Microbial Solutions

PRESS RELEASE - 22 January 2008

Microbial Solutions announces partnership with Houghton Europe

Microbial Solutions Ltd (Oxford, UK) a newly formed spin-out company from the Centre for Ecology & Hydrology, a research centre owned by the Natural Environment Research Council, today announced that it has raised £1.2 million to commercialise its innovative wastewater treatment technology, which uses a patent protected collection of ‘clever’ non-pathogenic bacteria to cleanse toxic metal working fluids from the engineering industry. The investment round was led by Oxford Capital Partners investing alongside H2O Venture Partners, who also provided management input to develop the Company. The Rainbow Seed Fund, the Company’s initial investor, committed further capital in this round. Microbial Solutions has also announced a partnership with Houghton Europe, the leading provider of industrial fluids, which will see the two firms provide a complete supply and treatment process to major manufacturing companies using industrial fluids.

Current disposal processes for metal working fluids, the oily lubricants used to ensure clean cutting processes during drilling and manufacturing, require the used fluids to be transported offsite by tanker to specialist treatment facilities. These treatment processes are themselves energy intensive, are expensive, cannot remove all the toxic components - and still leave a residual oily waste that then has to be transported to landfill for disposal, where their anaerobic degradation produces the high impact climate change gas, methane. With such disposal options reducing and costs rising, manufacturers’ costs are also rising unpredictably.

By contrast, Microbial Solutions’ innovative on-site bacterial process can treat metal working fluids within seven to ten days in a much more environmentally friendly manner, producing grey water that is safe to dispose of in the sewerage system, and with no methane production in the process - so lower greenhouse gas impact. Water re-use is also possible, and the Company can offer treatment price certainty and stability to manufacturers, on a non-capital investment ‘pay-as-you-treat’ per litre basis.

The technology has been successfully trialed with a leading car manufacturer. Microbial Solutions has now moved to new office and laboratory facilities in Oxfordshire, and following an introduction by Houghton Europe, is also now set to conduct a commercial pilot of its patent protected bacterial treatment, known as ‘Microcycle^TM Technology’ at the site of a major aerospace manufacturer.

Microbial Solutions uses a simple bioreactor (a large cylinder) containing a meshed plastic grid on which a variety of non-pathogenic bacteria are cultivated - each bacterial species feeds off different components of the metal working fluids, together ‘eating’ the polluting and toxic elements. The resulting grey water is disposed of to sewer, removing the need to transport to landfill, and the next batch of metal working fluid is added to repeat the process.

Prof. William Pope, Chief Executive Officer, said: “We are delighted to have secured the funding we need to take our technology to market and to have signed a partnership agreement with Houghton Europe.

“Our Microcycle^TM Technology can revolutionize the treatment and disposal of metal working fluids. It can generate significant cost savings as future disposal costs rise - the costs of waste disposal in Europe alone are already estimated at around 1 billion euros per annum - and, unlike existing facilities, our bioreactors are straightforward to scale up.

“Our treatment is particularly relevant in the current marketplace as Industry faces increasing pressure from regulators to significantly reduce the pollution and toxicity of waste fluids as well as the amount of waste sent to landfill, and to reduce the impact of climate change gas generation. Microcycle^TM hits all these targets.”

Steve Mayo, Marketing Director of Houghton Europe, said: “We are pleased to be working with Microbial Solutions. The combination of their simple, scalable bioreactor hardware and clever bacterial consortium produces a treatment that is fast, cost-effective and more environmentally friendly than existing disposal processes. Together, we will be able to provide a complete and effective supply and treatment process to the major industrial companies that use metal working fluids.”

Dr Victor Christou, Senior Investment Manager at Oxford Capital Partners, said: “The single most important driver of our investment decision was the desire of Microbial Solutions’ customers to implement Microcycle^TM as soon as possible. Microcyle^TM has the potential to eliminate waste streams completely. When this is combined with the company’s ‘pay as you treat’ business model, it looks like an attractive proposition to engineering companies faced with a pressing need to reduce their environmental impact.

“The investment plays to Oxford Capital Partners’ strengths in the environmental and biological sectors and is a good example of our interest in investing across traditional sector boundaries.”

Mark White of the Rainbow Seed Fund added: “We were impressed by the major advances the company had made with the help of H2O Venture Partners and were delighted to be able to make a further investment in one of the most promising and beneficial technologies we have seen recently.”

Dr David Kelly, Managing Partner of H20 Venture Partners, said: “Microbial Solutions stands as a first class example of what can be achieved by intensively resourcing development of the commercial proposition for high quality Intellectual Property from the publicly funded research base. We are delighted that such high quality investors as Oxford Capital Partners and the Rainbow Seed Fund felt able to support the next phase in the Company’s development.”

- ENDS -

Editors Notes

Press enquiries to: Margaret Henry, PR Consultant.

Tel: +44 (0)1865 811199 E-mail: m.henry@oxin.co.uk

About Microbial Solutions Ltd

On 1 December 2007 Microbial Solutions span out from research conducted at the Centre for Ecology & Hydrology, a wholly owned research centre of the Natural Environment Research Council (NERC) located in the University of Oxford Science area. The Centre for Ecology & Hydrology is the UK’s leading research organisation for land and freshwater science employing 500 staff across England, Scotland and Wales. Microbial Solutions is now located at the DiagnOx Laboratory in Cherwell Innovation Centre, North Oxfordshire.

Microbial Solutions has developed an innovative patent protected non-pathogenic bacterial consortium in a treatment process known as ‘Microcycle^TM Technology’, using a collection of clever bacteria to remove the toxic components from metal working fluids (oily lubricants used to ensure clean cutting processes in industry) and produce grey water that is safe to dispose of in the sewerage system.

The bacterial consortium has been carefully selected following a worldwide search of the hundreds of bacteria that survive naturally in machine sumps, where they eat metal working fluids. In their ‘natural’ conditions in machine sumps, these bacteria can only survive in very low concentrations because of the conditions, and what operators and users most notice is in fact the prevalence of other bacteria, such as sulphate reducers, which produce hydrogen sulphide, a chemical that causes the characteristic smell of rotten eggs and is more toxic to humans than hydrogen cyanide.

After isolating complementary bacteria that co-exist without destroying each other and eat the different components of waste metal working fluids, Microbial Solutions ensures that they can thrive in its bioreactors (cylinders) by providing the appropriate environment for them to grow and increase in biomass. The bugs convert the wastes to biomass and in the process produce no hydrogen sulphide, or associated odour, and some carbon dioxide which is 20 times less harmful than methane (the gas produced from waste sent to landfill) as a greenhouse gas.

Microbial Solutions was founded by Prof. Ian Thompson (now at the University of Oxford) and Dr Christopher van der Gast of the Centre for Ecology & Hydrology who remain members of the Company’s Strategic Advisory Board, and shareholders along with NERC.

The other founders and management team members include Prof. William Pope, CEO and shareholder, one of the UK’s leaders in managing and developing environmental companies over the last 25 years, and four times a winner of the “Technology Fast 50″ awards for the fastest growing companies. Prof Pope is also a founder director and past Chairman of The Society for the Environment and Vice-President of the Institution of Environmental Science.

David Whitby, Chairman, is CEO of Pathmaster Marketing Ltd, an oil, gas and energy industry consultancy and was formerly Business Manager with BP Ventures; Prof. Geoff Randall OBE, non-executive director, was formerly Director of Global Safety for Astra Zeneca and is currently Vice President of the Marine Biological Association; Dr David Kelly, non-executive director, is CEO of H20 Venture Partners and a former director of Oxitec, which has developed an environmentally friendly pest control technology; Dr Victor Christou, non-executive director, is Senior Investment Manager at Oxford Capital Partners; and Dr Duane Ager, formerly of the Centre for Ecology and Hydrology, is Chief Scientific Officer.

About the Natural Environment Research Council

The Natural Environment Research Council funds world-class science, in universities and its own research centres, that increases knowledge and understanding of the natural world. It is tackling major environmental issues such as climate change, biodiversity and natural hazards. NERC receives around £400m a year from the government’s science budget, which it uses to provide independent research and training in the environmental sciences.

About Oxford Capital Partners

Oxford Capital Partners is a science and technology venture capital firm with extensive experience in investing in and supporting businesses with high growth potential. Oxford Capital Partners looks for the best opportunities, backing exceptional entrepreneurs and investing across all stages of development, from start-up to IPO. Leveraging its extensive networks, Oxford Capital Partners assists portfolio companies in accessing international markets in Europe, the US, Middle East and Asia. Oxford Capital Partners is the manager of four Oxford Gateway Funds and oversees a portfolio of over 25 companies in a range of technology sectors, including sustainability, healthcare and information and communications technologies.

Oxford Capital Partners was named Venture Capital House of the Year 2005 at the Unquote Awards. For more information: www.oxcp.com

About the Rainbow Seed Fund

The Rainbow Seed Fund is an early stage technology venture capital fund with close links to the UK’s leading centres of scientific research outside the universities. As well as the research centres attached to NERC, the fund is linked with such major sites as the Rutherford Appleton Laboratory in Oxfordshire, the John Innes Centre in Norwich, the Babraham Institute in Cambridge and Porton Down in Wiltshire. It has a portfolio of 15 high tech companies engaged in a broad range of areas from advanced detection systems for counter-terrorism through to potential novel treatments for countering the “superbug” Clostridium Difficile. For more information: www.rainbowseedfund.com

About H2O Venture Partners (Private Equity) LLP

H2O Venture Partners (Private Equity) LLP is a team of ten scientists, entrepreneurs and support professionals that invests small amounts of capital and large amounts of management effort in Intellectual Property arising from the UK’s publicly funded research base. H2O fills an important resource gap between academic invention and commercial exploitation which is principally one of expert managerial support at the critical earliest stages in the development of the business proposition. For more information: www.h2ovp.com