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U.S. Microbics CEO Optimistic About Future.

Answers Questions and Concerns from Shareholders and Investors

CARLSBAD, Calif. -- Robert Brehm, President and CEO of U.S. Microbics, Inc. (OTCBB:BUGS) (BCN:615212), an innovative environmental products and services company, was recently interviewed by shareholders and potential investors desiring to learn more about the company's current status and future potential. In the interview Brehm expressed his optimism about the future prospects of U.S. Microbics and its operating subsidiaries based upon the recent increase in contract authorizations and business accomplishments in Mexico made during FY 2006 and 2007. This press release serves to update all interested parties about the company.

Q. Bob, it appears that BUGS has gone through significant change in 2006. Can you briefly describe some of these key changes and their effects?

A. FY 2006, ending on September 30, has been a year of focus on our mission to utilize our technology and professional services to create jobs, attract foreign investment and clean up the environmental problems for the people of Mexico. Through our environmental cleanup subsidiary, Sub-Surface Waste Management (SSWM), we have successfully crafted a unique business relationship with the heads of state governments, the national university, and various federal regulatory agencies to navigate its Mexico subsidiary company, Environmental Tec International, S.A. de C.V. (ETI) toward becoming a leading environmental service provider throughout the country using the BUGS cleanup technology. The effect of this refocusing effort has generated the highest authorized contract backlog in the company's history as an environmental firm with substantial growth anticipated in the future after the new president and legislators take office in December.

Q. Tell us about the core business accomplishments in 2006 and how they will affect future revenue and earnings?

A. BUGS' major revenue generating subsidiary is SSWM, our environmental engineering company, and its Mexico operating subsidiary, ETI with offices in Mexico City and projects in Torreon, Puebla and Yucatan. ETI has an exclusive arrangement for its projects to provide environmental services with the National Autonomous University of Mexico (UNAM) an entity of the Federal Government. Coupled with top down political access and our proven yet protected technology we are today in the enviable position of becoming the dominant player in our field in this burgeoning new market for environmental services.

Our business model in Mexico means we promote and identify needed and sustainable environmental service solutions for Federal entities and State and City Governments and then bring our UNAM partnership into play with UNAM as the 'prime contractor.' ETI in partnership with UNAM has its engineer's scope, design and cost the remedy required by the project assignment, which subsequently becomes our working 'sub contract' with UNAM with milestone tasks and objectives that are invoiced as the work is completed. UNAM marks-up our subcontract and this becomes the master contract with the client. Our working relationship with the Federal Electricity Commission (C.F.E.), the world's largest electric company, uses this business model which has resulted in recent contract authorizations of over $5.1MM.

Q. Can you comment on FY 2006 results?

A. Our fiscal year ends on September 30 and we are currently preparing for our annual audits for SSWM and BUGS and expect to release the audited results in January. However preliminary numbers are close to the expected revenues for SSWM/ETI as it has successfully transitioned from working on projects from US clients with Mexico operations directly to contracts with Mexico state government agencies. This significant change in clients has resulted in revenues of approximately fifty percent of the prior year but has also yielded a record-breaking authorized contract backlog of over $7.1MM as of today which could make FY 2007 our best year yet as an environmental company. Our successful business development efforts have also created a substantial pending contracts backlog for emergency response centers and landfill work in several states awaiting the approval of new state and federal legislatures to be installed in December of this year.

Q. What do you see as the major opportunities in Mexico and when do you think SSWM/ETI will begin to realize results? Are the risks and profits worth the effort?

Mexico is a wonderful country of opportunity for environmental services now that they must meet the same environmental standards as the US under a sidebar NAFTA agreement. SSWM/ETI has forged significant political relationships with various state governors and has embarked on a campaign to not only assess and cleanup environmental problems but also to install new governmental infrastructure for pollution discharge permitting, health risk assessment from chemical discharges and emergency response centers for contaminant discharges.

Many of the environmental infrastructure changes require political interaction, discussion and agreement as SSWM/ETI has spent considerable time and resources to establish political relationships with state governors and federal agency officials to craft new policy guidelines for the implementation of environmental infrastructure which will create new jobs, attract foreign investment, and cleanup major environmental problems affecting many people in Mexico.

SSWM/ETI is beginning to see the fruits of their labor from FY 2006 as new contract authorizations continue through FY 2007 from CFE ($5.1 MM), and the State of Puebla ($2 MM) with another $1.8MM pending and expected before the end of 2006 from Puebla. The ERC project in Veracruz awaits the approval of the new legislators to be installed December 1 and the Tlaxcala landfill project is pending approval of the governor and the landfill siting report authorization.

Although there is great business opportunity in Mexico for high revenue and gross profits, there are also risks involved with significant time delays, political relationship building, and government bureaucracy. However the proactive stance of certain governors and federal officials who foresee the development of a new environmental industry to create new jobs and economic prosperity as well as cleanup the environmental problems plaguing the people for many years, provides a significant opportunity for SSWM/ETI to utilize their technology and services to increase shareholder value in a short period of time.

Q. Bob have you investigated other business opportunities that could use the BUGS technology to generate revenue and to augment the SSWM/ETI activities?

A. BUGS continues to look at business opportunities for its technology. Currently under consideration and investigation are several promising projects including:

Alternative energy using bio-digesters with bugs for methane gas production from animal wastes to generate electrical power.

Plant growth enhancement for bio-fuels such as sugar cane and corn used for ethanol production - currently looking at alternatives in Mexico and elsewhere - remember we had a 38% increase in sugarcane yields using our bug technology, less water and no fertilizer and that may come in very useful since ethanol is in a shortage position in the US.

Use of our existing laboratory and fermentation facility for third party use and our FDA soil testing lab for third party products. We are currently looking into equipment and manpower requirements and revenue potentials for our fermentation subsidiary.

We are now formulating and creating product packaging for the Bi-Agra[TM] agriculture growth enhancement and soil amendment product line including Too Tall Tomatoes[TM] and other products. We expect product information and beta testing from a collaborative network of shareholders and friends of BUGS to be announced this quarter.

Q. Bob, with all these accomplishments why is the stock price at a historical low? Why is it not reflecting the true value of BUGS?

A. BUGS stock price doesn't necessarily indicate the future prospects of the company. When you have more buyers than sellers, or stock shorters, then you have a stock price that is increasing. Yes our stock price is lower and yes we have had to issue a lot of shares at this lower price to continue our business development in Mexico but our sacrifice is paying off as we have a significant authorized contract backlog and the SSWM balance sheet had a healthy cash position at fiscal year end. I personally have bought a lot of BUGS and SSWM stock this year as I am a firm believer in the direction we are moving and the results we are achieving with the opportunities in Mexico. Savvy investors should do their own due diligence and determine if they should accumulate BUGS and SSWM stock at these historical low levels for future appreciation.

I should also add that BUGS has no plans for a stock reverse at this time as our analysis shows that our expected Mexico business in 2007 and beyond could contribute significant earnings for higher stock prices and cash flow for possible buyback programs.

Q. Bob, there is a lot of scuttlebutt on the chat rooms and investor boards about BUGS and SSWM, could you comment?

First of all I don't consider the chat rooms and boards like Raging Bull creditable sources of company information as many of their posters have their own personal agendas, often fabricate messages using multiple usernames or interpret company results for their own personal spin. I do not personally post on Raging Bull but have participated in a German chat room because of a good following of German shareholders who are genuinely interested in the forward progress of BUGS. We also have some Brazilian shareholders and we have created a Portuguese section of our website for them. I do answer emails from shareholders regularly as far as it concerns public information from our press releases or filed financial reports. Many shareholders have also suggested business opportunities which we do follow up. Potential investors and existing shareholders should consider a variety of sources before investing including the company websites, SEC filings and other pertinent information suitable to them.

Q. Bob, where do you see the company going from here?

A. We have made solid progress in 2006 - record contract authorizations in Mexico, major pending contract proposals for Emergency Response Centers, landfill operations, health risk assessments, and new permitting infrastructure. We have set the foundation for achieving positive cash flow in 2007 as we start these projects and generate the revenue and collect proceeds as task milestones are met. I congratulate our management team for going the extra mile and achieving extraordinary accomplishments in record time on a limited budget.

When investors discover BUGS and SSWM and complete their due diligence, I think they will find a company on its way to becoming a major player in the environmental industry of developing nations using environmental technologies to drive job creation, economic prosperity and cleaner living conditions for their people.

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, or To be on the email list for press releases please visit:

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.
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Publication:Business Wire
Date:Oct 31, 2006
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