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U.S.
Microbics, Inc.
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U.S.
Microbics, Inc.
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U.S.
Microbics, Inc.
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U.S. Microbics is working
with the heads of state and federal government in Mexico to create new jobs and economic
prosperity as they establish infrastructure, technology and protocols for a new
environmental cleanup industry with beneficial social and economic change for the country
U.S.
MICROBICS
INC.
Environmental
(BUGS.OB)
U.S. Microbics, Inc.
6451 El Camino Real Ste. C
Carlsbad, CA 92009
Phone: 760-918-1860 x102
Robert Brehm
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published - November 24, 2006
BIO:
Robert C. Brehm has served as CEO since July 19, 1997. He has a double engineering degree
in electrical engineering and computer science and an MBA from UC Berkeley in Finance and
Accounting. Mr. Brehm has operated a large chemical production facility for a Fortune
500 company, owned several software companies, a finance company, and an investor
relations company. He understands the scientific aspects of the microbial technology
business as well as the business, marketing, promotion and financial requirements for
success in a public enterprise.
Company Profile:
U.S. Microbics Inc. (BUGS.OB) is a business development and holding company that
acquires, develops, and deploys innovative environmental technologies for soil,
groundwater, and carbon remediation; air pollution reduction; and agricultural yield
enhancement using local resources to stimulate regional economies in developing nations.
Key product lines offered are:
Bio-Raptor™ & Microbial Application System™ Products
The Sub-Surface Waste Management Bio-Raptor™
is a patented bioremediation shredder, sprayer, conveyor system for cleaning up
hydrocarbon contaminated soils. It treats soil contamination on-site, slashing costs,
maximizing material treatment surface area and aeration, reducing retention time,
minimizing potential liability through on-site treatment and elimination of contaminant
transportation-related risks and site downtime.
Bi-Agra™ - Agricultural Growth Enhancement Products
The key benefits of the agricultural products include a dramatic increase in seed
germination and survival rates, less water and fertilizer usage, greener turf
applications, fruit and vegetable harvests that can be picked sooner, have higher weight
and yields and a lower mortality rate due to healthier plants.
CEOCFO: Mr. Brehm, it has been about a year since we have
spoken; how has BUGS changed over the year?
Mr. Brehm: “I think BUGS has made a lot
of internal changes in the past year as we have redefined our long term goals and
objectives to react to the needs of the marketplace. When we talked last year, we were
just starting to become entrenched in Mexico working with various state governors, federal
agencies including their EPA, and the national university who is now our partner on many
environmental cleanup projects. We are creating an environmental industry with new job
opportunities and less pollution for the Mexican people. They have embraced our
technology, our project management skills and experience and I believe BUGS has a bright
future in Mexico in the years ahead.”
CEOCFO:
Will you tell us why Mexico has so much opportunity for BUGS?
Mr. Brehm: “I will give you some
background on the environmental marketplace in the United States verses Mexico and I will
think you will see why Mexico makes a lot of sense for our technology. In the US,
environmental consulting firms are selling a “billable hour” of engineering time
to review, monitor and report on an environmental problem. The report is submitted to a
responsible governmental agency which makes sure the project is in compliance with any
cleanup order and the consultant is paid for the time. However, many times the pollution
problem continues to exist at the detriment of the people of the area. There is little or
no incentive to cleanup the problem, only extend it as long as possible to increase the
revenue for the consultant. This is the classic “treat the symptom, not the
problem” philosophy that has been prevalent in the US since the EPA was formed in the
early 1970’s. It has been estimated that over 70% of all the environmental projects
started since the EPA was created in the 1970’s are still open and being studied (and
billed)!
The BUGS environmental philosophy is to solve the problem by removing the pollution and go
on to the next project – a paradigm-shifting philosophy that is not well received in
the US by government empire-builders who want many open projects to justify their
existence and budgets! It is the main reason why it is very difficult for a small
alternative technology company like BUGS to gain significant traction in the U.S.
environmental market.
The environmental conditions and loss of life in Mexico, however, create a unique and
potentially very profitable opportunity for BUGS and its technology as we help the country
cleanup its pollution problems and create new jobs and regional economic prosperity. There
are many compelling political, economic, and social factors that make Mexico a great
opportunity for BUGS technology. First, the World Trade Organization (WTO) of which the US,
Mexico and a variety of other countries are members of, all have an agreement to clean up
the environment as a condition to doing business with each other. France, Germany and the
European Union, which are heavily invested in Mexico, put a lot of pressure on Mexico,
through the WTO, to initiate an environmental cleanup program even though they had very
little infrastructure for measuring or cleaning up pollution. There was an enormous amount
of pressure in terms of potential sanctions and loss of foreign investment unless Mexico
took a proactive stance on the environment. Second, over the past several years with the
increase in oil prices, Mexico has a significant cash surplus and their oil company,
PEMEX, has committed over $1B for environmental cleanup using approved technologies such
as provided by BUGS. Third, there is a side bar agreement to NAFTA, signed by
President’s Fox and Bush in early 2003, which adopted U.S. Federal regulatory
standards to toxic releases of petroleum hydrocarbons, which our technology treats very
well. Fourth, we have a Mexico affiliate with much experience in state and federal
government contracting who is also an environmentalist and wants to help his country clean
up its pollution problems. He is committed to helping us become a dominant player in Mexico.
Fifth, many of the political candidates for Governor and other federal posts ran on a
political platform that emphasized environmental cleanup and the establishment of new jobs
and clean air, water and soil for their voters and they need a solution which we can
provide as we want to hire local people and train them how to cleanup their own problems.
For those reasons, and many more, we chose to be in Mexico.”
CEOCFO:
Is there any fall-out to you from the current unrest between US and Mexico?
Mr. Brehm: “As a U.S. citizen I
disapprove of all illegal actions at our borders. However, there is an enormous incentive
from Washington for US companies all across the nation, to create business and to create
industries in Mexico that employ Mexicans in Mexico so they can have good jobs down there
rather than giving them an incentive to come across the border. Therefore, we have worked
with government officials here in the US and they have significant funds for investing in
companies and specifically projects down in Mexico that employ Mexican workers. For
example, the Governor of Veracruz has accepted our proposal to implement eleven emergency
response centers for pollution cleanup and we estimate 500 to 1000 new jobs will be
created just in that state alone. With many states facing major pollution problems across
the country of Mexico, we think there will be significant new environmental jobs for
college interns and graduates from the universities as well as for laborers and
technicians. Since the EPA was created, the environmental services industry has become a
$200 billion market in the United States. We think over the next few years that the
environmental business to be generated in Mexico is probably in the 5 to $10 billion range
and fortunately we seem to be at the forefront of that wave.”
CEOCFO:
Will you describe what US Microbics does?
Mr. Brehm: “We started out as an
environmental product company and that moved to becoming an environmental engineering
services company. We have evolved over the last several years to become somewhat of an
economic development company, using the environmental industry as our tool. In Mexico we
have worked at the governor level, the presidential level and head of the EPA level with
the government officials down there, and convinced them that due to these external
pressures, from NAFTA and WTO (World Trade Organization), that they need to implement an
environmental program which meets US federal standards. Also compelling is the fact that
there is little clean water in Mexico and there are enormous spills from oil, gas, and
diesel that have never been cleaned up. It puts an emphasis on them to do something about
it for their people. We have come in and suggested to them that we implement a program
that not only cleans up their environment but also hires people, creates jobs and requires
polluters to pay for their pollution. Because we are creating environmentally compliant
property, foreign investment can now come into the country and increase the overall
general welfare of not only the country, but also the localities. That change and maturity
over the years has finally culminated in a proactive environmental policy supported by the
elected officials in Mexico, which helps the country enormously. We think the
environmental stewardship philosophy can then be transferred to different parts of Latin
America all the way to the tip of South America.”
CEOCFO:
Is it mostly state-by-state that you will be doing projects, and will you tell us how it
is going to happen?
Mr. Brehm: “The stance of the new
president of Mexico, Felipe Calderon, who was previously the energy minister of the
country and in charge of the environment policy; is proactive not reactive concerning the
environment. They are trying to solve the problem, rather than reacting to the problem
when it occurs thus showing the WTO countries that they are cleaning up the environment
and creating jobs, which keeps foreign trade and investment coming into Mexico. PEMEX has
allocated a billion dollar fund to clean up the country, however the implementation of is
more than likely going to be done on the state level. We have introduced the concept of
“emergency response centers” to the governors of Puebla and Veracruz as a method
to react to emergency pollution problems with direct reimbursement form PEMEX and they
have been very receptive to the idea.”
CEOCFO:
What is the timetable going forward?
Mr. Brehm: “We just completed about a
$1.5 million project for a major U.S. manufacturer doing business in Mexico. Why was that
so important? Because it was the first project in the entire country under the new
environmental laws, which has been completed and we received major recognition from both
federal enforcement and other government officials for a job well done. Therefore, it was
very good for us and also gave them the credibility for implementing a program that will
clean up their country. We are also working on several projects for the government of Puebla,
which are already in process and we are starting to do some work for the federal utility
company across the entire country. We are also ready to start work with the governor of Veracruz
on the emergency response centers pending budget approval. I cannot put a definitive time
on those projects, but I can tell you that they are committed to doing it and we are
working out the final financial reimbursement details for the operating contracts at this
point in time. We hope to have the emergency response centers started in 2007.”
CEOCFO:
Do you need additional personnel?
Mr. Brehm: “Our primary goal in Mexico
is to first get the work and then teach the Mexican people and graduates of their
university and technicians and laborers, how to clean up the country themselves. We do
that by working with the university as our partner with most of the projects throughout
the country so that we can utilize their people in various aspects of it. Secondly, we do
use subcontractors from the U.S., but primarily subcontractors from Mexico or companies
that are working in Mexico that have experience in the environment and civil engineering.
We often act as the general contractor or prime subcontractor. Additional projects also
mean that we will be hiring more project support people in California, Colorado and Texas.
So yes we will be hiring people in the U.S., but our primary goal is to start having
people in Mexico, solve the problems of Mexico.”
CEOCFO:
What is the financial situation at BUGS today?
Mr. Brehm: “Sales are down a little
this year only because of the transition from South Carolina projects, which were our
primary revenue source last year to Mexico projects which are just ramping up. However, at
the end of the fiscal year we did have a significant backlog of authorized contracts in Mexico,
which surpasses the total of the prior two years revenue so we are starting FY 2007 in
good shape. We are also working on a major landfill project and the emergency response
centers project in Veracruz. We expect to be able to make some announcements of their
status as soon as the new legislators are installed on December 1 of this year. The
governors are committed to doing the project and we hope to have very favorable results to
report in 2007.”
CEOCFO:
Will you tell us about the Emergency Response Centers?
Mr. Brehm: “The Emergency Response Center
is an interesting concept. If there is a hazardous waste spill in the U.S., which many of
us are most familiar, either the Hazardous Materials (HAZMAT) people or the local fire
department will appear to cleanup the mess. However, down in Mexico they do not have that
concept of a HAZMAT or a local Fire Department treating anything contaminant spills. For
the most part, the national petroleum company, PEMEX, the company that drills all the oil
and exports it to different nations, is responsible for the clean-ups and they have
allocated $1B for that purpose. Since the problems occur on a state level, the governors
are interested in implementing a cleanup program for civil defense purposes on a
state-by-state basis. The governor of Veracruz, being a very forward-looking and proactive
environmentalist, decided that emergency response stations for contaminant cleanup is the
wave of the future for his state. Not only will they help clean up the environment and
create jobs, a variety of good things are happening economically and politically for the
governor and Veracruz. He has committed to putting in 11 Emergency Response Centers (ERC)
around their state. We brought the capital financing to the table and now they are
deciding specifically where those sites are going to be and what the timetable is for
putting them in and finalizing the operating contracts. We expect the implementation of
those to take about a year and we hope to start in 2007. We presented the ERC concept at
the 2006 Hurricane Conference in Mexico and the consensus was that there are five other
governors wanting to implement similar programs as Veracruz but they want to see the first
ones in operation first. We see a bright future for Emergency Response Centers across the
entire country.”
CEOCFO:
Other than the time factor, are there any challenges that you foresee?
Mr. Brehm: “We are very proactive with
meeting all the parties that are involved with the decision-making on both the state and
federal levels. The federal government in Mexico tends to set the policies and the number
of dollars that are available. They also decide how the states access the funds. It is up
to the state to determine how specifically they are going to utilize the funds. Mario
Marin Torres, the Governor of Puebla, happens to be the national coordinator of all
emergency response and we are working on key infrastructure projects for him. He has
helped introduced us to some of the other governors, and wants to spearhead the ERC
concept throughout the country. We try to work with all the decision makers including the
labor unions and political leaders and other people who have a say in what is going to
happen because we are creating a brand new industry with a major social and economic
change for the country. It is all positive and we hope to not only be the orchestrater but
also the implementer along with the Mexican people over the next decade.”
CEOCFO:
Why should potential investors be looking at BUGS now?
Mr. Brehm: “I have personally been
working on this project for 10 years and we have tried to find markets that will use our
alternative technology. Mexico officials and their people have been very receptive
to us. Our technology is protected under Mexico federal law unlike many Asian countries.
We believe our technology was one of the first five technologies, which were licensed and
approved to be used in Mexico when registration commenced and the only one that is
biotechnology based at that time. We believe that BUGS is on the precipice of a major
change. With pending ERC contracts over $160MM and over $10MM in current authorized
contracts, we could have a very significant future for our shareholders. For a company
that is doing less than a million dollars a year right now, this new revenue is a home run
after many years of base hits! The variable in the project is when will that happen? I do
not know the answer to that, but we are working on it as diligently as possible. We are
hoping to meet our internal deadlines, however we are on Mexico time, which is not the
same as the instantaneous turn-around that we all have become accustomed to in the U.S.,
so we have to be patient and work with our friends in Mexico at their pace. The important
point is that the parties on both sides are fully committed to making it happen and when
it does, our shareholders could be very happy!”
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