<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

         [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                EXCHANGE ACT OF 1934

         For the Fiscal Year ended: SEPTEMBER 30, 2003

         [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

         For the Transition Period From ____ to ____

                        Commission File Number: 33-3378-D

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE, INC.
                    (FORMERLY COVINGHAM CAPITAL CORPORATION)
             (Exact name of Registrant as specified in its charter)

         DELAWARE                                            51-0401125
State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

                    6451-C EL CAMINO REAL, CARLSBAD, CA 92009
               (Address of principal executive offices) (Zip Code)

                                 (760) 918-1860
              (Registrant's telephone number, including area code)

         Securities Company pursuant to Section 12(b) of the Act:          None

         Securities registered pursuant to Section 12(g) of the Act:       None

         Check whether the issuer: (1) filed all reports required to be filed by
Section 12 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X ] No [ ]

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is contained in this form, and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         The issuer's revenues for the twelve months ended September 30, 2003
were $432,754

         As of January 8, 2004, there are approximately 4,174,000 shares of
common voting stock of the Company held by non-affiliates having an aggregate
market value of $196,200.

         As of January 8, 2004, there were 18,716,000 shares of the Company's
Common Stock outstanding.

         Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE, INC.

                                   FORM 10-KSB

                    For Nine Months Ended September 30, 2002

                                                                         Page
                                                                         ----
                                     PART I
                                     ------

Item 1. Description of Business.........................................   3

Item 2. Description of Properties.......................................  22

Item 3. Legal Proceedings ..............................................  22

Item 4. Submission of Matters to a Vote of Security Holders ............  22

                                     PART II
                                     -------

Item 5. Market for Common Equity and Related Stockholder Matters........  24

Item 6. Management Discussion and Analysis or Plan of Operation ........  25

Item 7. Financial Statements ...........................................  F-1 to
                                                                          F-19

Item 8. Changes in and Disagreements With Accountants on Accounting
              and Financial Disclosures ................................  26

Item 8(a).  Controls and Procedures ....................................  26

                                    PART III
                                    --------

Item 9. Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act .............  27

Item 10. Executive Compensation ........................................  29

Item 11. Security Ownership of Certain Beneficial Owners and Management.  32

Item 12. Certain Relationships and Related Transactions ................  34

Item 13 Exhibits and Reports on Form 8-K................................  35

Item 14. Item 14. Principal Accountant's Fees and Services..............  36

Signatures .............................................................  37

                                     Page 2





<PAGE>

                                     PART I
                                     ------

ITEM 1. DESCRIPTION OF BUSINESS

This Annual Report on Form 10-KSB (including the section regarding Management's
Discussion and Analysis of Financial Condition and Results of Operations)
contains forward-looking statements regarding our business, financial condition,
results of operations and prospects. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions or
variations of such words are intended to identify forward-looking statements,
but are not deemed to represent an all-inclusive means of identifying
forward-looking statements as denoted in this Annual Report on Form 10-KSB.
Additionally, statements concerning future matters are forward-looking
statements.

Although forward-looking statements in this Annual Report on Form 10-KSB reflect
the good faith judgment of our management, such statements can only be based on
facts and factors currently known by us. Consequently, forward-looking
statements are inherently subject to risks and uncertainties and actual results
and outcomes may differ materially from the results and outcomes discussed in or
anticipated by the forward-looking statements. Factors that could cause or
contribute to such differences in results and outcomes include, without
limitation, those specifically addressed under the heading "Risks Related to Our
Business" below, as well as those discussed elsewhere in this Annual Report on
Form 10-KSB. Readers are urged not to place undue reliance on these
forward-looking statements, which speak only as of the date of this Annual
Report on Form 10-KSB. We file reports with the Securities and Exchange
Commission ("SEC"). We make available on our website under "Investor
Relations/SEC Filings," free of charge, our annual reports on Form 10-KSB,
quarterly reports on Form 10-QSB, current reports on Form 8-K and amendments to
those reports as soon as reasonably practicable after we electronically file
such materials with or furnish them to the SEC. Our website address is
www.adnas.com. You can also read and copy any materials we file with the SEC at
the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549.
You can obtain additional information about the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains an Internet site (www.sec.gov) that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC, including us.

We undertake no obligation to revise or update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
Annual Report on Form 10-KSB. Readers are urged to carefully review and consider
the various disclosures made throughout the entirety of this Annual Report,
which attempt to advise interested parties of the risks and factors that may
affect our business, financial condition, results of operations and prospects.

Overview
--------

The Company engages in developing, manufacturing and selling engineered
remediation solutions for clean up of toxic waste releases to soil and/or
groundwater and the bio-recycling of spent activated carbon filtration media.
The treatments may be made directly to the contaminated soil or groundwater in
the location at which the contamination was found ("in situ"), using wells and
subsurface injection/extraction points to administer the Company's proprietary

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<PAGE>

microbial blends for bioremediation of various waste streams, or the treatments
may require excavation of contaminated soil or pumping of groundwater ("ex
situ"), and washing activated carbon filtration media with microbes to
Bio-recycle with the Company providing technical engineering consultation and
microbial blends to its teaming partners and/or executing the work directly as a
contractor. We also provide comprehensive civil and environmental engineering
project management services including specialists to design, permit, build and
operate environmental waste clean-up treatment systems using conventional,
biological and filtration technologies.

History

The Company was incorporated under the laws of the state of Utah on January 30,
1986 and was re-domiciled in the State of Delaware in February, 2001 under the
name of Covingham Capital Corporation ("Covingham"). Covingham was an inactive
publicly registered shell corporation with no significant assets or operations.
On December 13, 2002, Covingham entered into a Capital Stock Exchange Agreement
("Agreement") with the stockholders of Sub Surface Waste Management, Inc.
("SSWM"), a wholly-owned subsidiary of U.S. Microbics, Inc. organized under the
laws of the State of  Nevada. Effective with the Agreement, all previously
outstanding common stock, preferred stock, options and warrants owned by SSWM
stockholders were exchanged for an aggregate of 10,774,000 shares of the
Covingham's common stock and 5,360,000 shares of the Covingham's Series A
Convertible Preferred stock.

Following the consummation of the Capital Stock Exchange Agreement, in December
of 2002, Covingham's name was changed to Sub Surface Waste Management of
Delaware, Inc.

INDUSTRY BACKGROUND

         On December 11, 1980, Congress enacted the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"), commonly known as
Superfund. This law provided broad federal authority to respond directly to
releases or threatened releases of hazardous substances that may endanger public
health or the environment. CERCLA established prohibitions and requirements
concerning closed and abandoned hazardous waste sites, provided for liability of
persons responsible for releases of hazardous waste at these sites, and
established a trust fund to provide for cleanup when no responsible party could
be identified.

         After the enactment of CERCLA, states also began to regulate in the
area of environmental protection. Many states now have environmental protection
departments.

         The purchase or management of contaminated industrial property can
result in staggering liability to the property owner or manager. Under federal
law, an "owner" or "operator" of property is strictly liable for the release of
any hazardous substance on or under the property. Further, the current owner or
operator may be responsible for the cleanup of all previous contamination if it
did not investigate the existence of hazardous substances prior to the purchase.

         Today, the remediation or cleanup of hazardous materials from the
environment represents a $50 billion service industry and is a part of the
approximately $205 billion spent annually in the U.S. for all environmental
related products and services (source Environmental Business Journal(R)). While
the terms "remediate" and "clean-up" are often applied interchangeably, they are
defined differently. "Remediation" is the removal or treatment of hazardous
contaminants to levels or standards imposed by regulatory agencies, which may
neither restore the site to "pristine" condition, nor to the condition existing
prior to the activities causing the contamination. The remediation levels or
standards established by regulatory agencies are primarily based upon health

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<PAGE>

risk assessments. These risk assessments analyze the danger to public health and
safety from various exposures to the contaminants discovered. The risks of
exposure, plus the severity of the exposure itself, are the principal factors in
determining the remediation standards. "Clean-up" of a site, however, achieves
levels of contamination at or below the detectable level required by regulatory
agencies. When this is possible, land use opportunities improve, thereby
enhancing the economic benefits to be derived from the property.

         One of the methods used to remediate or clean-up toxic waste is
bioremediation. Bioremediation is a treatment process that uses naturally
occurring microorganisms, such as yeast, fungi or bacteria, to breakdown
hazardous substances into less toxic, or even non-toxic, substances.
Bioremediation technologies assist the growth of microorganisms and increase
microbial populations by creating optimum environmental conditions for them to
detoxify the maximum amount of contaminants. The specific type of bioremediation
technology used is determined by several factors, including the type of
microorganisms present, the site conditions, and the quantity and toxicity of
contaminant chemicals. Different microorganisms degrade different types of
compounds and survive under different conditions. Bioremediation treatments may
be in situ or ex situ. In situ bioremediation treats the contaminated soil or
groundwater in the location in which it was found. Ex situ bioremediation
processes require excavation of contaminated soil or pumping of groundwater
before treatment.

         Bioremediation encompasses opportunities not only for the remediation
or cleanup of commercial and industrial sites, but of government sites as well.

MISSION

         As of the end of the year 2003, contaminated during the last 20 years
only a fraction of cleanup sites have met and received regulatory agency
closure. The Company's goal is to take advantage of changes in the environmental
remediation market from traditional remediation technologies, which are costly
and time-consuming, to bioremediation technology, which the Company believes is
state of the art. Clients in the oil and gas, transportation, land development,
and petro-chemical industries are interested in source eliminating technologies,
such as bioremediation, to treat contaminated property in a timely and cost
effective manner.

         Specifically, the Company's mission is to become the leading
bioremediation expert in the on-site treatment and elimination of petroleum
hydrocarbon constituents, including methyl-tertiary-butyl-ether ("MTBE"), and to
apply its licensed proprietary microbial blends, using patented treatment
processes, for both traditional toxic materials and newly emerging urgent
issues.

         According to the U.S. Environmental Protection Agency ("EPA") and the
American Petroleum Institute, 73% of the 180,567 active retail gasoline service
sites in the U.S. have reported and documented releases with MTBE impacts to
soil and ground water. The Company estimates that the market for MTBE
remediation may be worth as much as $6 billion. MTBE is the reformulated "clean
fuel" oxygenate additive in the process of being banned, nationwide, for the
adverse impact its release with gasoline has caused to soil, water and
groundwater in the United States. The Company is capturing work in this market,
it can achieve 25-30% gross profit before tax. If it is successful in capturing
approximately 1% of this market and in acquiring revenue generating engineering
companies, assuming that other, more effective or inexpensive methods of
remediating the effects of MTBE are not discovered, the Company anticipates that
its revenues could grow to $100 million by the end of 2006.

                                     Page 5





<PAGE>

REMEDIATION SERVICES AND PRODUCTS
---------------------------------

         The Company provides engineered remediation solutions for cleanup of
toxic waste releases to soil and/or groundwater. To date, these services have
been sold principally in the United States. Treatment may be in situ, using
wells and subsurface injection/extraction points to administer the Company's
proprietary microbial blends for bioremediation of various waste streams. The
Company also provides ex situ treatment services using its Bio-Raptor system in
conjunction with its proprietary microbial blends, providing direct technical
engineering consultation as needed.

         The Company's products consist of unique collections of microbial
cultures developed over a thirty-year period and licensed to the Company by
XyclonyX, a subsidiary of U.S. Microbics, Inc. The Company uses these cultured
specific microbial blends to address specific identified wastes. The Company's
in-house technicians work with an assigned Project Engineer to develop a
site-specific engineered-remedial solution that will meet or exceed regulatory
agency requirements.

Some of the past uses of the Company's products and processes include, but are
not limited to, the following:

         o        In situ bioremediation of underground contaminants in soil
                  and/or groundwater;

         o        Ex situ bioremediation of contaminants;

         o        Biorecycling of spent activated carbon filtration media; and

         o        Open-water (both fresh and marine) containment/treatment
                  bioremediation.

         The Company's remediation technologies, including those currently being
developed, meet the requirements of the various industries as well as the EPA
provisions for application of naturally occurring and non-genetically modified
microbes. Management believes that the Company's products are superior to
existing technologies in terms of energy efficiency, ease of manufacturing,
breadth of usefulness and cost. The XyclonyX microbial products have received
approval as "relatively safe" from the U.S. Department of Agriculture, its
highest rating.

BIO-RAPTOR(TM)
--------------

         Bio-Raptor(TM) is the Company's patented ex-situ bioremediation
treatment system for cleaning up hydrocarbon-contaminated soil. The
Bio-Raptor(TM) screens and treats soil contamination on-site, thereby reducing
costs, maximizing material treatment surface area and aeration, reducing
retention time, minimizing potential liability through on-site treatment and
eliminating contaminant transportation-related risks and site downtime.

         Bio-Raptor(TM) has high-throughputs of up to 500 tons per hour with
larger and smaller customized models engineered to fit specific site remediation
requirements. The Company has signed a Technology License Agreement with an
affiliate, Xyclonyx, granting the Company a sub-license to use products,
technical information and patent processes related to the Bio-Raptor(TM).

                                     Page 6





<PAGE>

BAC(TM) & BIO-GAC(TM)

         BAC(TM) and BioGAC(TM) are our biorecycling technologies used to
reactivate or extend the service life of on-line activated carbon filtration
media used to control toxic pollutant emissions from both air and water waste
streams.

PROPRIETARY MICROBIAL BLENDS
----------------------------

         The Company purchases blends from an affiliate, West Coast Fermentation
Center, which manufactures and uses its own microbial blends for bioremediation
purposes. These blends include the following products:

         MTBECTOMY(TM) - Formulated specifically to address the need for rapid
remediation of MTBE and its daughter products such as TBA. MTBEctomy(TM) is
injected directly into impacted soil & groundwater resources to bioremediate the
gasoline fraction containing MTBE in situ for underground leakage and cleanup of
gasoline/fuel containment vessels (e.g. gasoline station tanks, etc.). The
Company is currently the only licensee of this process for in situ treatment of
petroleum contamination.

         REMEDILINE(TM)-30XH - Formulated to deal effectively with the heavy,
tarry types of oils, coal tars, and organic sludges. This product is
particularly well suited for phenolic and other aromatic chemical structure
wastes. Usually the product of choice for coking and wood preserving wastes.

         REMEDILINE(TM)-30XFA - Biological above ground site remediation
process.

         The foregoing blends can also be customized, depending upon the waste
stream to be treated. Tougher waste streams require more expensive, customized
blends and the Company can charge higher costs per ton for treatment.

TECHNOLOGY LICENSING
--------------------

         In special circumstances or where economic incentives exist for it to
do so, the Company has licensed its technology and services to qualified
entities. Most recently, Tetra Tech Inc., (NASDAQ:TTEK), a provider of
consulting, engineering and technological services, has a non-exclusive license
from the Company the BAC(TM) & Bio-GAC(TM) carbon recycling technology for
distribution in the U.S. and Mexico.

         The Company will continue to license its technology and services as a
core business strategy. The Company is actively seeking licensees in the
European Union and in South and East Asia. As in the U.S., the Company's
technology can be licensed to property developers, major oil companies,
equipment manufacturers, toxic and hazardous waste generators, and remediation
companies.

MARKETS FOR REMEDIATION PRODUCTS

         Contaminated property in need of remediation or cleanup may be public
or private, used by the government or by commerce and industry. If the 1980s was
the era of investigation, then the 1990's and beyond will be the era of
implementation, remediation, and reduction or control, both here and abroad.
Sites previously studied are now moving into the remediation phase, with sites
like Fernald, Ohio and Hanford, Washington costing over $1 billion each for
remediation. Government contracting assignments make up less than 50% of
expenditures for remediation or cleanup. Approximately 65% of expenditures for
remediation or cleanup were made in the past, and continue to be made, by
private industry.

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<PAGE>

         Furthermore remediation, once implemented, is not unchanging. Property
is assessed for risk based upon its proposed uses. Changed uses or changing
scientific health data regarding the dangers associated with particular
exposures may also change the remediation standards for the property. For
example, in recent years, dangers associated with exposure to MTBE and
chlorinated solvents in potable groundwater have created an increased need for
definitive treatment technologies. The Company's bioremediation applications
technology enables its clients to address changing remediation standards by
up-grading existing installed treatment systems and/or in situ source removal.

         Many businesses generate contamination as a byproduct of their
processes. For example, the Company estimates that there are approximately
17,000 active dry cleaning facilities in the U.S. that contain some level of
contamination. The Company estimates that conventional technology costs for
cleanup range from $100,000 to $2,000,000 per site. The Company believes that
its biotechnology could save the dry cleaning industry up to 50% of the cost of
conventional solutions and significantly shorten the cleanup time for on-site
treatment.

         The Company's patented in-situ application of all-natural,
non-genetically engineered bacteria has successfully proven to remediate dry
cleaner solvents containing tetrachloroethene (PCE or PERC). In a One Hour
Martinizing(TM) site located in southeastern Michigan, during a period of
approximately 90 days the Company's solution removed more than 60% of the
volatile organic compounds, commonly known as VOCs, detected in the soil prior
to treatment. Aside from removing the VOCs, the Company's technology generated
non-detectable levels of vinyl chloride and methyl chloride during the
remediation processes. The Company believes that this result is far superior to
conventional methods of remediation and cleanup.

         Underground storage tanks also pose a major problem in the U.S. due to
the disastrous effects of leakage into soil and/or groundwater systems, creating
a direct pathway to humans and livestock from potable water resources. MTBE and
petroleum hydrocarbons are toxic to humans and both state and federal regulatory
agencies require these wastes to be immediately cleaned up. The vast number of
tanks, tank farms, terminals and refineries and their proximity to people is
illustrated in the following facts, taken from Superfund documents:

         o        Through December 2002 , states most recently reported to the
                  U.S.EPA 412,000 confirmed retail gasoline station releases,
                  includes active and closed.

         o        MTBE remains persistent in groundwater drinking supplies after
                  gasoline cleanup. SOURCE: USEPA

         o        180,567 active retail gasoline stations in the U.S. Of these,
                  73% had reported releases with MTBE.

         o        MTBE has become a ubiquitous groundwater contaminant. SOURCE:
                  AMERICAN PETROLEUM INSTITUTE

         MTBE has become the real problem in leaking underground storage tank
remediation as this ether based clean fuel additive product moves exponentially
through soils and groundwater, outdistancing gasoline constituents that
typically cling to soils and remain perched atop groundwater regimes.
Conventional mechanical extraction technologies are unable to remove MTBE
concentrations sufficient to achieve site closure.

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<PAGE>

         Even after the cleanup and upgrade of leaking underground storage
tanks, residual waste and new waste continue to drive the industry forward
toward remediation, cleanup, and source reduction.

         In addition to the basic needs of environmental management and
remediation of hazardous and toxic sites, wastewater treatment will continue to
expand as urban growth in the 21st century puts ever-greater pressure on limited
water resources. Management believes that the Company's engineering applications
can assist the wastewater treatment industry to further reduce processed water
consumption through incorporation of microbial treatment with membrane
filtration and reverse osmosis technologies.

         Management believes that both large corporations and small, independent
entrepreneurs can benefit from the Company's engineering services, proprietary
microbial products and patented treatment application processes for in situ and
ex situ clean up of environmental impacts to soil and groundwater and for
bio-recycling of spent activated carbon filtration media. Examples include:

o        MAJOR OIL COMPANIES with impacts to surrounding soil and groundwater
         from sudden and uncontrolled releases of petroleum products at retail
         stations, terminals, pipelines, barges, ships and refineries.

o        MAJOR TOXIC AND HAZARDOUS WASTE TREATMENT AND DISPOSAL COMPANIES with a
         desire to comply with existing permit conditions and extend the actual
         or potential life of present storage and treatment sites and facilities
         through on-site remediation of stored waste-streams and control of
         nuisance odors.

o        MANUFACTURERS WITH FIXED POINT SOURCE FACILITIES such as automotive,
         aerospace and electronic component manufacturers.

o        SPECIALTY ENVIRONMENTAL REMEDIATION COMPANIES, which have not been
         previously exploited (for example, hydrocarbon waste stream treatment
         at the municipal waste treatment facility, emergency cleanup response
         companies, open-water clean-up, habitat restoration in environmentally
         sensitive locals, etc.).

o        COMPANIES WHO WANT TO REPLACE EXISTING, LESS EFFICIENT TREATMENT
         TECHNOLOGIES IN THEIR RESPECTIVE NICHE MARKETS, for example,
         agricultural processors, paper and cellulose waste-stream producers,
         golf courses, poultry, pork, beef, and fish processors, and medical and
         hospitality waste-streams, to reduce their environmental disposal
         problems.

         The Company's representative clients include, UNOCAL, BARMAC (Brown &
Root, McDermott), BP-ARCO, Chevron, Allied Waste Company, American Industrial
Manufacturing Services (Denso North America), Attorneys Pepper Hamilton, LLP,
Caratron Industries, Inc., and Horsehead Industries, Signal Hill Petroleum,
Global Solutions, Inc. & Fletcher Oil Co., LLC, Hopkins Real Estate Group, The
Arthur Pearlman Group, One Hour Martinizing(TM), Applied Technical Solutions,
ATC Associates, Enviro-Sciences and S&ME Consulting Engineers, ISE
(InSinkErator), City of Chula Vista, CA, MFG/Tetra Tech, Grupo Protexa de
Mexico, Charles Taylor Consultants of Mexico (Agents for Lloyd's of London
Insurance Underwriters) and the South Carolina Department of Health &
Environmental Control.

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COMPETITION

         There are various methods that can be used to remediate soil. A
comparison of these methods and the advantages and disadvantages of each method
is shown in the table below.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                           ALTERNATIVE REMEDIATION METHODS
-----------------------------------------------------------------------------------------------------------------------
<S>                   <C>                                      <C>
METHOD                PRO                                      CON
Thermal Description   Works for gasoline and light             Low temperature heat only removes volatile
                      hydrocarbons.                            constituents.

Incineration          At high temperatures, can sufficiently   Expensive excavation. Can generate more hazardous
                      burn most compounds.                     compounds.
                      works for light hydrocarbons.            Projects can last many years. Expensive. Doesn't
                                                               remediate heavy fuels.

Vapor Extraction      Works for light hydrocarbons. Can be     Lengthy time frames. Doesn't work for heavy
Bio-venting           inexpensive.                             fuels.

Air Sparging          Works for light hydrocarbons.            Lengthy time frames. Doesn't work for heavy fuels.
                                                               Treatment can take many years. Expensive. Carbon
                                                               Filters often become obstructed. Carbon Filters must
Pump and Treat        Unobtrusive method.                      be recycled and waste disposed in traditional landfill.

Landfill Disposal     Contamination no longer is on your       You are now legally responsible for the ENTIRE
                      property.                                landfill.

Bio-stimulation       Can be inexpensive.                      Can last longer than Pump and Treat methods.

Bio-augmentation      Inexpensive. Can remediate all           Can last several months but remediates at the source.
                      contaminants. Unobtrusive.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

         The costs of the most popular treatment methods are shown below. The
range of costs is based on types of wastes, their concentrations and the status
of local or state and federal regulatory permit conditions at time of disposal:

TREATMENT METHOD                            COSTS PER GALLON OR TON
-------------------------------------------------------------------

Pump and treat with carbon                  @ 5 GPM, $.04-$.06 per gallon
Landfill disposal (if available)            $25-$100 per ton plus tax,
                                              transportation and licenses
Mobile Incineration (on site)               $150-$400 per ton
Fixed Incineration (on site)                $300-$1,000 per ton
Stabilization/fixation                      $100-$200 per ton

On Site (ex situ) Treatment by the Company with Bio-GAC(TM) and the
-------------------------------------------------------------------
Bio-Raptor(TM) System
---------------------

Bio-GAC(TM)                                 @ 5GPM, $.025-.03 per gallon
Bioremediation (bio-augmentation)           $15 to $100 per ton

         The Company's licensed microbial cultures were created by George
Robinson, father of Mery Robinson, a director of U.S. Microbics, Inc.' George
Robinson empirically derived many new custom blends that have benefits that the
Company believes have never been duplicated in similar treatment quantities.
Management believes that the ultra-high count fermentation methods in George
Robinson's custom blends yield microorganism counts that may be unmatched in the

                                    Page 10





<PAGE>

industry. Consequently, the concentrated fermentation product can be highly
effective in small quantities. Management believes that these unique blends are
often more effective than many of the blends of the Company's competitors.
Management believes that the unique blends, high microorganism counts, and
extensive applications histories gives the Company a competitive edge over other
providers of bioremediation services.

         Most microorganisms used in bioremediation are sold by distributors,
who want to make a profit on their services, to outside contractors.
Distributors must purchase the microorganisms they sell from a manufacturer, who
must also make a profit. This can drive up the cost of microorganism blends.
Furthermore, most microorganism manufacturers and earth excavation contractors
have little or no experienced environmental engineering services, and must rely
on third party technologists to prepare the appropriate application rates for
the job at hand and thereafter to successfully execute the work. Few earth
excavation contractors, if any, have patented treatment technology,
bio-inoculation specialty equipment, in-house integration of project
engineering, microbiological specialists or field application know-how and
experience to address both in situ and ex situ contamination problems.

         The Company believes that it can establish a competitive edge in the
bioremediation market for two primary reasons. First, because the Company is
majority-owned by a microorganism manufacturer, management believes that it can
favorably compete in pricing with any distributor and/or contractor. The Company
has licensed a patented process and proprietary microbial products, unavailable
to others, for a wide range of toxics. Second, because it has in-house
engineering ability, the Company is able to execute remediation projects for its
customers using these custom microbial blends not available to competitors.

         One of the Company's most innovative ideas is the concept of
"Pay-for-Performance". Instead of paying for the Company's services through with
industry standard "Pay-for-Effort" or time & material contracts and fixed unit
price contracts, the client pays for the remediation services only when the site
attains milestone interim and final closure approval by a regulatory agency. The
Company's work for the South Carolina Department of Health and Environmental
Control's Leaking Underground Storage Tank Fund is the nation's first such "pay
for performance" contract program. Management believes that the risk in entering
into these contracts to regulatory agency closure will be offset with higher
profit margins that the Company believes will be realized as a result of the
reduction in time and expense related to attaining site closures via its
aggressive bio-augmentation process supported by a captive fermentation
capability. Bioremediation is competitive in both time and cost when compared
with conventional pump and treat, thermal or landfill disposal technology.

INTELLECTUAL PROPERTY

         The Company is the sub-licensee of XyclonyX, an affiliate, of two
patents, one for a method of treating hydrocarbon spills and one for a method of
treating hydrocarbon contaminated soil and a patent pending for the "treatment
of contaminated activated charcoal." XyclonyX is a licensee of the inventors for
all these patents. These patents were issued on August 13, 1991 and August 2,
1994 with the patent pending filed January 18, 2002.

         SSWM's Chief Engineer Behzad Mirzayi, P.E. in conjunction with XyclonyX
developed the BAC(TM) and BioGAC(TM) carbon recycling technology that has been
Patent Pending since first filed January 2002 with the U.S. Patent and Trademark
Office. Once this patent is approved, SSWM will formalize an additional
sub-license agreement with XyclonyX at that time.

                                    Page 11





<PAGE>

         During the past two years the Company has done a minimal amount of
basic research and development amounting to less than $50,000 in each fiscal
year. The Company plans to spend approximately the same amount on research and
development over the next fiscal year, integrating its engineering services with
historical application research provided by George Robinson to incorporate new
waste treatments into its final engineering design for customer project work.

         EMPLOYEES

         As of September 30, 2003 the Company had 6 full time employees. The
Company also makes use of professionals on an as-needed basis. The Company's
employees are not represented by a labor union and the Company believes its
employee relations are good. The Company shares space with its parent Company,
U.S. Microbics, Inc, which provides financial and administrative support to SSWM

                                  RISK FACTORS

AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO
THE OTHER INFORMATION IN THIS REPORT, THE FOLLOWING RISK FACTORS SHOULD BE
CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS. THIS REPORT
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED. ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN
AS THEY ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS CONCERNING FUTURE
EVENTS OR FUTURE PERFORMANCE OF THE COMPANY. READERS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH ARE ONLY PREDICTIONS
AND SPEAK ONLY AS OF THE DATE HEREOF. FORWARD-LOOKING STATEMENTS USUALLY CONTAIN
THE WORDS "ESTIMATE," "ANTICIPATE," "BELIEVE," "PLAN," "EXPECT," OR SIMILAR
EXPRESSIONS, AND ARE SUBJECT TO NUMEROUS KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES. IN EVALUATING SUCH STATEMENTS, PROSPECTIVE INVESTORS SHOULD
REVIEW CAREFULLY VARIOUS RISKS AND UNCERTAINTIES IDENTIFIED IN THIS REPORT,
INCLUDING THE MATTERS SET BELOW AND IN THE COMPANY'S OTHER SEC FILINGS. THESE
RISKS AND UNCERTAINTIES COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE INDICATED IN THE FORWARD-LOOKING STATEMENTS. THE COMPANY
UNDERTAKES NO OBLIGATION TO UPDATE OR PUBLICLY ANNOUNCE REVISIONS TO ANY
FORWARD-LOOKING STATEMENTS TO REFLECT FUTURE EVENTS OR DEVELOPMENTS.

OUR ABILITY TO CONTINUE OPERATIONS IS DEPENDENT ON A NUMBER OF FACTORS.

         We are a development stage company engaged in developing and selling
microbial technology and engineering application expertise. Since our inception
we have experienced annual operating losses and negative operating cash flow. As
of June 30, 2003, we had an accumulated deficit of $ 6,772,721 . We have
generated only limited revenues to date. Our parent company, U.S. Microbics,
Inc., has invested approximately $6,700,000 in our operations to date, however
we will need to raise additional capital to continue as a going concern.

         There can be no assurance that we will successfully commercialize any
products and services based on microbial technology or manage the related
manufacturing, marketing, sales, licensing and customer support operations in a
profitable manner. In particular, our prospects must be considered in light of
the problems, delays, expenses and difficulties encountered by any company in
the startup stage, many of which may be beyond our control. These problems,
delays, expenses and difficulties include unanticipated problems relating to
product development and formulation, testing, quality control, production,
inventory management, sales and marketing and additional costs and competition,
any of which could have a material adverse effect on our business, financial
condition and results of operations. There can be no assurance that our products
and services can be successfully marketed or that we will ever achieve
significant revenues or profitable operations.

                                    Page 12





<PAGE>

         Our ability to become profitable will depend on a variety of factors,
including the following:

         o        price, volume and timing of product sales;
         o        variations in gross margins on our products, which may be
                  affected by the sales mix and competitive pricing pressures;
         o        regulatory approvals for using our bioremediation products,
                  including permits for treatment sites, water quality permits,
                  air quality permits, and other permits as required by
                  particular jurisdictions;
         o        changes in our levels of research and development, including
                  the timing of any demonstration projects for regulatory
                  approval; and
         o        acquisitions of products, technology or companies; and
         o        our ability to obtain performance bonding when required.

         Our long-term success also will be affected by expenses, difficulties
and/or delays encountered in developing and selling microbial technology,
competition, and the often burdensome environmental regulations associated with
permitting hydrocarbon remediation sites.

WE WILL NEED ADDITIONAL FINANCING TO FULLY IMPLEMENT OUR BUSINESS PLAN, AND WE
CANNOT ASSURE YOU THAT WE WILL BE SUCCESSFUL IN OBTAINING SUCH FINANCING OR IN
CONTINUING OUR OPERATIONS.

         We have focused our efforts on developing our business in the
environmental biotechnology sector. We will need to raise additional capital to
implement fully our business plan and continue to establish adequate
manufacturing, marketing, sales, licensing and customer support operations.
There can be no assurance that additional public or private financing, including
debt or equity financing, will be available as needed, or, if available, on
terms favorable to us. Any additional equity financing may be dilutive to our
stockholders and such additional equity securities may have rights, preferences
or privileges that are senior to those of our existing common or preferred
stock. Furthermore, debt financing, if available, will require payment of
interest and may involve restrictive covenants that could impose limitations on
our operating flexibility. Our failure to successfully obtain additional future
funding may jeopardize our ability to continue our business and operations.

OUR TECHNOLOGY HAS NOT GAINED FULL MARKET ACCEPTANCE, AND WE CANNOT ASSURE YOU
THAT IT EVER WILL.

         Our microbial technology has not been fully utilized in any particular
market. Market acceptance of our products and services will depend in large part
upon our ability to demonstrate the technical and operational advantages and
cost effectiveness of our products and services as compared to alternative,
competing products and services, and our ability to train customers concerning
the proper use and application of our products. There can be no assurance that
our products and services will achieve a level of market acceptance that will be
profitable for us.

         Due to lack of market acceptance and other factors, we may not be able
to distribute our products through the retail channel via strategic
relationships with existing distributors and joint ventures enacted for domestic
and international business.

                                    Page 13





<PAGE>

WE MAY BE SUBJECT TO FUTURE ENVIRONMENTAL LIABILITIES THAT COULD AFFECT OUR
RESULTS OF OPERATIONS OR FINANCIAL CONDITION.

         We are subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of hazardous
materials and waste products. We currently maintain a supply of several
hazardous materials at our facilities. While we currently meet these
environmental requirements, there is no assurance that future laws and
regulations will not impose significant compliance costs. If there is an
accident, we could be held liable for any damages that result and the liability
could exceed our resources. In addition, the use of our BIO-RAPTOR(TM) requires
permits to treat contaminated soil. Permit issues may delay the implementation
and installation of our products, including the BIO-RAPTOR(TM).

IF WE ARE UNABLE TO MANAGE FUTURE GROWTH, OUR BUSINESS MAY BE NEGATIVELY
AFFECTED.

         We are continuing to pursue a strategy of rapid growth, and plan to
expand significantly our manufacturing capability and devote substantial
resources to our marketing, sales, administrative, operational, financial and
other systems and resources. Such expansion will place significant demands on
our marketing, sales, administrative, operational, financial and management
information systems, controls and procedures. Accordingly, our performance and
profitability will depend on the ability of our officers and key employees to:

         o        manage our business and our subsidiaries as a cohesive
                  enterprise;
         o        manage expansion through the timely implementation and
                  maintenance of appropriate administrative, operational,
                  financial and management information systems, controls and
                  procedures;
         o        add internal capacity, facilities and third-party sourcing
                  arrangements as and when needed;
         o        maintain service quality controls; and
         o        attract, train, retain, motivate and manage effectively our
                  employees.

         There can be no assurance that we will integrate and manage
successfully new systems, controls and procedures for our business, or that our
systems, controls, procedures, facilities and personnel, even if successfully
integrated, will be adequate to support our projected future operations. Any
failure to implement and maintain such systems, controls and procedures, add
internal capacity, facilities and third-party sourcing arrangements or attract,
train, retain, motivate and manage effectively our employees could have a
material adverse effect on our business, financial condition and results of
operations.

         In addition, we may incur substantial expenses identifying,
investigating and developing appropriate products and services based on
microbial technology in the global environmental, manufacturing, agricultural,
natural resource and other potential markets. There can be no assurance that any
expenditures incurred in identifying, investigating and developing such products
and services will ever be recouped.

WE MAY FACE STRONG COMPETITION FROM LARGER, ESTABLISHED COMPANIES.

         We likely will face intense competition from other environmental
companies, virtually all of which can be expected to have longer operating
histories, greater name recognition, larger installed customer bases and
significantly more financial resources, R&D facilities and manufacturing and
marketing experience than the Company. There can be no assurance that
developments by our current or potential competitors will not render our
proposed products or services obsolete.

                                    Page 14





<PAGE>

         In addition, we expect to face additional competition from new entrants
into our targeted industry segments. As the demand for products and services
based on microbial technology grows and new markets are exploited, we expect
that competition will become more intense, as current and future competitors
begin to offer an increasing number of diversified products and services.

         Although we believe that we have certain technical advantages over
certain of our competitors, including, without limitation, the development of
technological innovations that will make the BIO-RAPTOR(TM) and the use of our
microbial blends more economical and efficient than other bioremediation
methods, maintaining such advantages will require a continued high level of
investment in research and development, marketing, sales and customer support.
We may not have sufficient resources to maintain our research and development,
marketing, sales and customer support efforts on a competitive basis.
Additionally, we may not be able to make the technological advances necessary to
maintain a competitive advantage with respect to our products and services.
Increased competition could result in price reductions, fewer product orders,
obsolete technology and reduced operating margins, any of which could materially
and adversely affect our business, financial condition and results of
operations.

WE MAY BE SUBJECT TO FUTURE PRODUCT LIABILITY CLAIMS, WHICH MAY REQUIRE US TO
PAY MONEY TO THE CLAIMANT.

         The development, marketing, sale and/or licensing of products based on
microbial technology entail liability risks in the event of product failure or
claim of harm caused by product operation. While we offer to contract with our
potential customers on a pay for performance basis, and we are not aware of any
claim against us based upon the use or failure of our products, end users of any
of our proposed products and services could assert claims against us. Although
we maintain product liability insurance against any such claims, there can be no
assurance that such insurance will be sufficient to cover all potential
liabilities, or that we will be able to continue to obtain insurance coverage in
an amount that we believe to be adequate. If there is a successful suit against
us, lack or insufficiency of insurance coverage would have a material adverse
effect on our business, financial condition and results of operations.

OUR SUCCESS DEPENDS IN LARGE PART ON OUR ABILITY TO ATTRACT AND RETAIN KEY
EMPLOYEES AND MANAGEMENT.

         Our success and execution of our business strategy will depend
significantly upon the continuing contributions of, and on our ability to
attract, train and retain qualified management, marketing, sales, operational,
production, administrative and technical personnel. In this regard, we are
particularly dependent upon the services of Bruce S. Beattie, our President and
Chief Executive and Behzad Mirzayi, Executive Vice President. The loss of the
services of one or more of our key employees and the failure to attract, train
and retain additional qualified personnel in a timely manner could have a
material adverse effect on our business, financial condition and results of
operations.

                                    Page 15





<PAGE>

OUR RESULTS OF OPERATIONS MAY HIGHLY FLUCTUATE FROM QUARTER TO QUARTER AS WE
CONTINUE TO GROW, THEREFORE YOU CANNOT USE THESE RESULTS TO PREDICT HOW WE MAY
PERFORM IN THE FUTURE.

         As a result of our limited operating history, we do not have historical
financial data for a significant number of periods in which to base our planned
operating expenses. In addition our revenues have not met our expectations. Our
expense levels are based in part on our projections as to future revenues that
are expected to increase. It is anticipated that as we mature, our sales and
operating results may fluctuate from quarter to quarter and from year to year
due to a combination of factors, including, among others:

         o        the volume, timing of, and ability to fulfill customer orders;
         o        the demand for our products and services;
         o        the number, timing and significance of product enhancements
                  and new product introductions by us and our competitors;
         o        changes in pricing policies by us or our competitors;
         o        changes in the level of operating expenses;
         o        expenses incurred in connection with our plans to fund greater
                  levels of sales and marketing activities and operations,
                  develop new distribution channels, broaden our customer
                  support capabilities and continue our R&D activities;
         o        personnel changes;
         o        product defects and other product or service quality problems;
                  and
         o        general domestic and international legal, economic and
                  political conditions.

Any unfavorable changes in these or other factors could have a material adverse
effect on our business, financial condition and results of operation.

IF WE ARE UNABLE TO KEEP UP WITH TECHNOLOGICAL DEVELOPMENTS, OUR BUSINESS COULD
BE NEGATIVELY AFFECTED.

         The markets for our products and services based on microbial technology
are generally characterized by rapid technological change and are highly
competitive with respect to timely innovations. Accordingly, we believe that our
ability to succeed in the sale of our products and services will depend
significantly upon the technological quality of our products and services
relative to those of our competitors, and our ability to continue to develop and
introduce new and enhanced products and services at competitive prices and in a
timely and cost-effective manner.

         In particular, our future success is dependent upon our BIO-RAPTOR(TM),
Remediline(TM), MTBEctomy(TM), BAC(TM), and BioGAC(TM) product lines, each of
which is innovative and has not achieved market acceptance. In order to develop
such new products and services, we will depend upon close relationships with
existing customers that previously utilized microbial technology in the
bioremediation, agricultural and waste treatment industries, and our ability to
continue to develop and introduce new and enhanced products and services at
competitive prices and in a timely and cost-effective manner. There can be no
assurance that our customers will provide us with timely access to such
information or that we will be able to develop and market our new products and
services successfully or respond effectively to technological changes or new
product and service offerings of our competitors. We may not be able to develop
the required technologies, products and services on a cost-effective and timely
basis, and any inability to do so could have a material adverse effect on our
business, financial condition and results of operations.

                                    Page 16





<PAGE>

WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WHICH COULD ADVERSELY
AFFECT OUR BUSINESS.

         We rely on patent, trademark, trade secret and copyright protection to
protect our technology. We believe that technological leadership in microbial
technology will be achieved through additional factors such as the technological
and creative skills of our personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance. Nevertheless,
our ability to compete effectively depends in part on our ability to develop and
maintain proprietary aspects of our technology, such as those patents currently
licensed by our technology and research and development affiliate, XyclonyX. We
may not secure future patents and patents may become invalid and may not provide
meaningful protection for our product innovations. In addition, the laws of some
foreign countries do not protect our intellectual property rights to the same
extent as do the laws of the United States. Furthermore, there can be no
assurance that competitors will not independently develop similar products,
"reverse engineer" our products, or, if patents are issued to us, design around
such patents.

         We also rely upon a combination of copyright, trademark, trade secret
and other intellectual property laws to protect our proprietary rights by
entering into confidentiality or license agreements with our employees,
consultants and vendors, and by controlling access to and distribution of our
technology, documentation and other proprietary information. There can be no
assurance, however, that the steps taken by us will not be challenged,
invalidated or circumvented, or that the rights granted there under will provide
a competitive advantage to us. Any such circumstance could have a material
adverse effect on our business, financial condition and results of operations.

         While we are not currently engaged in any intellectual property
litigation or proceedings, there can be no assurance that we will not become so
involved in the future or that our products do not infringe any intellectual
property or other proprietary right of any third party. Such litigation could
result in substantial costs, the diversion of resources and personnel, and
subject us to significant liabilities to third parties, any of which could have
a material adverse effect on our business.

         We also rely on certain technology which we license from third parties,
including microbial technology which is integrated with internally developed
products and used in the XyclonyX product line to perform key functions. There
can be no assurance that the patents underlying such third party technology
licenses will continue to remain unchallenged or that we will not have to defend
them, along with the licensors, to continue their commercial viability to us.
The loss of or inability to maintain any of these technology licenses could
result in delays or reductions in product shipments which could materially
adversely affect our business, financial condition or results of operations.

WE MAY NOT BE ABLE TO PROTECT OUR TRADE NAMES AND DOMAIN NAMES.

         We may not be able to protect our trade names and domain names against
all infringers, which could decrease the value of our brand name and proprietary
rights. We currently hold the Internet domain name "bugsatwork.com" and we use
"Sub Surface Waste Management, Inc." as a trade name. Domain names generally are
regulated by Internet regulatory bodies and are subject to change and may be
superceded, in some cases, by laws, rules and regulations governing the
registration of trade names and trademarks with the United States Patent and
Trademark Office and certain other common law rights. If the domain registrars
are changed, new ones are created or we are deemed to be infringing upon
another's trade name or trademark. In such event, we could be unable to prevent
third parties from acquiring or using, as the case may be, our domain name,
trade names or trademarks, which could adversely affect our brand name and other
proprietary rights.

                                    Page 17





<PAGE>

WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CONTRACT BONDING

         The deployment of engineering services for certain government and/or
private remediation projects may require contract performance bonding. The
availability of contract bonding in the remediation market has been curtailed
since the September 11, 2001 World Trade Center disaster. Insurance bonding
requirements often require collateral of 100% of the contract amount. The
collateral and bonding requirements could limit the number and size of projects
requiring bonds undertaken by the Company. In the event contract bonding cannot
be obtained at an economical price or collateral requirements are beyond the
Company's financial capability the failure to obtain contract bonding could have
a material adverse effect on the Company's business, financial condition and
results of operations.

OUR MAJORITY SHAREHOLDER, U.S. MICROBICS, INC., IS ABLE TO EXERCISE SIGNIFICANT
INFLUENCE OVER ALL MATTERS REQUIRING SHAREHOLDER APPROVAL.

         U.S. Microbics, Inc., our majority shareholder, owns approximately
74.10% of the outstanding shares of common stock and common stock equivalents,
including convertible preferred stock and stock options. As a result, U.S.
Microbics, Inc. is able to exercise significant influence over all matters
requiring shareholder approval, including the election of directors and the
approval of significant corporate transactions. Such a concentration of
ownership may also have the effect of delaying or preventing a change in control
of the Company.

FOREIGN DISTRIBUTORS MAY EXPLOIT OUR PRODUCTS WITHOUT COMPENSATION TO US

         When we ship to foreign distributors, they may try to reverse engineer
our remediation technology and exploit it without compensating us. Foreign
distributors may also set up manufacturing and distribution operations that
could compete unfairly with us, using lower prices and/or broader distribution.
There is no assurance that we will be able to protect our business through the
use of licensing agreements against such events.

We May Not Be Successful In OUR International Sales Activities, Which Could
Adversely Affect our Growth[[IS THE COMPANY ENGAGING IN THESE ACTIVITIES? MAYBE
THIS ISN'T A RISK AT THIS TIME, IF YOU DON'T HAVE INTERNATIONAL SALES
ACTIVITIES. CONSIDER DELETING THIS IF IT DOESN'T DESCRIBE A RISK OF YOUR CURRENT
OPERATIONS.]]

         Our international sales will be limited if we are unable to establish
and maintain relationships with international distributors and customers. Even
if we increase our international sales efforts, we cannot be certain that it
will increase demand for our products in these markets. Our international
operations are subject to a number of risks, including:

         o        Market acceptance;

         o        Environmental laws;

         o        Longer sales cycles;

         o        Difficulty in collecting accounts receivable;

         o        Political and economic instability;

                                    Page 18





<PAGE>

         o        Reduced protection of intellectual property rights;

         o        Protectionist laws and business practices that favor local
                  competition;

         o        Dependence on local vendors; and

         o        Foreign language barriers.

         In addition, because we intend to market our products internationally,
a portion of our expected international revenue may be denominated in foreign
currencies in the future, which will subject us to risks associated with
fluctuations in the foreign currencies. An increase in the value of the U.S.
dollar relative to foreign currencies could make our products more expensive and
therefore less competitive in foreign markets.

OUR ENGINEERING SERVICES LIABILITY MAY NOT BE SUFFICIENT TO COVER ALL POTENTIAL
LIABILITIES

         Our engineering services are covered under a $1 million professional
errors and omissions policy for the execution of professional engineering
services in support of our activities. We are not aware of any claims or
disputes exceeding this insured limit. While we will continue to maintain
professional engineering liability insurance against any such claims, there can
be no assurance that such insurance will be sufficient to cover all potential
liabilities, or that we will be able to continue to obtain insurance coverage in
an amount that we believe to be adequate. In the event of a successful suit
against us, lack or insufficiency of insurance coverage could have a material
adverse effect on our business, financial condition and results of operations.

WE RELY ON WEST COAST FERMENTATION CENTER, WHICH HAS LIMITED SERVICE AND
MANUFACTURING FACILITIES

         Our future performance will depend to a substantial degree upon our
ability to engineer, manufacture, market and deliver our products and services
based on the remediation technology in an efficient and profitable manner. We
purchase the microbial products from West Coast Fermentation Center, Inc.
("WCFC"), a wholly owned manufacturing subsidiary of U.S. Microbics, Inc. As of
this date, WCFC has only partially implemented its final build-out of
manufacturing operations Prior to becoming our supplier, WCFC had no experience
in maintaining the type of facility that will manufacture our products in the
quantities required for profitable operations. Accordingly, there can be no
assurance that WCFC will be able to complete the facility in a timely manner,
that the cost of completing the facility will not exceed its current estimates,
that the demand for the our products will not exceed the facility's capacity or
that the facility will achieve satisfactory levels of manufacturing efficiency
in a timely manner or at a level of quality control that meets competitive
demands. In addition, the implementation of WCFC's manufacturing operations at
the facility presents risks that, singly or in any combination, could have a
material adverse effect on our business, financial condition and results of
operations. These risks include, but are not limited to, production delays
associated with products based on the remediation technology, unavailability of
required capital equipment and qualified personnel, raw material shortages,
higher-than-expected overhead or operational costs, lack of sufficient quality
control over the products and order backlogs. In addition, WCFC's development of
its internal manufacturing capacity will depend in large part on its ability to

                                    Page 19





<PAGE>

raise sufficient capital for this purpose. There can be no assurance that WCFC
will develop adequate manufacturing capacity or raise sufficient capital, the
failure of either of which could have a material adverse effect on our business,
financial condition, results of operations and possibly on our relationships
with our customers and vendors. WCFC may consider third-party outsourcing
arrangements for the manufacture and supply of certain products during the
period in which WCFC expands its internal manufacturing capacity. These
outsourcing arrangements are subject to various risks, including, without
limitation, production delays or interruptions, inferior product quality,
misappropriation of trade secrets and lower profit margins.

WE PAY NO DIVIDENDS

         We have never declared nor paid cash dividends on our capital stock. We
currently intend to retain any earnings for funding growth however these plans
may change depending upon capital raising requirements.

RISK OF PENNY STOCK.

         Our common stock is deemed to be a "penny stock" as that term is
defined in Rule 3a51-1 of the Exchange Act of 1934. Penny stocks are stocks (i)
with a price of less than five dollars per share; (ii) that are not traded on a
"recognized" national exchange; (iii) whose prices are not quoted on the NASDAQ
automated quotation system (NASDAQ-listed stocks must still meet requirement (i)
above); or (iv) of an issuer with net tangible assets less than US$2,000,000 (if
the issuer has been in continuous operation for at least three years) or
US$5,000,000 (if in continuous operation for less than three years), or with
average annual revenues of less than US$6,000,000 for the last three years.

         A principal exclusion from the definition of a penny stock is an equity
security that has a price of $5.00 or more, excluding any broker or dealer
commissions, markups or markdowns. As of the date of this Annual Report the
Company's common stock is not listed or traded.

         If the Company's common stock were deemed a penny stock, section 15(g)
and Rule 3a51-1 of the Exchange Act of 1934 would require broker-dealers dealing
in the Company's common stock to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in the Company's common
stock are urged to obtain and read such disclosure carefully before purchasing
any shares that are deemed to be "penny stock."

         Moreover, Rule 15g-9 of the Exchange Act of 1934 Commission requires
broker-dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker-dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker-dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of
such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
the Company's common stock to resell their shares to third parties or to
otherwise dispose of them.

                                    Page 20





<PAGE>

THE TRADING PRICE OF OUR COMMON STOCK MAY DECREASE DUE TO FACTORS BEYOND OUR
CONTROL.

         The trading price of the common stock is subject to significant
fluctuations in response to numerous factors, including:

         o        Variations in anticipated or actual results of operations;

         o        Announcements of new products or technological innovations by
                  us or our competitors;

         o        Changes in earnings estimates of operational results by
                  analysts;

         o        Results of product demonstrations.

         o        Inability of market makers to combat short positions on the
                  stock;

         o        Inability of the market to absorb large blocks of stock sold
                  into the market;

         o        Developments or disputes concerning our licensed patents,
                  trademarks or proprietary rights; and

         o        Comments about us or our markets posted on the Internet.

         Moreover, the stock market from time to time has experienced extreme
price and volume fluctuations, which have particularly affected the market
prices for emerging growth companies and which often have been unrelated to the
operating performance of the companies. These broad market fluctuations may
adversely affect the market price of our Common Stock. If our shareholders sell
substantial amounts of their common stock in the public market, the price of our
common stock could fall. These sales also might make it more difficult for us to
sell equity or equity related securities in the future at a price we deem
appropriate.

THE UNCERTAINTY OF CONVERSION EFFECTS OF THE PREFERRED STOCK MAY CAUSE DILUTION
OF CURRENT COMMON SHAREHOLDERS.

         Within the next 24 months from the date of this report the holders of a
majority of our Preferred Stock and certain warrant and option holders will have
the right to convert their respective interests into approximately 1,870,000
shares of Common Stock. In the event that such holders of Preferred Stock,
warrants and options exercise their conversion rights, the holders of the Common
Stock then issued and outstanding may experience immediate and substantial
dilution in the net tangible book value of their shares if earnings and other
factors do not compensate for the increased number of shares of such Common
Stock.

THE LIQUIDITY OF OUR STOCK COULD BECOME IMPAIRED

         Our common stock currently is traded on the OTC Bulletin Board, which
is generally considered to be a less efficient market than national exchanges
such as NASDAQ. Consequently, the liquidity of our securities could be impaired,
not only in the number of securities which could be bought and sold, but also
through delays in the timing of transactions, difficulties in obtaining price
quotations, reduction in security analysts' and the media's coverage of ours, if
any, and lower prices for our securities than might otherwise be attained. This
circumstance could have an adverse effect on the ability of an investor to sell
any shares of our Common Stock as well as on the selling price for such shares.
In addition, the market price of our Common Stock may be significantly affected
by various additional factors, including, but not limited to, our business
performance, industry dynamics or changes in general economic conditions.

                                    Page 21





<PAGE>

DOUBT ABOUT OUR ABILITY TO CONTINUE OPERATIONS AS A "GOING CONCERN". YOU MAY
LOSE ALL OF YOUR INVESTMENT IF WE ARE UNABLE TO CONTINUE OPERATIONS

The Company's ability to continue as a going concern is subject to substantial
doubt given its current financial condition and requirements for additional
funding. There can be no assurance that we will be able to generate sufficient
revenues from continuing operations to meet our obligations . As a result of the
foregoing, our auditors have expressed substantial doubt about our ability to
continue as a going concern. If we cannot continue as a going concern, then you
may lose all of your investment.

If we raise additional funds by issuing equity securities, existing stockholders
may experience a dilution in their ownership. In addition, as a condition to
giving additional funds to us, future investors may demand, and may be granted,
rights superior to those of existing stockholders.

ITEM 2.   DESCRIPTION OF PROPERTIES

         The Company shares an administrative facility with U.S. Microbics, Inc.
in a 12,083 square foot building located at 6451-C El Camino Real, Carlsbad,
California. The facility houses the fermentation plant, the research and
development facility of XyclonyX, and the operations of the Company, Bio-Con
Microbes, and Sol Tech. The facility should provide enough space for the Company
for the next four years of operation, at which time additional space may be
required. U.S. Microbics, Inc., charges the Company its pro-rata share of the
rent based on floor space. The Company's Engineering Resources Division is
headquartered in Littleton, Colorado in an office facility that can accommodate
up to 10 engineers. The Company also maintains a project office in Charleston,
South Carolina.

ITEM 3.   LEGAL PROCEEDINGS

         The Company is not a party to any pending legal proceeding. No federal,
state or local governmental agency is presently contemplating any proceeding
against the Company. No director, executive officer or affiliate of the Company
or owner of record or beneficially of more than five percent of the Company's
common stock is a party adverse to the Company or has a material interest
adverse to the Company in any proceeding.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The annual meeting of the Company's shareholders was held on July 31,
2003. The following matters were submitted to the shareholders for vote.

                                    Page 22





<PAGE>

         PROPOSAL NO. 1:

         Election of Bruce S. Beattie, Behzad Mirzayi, Conrad Nagel, Robert C.
Brehm and Bill Hopkins to serve as Directors for a term of one year and until
their successor(s) is/are duly appointed and qualified.

         PROPOSAL NO. 2:

         Ratification of the 2003 employee Stock Incentive Plan.

         PROPOSAL NO. 3:

         Ratification of the appointment of Russell, Bedford, Stefanou,
Mirchandani LLP, as the Company's independent accountants for the fiscal year
2003.

         The number of votes cast for, against and withheld for each proposal,
as well as the number of abstentions and broker non-votes, is as follows:

<TABLE>
<CAPTION>
         Proposal No. 1:

                                    For              Against     Withheld       Abstentions/Non Votes
                                    ---              -------     --------       ---------------------

         <S>                        <C>              <C>               <C>              <C>
         Bruce S. Beattie           38,277,292       0                 0                0

         Behzad Mirzay              38,277,292       0                 0                0

         Conrad Nagel               38,277,292       0                 0                0

         Robert C. Brehm            38,277,292       0                 0                0

         Bill Hopkins               38,277,292       0                 0                0

         Proposal No. 2:

         For      38,273,592        Against  3,700   Withheld 0   Abstentions/Non-Votes 0

         Proposal No. 3:

         For      38,275,592        Against 2,000    Withheld 0   Abstentions/Non-Votes 0
</TABLE>

                                     PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

Market Information
------------------

         On January 27th, 2003 the Company filed Form 211 with the National
Association of Security Dealers ("NASD"), pursuant to Rule 15c2-11 of Securities
and Exchange Commission. Form 211 is an application for the outstanding common
stock of the Company to be publicly traded on the Over-the-Counter Bulletin
Board. On August 19, 2003, the application was approved and the Company's stock
commenced trading on the OTC Bulletin Board under the symbol "SSWM".

                                    Page 23





<PAGE>

         The following table indicates the high and low bid prices for the
Company's Common Stock as quoted on the OTC Bulletin Board for the periods
indicated. The prices shown are representative inter-dealer prices, do not
include retail markups, markdowns or commissions and may not necessarily reflect
actual transactions. The Company's common stock began publicly trading on August
19, 2003. The opening quote on that date was $.05 Bid, $.25 Ask.

                                BID AND ASK PRICES
PERIOD ENDING                       HIGH CLOSE                         LOW CLOSE
-------------                       ----------                         ---------

September 30, 2003                    $0.75                              $0.62

The approximate number of registered holders of our common stock as of January
8, 2004 was 200.

Dividends
---------

         The Company has not declared any cash dividends with respect to its
common stock and does not intend to declare dividends in the foreseeable future.
The future dividend policy of the Company cannot be ascertained with any
certainty, and if and until the Company completes any acquisition,
reorganization or merger, no such policy will be formulated. There are no
material restrictions limiting, or that are likely to limit, the Company's
ability to pay dividends on its securities.

Recent Sales of Unregistered Securities.
----------------------------------------

         On October 21, 2002, the Company issued 800,000 to Sol Tech
Corporation, an affiliate of U.S. Microbics, Inc., under a consulting agreement.
This transaction was valued at $0.05 per share of common stock.

         On December 13, 2002, the Company entered into a Capital Stock Exchange
Agreement with the stockholders of Sub Surface Waste Management, Inc. ("SSWM
Stockholders"). The SSWM Stockholders transferred 10,824,000 shares of SSWM
common stock and 5,360,000 shares of SSWM preferred stock in exchange for
10,744,000 shares of the Company's common stock and 5,360,000 shares of the
Company's preferred stock. Additionally, the SSWM holders of options to purchase
Series A preferred stock of SSWM exchanged their options for options to purchase
the Company's Series A preferred stock. The exercise price of the options is
$$.25 per share and the term of the options is Three years. On the date of the
transaction, the Company's common stock was valued at $.05 per share and the
Company's Series A preferred stock was valued at $.25 per share.

         On January 24, 2003, the Company sold to an accredited investor, 60,000
shares of common stock. This transaction was valued at $0.50 per common share.

         In August 2003, the Company sold to investors 245,000 shares of common
stock. These transactions were valued at $0.25 per common share.

         In September of 2003, the Company sold to investors 685,000 shares of
common stock. Of the total, 210,000 shares were valued at $0.50 per common
share, 25,000 shares were valued at $0.40 per common share, 125,000 shares were
valued at $0.25 per share and 325,000 shares were valued at $0.15 per share.

                                    Page 24





<PAGE>

         The offers and sales of these securities are believed to have been
exempt from the registration requirements of Section 5 of the Securities Act of
1933 pursuant to Section 4(2) thereof, and from similar states' securities laws,
rules and regulations requiring the offer and sale of securities by available
state exemptions from such registration.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY INCENTIVE PLAN

         Set forth in the table below is information regarding awards made
through compensation plans or arrangements through September 30, 2003, the most
recently completed fiscal year.

<TABLE>
<CAPTION>
----------------------------- -------------------------- ------------------------- --------------------------
                                                                                   Number of securities
                                                                                   remaining available for
                                                                                   future issuance under
                              Number of securities to    Weighted average          equity compensation
                              be issued upon exercise    exercise price of         plans (excluding
                              of outstanding options,    outstanding options,      securities reflected in
Plan Category                 warrants and rights        warrants and rights       column 2)
----------------------------- -------------------------- ------------------------- --------------------------

----------------------------- -------------------------- ------------------------- --------------------------
<S>                                    <C>                         <C>                      <C>
Equity Compensation Plans
Approved by Security Holders           200,000                     N/A                      200,000
----------------------------- -------------------------- ------------------------- --------------------------

----------------------------- -------------------------- ------------------------- --------------------------
Equity Compensation Plans
Not Approved by Security
Holders                                  N/A                       N/A                        N/A
----------------------------- -------------------------- ------------------------- --------------------------

----------------------------- -------------------------- ------------------------- --------------------------
</TABLE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

CAUTIONARY FORWARD - LOOKING STATEMENT
--------------------------------------

         Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, and in future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases and in oral statements made with the approval of an authorized
executive officer which are not historical or current facts are "forward-looking
statements" made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The following
important factors, among others, in some cases have affected and in the future
could affect the Company's actual results and could cause the Company's actual
financial performance to differ materially from that expressed in any
forward-looking statement: (i) the extremely competitive conditions that
currently exist in the market for "blank check" companies similar to the Company
and (ii) lack or resources to maintain the Company's good standing status and
requisite filings with the Securities and Exchange Commission. The foregoing
list should not be construed as exhaustive and the Company disclaims any
obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.

                                    Page 25





<PAGE>

Critical Accounting Policies

         The preparation of our consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires us
to make estimates and judgments that affect our reported assets, liabilities,
revenues, and expenses, and the disclosure of contingent assets and liabilities.
We base our estimates and judgments on historical experience and on various
other assumptions we believe to be reasonable under the circumstances. Future
events, however, may differ markedly from our current expectations and
assumptions. While there are a number of significant accounting policies
affecting our consolidated financial statements; we believe the following
critical accounting policies involve the most complex, difficult and subjective
estimates and judgments:

         o        business combinations

         o        stock-based compensation.

         o        revenue recognition

Business combinations

         The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards ("SFAS") No. 141, Business Combinations, which
established accounting and reporting standards for business combinations and
requires that all business combinations be accounted for by the purchase method.
Under the purchase method of accounting, the cost, including transaction costs,
is allocated to the underlying net assets, based on their respective estimated
fair values. The excess of the purchase price over the estimated fair values of
the net assets acquired is recorded as goodwill.

         The judgments made in determining the estimated fair values and
expected useful lives assigned to each class of assets and liabilities acquired
can significantly impact net income. For example, different classes of assets
will have useful lives that differ. Consequently, to the extent a longer-lived
asset is ascribed greater value under the purchase method than a shorter-lived
asset, there may be less amortization recorded in a given period.

         Determining the fair value of certain assets and liabilities acquired
is subjective in nature and often involves the use of significant estimates and
assumptions. We use a one-year period following the consummation of acquisitions
to finalize estimates of the fair values of assets and liabilities acquired. Two
areas, in particular, that require significant judgment are estimating the fair
values and related useful lives of identifiable intangible assets. While there
are a number of different methods used in estimating the value of acquired
intangibles, there are two approaches primarily used: the discounted cash flow
and market comparison approaches. Some of the more significant estimates and
assumptions inherent in the two approaches include: projected future cash flows
(including timing); discount rate reflecting the risk inherent in the future
cash flows; perpetual growth rate; determination of appropriate market
comparables; and the determination of whether a premium or a discount should be
applied to comparables. Most of the foregoing assumptions are made based on
available historical information.

                                    Page 26





<PAGE>

Stock-Based Compensation

         In December 2002, the FASB issued SFAS No. 148 - Accounting for
Stock-Based Compensation - Transition and Disclosure. This statement amends SFAS
No. 123 - Accounting for Stock-Based Compensation, providing alternative methods
of voluntarily transitioning to the fair market value based method of accounting
for stock based employee compensation. FAS 148 also requires disclosure of the
method used to account for stock-based employee compensation and the effect of
the method in both the annual and interim financial statements. The provisions
of this statement related to transition methods are effective for fiscal years
ending after December 15, 2002, while provisions related to disclosure
requirements are effective in financial reports for interim periods beginning
after December 31, 2002.

         The Company elected to continue to account for stock-based compensation
plans using the intrinsic value-based method of accounting prescribed by APB No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Under the provisions of APB No. 25, compensation expense is measured at the
grant date for the difference between the fair value of the stock and the
exercise price.

Revenue Recognition

         Revenue for product sales is recognized at the time the product is
shipped to or picked up by the customer. Revenue for short-term engineering or
remediation services is recognized at the completion of the contract. Sales
under long-term contracts are accounted for under the percentage of completion
method. Revenues are recognized as the actual cost of work performed related to
the estimate at completion. Profits expected to be realized on contracts are
based on the Company's estimates of total contract sales value and costs at
completion. Assumptions used for recording sales and earnings are adjusted in
the period of change to reflect revisions in contract value and estimated costs.
In the period in which it is determined that a loss will be incurred on a
contract, the entire amount of the estimated loss is charged to income.

         PLAN OF OPERATION.
         ------------------

         The Company's wholly owned subsidiary, Sub Surface Waste Management,
Inc., engages in developing, manufacturing and selling engineered remediation
solutions for clean up of toxic waste releases to soil and/or groundwater and
the bio-recycling of spent activated carbon filtration media. The treatments may
be made directly to the contaminated soil or groundwater in the location at
which the contamination was found ("in situ"), using wells and subsurface
injection/extraction points to administer the Company's proprietary microbial
blends for bioremediation of various waste streams, or the treatments may
require excavation of contaminated soil or pumping of groundwater ("ex situ"),
and washing activated carbon filtration media with microbes to Bio-recycle with
the Company providing technical engineering consultation and microbial blends to
its teaming partners and/or executing the work directly as a contractor.

                                    Page 27





<PAGE>

         The Company's plan of operation for the next 12 months is to continue
the business of Sub Surface Waste Management, of Delaware Inc., raise additional
working capital and to seek the acquisition of additional companies which can
augment the base business of the Company.

         During the next 12 months, the Company's foreseeable cash requirements
are approximately $5,000,000 to implement its business plan in the environmental
cleanup business. The company will most likely need to issue additional common
or preferred stock, which will have a dilutive effect on current shareholders,
in order to raise the necessary capital to continue and expand its operations.

         Results of Operations.
         ----------------------

         Revenues for year ended September 30, 2003 were $432,754 compared to
$264,463 for the year ended September 30, 2002. Gross profit for the year ended
September 30, 2003 was $80,492 as compared to $28,381 for the comparable period
in the prior fiscal year.

         During the year ended September 30, 2003, the Company incurred
$1,195,786,in selling, general and administrative expenses, compared to $851,632
for the year ended September 30, 2002. The increase in selling, general and
administrative expenses of approximately $344,200 was primarily due to increases
in legal and accounting expenses, salaries and office expenses. During the year
the Company started trading on the Over-The-Counter Bulletin Board, an as a
result, legal and accounting expensed increased significantly.

         Depreciation expense for the year ended September 30, 2003 was $2,661
compared to $4,148 for the year ended September 30, 2002. Interest expense for
the years September 30, 2003 and 2002 respectively were $67,164 and $13,444.

                                    Page 28





<PAGE>

         Liquidity and Capital Resources:

As of September 30, 2003, we had a working capital deficit of $ 460,280. As a
result of our operating losses incurred during the year ended September 30,
2003, we generated a cash flow deficit of $629,638 from operating activities.
Cash flows used in investing activities was $ 2,747 during the year ended 2003.
We met our cash requirements during this period through the issuance of common
stock totaling $ 399,852 and $ 242,846 from notes payable and advances from the
Company's officers and shareholders.

While we have raised capital to meet our working capital and financing needs in
the past, however, additional financing is required in order to meet our current
and projected cash flow deficits from operations and development. We are seeking
financing in the form of equity in order to provide the necessary working
capital. On September 3, 2003, the Company entered into a continuous secondary
offering term sheet with Fusion Capital Fund II, LLC (Fusion)." Under the terms
of this agreement, Fusion agreed to purchase up-to $10,000,000 of the Company's
common stock over a period of 25 months. The agreement also requires the Company
to a minimum of 500,000 Commitment Shares to Fusion prior to commencement of the
funding. The Company reimbursed Fusion for expenses in the amount of $35,000,
$10,000 in cash and $25,000 in stock. To date, the Company has not issued the
Commitment Shares and is still evaluating the effects of entering into a binding
Common Stock Purchase Agreement with Fusion. If the Company does complete the
funding commitment with Fusion, substantial dilution of existing stockholders
could occur. The Company may not be successful in raising part or all of the
full amount of $10,000,000 from Fusion should Common Stock Purchase Agreement be
signed by the Company .

By adjusting its operations and development to the level of capitalization,
management believes it has sufficient capital resources to meet projected cash
flow deficits. However, if during that period or thereafter, we are not
successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to us, this could have a
material adverse effect on our business, results of operations liquidity and
financial condition.

The Company has relied mostly on cash infusions from its parent Company, U.S.
Microbics, Inc., and the sale of its common stock during the first five years of
its existence. Its parent Company has limited resources and may not be able to
continue to provide sufficient funds for SSWM to successfully continue its
operations.

Therefore, the Company will need additional capital to continue its operations
and will endeavor to raise funds through the sale of equity shares and revenues
from operations. In addition, SSWM will be offering a Private Placement
Memorandum ("PPM") of $5 million. The potential maximum net proceeds of $4.5
million from the PPM is planned to be used as follows: $3.5 million for business
development, acquisitions and general working capital and $1 million will be
used to increase the Company's technical services capability, purchase capital
equipment and increase microbial blend inventories. Assuming that the
acquisition(s) are completed and that the companies acquired are successful,
SSWM anticipates increasing its revenues faster than could be achieved solely
through internal growth.

There can be no assurance that the Company will generate revenues from
operations or obtain sufficient capital on acceptable terms, if at all. Failure
to obtain such capital or generate such operating revenues would have an adverse
impact on the Company's financial position and results of operations and ability
to continue as a going concern.

The Company's operating and capital requirements during the next fiscal year and
thereafter will vary based on a number of factors, including: (i) the rate at
which microbial products are shipped and generate profits; (ii) the necessary
level of sales and marketing activities for environmental products; and (iii)
the level of effort needed to develop additional distribution channels to the
point of commercial viability.

There can be no assurance that additional private or public financing, including
debt or equity financing, will be available as needed, or, if available, on
terms favorable to the Company. Any additional equity financing may be dilutive
to shareholders and such additional equity securities may have rights,
preferences or privileges that are senior to those of the Company's existing
Common or Preferred Stock. Furthermore, debt financing, if available, will
require payment of interest and may involve restrictive covenants that could
impose limitations on the operating flexibility of the Company. The failure of
the Company to successfully obtain additional future funding may jeopardize the
Company's ability to continue its business and operations.

During fiscal year ended September 30, 2004, the Company projects expenditures
for plant and equipment of approximately $100,000 and research and development
costs of less than $150,000, assuming the Company raises projected capital.
Research and development costs will be associated primarily with applications of
in-situ bio-remediation. The Company also plans to increase its number of
employees to approximately 15 by the end of fiscal year 2004.

                                    Page 29





<PAGE>

The independent auditor's report on the Company's September 30, 2003 financial
statements included in this Annual Report states that the Company's recurring
losses raise substantial doubts about the Company's ability to continue as a
going concern.

Recent Accounting Pronouncements

The Company adopted SFAS No. 142. Under the new rules, the Company will no
longer amortize goodwill and other intangible assets with indefinite lives, but
such assets will be subject to periodic testing for impairment. On an annual
basis, and when there is reason to suspect that their values have been
diminished or impaired, these assets must be tested for impairment, and
write-downs to be included in results from operations may be necessary. SFAS No.
142 also requires the Company to complete a transitional goodwill impairment
test six months from the date of adoption.

Any goodwill impairment loss recognized as a result of the transitional goodwill
impairment test will be recorded as a cumulative effect of a change in
accounting principle no later than the end of fiscal year 2002. The adoption of
SFAS No. 142 had no material impact on the Company's consolidated financial
statements SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company expects that the provisions of SFAS No. 143 will not have
a material impact on its consolidated results of operations and financial
position upon adoption. The Company adopted  SFAS No. 143 effective
January 1, 2003.

SFAS No. 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No. 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS No. 121), and APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". The Company adopted
SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144 had no
material impact on Company's consolidated financial statements.

In April 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement rescinds FASB Statement No. 4, "Reporting Gains and
Losses from Extinguishment of Debt", and an amendment of that Statement, FASB
Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements" and FASB Statement No. 44, "Accounting for Intangible Assets of
Motor Carriers". This Statement amends FASB Statement No. 13, "Accounting for
Leases", to eliminate an inconsistency between the required accounting for sale-
leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale- leaseback
transactions. The Company does not expect the adoption to have a material impact
to the Company's financial position or results of operations.

In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The provisions
of this Statement are effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged. The
Company does not expect the adoption to have a material impact to the Company's
financial position or results of operations.

                                    Page 30





<PAGE>

In October 2002, the FASB issued Statement No. 147, "Acquisitions of Certain
Financial Institutions-an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9", which removes acquisitions of financial institutions from
the scope of both Statement 72 and Interpretation 9 and requires that those
transactions be accounted for in accordance with Statements No. 141, Business
Combinations, and No. 142, Goodwill and Other Intangible Assets. In addition,
this Statement amends SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, to include in its scope long-term customer-relationship
intangible assets of financial institutions such as depositor- and
borrower-relationship intangible assets and credit cardholder intangible assets.
The requirements relating to acquisitions of financial institutions are
effective for acquisitions for which the date of acquisition is on or after
October 1, 2002. The provisions related to accounting for the impairment or
disposal of certain long-term customer-relationship intangible assets are
effective on October 1, 2002. The adoption of this Statement did not have a
material impact to the Company's financial position or results of operations as
the Company has not engaged in either of these activities.

In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure", which amends FASB Statement No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The transition guidance and annual disclosure provisions of Statement
148 are effective for fiscal years ending after December 15, 2002, with earlier
application permitted in certain circumstances. The interim disclosure
provisions are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002. The adoption of this
statement did not have a material impact on the Company's financial position or
results of operations as the Company has not elected to change to the fair value
based method of accounting for stock-based employee compensation.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation 46 changes the criteria by which one
company includes another entity in its consolidated financial statements.
Previously, the criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation requirements
apply to older entities in the first fiscal year or interim period beginning
after June 15, 2003. Certain of the disclosure requirements apply in all
financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The Company does not expect the
adoption to have a material impact to the Company's financial position or
results of operations.

In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, Amendment of Statement No. 133 on Derivative Instruments and
Hedging Activities . SFAS 149 amends SFAS No. 133 to provide clarification on
the financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted

                                    Page 31





<PAGE>

for on a comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of SFAS 149 did not
have a material impact on the Company's results of operations or financial
position.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS 150 did not have a material impact on the Company's results
of operations or financial position.

                                    Page 32





<PAGE>

ITEM 7.   FINANCIAL STATEMENTS

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                       FINANCIAL STATEMENTS AND SCHEDULES

                           SEPTEMBER 30, 2003 AND 2002

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE , INC.

                                      F-1





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE , INC.

                          Index to Financial Statements

--------------------------------------------------------------------------------

                                                                      Page No.
                                                                      --------
Report of Independent Certified Public Accountants                       F-3
Consolidated Balance Sheets at September 30, 2003 and 2002               F-4
Consolidated Statements of Losses for the two years ended
  September 30, 2003 and 2002                                            F-5
Consolidated Statements of Deficiency in Stockholders' Equity for the
two years ended September 30, 2003                                     F-6 ~ F-7
Consolidated Statements of Cash Flows for the two years ended
  September 30, 2003 and 2002                                            F-8
Notes to Consolidated Financial Statements                            F-9 ~ F-20

                                      F-2





<PAGE>

                    RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                          CERTIFIED PUBLIC ACCOUNTANTS

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Sub Surface Waste Management of Delaware, Inc.
Carlsbad, CA

We have audited the accompanying consolidated balance sheet of Sub Surface Waste
Management of Delaware, Inc. and its wholly-owned subsidiary (the "Company") as
of September 30, 2003 and 2002 and the related consolidated statements of
losses, deficiency in stockholders' equity, and cash flows for the two years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based upon our audit.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of September 30, 2003 and 2002, and the results of its operations and
its cash flows for the two years then ended, in conformity with accounting
principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note M, the
Company has sustained recurring losses from operations and is experiencing
difficulty in generating sufficient cash flow to meet it obligations and sustain
its operations, which raises substantial doubt about its ability to continue as
a going concern. Management's plans in regard to this matter are described in
Note M. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

                                 /s/RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                                 -------------------------------------------
                                   Russell Bedford Stefanou Mirchandani LLP
                                         Certified Public Accountants

McLean, Virginia
December 13, 2003

                                       F-3





<PAGE>
<TABLE>

                              SUB SURFACE WASTE MANAGEMENT OF DELAWARE, INC.
                                        CONSOLIDATED BALANCE SHEETS
                                        SEPTEMBER 30, 2003 AND 2002
<CAPTION>

                                                                                   2003           2002
                                                                               ------------   ------------
<S>                                                                            <C>            <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                                    $    22,238    $    11,925
  Restricted cash (Note C)                                                         258,468        251,796
  Accounts receivable, net                                                          68,649          8,807
  Due from affiliates                                                               30,000             --
  Prepaid expenses and other assets                                                 23,230         52,666
  Costs and estimated profit in excess of billings                                 156,057         80,612
                                                                               ------------   ------------
          TOTAL CURRENT ASSETS                                                     558,642        405,806

Plant, Property and Equipment
Office furniture and equipment                                                       7,661          5,565
Manufacturing equipment                                                              5,147          5,147
Vehicle                                                                              8,851             --
                                                                               ------------   ------------
                                                                                    21,659         10,712
Less: Accumulated Depreciation                                                      (6,407)        (3,746)
                                                                               ------------   ------------
                                                                                    15,252          6,966
OTHER ASSETS
Deposits and other                                                                   2,669          2,669
                                                                               ------------   ------------
          TOTAL ASSETS                                                         $   576,563    $   415,441
                                                                               ============   ============

LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and accrued liabilities, net (Note E)                       $   173,037    $    70,548
  Due to affiliates, net                                                           573,810        127,507
  Notes payable, related parties - current portion (Note F)                        272,075          8,010
                                                                               ------------   ------------
          TOTAL CURRENT LIABILITIES                                              1,018,922        206,065

LONG-TERM LIABILITIES:
  Notes payable, related party (Note F)                                             20,290         58,930
                                                                               ------------   ------------
          TOTAL LONG-TERM LIABILITIES                                               20,290         58,930
                                                                               ------------   ------------
          TOTAL LIABILITIES                                                      1,039,212        264,995
                                                                               ------------   ------------
Commitments and Contingencies (Note K)

DEFICIENCY IN  STOCKHOLDERS' EQUITY
  Convertible preferred stock, .001 par value; 50,000,000 shares authorized:
    Series A; 10,000,000 shares authorized; 5,360,000 and 5,000,000 issued
    and outstanding as of September 30, 2003 and 2002, respectively                  5,360          5,000
  Common stock; .001 par value; 300,000,000 shares authorized;
    17,490,784 and 10,550,000 shares issued and outstanding at September 30,
    2003 and 2002, respectively                                                     17,491         10,550
Additional paid-in capital                                                       6,312,221      5,754,170
Accumulated deficit                                                             (6,797,721)    (5,619,274)
                                                                               ------------   ------------
          TOTAL  DEFICIENCY STOCKHOLDERS' EQUITY                                  (462,649)       150,446
                                                                               ------------   ------------
          TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                       $   576,563    $   415,441
                                                                               ============   ============

                (The accompanying notes are an integral part of these financial statements)

</TABLE>

                                                    F-4





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE, INC.
                        CONSOLIDATED STATEMENTS OF LOSSES
                 FOR THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002

                                                       2003            2002
                                                   -------------   -------------

Revenues                                           $    432,754    $    264,463

Cost of revenues                                        352,262         236,082
                                                   -------------   -------------
Gross profit                                             80,492          28,381

Operating Expenses:
  Selling, general and administrative expenses        1,195,786         851,632
  Depreciation                                            2,661           4,148
                                                   -------------   -------------
Total operating expenses                              1,198,447         855,780

Loss from operations                                 (1,117,955)       (827,399)

Other income (expense):
  Interest income                                         6,672              18
  Interest expense                                      (67,164)        (13,444)
                                                   -------------   -------------
Total other income (expense)                            (60,492)        (13,426)
                                                   -------------   -------------

Loss before income taxes                             (1,178,447)       (840,825)

Income tax expense                                         -              --
                                                   -------------   -------------
Net loss                                           $ (1,178,447)   $   (840,825)
                                                   =============   =============

Net loss per common share (basic and diluted)             (0.08)          (0.23)
                                                   -------------   -------------

Weighted average common shares outstanding           15,416,539       3,597,628
                                                   =============   =============

   (The accompanying notes are an integral part of these financial statements)

                                       F-5





<PAGE>
<TABLE>

                                           SUB SURFACE WASTE MANAGEMENT OF DELAWARE , INC.
                                    CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
                                            FOR THE TWO YEARS ENDED SEPTEMBER 30, 2003
<CAPTION>
                                                                                            Additional
                                       Preferred Stock               Common Stock            Paid-in            Accumulated
                                   Shares          Amount         Shares        Amount       Capital       Deficit         Total
                                 ------------   ------------   ------------  ------------  ------------  ------------   ------------
<S>                              <C>            <C>            <C>           <C>           <C>           <C>            <C>
Balance at October 1, 2001                --             --         50,000            50        49,950    (4,778,449)    (4,728,449)

Shares issued to Parent in
  exchange for previously
  incurred debt                    5,000,000          5,000             --            --     5,695,220            --      5,700,220
Shares issued to Parent in
  exchange for services                   --             --      6,500,000         6,500            --            --          6,500
Shares issued to Affiliate
  in exchange for services                --             --      3,000,000         3,000            --            --          3,000
Shares issued to employees
  in exchange for services                --             --      1,000,000         1,000         9,000            --         10,000
Net loss                                                                                                    (840,825)      (840,825)
                                 ------------   ------------   ------------  ------------  ------------  ------------   ------------
Balance at September 30, 2002      5,000,000          5,000     10,550,000        10,550     5,754,170    (5,619,274)       150,446
                                 ------------   ------------   ------------  ------------  ------------  ------------   ------------

Shares issued in exchange for
  consulting fee at $0.05 per
  share in October 2002              250,000            250                                     12,250                       12,500
Shares issued in exchange for
  consulting fee at $0.05 per
  share in October 2002               55,000             55                                      2,695                        2,750
Shares issued in exchange for
  consulting fee at $0.05 per
  share in October 2002               55,000             55                                      2,695                        2,750
Shares issued to affiliate for
  consulting fee at $0.05 per
  share in October 2002                                            800,000           800        39,200                       40,000
Shares issued in exchange for
  cash at $0.50 per share in
  October 2002, net of finder
  cost of $2,500                          --             --         50,000            50        22,450            --         22,500
Shares issued in exchange for
  cash at $0.50 per share in
  November 2002                                                     44,000            44        21,956                       22,000
Shares issued in exchange for
  cash at $0.50 per share in
November 2002, net of finder
  cost of $2,500                                                    50,000            50        22,450                       22,500
Shares issued in exchange for
  cash at $0.50 per share in
  November 2002                                                     20,000            20         9,980                       10,000
Shares issued in exchange for
  cash at $0.50 per share in
  November 2002                                                     20,000            20         9,980                       10,000
Shares issued in exchange for
  cash at $0.50 per share in
  November 2002, net of finder
  cost of $2,500                                                    50,000            50        22,450                       22,500
Shares issued in exchange for
  cash at $0.50 per share in
  November 2002                                                     40,000            40        19,960                       20,000
Conversion benefit of issuance
  of preferred stocks                                                                           18,000                       18,000
Issuance of preferred stock in
  connection with merger with
  Covingham Capital Corporation
  on December 20, 2002             5,360,000          5,360                                         --                        5,360
                                 ------------   ------------   ------------  ------------  ------------  ------------   ------------
Total carried forward             10,720,000         10,720     11,624,000        11,624     5,958,236    (5,619,274)       361,306
                                 ------------   ------------   ------------  ------------  ------------  ------------   ------------

                             (The accompanying notes are an integral part of these financial statements)

                                                                F-6





<PAGE>

                                                                                            Additional
                                       Preferred Stock               Common Stock            Paid-in            Accumulated
                                   Shares          Amount         Shares        Amount       Capital       Deficit         Total
                                 ------------   ------------   ------------  ------------  ------------  ------------   ------------

Total brought forward             10,720,000         10,720     11,624,000        11,624     5,958,236    (5,619,274)       361,306

Common shares retained by
  Covingham Capital Corporation                                  4,351,784         4,352                                      4,352
Issuance of common stock in
  connection with merger with
  Covingham Capital Corporation
  on December 20, 2002                                          10,744,000        10,744            --                       10,744
Cancellation of preferred stock
  in connection with merger with
  Covingham Capital Corporation
  on December 20, 2002            (5,360,000)        (5,360)                                        --                       (5,360)
Cancellation of common stock in
  connection with merger with
  Covingham Capital Corporation
  on December 20, 2002                                         (10,744,000)      (10,744)           --                      (10,744)
Shares issued to employees as
  stock bonus at $0.10 per
  share in December 2002.                                           98,000            98         9,702                        9,800
Shares issued to consultants for
  consulting fees at $0.10 per
  share in December 2002.                                          402,000           402        39,798                       40,200
Shares issued to affiliate at
  $0.10 per share in January 2003                                   60,000            60        29,940                       30,000
Shares issued in exchange for
  cash at $0.25 per share in
  August 2003.                                                     125,000           125        31,125                       31,250
Shares issued in exchange for
  cash at $0.25 per share in
August 2003, net of finder
  cost of $2,500                                                   100,000           100        22,400                       22,500
Shares issued in exchange for
  cash at $0.25 per share in
  August 2003.                                                      20,000            20         4,980                        5,000
Shares issued in exchange for
  cash at $0.40 per share in
  September 2003.                                                   25,000            25         9,975                       10,000
Shares issued in exchange for
  cash at $0.25 per share in
  September 2003.                                                  125,000           125        31,125                       31,250
Shares issued in exchange for
  cash at $0.50 per share in
  September 2003, net of finder
  cost of $1,000                                                    20,000            20         8,980                        9,000
Shares issued in exchange for
  cash at $0.50 per share in
  September 2003, net of finder
  cost of $1,500                                                    30,000            30        13,470                       13,500
Shares issued in exchange for
  cash at $0.50 per share in
  September 2003, net of finder
  cost of $500                                                      10,000            10         4,490                        4,500
Shares issued in exchange for
  cash at $0.50 per share in
  September 2003, net of finder
  cost of $500                                                      10,000            10         4,490                        4,500
Shares issued in exchange for
  cash at $0.50 per share in
  September 2003.                                                  120,000           120        59,880                       60,000
Shares issued in exchange for
  cash at $0.50 per share in
  September 2003, net of finder
  cost of $1,000                                                    20,000            20         8,980                        9,000
Shares issued in exchange for
  cash at $0.15 per share in
  September 2003.                                                  325,000           325        49,675                       50,000
Shares issued in exchange for
  Consulting fee at $1.00 per
  share in September 2003.                                          25,000            25        24,975                       25,000
Net loss                                                                                                  (1,178,447)    (1,178,447)
                                 ------------   ------------   ------------  ------------  ------------  ------------   ------------
Balance at September 30, 2003      5,360,000          5,360     17,490,784        17,491     6,312,221    (6,797,721)      (462,649)
                                 ============   ============   ============  ============  ============  ============   ============

                             (The accompanying notes are an integral part of these financial statements)

                                                                 F-7
</TABLE>





<PAGE>
<TABLE>

                             SUB SURFACE WASTE MANAGEMENT OF DELAWARE INC.
                               (FORMERLY, COVINGHAM CAPITAL CORPORATION)
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                            FOR THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002
<CAPTION>

                                                                               2003           2002
                                                                           ------------   ------------
<S>                                                                        <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                   $(1,178,447)   $  (840,825)
                                                                           ------------   ------------
  Adjustment to reconcile net loss to cash used in operating activities:
     Depreciation                                                                2,661          4,148
     Loss on sale of asset                                                          --          4,833
     Benefit conversion feature
     Common stock issued in exchange for services                              133,000         19,500
    Organization cost related to merger, net                                     2,500             --
     Expenses incurred by Parent on behalf of the Company, net                 420,682        779,406
  Decrease (increase) in:
     Accounts receivable                                                       (59,842)        13,337
     Cost and estimated profit in excess of billing                            (75,445)
     Restricted cash                                                            (6,672)      (251,796)
     Prepaid expenses and other assets                                          29,436       (117,093)
  Increase (decrease) in:
     Accounts payable and accrued expenses                                     102,489         35,542
                                                                           ------------   ------------
NET CASH (USED IN) OPERATING ACTIVITIES                                       (629,638)      (352,948)
                                                                           ------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                            (2,747)        (3,285)
  Sale of asset                                                                     --         45,000
                                                                           ------------   ------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                             (2,747)        41,715
                                                                           ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from parent and affiliates                                           40,621        251,796
  Proceeds from notes payable to related parties                               202,225         66,940
  Proceeds from issuance of common stock, net                                  399,852             --
                                                                           ------------   ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                      642,698        318,736
                                                                           ------------   ------------

DECREASE IN CASH                                                                10,313          7,503

CASH AT BEGINNING OF PERIOD                                                     11,925          4,422
                                                                           ------------   ------------
CASH AT END OF PERIOD                                                      $    22,238    $    11,925
                                                                           ============   ============

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Acquisition of assets for note payable to affiliate                            8,200
  Common stocks issued in exchange for services                                115,000         19,500
  Preferred stocks issued in exchange for services                              18,000
  Common stock issued in exchange for amounts due from affiliate                30,000
  Preferred stocks issued in exchange for previously incurred
     debt and expenses incurred on behalf of the Company                                    5,700,220

CASH PAID FOR:
  Interest                                                                      32,164             --
  Income taxes                                                                     800             --

              (The accompanying notes are an integral part of these financial statements)

                                                  F-8
</TABLE>





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE , INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE A - SUMMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of
the accompanying financial statements follows.

Business and Basis of Presentation
----------------------------------

Sub Surface Waste Management of Delaware, Inc. ("the Company") was formed under
the laws of the State of Utah in January, 1986 and re-domiciled to the state of
Delaware in February, 2001. The Company designs, installs and operates
proprietary soil and groundwater remediation systems.

The consolidated financial statements include the companies which are
effectively controlled directly by the Company, where control is defined as the
power to govern the financial and operating policies. This control is generally
evidenced when the Company directly or indirectly owns more than 50% or the
voting rights of the company's share capital. Significant intercompany
transactions have been eliminated in consolidation. Certain prior period amounts
have been reclassified for comparative purposes.

As of September 30, 2003 and 2002, U.S. Microbics, Inc., and subsidiaries
("Parent" or "Affiliates") control approximately 72% and 70.89%, respectively,
of the outstanding stock of the Company.

Cash and Cash Equivalents
-------------------------

For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents.

Accounts Receivable
-------------------

Accounts receivable is reported at its fair value and, in the opinion of
management, is collectible and no allowance for doubtful accounts was necessary
at September 30, 2003 and 2002.

Property and Equipment
----------------------

Property and equipment is stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets.

Long-Lived Assets
-----------------

The Company accounts for its long-lived assets under the provision of Statements
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of." The Company's
long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. Events relating to recoverability may include significant
unfavorable changes in business conditions, recurring losses, or a forecasted
inability to achieve break-even operating results over an extended period. The
Company evaluates the recoverability of long-lived assets based upon forecasted
undercounted cash flows. Should an impairment in value be indicated, the
carrying value of intangible assets will be adjusted, based on estimates of
future discounted cash flows resulting from the use and ultimate disposition of
the asset.

                                      F-9





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE , INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Income Taxes
------------

The Company has adopted Financial Accounting Standard No. 109 (SFAS 109) which
requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statement or tax returns. Under this method, deferred tax liabilities and assets
are determined based on the difference between financial statements and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. Temporary differences between
taxable income reported for financial reporting purposes and income tax purposes
are insignificant.

Net Loss Per Common Share
-------------------------

The Company computes earnings per share under Financial Accounting Standard No.
128, "Earnings Per Share" (SFAS 128). Net loss per common share is computed by
dividing net loss by the weighted average number of shares of common stock and
dilutive common stock equivalents outstanding during the year. Dilutive common
stock equivalents consist of shares issuable upon conversion of convertible
preferred shares and the exercise of the Company's stock options and warrants
(calculated using the treasury stock method). During 2003 and 2002, common stock
equivalents are not considered in the calculation of the weighted average number
of common shares outstanding because they would be anti-dilutive, thereby
decreasing the net loss per common share.

Use of Estimates
----------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly actual results
could differ from those estimates.

Revenue Recognition
-------------------

Revenue for product sales is recognized at the time the product is shipped to or
picked up by the customer. Revenue for short-term engineering or remediation
services is recognized at the completion of the contract. Sales under long-term
contracts are accounted for under the percentage of completion method. Revenues
are recognized as the actual cost of work performed related to the estimate at
completion. Profits expected to be realized on contracts are based on the
Company's estimates of total contract sales value and costs at completion.
Assumptions used for recording sales and earnings are adjusted in the period of
change to reflect revisions in contract value and estimated costs. In the period
in which it is determined that a loss will be incurred on a contract, the entire
amount of the estimated loss is charged to income.

Advertising
-----------

The Company follows the policy of charging the costs of advertising to expenses
incurred. The Company incurred advertising costs of $ 0 and $ 0 during the years
ended September 30, 2003 and 2002, respectively.

Reclassifications
-----------------

Certain reclassifications have been made in prior year's financial statements to
conform to classifications used in the current year.

                                      F-10





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE , INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Liquidity
---------

As shown in the accompanying financial statements, the Company has incurred a
net loss of $1,178,447 and $840,825 during the years ended September 30, 2003
and 2002, respectively. The Company's current liabilities exceeded its current
assets by $460,280 as of September 30, 2003 and 2002.

Concentrations of Credit Risk
-----------------------------

Financial instruments and related items, which potentially subject the Company
to concentrations of credit risk, consist primarily of cash, cash equivalents
and related party receivables. The Company places its cash and temporary cash
investments with credit quality institutions. At times, such investments may be
in excess of the FDIC insurance limit. The Company periodically reviews its
trade receivables in determining its allowance for doubtful accounts. The
allowance for doubtful accounts was $0 at September 30, 2003 and 2002.

Stock Based Compensation
------------------------

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in APB
Opinion No. 25 and related interpretations. Accordingly, compensation expense
for stock options is measured as the excess, if any, of the fair market value of
the Company's stock at the date of the grant over the exercise price of the
related option. The Company has adopted the annual disclosure provisions of SFAS
No. 148 in its financial reports for the years ended September 30, 2003 and
2002.

Had compensation costs for the Company's stock options been determined based on
the fair value at the grant dates for the awards, the Company's net loss and
losses per share would have been as follows (transactions involving stock
options issued to employees and Black-Scholes model assumptions are presented in
Note H):

                                               For the years ended September 30,
                                                     2003             2002
                                                ---------------  ---------------
Net loss - as reported                          $   (1,178,447)  $     (840,825)
Add: Total stock based employee compensation
     expense as reported under intrinsic
     value method (APB. No. 25)                             --               --
Deduct: Total stock based employee
     compensation expense as reported under
     fair value based method (SFAS No. 123)                 --               --
                                                ---------------  ---------------
Net loss - Pro Forma                            $   (1,178,447)  $     (840,825)
                                                ===============  ===============
Net loss attributable to common stockholders
   - Pro forma                                  $   (1,178,447)  $     (840,825)
Basic (and assuming dilution) loss per share
   - as reported                                $        (0.08)  $        (0.23)
Basic (and assuming dilution) loss per share
   - Pro forma                                  $        (0.08)  $        (0.23)

Comprehensive Income
--------------------

Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (SFAS 130), establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company adopted SFAS 130 during the year ended
December 31, 1998 and has no items of comprehensive income to report.

                                      F-11





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Segment Information
-------------------

Statement of Financial Accounting Standards No. 131, Disclosures about Segments
of an Enterprise and Related Information (SFAS 131) establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. SFAS 131 also establishes
standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation by the
chief operating decision maker, or decision-making group, in making decisions
how to allocate resources and assess performance. The information disclosed
herein, materially represents all of the financial information related to the
Company's principal operating segment.

New Accounting Pronouncements
-----------------------------

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No.
141), and Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" (SFAS No. 142). The FASB also issued Statement of
Financial Accounting Standards No. 143, "Accounting for Obligations Associated
with the Retirement of Long-Lived Assets" (SFAS No. 143), and Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS No. 144), in August and October 2001,
respectively.

SFAS No. 141 requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interest method. The adoption of SFAS No. 141 had no material impact
on the Company's consolidated financial statements.

Effective January 1, 2002, the Company adopted SFAS No. 142. Under the new
rules, the Company will no longer amortize goodwill and other intangible assets
with indefinite lives, but such assets will be subject to periodic testing for
impairment. On an annual basis, and when there is reason to suspect that their
values have been diminished or impaired, these assets must be tested for
impairment, and write-downs to be included in results from operations may be
necessary. SFAS No. 142 also requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption.

Any goodwill impairment loss recognized as a result of the transitional goodwill
impairment test will be recorded as a cumulative effect of a change in
accounting principle no later than the end of fiscal year 2002. The adoption of
SFAS No. 142 had no material impact on the Company's consolidated financial
statements

SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company expects that the provisions of SFAS No. 143 will not have
a material impact on its consolidated results of operations and financial
position upon adoption. The Company plans to adopt SFAS No. 143 effective
January 1, 2003.

SFAS No. 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No. 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS No. 121), and APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions". The Company adopted
SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144 had no
material impact on Company's consolidated financial statements.

                                      F-12





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, Amendment of Statement No. 133 on Derivative Instruments and
Hedging Activities . SFAS 149 amends SFAS No. 133 to provide clarification on
the financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for on a comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of SFAS 149 did not
have a material impact on the Company's results of operations or financial
position.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS 150 did not have a material impact on the Company's results
of operations or financial position.

NOTE B - ACQUISITION

On December 20, 2002, the Company entered into a Capital Stock Exchange
Agreement ("Agreement") with Covington Capital Corp. ("Covington") an inactive
publicly registered shell corporation with no significant assets or operations.
For accounting purposes, the Company shall be the surviving entity. The
transaction is accounted for using the purchase method of accounting. The total
purchase price and carrying value of net assets acquired was $1,853 From January
1986 until the date of the Agreement, Covington was an inactive corporation with
no significant assets and liabilities.

Effective with the Agreement, all previously outstanding common stock, preferred
stock, options and warrants owned by the Company's shareholders were exchanged
for an aggregate of 10,744,000 shares of the Covington common stock and
5,360,000 shares of Covington preferred stock. The value of the stock that was
issued was the historical cost of the Covington's net tangible assets, which did
not differ materially from their fair value. In addition, holders of the
Company's options to acquire Series A Preferred stock exchanged their options
for options to acquire the Company's Series A preferred stock.

In accordance with  SFAS No. 141, the Company was the acquiring  entity.

The total purchase price and carrying value of net assets acquired of Covingham
was $1. The net assets acquired were as follows:

               Accumulated deficit           $   (784,652)
               Common stock retained                4,352
               Additional paid in capital         780,301
                                             -------------
               Net assets acquired           $          1
                                             =============

Effective with the Agreement, Covington changed its name to Sub Surface Waste
Management of Delaware, Inc., increased its authorized shares of $.001 par value
common stock to 300,000,000 and $.001 par value preferred shares to 50,000,000.

NOTE C - RESTRICTED CASH

Included in restricted cash are two certificates of deposits, which total
$251,778. Both certificates of deposits are pledged as collateral on letters of
credit (see Note K) issued to the State of South Carolina in lieu of performance
bonds on two remediation projects, Off Ramp # 83 and McGill's Store.

                                      F-13





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE C - RESTRICTED CASH (CONTINUED)

One certificate of deposit issued by Community National Bank is for $184,211,
and earns interest at the rate of 1.54% per annum, and serves as collateral for
a letter of credit issued to the State of South Carolina, on the Off Ramp #83
job in the amount of $175,000. The letter of credit is dated May 22, 2002 and
expires on May 22, 2004. The certificate of deposit will be released as
collateral for the letter of credit when the Off Ramp #83 job project is
completed, which is expected to occur prior to the expiration of the letter of
credit on May 22, 2004. If necessary, the letter of credit could be extended if
additional time is required to complete the job.

The second certificate of deposit issued by Bank of America is for $67,567, and
earns interest at the rate of 2.0% per annum, and serves as collateral for a
letter of credit issued to the State of South Carolina, on the McGill's Store
job in the amount of $67,567. The letter of credit is dated September 4, 2002
and expires on August 27, 2004. The certificate of deposit will be released as
collateral for the letter of credit when the McGill's Store job project is
completed, which is expected to occur prior to the expiration of the letter of
credit on August 27, 2004. If necessary, the letter of credit could be extended
if additional time is required to complete the job.

NOTE D - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

                                                      2003               2002
                                                      ----               ----
Office furniture and equipment                      $  7,661           $  5,565
Manufacturing equipment                                5,147              5,147
Vehicle                                                8,851                  -
                                                    ---------          ---------
                                                      21,659             10,712
Less: accumulated depreciation                        (6,407)            (3,746)
                                                    ---------          ---------
                                                    $ 15,252           $  6,966
                                                    =========          =========

Depreciation expense for the years ended September 30, 2003 and 2002 was $2,661
and $4,148, respectively.

NOTE E - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consisted of the following:

                                                     2003                2002
                                                     ----                ----
Accounts payable                                   $147,673            $ 58,708
Accrued expenses:
   Interest                                          25,324               5,312
   Other                                                 40               6,528
                                                   ---------           ---------
                                                   $173,037            $ 70,548
                                                   =========           =========

                                      F-14





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE F - NOTES PAYABLE TO RELATED PARTIES

<TABLE>
<CAPTION>

Notes payable to related parties at September 30, 2003 and 2002 consists of the
following:

                                                                                 2003                 2002
                                                                                 ----                 ----
<S>                                                                           <C>                  <C>
Note payable to an entity controlled by the President of U.S.
Microbics, Inc.; interest is charged at 10% per annum; unsecured and
due in April 2005.                                                            $   8,010            $   8,010

Note payable to President of U.S. Microbics; interest is charged at 12%
per annum; unsecured and payable on demand.                                      30,000                    -

Note payable to President of U.S. Microbics, Inc. for purchase of a
vehicle; interest is charged at 10% per annum; secured by the vehicle;
repayable in monthly installment of $750 per month, including principal
and interest.                                                                     5,425                    -

Note payable to President of U.S. Microbics, Inc.; interest is charged
at 12% per annum; unsecured and payable on April 2005.                           12,280               42,280

Convertible note payable, interest at 10% per annum, secured by third
party collateral provided by an officer of the Company and due in
August 2003; Noteholder has the option to convert unpaid note principal
together with accrued and unpaid interest to the Company's common stock
at the lower of $.50 per share or 50% of the Company's common stock
fair market value of the Company's common stock based upon a ten day
moving average closing price over a ten (10) day period. The Company is
in default under this note agreement.                                            55,000                    -

Convertible note payable, interest at 10% per annum, secured by third
party collateral provided by an officer of the Company and due in
August 2003; Noteholder has the option to convert unpaid note principal
together with accrued and unpaid interest to the Company's common stock
at the lower of $.50 per share or 50% of the Company's common stock
fair market value of the Company's common stock based upon a ten day
moving average closing price over a ten (10) day period. The Company is
in default under this note agreement.                                            55,000                    -

Convertible note payable , interest at 10% per annum, secured by third
party collateral provided by an officer of the Company and due in
September 2003; Noteholder has the option to convert unpaid note
principal together with accrued and unpaid interest to the Company's
common stock at the lower of $.50 per share or 50% of the Company's
common stock fair market value of the Company's common stock based upon
a ten day moving average closing price over a ten (10) day period. The
Company is in default under this note agreement.                                 55,000                    -

Convertible note payable, interest at 10% per annum, secured by third
party collateral provided by an officer of the Company and due in
September 2003; Noteholder has the option to convert unpaid note
principal together with accrued and unpaid interest to the Company's
common stock at the lower of $.50 per share or 50% of the Company's
common stock fair market value of the Company's common stock based upon
a ten day moving average closing price over a ten (10) day period. The
Company is in default under this note agreement.                                 55,000                    -

Notes payable (2) of $8,150 and $8,500 to the Chief Operating Officer
of U.S. Microbics, Inc.: interest is charged at 12% per annum;
unsecured and is payable March 8, 2005 and April 17, 2005 respectively.          16,650               16,650
                                                                              ----------           ----------
Total                                                                           292,365               66,940
Less: current portion                                                            272,075                8,010
                                                                              ----------           ----------
                                                                              $ 20,290            $  58,930
                                                                              ==========           ==========
</TABLE>

                                      F-15





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE , INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE F - NOTES PAYABLE TO RELATED PARTIES (CONTINUED)

Aggregate maturities of long-term debt as of September 30, 2003 are as follows:

         YEAR                                          Amount
         ----                                          ------
         2004                                         $272,075
         2005                                           20,290
         2006                                                -
                                                      ---------
                                                      $292,365
                                                      =========

NOTE G - CAPITAL STOCK

The Company has authorized 300,000,000 shares of common stock, with a par value
of $.001 per share. The Company has also authorized 50,000,000 shares of Series
A convertible preferred stock, with a par value of $.001 per share. The
preferred stock is convertible at the option of the holder into common stock at
the rate of five shares of common for every one share of preferred at the option
of the holder after one year. As of September 30, 2003, the Company has issued
and outstanding 17,490,784 shares of common stock and 5,360,000 shares of
convertible preferred stock.

During the year ended September 30, 2002, the Company issued 5,000,000 shares of
Series A convertible Preferred Stock to its Parent in exchange for previously
incurred debt of $5,700,220.

During the year ended September 30, 2002, the Company issued 6,500,000 shares of
its common stock to its Parent in exchange for services provided the Company
valued at $ .001 per share which represents the fair value of the services
received which did not differ materially from the value of the stock issued.

During the year ended September 30, 2002, the Company issued 3,000,000 shares of
its common stock to an affiliate of the Company in exchange for services
provided the Company valued at $ .001 per share which represents the fair value
of the services received which did not differ materially from the value of the
stock issued.

During the year ended September 30, 2002, the Company issued 1,000,000 shares of
its restricted common stock to employees in exchange for services provided the
Company valued at $ .01 per share which represents the fair value of the
services received which did not differ materially from the value of the stock
issued.

In December, 2002, the Company issued 10,744,000 shares of common stock in
connection with the merger with Covingham Capital Corproation (see Note B). In
addition, Covingham Capital Corporation shareholders retained 4,351,784 shares
of the Company's common stock. The shares were valued at $.001 per share, which
approximates the shares book value and does not differ materiality from the
shares fair value. The Company charged the value of the shares to operations as
organization costs.

During the year ended September 30, 2003, the Company issued 360,000 shares of
Series A convertible Preferred Stock for services provided the Company valued at
$ .05 per share which represents the fair value of the services received which
did not differ materially from the value of the stock issued.

On the date of issuance of the preferred stock, the effective conversion price
was at a discount to the price of the common stock to which it is convertible.
As result, the Company recorded an $18,000 dividend relative to the beneficial
conversion feature. The dividend is being accreted to retained earnings over the
period up to the earliest conversion date, resulting in accretion of $14,042 for
the year ended September 30, 2003.

                                      F-16





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE G - CAPITAL STOCK (CONTINUED)

During the year ended September 30, 2003, the Company issued 1,154,000 shares of
restricted common stock in exchange for $420,000, net of costs.

During the year ended September 30, 2003, the Company issued 560,000 shares of
its restricted common stock in exchange for services provided the Company valued
at $.10 per share which represents the fair value of the services received which
did not differ materially from the value of the stock issued.

NOTE H - STOCK OPTIONS

Employee Stock Options

The following table summarizes the changes in options outstanding and the
related prices for the shares of the Company's Preferred Stock Series A (see
Note G) issued to employees of the Company under a non-qualified employee stock
option plan.

                Options Outstanding                      Options Exercisable
                -------------------                      -------------------
                                               Weighted                 Weighted
                         Weighted Average      Average                  Average
Exercise     Number     Remaining Contractual  Exercise     Number      Exercise
 Prices    Outstanding      Life (Years)        Price     Exercisable    Price
 ------    -----------      ------------        -----     -----------    -----
$ 0.25      390,000             4.5            $ 0.25      156,000      $ 0.25

Transactions involving stock options issued to employees are summarized as
follows:

                                                                Weighted Average
                                             Number of Shares   Price Per Share
                                             ----------------   ---------------
Outstanding at October 1, 2001                         --                 --
   Granted                                        400,000        $      0.25
   Exercised                                           --                 --
   Canceled or expired                                 --                 --
                                             ----------------   ---------------
Outstanding at September 30, 2002                 400,000               0.25
   Granted                                             --                 --
   Exercised                                           --                 --
   Canceled or expired                            (10,000)                --
                                             ----------------   ---------------
Outstanding at September 30, 2003                 390,000        $      0.25
                                             ================   ===============

The weighted-average fair value of stock options granted to employees during the
year ended September 30, 2003 and 2002 and the weighted-average significant
assumptions used to determine those fair values, using a Black-Scholes option
pricing model are as follows:

                                                            2003         2002
                                                         ----------   ----------
Significant assumptions (weighted-average):
    Risk-free interest rate at grant date                   1.24%         --%
    Expected stock price volatility                           38%         --%
    Expected dividend payout                                  --          --
    Expected option life-years (a)                          4.50        5.50

         (a) The expected option life is based on contractual expiration dates.

If the Company recognized compensation cost for the non-qualified employee stock
option plan in accordance with SFAS No. 123, the Company's pro forma net loss
and net loss per share would have been $1,178,447 and $(0.08) for the year ended
September 30, 2003 and $840,825 and $(0.23) for the year ended September 30,
2002, respectively.

                                      F-17





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE , INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE H - STOCK OPTIONS (CONTINUED)

Non-Employee Stock Options

The following table summarizes the changes in options outstanding and the
related prices for the shares of the Company's common stock issued to
non-employees of the Company. These options were granted in lieu of cash
compensation in connection with issuance of the Company's debt.

<TABLE>
<CAPTION>
                              Options Outstanding                                  Options Exercisable
                              -------------------                                  -------------------
                                          Weighted Average        Weighed                       Weighted
                          Number       Remaining Contractual      Average         Number        Average
   Exercise Prices     Outstanding          Life (Years)       Exercise Price  Exercisable   Exercise Price
   ---------------     -----------          ------------       --------------  -----------   --------------
<S>      <C>             <C>                     <C>               <C>            <C>            <C>
         $.25            20,000                  5.5               $ .25          20,000         $ .25
</TABLE>

Transactions involving options issued to non-employees are summarized as
follows:

<TABLE>
<CAPTION>
                                                                                Weighted Average
                                                       Number of Shares         Price Per Share
                                                       ----------------         ---------------
<S>                                                             <C>             <C>
       Outstanding at October 1, 2001
          Granted                                                   --          $           --
          Exercised                                                 --                      --
          Canceled or expired                                       --                      --
                                                       ----------------         ---------------
       Outstanding at September 30, 2002                            --                      --
          Granted                                               20,000                     .25
          Exercised                                                 --                      --
          Canceled or expired                                       --                      --
                                                       ----------------         ---------------
       Outstanding at September  30, 2003                       20,000          $          .25
                                                       ================         ===============
</TABLE>

All options granted to non-employees are non-compensatory and exercise prices of
options are higher than the fair market value of the Company's common stock, and
thus there was no charged to operations for the years ended September 30, 2003

NOTE I - LOSSES PER COMMON SHARE

The following table presents the computation of basic and diluted loss per
share:

                                                   2003             2002
                                                   ----             ----
Net loss available for common shareholders      $ 1,178,447      $  840,825
                                                ============     ===========
Basic and fully diluted loss per share          $      0.08      $     0.23
                                                ============     ===========
Weighted average common shares outstanding       15,416,539       3,597,628
                                                ============     ===========

NOTE J - RELATED PARTY TRANSACTIONS

The Company's officers and entities controlled by the Company's officers have
advanced the Company funds during September 30, 2003 and 2002 for working
capital purposes. The net amount of advances due the related parties at
September 30, 2003 and 2002 was $72,365 and $66,940, respectively (see Note F).

NOTE K - INCOME TAXES

The Company has adopted Financial Accounting Standard No. 109 which requires the
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statement or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between financial statements and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Temporary differences between taxable
income reported for financial reporting purposes and income tax purposes are
insignificant.

                                      F-18





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE K - INCOME TAXES (CONTINUED)

From the Company's inception through the date of the Capital Stock Exchange
Agreement (see Note B), the Company's former parent, U.S. Microbics, Inc.,
elected to consolidate the Company's taxable income (loss) with its consolidated
federal and state tax returns.

At September 30, 2003, the Company has available for federal income tax purposes
a net operating loss carryforward of approximately $ 800,000, expiring in the
year 2023, that may be used to offset future taxable income. The Company has
provided a valuation reserve against the full amount of the net operating loss
benefit, since in the opinion of management based upon the earnings history of
the Company , it is more likely than not that the benefits will not be realized.
Due to significant changes in the Company's ownership, the future use of its
existing net operating losses may be limited.

Components of deferred tax assets as of September 30, 2003 are as follows:

              Non Current:
              Net operating loss carryforward                   $   300,000
              Valuation allowance                                  (300,000)
                                                                ------------
              Net deferred tax asset                            $         -
                                                                ============

NOTE L - COMMITMENTS AND CONTINGENCIES

Employment agreements
---------------------

Effective December 23, 2002, the Company entered into an employment agreement
with its President and Chief Executive Officer. This employment agreement
provides for a term of five years, at an initial annual base salary of $150,000,
salary increases of $10,000 per annum for each of the first four years and an
increase of $20,000 for the fifth year, and discretionary incentive bonuses.

Effective December 23, 2002, the Company entered into an employment agreement
with its Vice President and Chief Operating Officer. This employment agreement
provides for a term of five years, at an initial annual base salary of $145,000,
salary increases of $10,000 per annum for each of the first four years and an
increase of $20,000 for the fifth year, and discretionary incentive bonuses.

Litigation
----------

The Company is subject to legal claims and legal proceeding which arise in the
ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters should not have a material adverse effect on its financial position,
results of operations or liquidity.

Letters of credit
-----------------

The Company is obligated under various letters of credit in connection with the
issuance of bonds guarantying specific performance under certain remediation
contracts. The letters of credit, which aggregate approximately $815,000 are
secured by Company assets (see Note C) and third party collateral.

                                      F-19





<PAGE>

                 SUB SURFACE WASTE MANAGEMENT OF DELAWARE , INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2003 AND 2002

NOTE L - COMMITMENTS AND CONTINGENCIES (CONTINUED)

Lease Commitments
-----------------

The Company leases office space in South Carolina and Colorado on a month to
month basis. The Company also shares administrative offices with U.S. Microbics,
Inc. in Carlsbad, California.

Rental expense for the year ended September 30, 2003 and 2002 charged to
operations was $30,557 and $32,318, respectively.

NOTE M - GOING CONCERN

The accompanying consolidated statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements during the years ended September 30, 2003 and 2002, the Company
incurred losses from operations of $1,117,955 and $827,399, respectively. This
factor among others may indicate that the Company will be unable to continue as
a going concern for a reasonable period of time.

The Company's existence is dependent upon management's ability to develop
profitable operations and resolve its liquidity problems. Management anticipates
the Company will attain profitable status and improve its liquidity through the
continued developing, marketing and selling of its products and additional
equity investment in the Company. The accompanying financial statements do not
include any adjustments that might result should the Company be unable to
continue as a going concern.

In order to improve the Company's liquidity, the Company is actively pursing
additional equity financing through discussions with investment bankers and
private investors. There can be no assurance the Company will be successful in
its effort to secure additional equity financing.

If operations and cash flows continue to improve through these efforts,
management believes that the Company can continue to operate. However, no
assurance can be given that management's actions will result in profitable
operations or the resolution of its liquidity problems.

                                      F-20





<PAGE>

                                    PART III.
                                    ---------

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

On May 6, 2003, upon recommendation of its Board of Directors, the Company
dismissed its certifying accountant, HJ Associates & Consultants, LLP ("HJ
Associates"). H J Associate's reports on the financial statements for the nine
months ended September 30, 2002 and the year ended December 31, 2001 and the
period January 1, 1987 (date of inception) through September 30, 2002 did not
contain an adverse opinion or disclaimer of opinion, and were not qualified or
modified as to uncertainty, audit scope or accounting principles except that H J
Associate's report for the nine months ended September 30, 2003 and the year
ended December 31, 2001 and the period January 1, 1987 (date of inception)
through September 30, 2002 contained an explanatory paragraph regarding the
substantial doubt about the Company's ability to continue as a going concern.

The decision to change its certifying accountant was approved by the Company's
Board of Directors. During the nine months ended September 30, 2002 and the year
ended December 31, 2001 , and the period January 1, 1987 (date of inception)
through September 30, 2002, and the subsequent interim period through May 6,
2003 the Company has not had any disagreements with H J Associates on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.

The Company has engaged Russell Bedford Stefanou Mirchandani LLP ("Russell
Bedford Stefanou Mirchandani") as its certifying accountant as of May 6, 2003
for the Company's year ending September 30, 2003. The Company has not consulted
Russell Bedford Stefanou Mirchandani on either the application of accounting
principles or the type of opinion Russell Bedford Stefanou Mirchandani might
render on the Company's financial statements.

ITEM 8A.  CONTROLS AND PROCEDURES

         (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Regulations under
the Securities Exchange Act of 1934 require public companies to maintain
"disclosure controls and procedures," which are defined to mean a company's
controls and other procedures that are designed to ensure that information
required to be disclosed in the reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms. Our Chief
Executive Officer ("CEO"), who is also our President, and our Chief Financial
Officer ("CFO") carried out an evaluation of the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this report.
Based on those evaluations, as of the Evaluation Date, our CEO/President and CFO
believe:

                  (i) that our disclosure controls and procedures are designed
         to ensure that information required to be disclosed by us in the
         reports we file under the Securities Exchange Act of 1934 is recorded,
         processed, summarized and reported within the time periods specified in
         the SEC's rules and forms and that such information is accumulated and
         communicated to our management, including the CEO and CFO, as
         appropriate to allow timely decisions regarding required disclosure;
         and

                  (ii) that our disclosure controls and procedures are
         effective.

                                       26





<PAGE>

          (b) CHANGES IN INTERNAL CONTROLS. There were no significant changes in
our internal controls or, to our knowledge, in other factors that could
significantly affect our internal controls subsequent to the evaluation date.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

The directors and executive officers of the Company are as follows:

         NAME                    AGE     POSITION
         ----                    ---     --------

         Bruce Beattie            49     President, Chief Executive Officer and
                                         Chairman of the Board

         Behzad Mirzayi           47     Chief Operating Officer, Vice
                                         President, and Director

         Conrad Nagel             62     Chief Financial Officer and Director

         Robert C. Brehm          55     Director and President and CEO of
                                         parent U.S. Microbics, Inc.

         Bill Hopkins             69     Director

The Company's Bylaws provide for a minimum of three directors and a maximum of
11. Each director of the Company holds office until the next annual meeting of
shareholders and until his or her successor has been elected and qualified. Each
executive officer holds office at the pleasure of the Board of Directors and
until his or her successor has been elected and qualified. A brief background of
each Director and Executive Officer is provided below:

BRUCE BEATTIE became President, CEO and Director of the Company on December 16,
2002. Mr. Beattie has over 23 years experience in the environmental service
industry with expertise in business development, operations and project
management. His career spans the introduction of breakthrough treatment
technology for the sub surface remediation of chlorinated solvents, executive
level profit center turn-around management and was a pioneer in the development
of "Brownfield" redevelopment solutions for two nationally recognized
environmental firms. Previously, Mr. Beattie was President of Sub Surface Waste
Management, Inc. a subsidiary of U.S. Microbics, Inc since August 15, 2000.
Prior to that date he was Group Vice President for Environmental Reclamation,
Inc. since September 2, 1998.

BEHZAD MIRZAYI has served as COO, Executive Vice President, Chief Engineer and
Director for the Company since December 16, 2002. Mr. Mirzayi has over 18 years
experience in diversified areas of engineering, construction, and management. He
has extensive experience managing office and field staffs and professionals
involved in multi-discipline design and construction projects and management of
profit and loss centers. He has a diverse background in all types of management,
civil, environmental, geotechnical and structural engineering, construction
management, technical supervision analysis and design, and construction
oversight, cost and time management, risk evaluation, cost estimation and client
and regulatory interface for mining, industrial, oil and gas facilities.
Previously, Mr. Mirzayi was Vice President and COO of Sub Surface Waste
Management, Inc. a subsidiary of U.S. Microbics, Inc since September 25, 2000.
Prior to that date he was Chief Operating Officer for Environmental Reclamation,
Inc. since September 2, 1998.

                                       27





<PAGE>

CONRAD NAGEL has served as the Company's Chief Financial Officer and Director
since December 16, 2002. Mr. Nagel is also the CFO of parent company U.S.
Microbics, Inc., and has held that position for the past five years. Mr. Nagel
has an MS degree in Accounting, Kansas University (1964), a BS degree in
Business, University of Kansas (1963) and a CPA since 1966. Mr. Nagel has been
associated with SEC work, auditing, and finance operations for the past 30 years
including Audit Manager for Touche Ross (now Deloitte - Touche), Vice President
of Finance - Decision Incorporated, Internal Audit Manager for Kaiser Aetna, CFO
for Calusa Financial Medical, Inc., Vice President of Finance for Medical
Capital Corporation and over fifteen years CPA practice specializing in taxation
and SEC work.

ROBERT C. BREHM has served as Secretary of the Company since December 16, 2002
and a Director since October 24, 2002. Mr. Brehm is also the parent company's
Chief Executive Officer, President and Chairman of the Board since July 1997.
From July 1994 through the present, Mr. Brehm has served as the President of
Robert C. Brehm Consulting, Inc. From 1991 to 1994, he was the President of
Specialty Financing International, Inc., a finance procurement company. Mr.
Brehm has owned computer hardware, software, finance and consulting companies.
Mr. Brehm has a double engineering degree in electrical engineering and computer
science and an MBA in Finance and Accounting from UC Berkeley.

BILL HOPKINS has served as a Director of the Company since May 2003. Mr. Hopkins
is the owner and founder of Fastening Solutions, Inc., which manufactures
specialty fasteners for the government, marine and recreational vehicles markets
with worldwide distribution. Mr. Hopkins has served for 12 years as Regional
Sales Manager for the Business Group Sales for Digital Equipment Corporation and
for 10 years as Executive Sales Manager, Business Group sales, Burrows
Corporation. He received his BA in Business administration from the Babson
Institute in Boston MA.

Directorships
-------------

         The following Directors of the Company are Directors in its parent
company U.S. Microbics, Inc., Conrad Nagel and Robert C. Brehm. The following
Directors of the Company are also shareholders in its parent Company: Bruce
Beattie, Behzad Mirzayi, Conrad Nagel and Robert C. Brehm.

Significant Employees.
----------------------

         The Company has employees who are both engineers, geologists,
technicians, consultants and executive officers, all employees and consultants
are expected to make a significant contribution to the Company's business. It is
expected that current employees, consultants, members of management and the
Board of Directors will be the only persons whose activities will be material to
the Company's operations. Members of management are the only persons who may be
deemed to be promoters of the Company.

Family Relationships.
---------------------

         There are no family relationships between any directors or executive
officers of the Company, either by blood or by marriage.

Involvement in Certain Legal Proceedings.
-----------------------------------------

         During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer of the
Company:

                                       28





<PAGE>

         (1)      was a general partner or executive officer of any business
                  against which any bankruptcy petition was filed, either at the
                  time of the bankruptcy or two years prior to that time;

         (2)      was convicted in a criminal proceeding or named subject to a
                  pending criminal proceeding (excluding traffic violations and
                  other minor offenses);

         (3)      was subject to any order, judgment or decree, not subsequently
                  reversed, suspended or vacated, of any court of competent
                  jurisdiction, permanently or temporarily enjoining, barring,
                  suspending or otherwise limiting his involvement in any type
                  of business, securities or banking activities; or

         (4)      was found by a court of competent jurisdiction (in a civil
                  action), the Securities and Exchange Commission or the
                  Commodity Futures Trading Commission to have violated a
                  federal or state securities or commodities law, and the
                  judgment has not been reversed, suspended or vacated.

Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of the
Company's Common Stock, to file initial reports of beneficial ownership on Form
3, changes in beneficial ownership on Form 4 and an annual statement of
beneficial ownership on Form 5, with the SEC. Such executive officers, directors
and greater than ten percent shareholders are required by SEC rules to furnish
the Company with copies of all such forms that they have filed. To the Company's
knowledge, based solely on review of the copies of such reports furnished to the
Company and written representation that no other reports were required, the
Company's officers, directors and greater than 10% shareholders complied with
all applicable Section 16(a) filing requirements.

ITEM 10. EXECUTIVE COMPENSATION

         The following table sets forth the aggregate compensation paid by the
Company for services rendered during the periods indicated:

<TABLE>

                                                   SUMMARY COMPENSATION TABLE
                                                   --------------------------
<CAPTION>
                                                      LONG-TERM COMPENSATION
                                                      ----------------------
                                                    ANNUAL COMPENSATION                                        AWARDS
                             -----------------------------------------------------------------     -----------------------------
                                                                                 SECURITIES
NAME AND PRINCIPAL                                       RESTRICTED STOCK        UNDERLYING        OTHER ANNUAL       ALL OTHER
POSITION                     FISCAL YEAR   SALARY ($)       AWARDS ($)        OPTIONS/SARS (#)     COMPENSATION     COMPENSATION
--------                     -----------   ----------       ----------        ----------------     ------------     ------------
<S>                             <C>            <C>             <C>                  <C>                <C>             <C>
Bruce Beattie,                  2003           143,643         ----                 ----               ----            ----
President, Director             2002           130,300         ----                 ----               ----            ----
                                2001                 0         ----                 ----               ----            ----

Behzad Mirzayi,                 2003           143,300         ----                 ----               ----            ----
COO, Director                   2002           130,000         ----                 ----               ----            ----
                                2001                 0         ----                 ----               ----            ----

Gregory J. Chachas              2003                 0         ----                 ----               ----            ----
                                2002                 0         ----                 ----               ----            ----
                                2001                 0         (1)                  ----               ----            ----
</TABLE>

(1) Mr. Chachas received a grant of 150,000 shares of common stock in Covingham
Capital Corporation during the 2001 fiscal year. The stock was issued in
exchange for services having a value of $7,500.

                                       29





<PAGE>

STOCK OPTION GRANTS
-------------------

There were no grants of stock options to the Named Executive Officers during the
fiscal year ended September 30, 2003.

OPTION EXERCISES IN FISCAL YEAR 2003
------------------------------------

Set forth below is information with respect to exercises of stock options by the
Named Executive Officers during fiscal year 2003 and the fiscal year-end value
of all unexercised stock options held by such persons.

<TABLE>
<CAPTION>

                    AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
                    ---------------------------------------------------------------------------------

                                                                      NUMBER OF UNEXERCISED                VALUE OF UNEXERCISED,
                                                                     OPTIONS HELD AT FISCAL               IN-THE-MONEY OPTIONS AT
                                                                        YEAR-END 09/30/03                   FISCAL YEAR-END ($)
                                                                 ------------------------------     -------------------------------
                                     SHARES
                                   ACQUIRED ON      VALUE
                                    EXERCISE    REALIZED ($)
              NAME                     (#)           (1)         EXERCISABLE     UN-EXERCISABLE      EXERCISABLE     UN-EXERCISABLE
----------------------------       -----------  -------------    -----------     --------------      -----------     --------------
<S>                                   <C>           <C>              <C>                <C>             <C>               <C>
BRUCE S. BEATTIE, Director,
President and CEO:
   Preferred Series A Stock (1)       none          none              28,000            42,000           $98,000          $147.000

BEHZAD MIRZAYI Director,
Vice-President and COO:                                                                                        -                 -
   Preferred Series A Stock (1)       none          none              28,000            42,000           $98,000          $147.000

CONRAD NAGEL, CFO and Director:                                                                                -                 -
   Preferred Series A Stock (1)       none          none              16,000            24,000           $56,000           $84,000

ROBERT C. BREHM, Director and
CEO of parent, U.S. Microbics,
Inc.:
   Preferred Series A Stock (1)       none          none              40,000            60,000          $140,000          $210,000

MERY C. ROBINSON, COO of
Affiliate U.S. Microbics, Inc.:
   Preferred Series A Stock (1)       none          none              16,000            24,000           $56,000           $84,000

</TABLE>

(1)      Based on the closing price of $0.75 for the shares of Common Stock of
         the Company traded on the OTC Bulletin Board as of September 30, 2003.

                                       30





<PAGE>

COMPENSATION OF DIRECTORS.
--------------------------

         There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as director. No additional
amounts are payable to the Company's directors for committee participation or
special assignments.

         There are no arrangements pursuant to which any of the Company's
directors was compensated during the Company's last completed fiscal year for
any service provided as director.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
------------------------------------------------------------------------
ARRANGEMENTS.
-------------

         Effective December 23, 2002 the Company entered into an employment
agreement with Bruce S. Beattie, its President and Chief Executive Officer. Mr.
Beattie's employment agreement provides for a term of five years, at an initial
annual base salary of $150,000, salary increases of $10,000 per annum for each
of the first four years and an increase of $20,000 for the fifth year, and
discretionary incentive bonuses.

         Effective December 23, 2002 the Company entered into an employment
agreement with Behzad Mirzayi its Vice President and Chief Operating Officer.
Mr. Mirzayi's employment agreement provides for a term of five years, at an
initial annual base salary of $145,000, salary increases of $10,000 per annum
for each of the first four years and an increase of $20,000 for the fifth year,
and discretionary incentive bonuses

BONUSES AND DEFERRED COMPENSATION
---------------------------------

         None.

COMPENSATION PURSUANT TO PLANS
------------------------------

         None.

PENSION TABLE
-------------

         None; not applicable.

OTHER COMPENSATION
------------------

         None.

TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
------------------------------------------------------------

         On October 21, 2002, Gregory J. Chachas, the sole officer and director
of the Corporation entered into an agreement to sell 2,100,000 of the 2,573,800
shares he owned to USM Capital Group, Inc. In continued efforts to locate an
acquisition or merger candidate, the Company also entered into a consulting
agreement with Sol Tech Corporation whereby the Company issued 800,000 shares of
restricted common stock at the price of $0.05 per share. The result was that Sub
Surface Waste Management of Delaware, Inc., became a 56.3% owned subsidiary of
U.S. Microbics, Inc., the parent Company of both USM Capital Group, Inc. and Sol
Tech Corporation.

                                       31





<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL SHAREHOLDERS
----------------------

         The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of December 10 2003, by (i) each person who is
known by the Company to own beneficially more than 5% of the any classes of
outstanding Stock, (ii) each director of the Company, (iii) each of the Chief
Executive Officers and the four (4) most highly compensated executive officers
who earned in excess of $100,000 for all services in all capacities
(collectively, the "Named Executive Officers") and (iv) all directors and
executive officers of the Company as a group. Unless otherwise indicated below,
to the knowledge of the Company, all persons listed below have sole voting and
investing power with respect to their shares of Common Stock, except to the
extent authority is shared by spouses under applicable community property laws,
and, unless otherwise stated, their address is 6451-C, El Camino Real, Carlsbad,
CA 92009.

<TABLE>
<CAPTION>

      NAME AND ADDRESS OF BENEFICIAL OWNER                      AMOUNT(1)            PERCENT
--------------------------------------------------           --------------          ---------
<S>                                                             <C>                   <C>
Bruce S. Beattie
President, Chief Executive Officer and Chairman
of the Board                                                    640,000 (2)            3.36%

Behzad Mirzayi
Chief Operating Officer, Vice President and
Director                                                        640,000 (3)            3.36%

Conrad Nagel
Chief Financial Officer and
Director                                                        470,000 (4)            2.49%

Robert C. Brehm
Director, and CEO of Affiliate
U.S. Microbics, Inc.                                            980,000 (5)            5.09%

Bill Hopkins
Director                                                          5,000 (6)            0.03%

All Officers and Directors
As a group (5 persons)                                        2,735,000 (7)           13.37%

Affiliates and other 5% Shareholders of any class of Stock:

Mery C. Robinson
COO and Director of affiliate U.S. Microbics,
Inc.                                                            470,000 (8)            2.49%

                                       32





<PAGE>

      NAME AND ADDRESS OF BENEFICIAL OWNER                      AMOUNT(1)            PERCENT
--------------------------------------------------           --------------          ---------

USM Capital Group, Inc.
Affiliate                                                     5,100,000 (9)           27.43%

U.S. Microbics, Inc. Parent Company
                                                             32,300,000 (10)          74.10%
Mark Holmstedt
Director of U.S. Microbics, Inc.
154 Via Copia
Alamo, CA 94507                                                  45,000 (11)           1.65%

Alexander & Wade
888 Rio San Diego Drive
8th Floor
San Diego, CA 92108                                           1,250,000 (12)           6.30%

Darwin Ting and Kuei Mei Ting TRS FBO Ting
Family Trust UA 03-04-02
2142 Liane Lane
Santa Ana, CA 92705                                           1,367,500 (13)           7.25%
</TABLE>

------------------
(1)   Beneficial ownership is determined in accordance with the rules of the
      Securities and Exchange Commission and generally includes voting or
      investment power with respect to securities. Shares of Common Stock
      subject to options, warrants or convertible securities exercisable or
      convertible within 60 days of December 11, 2003 are deemed outstanding for
      computing the percentage of the person or entity holding such options,
      warrants or convertible securities but are not deemed outstanding for
      computing the percentage of any other person.

(2)   Includes: (i) 175,000 common stock options exercisable within 60 days of
      December 11, 2003, and (ii) Series A Preferred stock options convertible
      into 350,000 shares of common stock exercisable within 60 days of December
      11, 2003.

(3)   Includes: (i) 175,000 common stock options exercisable within 60 days of
      December 11, 2003, and (ii) Series A Preferred stock options convertible
      into 350,000 shares of common stock exercisable within 60 days of December
      11, 2003.

(4)   Includes: (i) 150,000 common stock options exercisable within 60 days of
      December 11, 2003 and (ii) Series A Preferred stock options convertible
      into 160,000 shares of common stock exercisable within 60 days of December
      11, 2003.

 (5)  Includes: (i) 300,000 common stock options exercisable within 60 days of
      December 11, 2003 and (ii) Series A Preferred stock options convertible
      into 350,000 shares of common stock exercisable within 60 days of December
      11, 2003.

(6)   Consists of 5,000 shares of common stock.

(7)   Includes 1,870,000 shares issuable under stock options or convertible
      securities held by directors and executive officers exercisable or
      convertible within 60 days of December 11, 2003.

                                       33





<PAGE>

(8)   Includes: (i) 150,000 common stock options exercisable within 60 days of
      December 11, 2003 and (ii) Series A Preferred stock options convertible
      into 160,000 shares of common stock exercisable within 60 days of December
      11, 2003.

(9)   Consists of 5,100,000 shares of common stock.

(10)  Includes 5,000,000 shares of Series A Preferred stock convertible into
      25,000,000 shares of common stock within 60 days of December 11, 2003.

(11)  Includes 20,000 common stock options exercisable within 60 days of
      December 11, 2003.

(12)  Consists of 250,000 shares of Series A Preferred stock convertible into
      1,250,000 shares of common stock.

(13)  Includes 55,000 shares of Series A Preferred stock convertible into
      275,000 shares of common stock within 60 days of December 11, 2003.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management and Others.
----------------------------------------

         There have been no material transactions, series of similar
transactions, currently proposed transactions, or series of similar
transactions, to which the Company or any of its subsidiaries was or is to be a
party, in which the amount involved exceeded $60,000 and in which any director
or executive officer, or any security holder who is known to the Company to own
of record or beneficially more than five percent of the Company's common stock,
or any member of the immediate family of any of the foregoing persons, had a
material interest except for the following issuances of common stock made on
December, 11, 2002 from the Company's Employees Stock Incentive Plan for the
Year 2003 as follows:

                                                    NUMBER OF S-8 SHARES
RECIPIENT                                                 RECEIVED
----------------------------------------------- -----------------------------
Bruce S. Beattie,                                                     10,000
President /CEO and Director

Behzad Mirzayi
Vice-president/COO and Director                                       10,000

Conrad Nagel/CFO and Director                                         10,000

Robert  C.  Brehm/President  and  CEO of  U.S.
Microbics, Inc. and Director                                          30,000

Mery C. Robinson
COO of U.S. Microbics, Inc.                                           10,000

         The above transactions were valued at $0.10 per common share

                                       34





<PAGE>

Certain Business Relationships.
-------------------------------

         There have been no material transactions, series of similar
transactions, currently proposed transactions, or series of similar
transactions, to which the Company or any of its subsidiaries was or is to be a
party, in which the amount involved exceeded $60,000 and in which any director
or executive officer, or any security holder who is known to the Company to own
of record or beneficially more than five percent of the Company's common stock,
or any member of the immediate family of any of the foregoing persons, had a
material interest. However, see the caption "Transactions with Management and
Others" of this Report.

Indebtedness of Management.
---------------------------

         There have been no material transactions, series of similar
transactions, currently proposed transactions, or series of similar
transactions, to which the Company or any of its subsidiaries was or is to be a
party, in which the amount involved exceeded $60,000 and in which any director
or executive officer, or any security holder who is known to the Company to own
of record or beneficially more than five percent of the Company's common stock,
or any member of the immediate family of any of the foregoing persons, had a
material interest. However, see the caption "Transactions with Management and
Others" of this Report.

Transactions with Promoters.
----------------------------

         There have been no material transactions, series of similar
transactions, currently proposed transactions, or series of similar
transactions, to which the Company or any of its subsidiaries was or is to be a
party, in which the amount involved exceeded $60,000 and in which any promoter
or founder, or any member of the immediate family of any of the foregoing
persons, had a material interest. However, see the caption "Transactions with
Management and Others" of this Report.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) List of Exhibits attached or incorporated by reference pursuant to
Item 601 of Regulation S-B.

         EXHIBIT     DESCRIPTION
         -------     -----------

         3.1(+)      Amended and Restated Certificate of Incorporation, Form
                     8-K filed December 10, 2002

         10.1(+)     Capital Stock Exchange and Agreement between the
                     Registrant and the stockholders and option holders of
                     Sub surface Waste Management, Inc., a Nevada
                     Corporation, Form 8-K filed December 10, 2002.

         10.1(+)     Consulting agreement with Sol Tech Inc., Form 8-K filed
                     December 24, 2002.

         23.1        Consent of Independent Auditor.

         31.1[+}[+]  Certification of Chief Executive Officer/President
                     Pursuant to Rule 13a-14(a) and 15d-14(a).

         31.2[+][+]  Certification of Chief Financial Officer Pursuant to
                     Rule 13a-14(a) and 15d-14(a).

         32.1[+][+]  Certification Pursuant to 18 U.S.C. Section 1350, as
                     adopted pursuant to Section 906 of the Sarbanes-Oxley
                     Act of 2002.

         32.2[+][+]  Certification Pursuant to 18 U.S.C. Section 1350, as
                     adopted pursuant to Section 906 of the Sarbanes-Oxley
                     Act of 2002.

         (+) Previously filed.
         (+)(+) Filed herewith.

         (b) Reports on Form 8-K. There were no reports on Form 8-K filed during
         the last quarter of the period covered by this report.

                                       35





<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

            The following table sets forth fees billed to us by our auditors
during the fiscal years ended September 30, 2002 and September 30, 2003 for: (i)
services rendered for the audit of our annual financial statements and the
review of our quarterly financial statements, (ii) services by our auditor that
are reasonably related to the performance of the audit or review of our
financial statements and that are not reported as Audit Fees, (iii) services
rendered in connection with tax compliance, tax advice and tax planning, and
(iv) all other fees for services rendered. Through December, 2002, principal
accountant fees and services were aggregated with the fees for services
provided the Company's former parent, U.S. Microbics, Inc. Accordingly,
the following table are management's estimates of fees allocated to the Company
for the period October 1, 2001 through December 2002

                                     September 30, 2003       September 30, 2002
                                     ------------------       ------------------

(i)         Audit Fees               $  25,000                $  14,000
(ii)        Audit Related Fees          18,000                   15,000
(iii)       Tax Fees                    10,000                    6,000
(iv)        All Other Fees                  --                       --
                                     ----------               ----------
    Total fees                       $  53,000                $  35,000
                                     ==========               ==========

         AUDIT FEES. Consists of fees billed for professional services rendered
for the audit of Sub Surface Waste Management of Delaware, Inc.'s consolidated
financial statements and review of the interim consolidated financial statements
included in quarterly reports and services that are normally provided by Russell
Bedford Stefanou Mirchandani LLP in connection with statutory and regulatory
filings or engagements.

         AUDIT-RELATED FEES. Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of Sub Surface Waste Management of Delaware, Inc.'s consolidated financial
statements and are not reported under "Audit Fees." There were no Audit-Related
services provided in fiscal 2003 or 2002.

         TAX FEES. Consists of fees billed for professional services for tax
compliance, tax advice and tax planning..

         ALL OTHER FEES. Consists of fees for products and services other than
the services reported above. There were no management consulting services
provided in fiscal 2003 or 2002.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITORS

         The Company currently does not have a designated Audit Committee, and
accordingly, the Company's Board of Directors' policy is to pre-approve all
audit and permissible non-audit services provided by the independent auditors.
These services may include audit services, audit-related services, tax services
and other services. Pre-approval is generally provided for up to one year and
any pre-approval is detailed as to the particular service or category of
services and is generally subject to a specific budget. The independent auditors
and management are required to periodically report to the Company's Board of
Directors regarding the extent of services provided by the independent auditors
in accordance with this pre-approval, and the fees for the services performed to
date. The Board of Directors may also pre-approve particular services on a
case-by-case basis.

                                       36





<PAGE>

         SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized.

                                   Sub Surface Waste Management of Delaware Inc.
                                   (A Delaware Corporation)

Dated: January 12, 2004            /S/ Bruce S. Beattie
                                   ------------------------------------------
                                   By: Bruce S, Beattie
                                   Its: President and Chief Executive Officer

Dated: January 12, 2004            /S/ Conrad Nagel
                                   ------------------------------------------
                                   By: Conrad Nagel
                                   Its: Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

    Name                          Position                            Date
    ----                          --------                            ----

/S/ Bruce S. Beattie
-----------------------
Bruce S. Beattie         Chief Executive Officer and Director   January 14, 2004

/S/ Behzad Mirzayi
-----------------------
Behzad Mirzayi           Chief Operating Officer and Director   January 14, 2004

/S/ Conrad Nagel
-----------------------
Conrad Nagel             Chief Financial Officer and Director   January 14, 2004

/S/ Robert C. Brehm
-----------------------
Robert C. Brehm          Director                               January 14, 2004

/S/ Bill Hopkins
-----------------------
Bill Hopkins             Director                               January 14, 2004

                                       37