U.S. Microbics 2002 Year Accomplishments Set Pace for 2003 Excellence; BUGS Reviews a Record Year Both Fiscally and Strategically.

Business Editors

CARLSBAD, Calif.--(BUSINESS WIRE)--Jan. 7, 2003

U.S. Microbics Inc. (OTCBB:BUGS) released its calendar year-end corporate development review for the year ended Dec. 30, 2002.

The company is pleased to announce that through a challenging economic, political, and market environment, that it achieved a record year both fiscally and strategically. This press release discusses the strategic developments in 2002 that have set the foundation for success in 2003. The financial results of Fiscal 2002 (ending 9/30/02) will be released in a subsequent release.

Robert C. Brehm, CEO of U.S. Microbics stated, "2002 was a record year for U.S. Microbics both from a fiscal standpoint with revenues up over 500% from the previous year, and from a strategic standpoint as we positioned the company into a business development and holding company that facilitates and develops the deployment of environmental technologies through its two new divisions, USM Solutions and USM Capital."

New Organizational Divisions

USM Solutions companies manufacture, develop and market proprietary microbial technologies that provide natural solutions to many of today's environmental problems including technology to revolutionize environmental cleanup (Sub Surface Waste Management or SSWM) and agricultural growth (Bio-Con Microbes). U.S. Microbics' microbes or "bugs" can be used to break down various hydrocarbon substances, including oil, diesel fuel, MTBE, PCE, certain toxic waste, and certain water and soil contamination.

USM Capital is the financial services division that assists in the financing and development of the five USM Solutions companies and additional equity holdings (primarily environmental companies desiring to go public). USM Capital provides management consulting, administrative services and investor relations services to its clients.

Success Factors

Brehm went on to say, "I know that U.S. Microbics' achievement of its financial objectives is highly dependent on two major success factors: (1) having completed projects utilizing the technology that demonstrates better-faster-cheaper-safer technology characteristics and (2) having financial capability to sustain project cash flow requirements. During the past fiscal year, SSWM has successfully demonstrated the environmental biotechnology in various field applications, but has been unable to establish needed financial capability due to lack of working capital and the prohibitive cost of contract performance bonding available to smaller companies after the September 11, 2001 disasters."

Brehm further stated, "To help solve the financial problem, U.S. Microbics established the USM Capital Group, Inc. subsidiary to help with project financing, creating bonding collateral and generating additional cash flow to support USM Solutions companies. In addition, SSWM turned to licensing the microbial technology to companies with sufficient financial capability to enter the markets developed by SSWM. In this manner SSWM provides added value for its licensees by supplying engineering services, and patented technology and microbial products while maintaining targeted project profit levels."

"The USM Capital division is a very important part of our organization, but many shareholders don't understand its significance or how it relates to our environmental business," stated Brehm. "USM Capital Group, Inc. (UCGI) is raising additional working capital to support USM Solutions companies by (1) Generating management consulting services revenue, (2) Selling stock in client companies obtained for services in taking them public, and (3) Providing Administrative Services and Investor Relations services to client companies. UCGI also facilitates the exchange of technologies and customers with SSWM and its client companies thus providing new technology licensees and new products for sale by SSWM."

Brehm also commented, "While UCGI ramps up its capital raising efforts, U.S. Microbics continues to raise working capital for its subsidiaries through the sale of shares of its common stock and private placement offerings of its subsidiaries as well as technology licensing arrangements. To relieve the substantial cash requirements and stock price strain on BUGS, we have taken SSWM public and it will soon be trading publicly. SSWM will be raising its own capital and adding value to BUGS because of its additional market capitalization. Moreover, as the dividend distribution stock registrations make their way through SEC approval, UCGI should be able to liquidate shares held in the spin-off companies to generate cash to support other operations of BUGS and its subsidiaries. USM Capital has been a tremendous success, is profitable, and we look forward to its continued growth and contribution to the BUGS' family of companies."

Merger and Spin-off Activity

On another popular shareholder subject, Brehm commented, "During 2002 BUGS announced three spin-off/dividend distributions subject to SEC approval of the stock registration documents. We certainly expected the dividends to be distributed by the end of 2002, but the registrations are still being reviewed by the SEC or being resubmitted after the SEC commented on needed changes. A recap of the spin-off companies is given in the table shown below. I expect these companies to begin trading in the second quarter of 2003 and the actual distributions to be done then. Since BUGS has no control over the other company's filings or SEC approval, we can only hope for the best timeframe possible. Most OTC Bulletin Board companies do not issue dividends, and we feel this is a major advantage for BUGS shareholders who may be able to look forward to additional dividends as soon as these are complete."

The following three companies have shares that are being spun off to BUGS shareholders through a dividend distribution. BUGS expects the following companies to be trading during the second quarter and have the underlying dividends distributed accordingly.

               # SHARES TO BE
COMPANY          DISTRIBUTED  DIVIDEND   RECORD   REGISTRATION  DATE
                               RATIO      DATE       FILED?     FILED
Commerce
Development
Corp.              400,000     1:125   10/28/2002   Not yet    Not yet

Majestic
Safe-T-Products  5,884,149       1:8    8/30/2002     Yes   11/12/2002

Capital Group
Holdings         2,175,028      1:18     7/3/2002     Yes    10/3/2002

Summary

Brehm summarized the strategic results of 2002 by saying, "I feel we came a long way and accomplished a lot in a financially difficult 2001 and 2002. On an annualized basis, we have seen the average daily share price of OTC BB shares traded fall to approximately $0.08 in 2002, down from approximately $0.87 for 2000. It is hard to buck that overall down trend no matter how well you perform with your given resources. I feel our management team did an exceptional job in proving technology, generating revenue, establishing profitable niche markets, and reorganizing to financially support themselves under competitive conditions. I think the strategic accomplishments set the pace for an excellent financial year in 2003."

For further information about U.S. Microbics and USM Capital, contact Justin Keener of USM Capital Group at 760/918-1860, ext. 128 or [e-mail]; or learn about the company by visiting its web site at www.bugsatwork.com. To join the company's mailing list, send your name and email address or fax number to [e-mail].

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.