No representations, whether written or oral, regarding the
financial condition, business or prospects of Subsidiary or US Labs have
been made to him by Subsidiary, US Labs, or any of their officers or
agents.

(e) Stockholder is not acquiring the Exchange Shares with a view
toward any distribution or resale of such shares to any person except in
accordance with the provisions of the Securities Act of 1933 and applicable
state securities laws. Stockholder acknowledges that the certificate
evidencing the Exchange Shares will bear the following legends:

The securities represented by the within certificate have not
been registered under the Securities Act of 1933 or under
applicable provisions of any state blue sky laws, and may not be
sold, transferred or otherwise disposed of except pursuant to
registration, exemption from registration or operation of law.

This certificate of stock and the shares represented hereby are
held subject to restrictions contained in an agreement between
the corporation and the person named on this certificate and may
not be transferred except in accordance with the terms and
provisions thereof.

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<PAGE>

6. RESTRICTED NATURE OF SHARES. As used herein, the "Restrictions Term"
shall commence on the date of this Agreement and shall continue until the
effective date of US Labs' initial registered public offering of its common
stock under the Securities Act of 1933 or a "Sale of the Company," whichever
occurs first. For purposes of this Agreement, "Sale of the Company" means a
sale of all or substantially all the assets of US Labs or a sale by the
stockholders of US Labs of such number of shares of US Labs common stock as
constitutes a controlling interest in US Labs.

(a) Except as otherwise provided herein, Stockholder agrees that,
during the Restrictions Term, he will not sell or otherwise transfer any
one or more of the Exchange Shares (other than to US Labs) except with US
Labs' prior written consent. Such prior written consent may be given or
withheld solely at the discretion of US Labs.

(b) During the Restrictions Term, US Labs shall have an option (the
"Employment Purchase Option") to purchase all the Exchange Shares from
Stockholder or his estate or personal representative, as the case may be,
at such point as Stockholder ceases to be employed by Subsidiary, US Labs,
or any other subsidiary or affiliate of US Labs (any such entity, a "US
Labs Entity"). The Employment Purchase Option shall not be applicable if
Stockholder, at the request of any US Labs Entity, agrees to be employed by
a different US Labs Entity. If US Labs exercises the Employment Purchase
Option, it will pay Stockholder (or his estate or personal representative,
as the case may be) an amount equal to the book value of the Exchange
Shares as of the date of termination of Stockholder's employment, and
Stockholder will be required to sell the Exchange Shares to US Labs for
such purchase price. The Employment Purchase Option will expire if not
exercised by US Labs within ninety (90) days of the date of termination of
Stockholder's employment. US Labs may, at its option, offset the purchase
price due pursuant to the Employment Purchase Option against any payments
due Stockholder from US Labs pursuant to any employment agreement or
otherwise.

(c) During the Restrictions Term, US Labs shall have a further option
(the "General Purchase Option") to purchase all the Exchange Shares from
Stockholder or his estate or personal representative, as the case may be.
If US Labs exercises the General Purchase Option, it will pay Stockholder
(or his estate or personal representative, as the case may be) an amount
equal to the fair market value of the Exchange Shares as of the date US
Labs notifies stockholder that it wishes to exercise the General Purchase
Option, such fair market value to be determined by US Labs' independent
public accountants, and Stockholder will be required to sell the Exchange
Shares to US Labs for such purchase price. Any payments US Labs is
required to make by reason of its exercise of the General Purchase Option
shall be made in full within sixty (60) days of US Labs' exercise of such
option.

(d) Stockholder agrees that if at any time during the Restrictions
Term the stockholders of US Labs elect to transfer to a third party such
number of shares of US Labs common stock held by them as constitutes a
controlling interest in US Labs, then the selling stockholders may require
Stockholder to sell, on the same terms and conditions and at the

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<PAGE>

same price per share as the proposed sale by the selling stockholders,
all or any portion of the Exchange Shares.

7. BINDING EFFECT. This Agreement is binding upon and shall inure to the
benefit of the parties hereto and their respective personal representatives,
heirs, successors and assigns.

IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first written above.

STOCKHOLDER: U.S. LABORATORIES INC.

/s/: Gary H. Elzweig By: /s/: Dickerson Wright, President

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<PAGE>

EXHIBIT 10.10

SHARE EXCHANGE AGREEMENT

THIS SHARE EXCHANGE AGREEMENT, effective as of January 1, 1998, is
entered into by and between Martin B. Lowenthal ("Stockholder") and U.S.
Laboratories Inc., a Delaware corporation ("US Labs").

RECITALS:

A. Stockholder is presently a minority stockholder in, U.S.
Engineering Laboratories, Inc., a Delaware corporation ("Subsidiary"). The
majority stockholder of Subsidiary is US Labs.

NOW THEREFORE, for good and valuable consideration as herein provided,
the parties agree as follows:

1. SALE OF SUBSIDIARY SHARES. US Labs hereby agrees to purchase and
Stockholder hereby agrees to sell, all of the Subsidiary Shares held by
Stockholder.

2. PURCHASE PRICE. The aggregate purchase price for the Subsidiary
Shares shall be equal to Sixty Six Thousand (66,000) shares of US Labs common
stock (the "Exchange Shares").

3. EFFECTUATION OF SHARE EXCHANGE. Contemporaneously with the
execution of this Agreement:

(a) Stockholder has delivered to US Labs original certificates for
the Subsidiary Shares, each duly endorsed for transfer, or duly executed
affidavits of loss.

(b) US Labs has delivered to Stockholder original certificates for
the Exchange Shares.

4. REPRESENTATIONS AND WARRANTIES OF US LABS. US Labs represents and
warrants to Stockholder that:

(a) Upon consummation of the transactions contemplated by this
Agreement, the Exchange Shares will be duly authorized, validly issued,
fully paid and nonassessable.

(b) US Labs is a Delaware corporation validly existing and in good
standing.

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<PAGE>

5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder represents
and warrants to US Labs that:

6. RESTRICTED NATURE OF SHARES. As used herein, the "Restrictions Term"
shall commence on the date of this Agreement and shall continue until the
effective date of US Labs'

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<PAGE>

initial registered public offering of its common stock under the Securities
Act of 1933 or a "Sale of the Company," whichever occurs first. For purposes
of this Agreement, "Sale of the Company" means a sale of all or substantially
all the assets of US Labs or a sale by the stockholders of US Labs of such
number of shares of US Labs common stock as constitutes a controlling
interest in US Labs.

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<PAGE>

7. BINDING EFFECT. This Agreement is binding upon and shall inure to the
benefit of the parties hereto and their respective personal representatives,
heirs, successors and assigns.

IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first written above.

STOCKHOLDER: U.S. LABORATORIES INC.

/s/: Martin B. Lowenthal By: /s/: Dickerson Wright, President

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<PAGE>

EXHIBIT 10.11

SHARE EXCHANGE AGREEMENT

THIS SHARE EXCHANGE AGREEMENT, effective as of January 1, 1998, is
entered into by and between Mark Baron ("Stockholder") and U.S. Laboratories
Inc., a Delaware corporation ("US Labs").

RECITALS:

A. Stockholder is presently a minority stockholder in San Diego
Testing Engineers, Inc., a Delaware corporation ("Subsidiary"). The majority
stockholder of Subsidiary is US Labs.

NOW THEREFORE, for good and valuable consideration as herein provided,
the parties agree as follows:

1. SALE OF SUBSIDIARY SHARES. US Labs hereby agrees to purchase and
Stockholder hereby agrees to sell, all of the Subsidiary Shares held by
Stockholder.

2. PURCHASE PRICE. The aggregate purchase price for the Subsidiary
Shares shall be equal to Forty Thousand (40,000) shares of US Labs common
stock (the "Exchange Shares").

3. EFFECTUATION OF SHARE EXCHANGE. Contemporaneously with the
execution of this Agreement:

(a) Stockholder has delivered to US Labs original certificates for
the Subsidiary Shares, each duly endorsed for transfer, or duly executed
affidavits of loss.

(b) US Labs has delivered to Stockholder original certificates for
the Exchange Shares.

4. REPRESENTATIONS AND WARRANTIES OF US LABS. US Labs represents and
warrants to Stockholder that:

(a) Upon consummation of the transactions contemplated by this
Agreement, the Exchange Shares will be duly authorized, validly issued,
fully paid and nonassessable.

(b) US Labs is a Delaware corporation validly existing and in good
standing.

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<PAGE>

5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder represents
and warrants to US Labs that:

6. RESTRICTED NATURE OF SHARES. As used herein, the "Restrictions Term"
shall commence on the date of this Agreement and shall continue until the
effective date of US Labs'

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<PAGE>

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<PAGE>

7. BINDING EFFECT. This Agreement is binding upon and shall inure to the
benefit of the parties hereto and their respective personal representatives,
heirs, successors and assigns.

IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first written above.

STOCKHOLDER: U.S. LABORATORIES INC.

/s/: Mark Baron By: /s/: Dickerson Wright, President

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<PAGE>

EXHIBIT 10.12

SHARE EXCHANGE AGREEMENT

THIS SHARE EXCHANGE AGREEMENT, effective January 1, 1998, is by and
between Thomas H. Chapman ("Stockholder") and U.S. Laboratories Inc., a
Delaware corporation ("US Labs").

RECITALS:

A. Stockholder is presently a minority stockholder in San Diego
Testing Engineers, Inc., a Delaware corporation ("Subsidiary"). The majority
stockholder of Subsidiary is US Labs.

NOW THEREFORE, for good and valuable consideration as herein provided,
the parties agree as follows:

1. SALE OF SUBSIDIARY SHARES. US Labs hereby agrees to purchase and
Stockholder hereby agrees to sell, all of the Subsidiary Shares held by
Stockholder.

2. PURCHASE PRICE. The aggregate purchase price for the Subsidiary
Shares shall be equal to Twenty Eight Thousand Six Hundred (28,600) shares of
US Labs common stock (the "Exchange Shares").

3. EFFECTUATION OF SHARE EXCHANGE. Contemporaneously with the
execution of this Agreement:

(a) Stockholder has delivered to US Labs original certificates for
the Subsidiary Shares, each duly endorsed for transfer, or duly executed
affidavits of loss.

(b) US Labs has delivered to Stockholder original certificates for
the Exchange Shares.

4. REPRESENTATIONS AND WARRANTIES OF US LABS. US Labs represents and
warrants to Stockholder that:

(a) Upon consummation of the transactions contemplated by this
Agreement, the Exchange Shares will be duly authorized, validly issued,
fully paid and nonassessable.

(b) US Labs is a Delaware corporation validly existing and in good
standing.

-1-

<PAGE>

5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder represents
and warrants to US Labs that:

6. RESTRICTED NATURE OF SHARES. As used herein, the "Restrictions Term"
shall commence on the date of this Agreement and shall continue until the
effective date of US Labs'

-2-

<PAGE>

-3-

<PAGE>

7. BINDING EFFECT. This Agreement is binding upon and shall inure to the
benefit of the parties hereto and their respective personal representatives,
heirs, successors and assigns.

IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first written above.

STOCKHOLDER: U.S. LABORATORIES INC.

/s/: Thomas H. Chapman By: /s/: Dickerson Wright, President

-4-

<PAGE>

EXHIBIT 10.13

SHARE EXCHANGE AGREEMENT

THIS SHARE EXCHANGE AGREEMENT, effective as of April 1, 1998, is entered
into by and between Donald C. Alford ("Stockholder") and U.S. Laboratories
Inc., a Delaware corporation ("US Labs").

RECITALS:

A. Stockholder is presently a minority stockholder in Wyman Testing
Laboratories, Inc., a Delaware corporation ("Subsidiary"). The majority
stockholder of Subsidiary is US Labs.

NOW THEREFORE, for good and valuable consideration as herein provided,
the parties agree as follows:

1. SALE OF SUBSIDIARY SHARES. US Labs hereby agrees to purchase and
Stockholder hereby agrees to sell, all of the Subsidiary Shares held by
Stockholder.

2. PURCHASE PRICE. The aggregate purchase price for the Subsidiary
Shares shall be equal to Sixty Thousand (60,000) shares of US Labs common
stock (the "Exchange Shares").

3. EFFECTUATION OF SHARE EXCHANGE. Contemporaneously with the
execution of this Agreement:

(a) Stockholder has delivered to US Labs original certificates for
the Subsidiary Shares, each duly endorsed for transfer, or duly executed
affidavits of loss.

(b) US Labs has delivered to Stockholder original certificates for
the Exchange Shares.

4. REPRESENTATIONS AND WARRANTIES OF US LABS. US Labs represents and
warrants to Stockholder that:

(a) Upon consummation of the transactions contemplated by this
Agreement, the Exchange Shares will be duly authorized, validly issued,
fully paid and nonassessable.

(b) US Labs is a Delaware corporation validly existing and in good
standing.

-1-

<PAGE>

5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder represents
and warrants to US Labs that:

6. RESTRICTED NATURE OF SHARES. As used herein, the "Restrictions Term"
shall commence on the date of this Agreement and shall continue until the
effective date of US Labs'

-2-

<PAGE>

-3-

<PAGE>

7. BINDING EFFECT. This Agreement is binding upon and shall inure to the
benefit of the parties hereto and their respective personal representatives,
heirs, successors and assigns.

IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first written above.

STOCKHOLDER: U.S. LABORATORIES INC.

/s/: Donald C. Alford By: /s/: Dickerson Wright, President

-4-

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated March 4, 1998 (except for Note 7, as to which
the date is October 21, 1998), accompanying the financial statements of U.S.
Laboratories Inc. and subsidiaries contained in the Registration Statement and
Prospectus. We consent to the use of the aforementioned report in the
Registration Statement and Prospectus, and to the use of our name as it appears
under the caption "Experts."

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
January 8, 1999

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated April 29, 1998, accompanying the financial
statements of Wyman Testing Laboratories, Inc. contained in the Registration
Statement and Prospectus. We consent to the use of the aforementioned report in
the Registration Statement and Prospectus, and to the use of our name as it
appears under the caption "Experts."

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
January 8, 1999

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S FINANCIAL STATEMENTS FOR YEAR ENDED DECEMBER 31, 1997
AND PERIOD ENDING JULY 31, 1998.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 SEP-30-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 SEP-30-1998
<CASH> 94,132 144,991
<SECURITIES> 0 0
<RECEIVABLES> 1,760,047 2,994,194
<ALLOWANCES> 40,927 57,755
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,042,438 3,410,368
<PP&E> 959,928 1,481,719
<DEPRECIATION> 564,217 718,873
<TOTAL-ASSETS> 3,531,707 6,216,205
<CURRENT-LIABILITIES> 2,407,435 3,035,002
<BONDS> 0 0
0 0
0 0
<COMMON> 20,324 22,000
<OTHER-SE> 647,088 1,665,413
<TOTAL-LIABILITY-AND-EQUITY> 3,531,707 6,216,205
<SALES> 7,766,414 8,478,329
<TOTAL-REVENUES> 7,766,414 8,478,329
<CGS> 4,476,952 4,432,509
<TOTAL-COSTS> 2,531,770 3,215,256
<OTHER-EXPENSES> 62,578 22,300
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 130,605 118,814
<INCOME-PRETAX> 689,665 734,050
<INCOME-TAX> 305,056 308,301
<INCOME-CONTINUING> 364,156 425,749
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 364,156 425,749
<EPS-PRIMARY> 0.14 0.19
<EPS-DILUTED> 0.14 0.19

</TABLE>