BUGS Reports 2006 Financial Results.

Company Closes U.S. Projects in Favor of Long Term Environmental Projects in Mexico

CARLSBAD, Calif. -- U.S. Microbics, Inc. (OTCBB:BUGS) today announced audited financial results for fiscal year 2006 ended September 30, 2006.

BUGS CEO Robert Brehm commented, "FY 2006 was a transition year for BUGS and its environmental clean-up subsidiary, Sub-Surface Waste Management of Delaware, Inc., (OTCBB:SSWM) as we closed down U.S. projects in favor of developing new, long-term environmental infrastructure projects in Mexico after experiencing good profit margins on our Torreon project and excellent response of government officials to our patented technology for soil and groundwater cleanup. Although revenues for 2006 were down from 2005, our existing $2.4MM of in-progress contracts and another $6.5MM in projects scheduled to start in 2007 indicate the shift to projects in Mexico was timely and a good strategic move for the company. As 2007 results start to be reported, I believe our shareholders will begin to see the significant future we have with our neighbors to the south."

Brehm continued, "Last fiscal year was also a turning point for BUGS as we were able to start using debt and working capital lines for project cash flow needs rather than rely solely on equity financing to cover overhead. As we continue to receive new contracts in 2007, we will pursue the use of bridge and working capital financing and conventional project financing coupled with Mexico state and federal guarantees thus reducing our dependency on equity financing. As projects grow larger in scope and magnitude, we are finding capital sources more interested in utilizing project financing for the environmental infrastructure projects we are developing in Mexico with the help of government leaders intent on attracting foreign investment, stimulating their local economies and creating more jobs in a new environmental industry."

Results of Operations

Year Ended September 30, 2006 Compared to Year Ended September 30, 2005:

The Company had revenues of $514,384 for fiscal year ended September 30, 2006 compared with revenues of $1,199,334 during the fiscal year ended September 30, 2005. This represents a decrease in revenue for 2006 from 2005 of 57%.

During fiscal year ended 2006, the Company had decreased revenues, primarily due to the discontinuation of several jobs by its subsidiary, Sub Surface Waste Management. In addition, the Company has been in pursuit of further developing its business operations in Mexico. The Company had gross profit during fiscal years ended 2006 and 2005 of $40,590 and $429,765 respectively. The gross profit for 2006 decreased by 90% from fiscal 2005 primarily due to the write off of costs and estimated profits associated with the closure of the five active projects in South Carolina.

Selling, general and administrative ("SG&A") expenses for fiscal year ended 2006 totaled $3,903,629 compared to $3,707,426 in fiscal year ended 2005. SG&A expenses increased in the fiscal year 2006, 5.3% over SG&A expenses in 2005. SG&A expenses consisted of accounting, legal, consulting, public relations, subsidiary startup and organization and fund raising expenses. SG&A expenses also included non-cash charges from the issuance of stock in the amounts of $762,531 for fiscal year 2006 and $1,101,820 for fiscal year ended 2005, a year-to-year decrease of $339,289.

Interest expense for fiscal year ended 2006 was $67,989 compared to $133,198 for fiscal year 2005. The decrease in interest expense of $65,209 was due primarily to a decrease in outstanding notes payable.

As a result of the above-mentioned expenses, the net loss for fiscal 2006 was $3,539,190 compared to $2,997,661 for fiscal year ended 2005. This represents an increase in the net loss for 2006 over 2005 of $541,529 or a 18% decrease. Net loss per share decreased to $0.011 in fiscal year ended 2006 from a net loss per share of $0.017 in fiscal year ended 2005. The decrease in the net loss per share was due to the increase in weighted average common shares outstanding to 311,072,079 as of September 30, 2006 from 173,078,669 as of September 30, 2005.

There was no provision for income taxes in either fiscal year ended 2006 or fiscal year ended 2005 due to the net operating loss carry forwards from prior years, and the likelihood that the Company would be able to utilize these net operating losses in the future.

Liquidity and Capital Resources

Cash and cash equivalents totaled $341,678 on September 30, 2006, compared to $108,498 for the prior fiscal year ended September 30, 2005. During the fiscal year ended 2006, net cash used by operating activities totaled $2,128,991 compared to $1,946,996 for the fiscal year ended 2005. Operating activities included payments for accounting, legal fees and professional services.

Net cash provided by financing activities for fiscal year ended 2006 totaled $2,383,629 compared to $2,041,206 for the prior fiscal year. In 2006 funds were raised by issuing stock under the Employee Stock Option Plan of $1,297,801 by the Company, as well as $446,003 by a subsidiary. This is compared to the fiscal year 2005, in which funds were raised by issuing stock under the Employee Stock Option Plan of $596,000 by the Company, and $526,926 by a subsidiary. Additional funds of $345,000 were also provided by drawing from a $500,000 line of credit with Pilgrim Bank.

On September 9, 2006, SSWM entered into a $500,000 line of credit agreement with Pilgrim Bank maturing on September 9, 2007. The line of credit agreement is partially collateralized by stock of SSWM and a pledged certificate of deposit held as collateral by one of the Company's affiliates. The line of credit has a fixed rate of interest of 7% per annum. As of September 30, 2006, the balance outstanding was $345,000.

To obtain this line of credit, a finance fee of 3,000,000 shares of SSWM restricted common stock was issued to an affiliate at discount of $0.032 per share. This resulted in a finance fee of $96,000 which is being amortized over the 12 month term of the debt. During the year ended September 30, 2006, SSWM amortized $5,523 of this amount to interest expense.

Net cash used by investing activities during fiscal year ended 2006 totaled $21,458 primarily from the purchase of property and equipment for operations in Mexico. In fiscal 2005 the company had net cash used by investing activities of $62,458 primarily from the purchase of property and equipment.

Net working capital (current assets less current liabilities) was a negative $1,651,309 as of September 30, 2006 and negative $1,381,177 as of September 30, 2005. Working capital decreased by $270,132 or 19.5% from fiscal 2006 to 2005. The Company had a balance due on its payroll taxes deposits as of September 30, 2006 of approximately $204,735.

The Company needs to continue to raise funds through various financings to maintain its operations until such time as cash generated by operations is sufficient to meet its operating and capital requirements. The Company had no long-term debt as of September 30, 2006, as well as none at September 30, 2005.

Total shareholders' deficit increased to $7,586,257 during fiscal year ended 2006 from $6,450,519 for fiscal year ended 2005, or an increase of $1,135,738. The increase was the result of a net loss of approximately $3,539,190 less increases resulting from issuance of common stock and stock options under the employee stock option plan of $1,526,779, issuance of common stock in settlement of accrued expenses of $319,363, and issuance of common stock to consultants for services of $183,000

A consolidated financial recap of results for FY 2006, 2005 and 2004 are shown in the following table:

[TABLE OMITTED]

The consolidated financial data above has been derived from the Company's Financial Statements for the periods ending 2004, 2005 and 2006 as shown. For the full financial report and additional information and a discussion of risk factors, please see the BUGS current 10Q & past 10K reports at www.sec.gov.

About U.S. Microbics Inc.

U.S. Microbics is a business development and holding company that acquires, develops and deploys innovative environmental technologies for environmental cleanup and agriculture yield enhancement using local resources and stimulating regional economies in developing nations.

For more information on the company, contact Robert Brehm at 760-918-1860 x102 or visit the website at www.bugsatwork.com.

The information contained in this press release includes forward-looking statements. Forward-looking statements usually contain the words "estimate," "anticipate," "believe," "expect" or similar expressions that involve risks and uncertainties. These risks and uncertainties include the company's status as a startup company with uncertain profitability, need for significant capital, uncertainty concerning market acceptance of its products, competition, limited service and manufacturing facilities, dependence on technological developments and protection of its intellectual property. The company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences are discussed more fully in the "Risk Factors," "Management's Discussion and Analysis or Plan of Operation" and other sections of the company's Form 10-KSB and other publicly available information regarding the company on file with the Securities and Exchange Commission. The company will provide you with copies of this information upon request.