U.S. Microbics Inc. (BUGS.OB)
Interview with: Robert Brehm, Chairman and CEO
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and Information on their biological technology to revolutionize environmental cleanup.

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U.S. Microbics Inc. is the first combined bacteria manufacturing and engineering application company aimed at cleaning contaminated soil and groundwater and providing solutions for feeding the masses

U.S. MICROBICS INC.

Basic Materials
Chemical Manufacturing
(BUGS.OB)

U.S. Microbics Inc.

6451 El Camino Real, Suite C
Carlsbad, CA. 92009
Phone: 760-918-1860 x 102



Robert Brehm
Chairman and
Chief Executive Officer

Interview conducted by:
Lynn Fosse
Senior Editor

CEOCFOinterviews.com
December 2003

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 a stock promotions company.   He fully understands the technical issues of the microbial technology business as well as the business, marketing, promotion and financial requirements for success in a public enterprise. His skill, knowledge and expertise have been invaluable for the rollout of the company.

Company Profile:
U.S. Microbics Inc. (BUGS.OB) is a business development and holding company that facilitates and develops the deployment of environmental technologies through its two divisions, USM Solutions and USM Capital. The company has holdings in more than eight corporations, including five majority owned subsidiaries. The Company’s USM Solutions division consists of five majority owned subsidiaries using biological technology to revolutionize environmental cleanup; and its USM Capital division finances and develops the five USM Solutions companies and additional equity holdings.

U.S. Microbics provides proprietary products and services for applications in the global bioremediation, waste water treatment, and regenerative agriculture markets using "Pay-for-Performance" solutions that treat the source of the environmental problem better, faster, cheaper and safer than conventional methods.  With the use of biotechnology-based solutions, parents and their children and grandchildren will enjoy cleaner water and soil and healthier plants sooner rather than later.

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.

Remediline™ - Bioremediation Products
The microbial blends for bioremediation of hydrocarbons, animal waste, and green waste using the Bio-Raptor™ and the Microbial Applications System™ for above ground remediation have been proven over the past 30 years in a variety of environmental situations.

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.

CEOCFOinterviews: Mr. Brehm, please give us a little background on the biotechnology that U.S. Microbics holds?

Mr. Brehm: “We have a biotechnology that had been in operation for roughly twenty years; when the founder of that technology died his daughter, Mery Robinson, our Executive Vice President, took it over and licensed the technology to U.S. Microbics. Our technology does several things; first, it cleans up contaminated soil in the water and different combinations of the bacteria are used for growing plants. That can be done with very little water and no fertilizer and you can often get a 100-200% increases in plant growth. The idea is that we can feed the masses by increasing the production of rice and fish, which is what 90% of the world, lives on, and at the same time, we can clean up the messes. We are much closer to that objective and over the last five years we have taken those two concepts and concentrated on cleaning up water and the soil first. We spent a lot of money putting our technology into different markets, finding out what worked and didn’t and now we have identified markets, we are generating revenue, and we are on our way to a major breakout next year.”

CEOCFOinterviews: You have a number of divisions and companies, will you tell us why you are structured the way you are?

Mr. Brehm: “The technology itself, and the manufacturing for the technology, is two separate corporations within U.S. Microbics. We are structured as separate corporations because we intend to take them public and spin those off as public companies on their own, licensing the technology from the main company. However, the core technology will stay here. The application of the technology, the actual engineering work or the agricultural or waste water work, will be done by a separate subsidiary, which will stand on its own, raise its own money, as well as run its own business. We will spin those off because we have on the game plan here, about fifteen different uses for the technology; all in separate companies. It was organized that way because our intent was to spin off the subsidiaries. ”

CEOCFOinterviews: It sounds like you had a lot more forethought than many companies of your type, is that correct?

Mr. Brehm: “I would agree with that! We have a technology that can be used by anybody in the world. It is the basic building blocks of life; we feed people and we clean up their messes. The reason we concentrate on these two things is because by the year 2050, the World Health Organization has told us that there will be nine billion people on this earth; there are a little over six billion right now, and that is a fifty percent increase. Further, there will not be enough water on earth or enough land to feed that amount of people unless major things change. We are going to have to get water from the sea, much more than we do so now. We are going to have to change the way people use land for agriculture. Chemical based fertilizer, cancer causing agents and all those types of things are going to limit the earth. If you use biotechnology with naturally occuring bacteria instead of genetically engineered bacteria or outdated convential technology, you can solve contamination problems, and you can clean up the water and you can also provide more food on the same amount of land or water that you can now. That will solve a problem that we are all going to have fifty years from now. That is why this technology, being a basic building block of life, is so important for the world.”

CEOCFOinterviews: How is the business going today?

Mr. Brehm: “We have more business than we can handle right now. Our game plan for the first five years was to prove to the world that our technology is workable. It is an alternative technology and any time that you try to change the system to use another technology or work philosophy, there is a lot of resistance. Now in certain particular markets, our technology is the technology of choice. We are now finance limited, and we are moving from a research and development mode  to building up the company and ramping up, now that we are generating revenue. We have growing pains now because of excess demand. Our game plan now is to solve that problem with new financing and investment capital which will take the company to positive cash flow, and generate an excellent return for our investors.”

CEOCFOinterviews: You have a proprietary culture collection of thirty microbes; what is it that you have and what makes your technology work?

Mr. Brehm: “There are millions of types of bacteria cultures. The best analogy to use is that it is kind of like a football team. If you have just one microbe, which is the center or quarterback, obviously you are not going to get down the field and score the touchdown. It is a teamwork approach where one bacteria starts off the chemical reaction and another one takes it to the next part and so on. The combination of those, allow the biotechnology to make the chemical process complete. In the case of cleaning up contamination, most of which are hydrocarbons, the bacteria eat part of the contamination, breaking it down into carbon dioxide and water, two innocuous elements. That process takes multiple bacteria to complete. In the case of agricultural growth, they bacteria adhere to the roots, making them grow much deeper and much making them much healthier and more insect resistant. Depending upon what the application is, if you find the magic formula, and there are many magic formulas, it is the bugs and how they are applied. We have patents on the process of applying them, that is what is proprietary about what we have.”

CEOCFOinterviews: What is involved in growing the bugs?

Mr. Brehm: “The particular bacteria that we use were first discovered in 1968 when the first commercial oil spill was done in Santa Barbara. The process of identifying bacteria is hit and miss. If you spill gas on the ground, eventually there will be some natural bacteria to degrade that, and if you identify those bacteria and if you can grow them in high quantities, billions and billions per cubic centimeter vs. half-a-million per cubic centimeter, which naturally occurs, and if you know which ones to apply to certain contaminations, you can effectively get rid of that problem in a more timely manner. Instead of thousands of years taken by Mother Nature, our process can take a few months to several years verses conventional technology that can take a many years to reach acceptable levels. The process of identifying the most beneficial bacteria over twenty-five years has been highly refined. The growing of the bacteria is done very similarly to what you would see in a micro brewery with large stainless steel vats.”

CEOCFOinterviews: Where do you stand with the environmental groups and the government agencies?

Mr. Brehm: “You have to look at who our customers are, because we have been endorsed by many of the environmental groups. On the other hand, our bread and butter comes from the environmental polluters. There is a fine line that we have to walk. Many countries that have a problem with growing food in the desert have called us or when there is very little water; we have a solution for that. We have remarkable results with sugar cane, tomatoes peppers, etc. We haven’t gone over to other countries at this point because we have been concentrating on cleaning up the messes in the U.S. first. We have some limited work in Mexico with crops and we have had phenomenal results.

When we can replace fertilizer and growing things with very little water, everyone wants you to prove it in their back yard. We have to do that over, and over again. We have gotten to the point with the contamination cleanup, that people believe us and the EPA (Environmental Protection Agency) is now backing the use of bioremediation to clean things up. South Carolina and Florida will only give environmental clean-up projects on a paid-for-performance basis. It takes awhile for people to understand what we are doing and how we are doing it. We don’t’ seek government agency approvals for the technology because they won’t give it to you; they won’t say this technology is better than another one.

If you look at the way our technology, which is the technology of the new millennia, vs. the 1970s or 1980s technology, which is what the competition uses, their philosophy is to never really fix the problem but to study it and work on it as long as possible. Our philosophy is to get in there and fix it, get paid when we fix it and let’s move on to the next one. We have an entire paradigm shift in terms of solving the problem and not fixing the symptoms. We expect most of the states will be changing to a pay for performance philosophy, and we are in the forefront of that movement. The only way to execute that philosophy is to use biotechnology. We are seeing a major change in the shift to clean up contamination. I think we are well positioned for the next twenty years.”

CEOCFOinterviews: Are there competing biotechnologies?

Mr. Brehm: “No there aren’t any competing biotechnologies. There are other bug manufacturing companies and unfortunately that is all they do is manufacture bugs, and then they have to give it to a consultant or a third party engineering group to make it work. This company and its subsidiaries, is the first time there has been a bacteria manufacturing company and an engineering application company, put together under one roof to actually make things work. The problem the consultants and the third parties have had with bugs over the past twenty years is that they don’t want to fix the problem, and bugs do fix the problem because they convert the contamination to carbon dioxide and water. They don’t know how to apply the biotechnology to solve the problem; because they don’t want to solve the problem; they want to study this problem and mess around with it for the next five or ten years because that is how they bill, the more hours they bill, the more money they make. Our philosophy is that there are so many jobs to fix and we would like to clean up this world one job at a time, not just bill all the hours and never clean it up. It is a fact that 70% of all the environmental jobs that have been started in the last twenty years, have never been closed because there is no incentive to close.”

CEOCFOinterviews: How do you get this going the way it should be?

Mr. Brehm: “We talked a little about paradigm shift; most of the industry right now in clean-up, is on a time and materials basis, in other words, they are paid for the effort of trying but they don’t’ guarantee their work. There are several states that require their clean-up projects to be bid on a pay-for-performance basis. You have to get rid of the contamination and you have to get rid of it at certain levels required, before they pay you. To date, major competition has not entered any of those states or projects, where they have to work on a performance basis. The reason is because they don’t guarantee the work and they would rather work on Department of Defense projects where they can get away with their pay for effort billing. What we find is that the two states of South Carolina and Florida, have over three billion dollars in cleanup projects, so we could work in those two states and have a very nice profitable company. South Carolina is a major part of our revenue at this point. We have little competition other than mom-and-pops, who are doing one to two million dollars a year, at a time. We have the potential  to do fifty to a hundred million dollars of pay for performance projects given the proper financing.”

CEOCFOinterviews: What is it that you need to accomplish your goals?

Mr. Brehm: “Financial bonding and working capital to work on the projects. Most of the new capital goes directly to new projects. We have spent twenty million dollars on research and development over the last seven years proving the economic potential of the biotechnology. It is getting to the point where people believe that our light bulb will work in any socket in any place in the United States. They now believe that, and want it. Before the financial purchasing managers of the large corporations will give you a five-year or two year job, they want to make sure you will be in business for that amount of time. That is the financial criteria, which has nothing to do with the technical criteria. Our job this year, is to beef up the balance sheet with assets, investments and get five or ten million dollar jobs, rather than having to work on quarter million dollar or half million dollar jobs. That is our game plan to get bigger jobs because we have a bigger balance sheet, and with a bigger balance sheet we can acquire other firms and the whole process continues. Acquisitions and financial capability is our target goal this year and we are well on our way to achieve both of those.”

CEOCFOinterviews: What do you want to acquire?

Mr. Brehm: “We want to acquire small engineering firms, which are local in nature, where we have a founder who is about ready to retire and there is no way out for them. Typically these firms are in the five to fifteen or twenty million dollar range and the owner is retiring. and disbanding the company. What we would like to do is acquire those firms, put our engineering technology solution into them, make them much more profitable because they are using biotechnology rather than the old pay for effort basis, and as a result, make the firm more profitable and us more profitable, and give a way for the founder to get out profitably and gracefully.”

CEOCFOinterviews: What else should potential investors know?

Mr. Brehm: “Potential investors should know that we have identified enough business to get us to the hundred million dollar market in the next three to five years if we can properly finance the effort. That means that people that invest in our stock today at fifty cents or a dollar, should be able to look at a stock at significantly higher future prices. The current research report that is out on the company and done by a third party, says that our stock today should be in the two dollar range based on a forecast of potential revenue we could achieve if properly financed. We have identified the business and the niche markets. The business is there for us to take without very much competition. It is something that is mandated whether we are in a recession or a boom time.  Cleanup of the soil is a mandated legal obligation of the state agencies, so the business is always there for us, which is great. Now it is just a matter of solving the financial solution of additional investment coming into the company so that we can go capture those and become a bigger company. For every dollar that comes in, we forecast approximately three dollars of revenue with 10-15% to the bottom line, so it is a very good business for an investor to analyze and invest in if it meets his investment criteria.”

CEOCFOinterviews: Do you think the economic up-turn will be helpful?

Mr. Brehm: “The economic up-turn helps us attract money into the company, but it doesn’t have any affect on the clean-up business, because the clean-up business is here whether there is an up-turn or a down-turn. In South Carolina, there is 800 million dollars in the fund and if the source of that fund is two cents a gallon, then every consumer pays because they know there is going to be problems in the future because it contaminates their water and if they don’t clean it up, people are going to get more cancer because of the cancer causing agents in gasoline and all of its components. They have to clean it up in recession or boom time. In boom time people have more money and they invest back in the stock market, which means they invest in companies like ours. That is what we see as the difference. Business wise, the business is there in good or bad times.”

CEOCFOinterviews: In closing,  knowing you have something of such value and not being able to can’t get it to everybody who needs it must be very frustrating?

Mr. Brehm: “That is true, however we are making major strides and part of making ourselves known, is telling the story of what we have. If people don’t know that there is an alternative to conventional technology or they put a band-aid on a problem and assume it is going to go away, we actually go in as a surgeon and cut out the problem. For the last 25 years, this industry has put a band-aid over the problem and tried to treat the symptoms. After all these years, consultants have said there is no way to treat it. Dilution is the solution for pollution, has been the watch phrase of the last twenty-five years. Now that people know there is an alternative viable technology with excellent profit potential, they are banging on our door to find out about it and now I just have to get them to invest in the company and take it to new levels.”

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SSWM, C. Trade and Omnitek to JV Gas Project in Bangladesh

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CARLSBAD, Calif.—September 23, 2004—Bruce Beattie, President of Sub Surface Waste Management of Delaware, Inc. (OTCBB: SSWM), announced today that it will joint venture with C. Trade, Inc. and Omnitek Engineering Corp., a leader in engine retrofit systems, to provide technology, engineering and project management for natural gas distribution services and for converting diesel engines to clean-burning natural gas in Bangladesh.  The conversion of older technology, high polluting engines to low-polluting engines in a cost effective manner, as well as creating a natural gas distribution infrastructure using local labor, will help the people of Bangladesh utilize an abundant natural resource, breathe cleaner air and become less dependent upon imported diesel fuel.

Posted: 9/26/04 - CEOCFOinterviews.com
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