UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q







(Mark
One)


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


For the
quarterly period  ended June
30, 2008




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


For the
Transition period from __________to__________




Commission
File No. 33-55254-38





General
Environmental Management, Inc.


(Exact
name of Small Business Issuer as specified in its charter)





NEVADA
            
            87-0485313(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification Number)


3191
Temple Ave., Suite 250, Pomona CA 91768
 (Address
of principal executive offices) (Zip
Code)
  (909)
444-9500




Issuer’s
telephone number, including area code
  Indicate
by check mark whether the issuer (1) has filed all reports required to be filed
by Section 13 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. xYes oNo
  Indicate
by check mark whether the registrant is a large accelerated file, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
  Large
      accelerated filer
                o
                
                Accelerated
      filer
                oNon-accelerated
      filer
                o
                (Do
      not check if a smaller reporting company)
                Smaller
      reporting company
                x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).oYes xNo
   APPLICABLE
ONLY TO CORPORATE ISSUERS
  State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practical date.  As of August 13, 2008, there were
12,673,885 shares of the issuer's $.001 par value common stock issued and
outstanding.










GENERAL
ENVIRONMENTAL MANAGEMENT, INC.


QUARTERLY
REPORT ON FORM 10-Q


FOR
THE SIX MONTHS ENDED JUNE 30, 2008





TABLE
OF CONTENTS




PagePart
      1Financial
      InformationItem
      1
            Financial
      Statements (Unaudited)
            1Condensed
      Consolidated Balance Sheets  as of June 30, 2008 (Unaudited)and
      December 31, 2007
            1Condensed
      Unaudited Consolidated Statements of Operations for the Three Months and
      Six Months ended June 30, 2008 and 2007
            3Condensed
      Unaudited Consolidated Statement of Shareholders’ Equity (Deficiency) for
      the Six  Months Ended June 30, 2008
            4Condensed
      Unaudited Consolidated Statements of Cash Flows for the
      Six  Months Ended June 30, 2008 and 2007
            5Notes
      to the Unaudited Condensed Consolidated Financial
    Statements
            7Item
      2
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
            20Item
      3
            Controls
      and Procedures
            27Part
      IIOther
      InformationItem
      1
            Legal
      Proceedings
            28Item
      2
            Changes
      in Securities
            28Item
      3
            Defaults
      Upon Senior Securities
            28Item
      4
            Submission
      of Matters to a Vote of Security Holders
            28Item
      5
            Other
      Information
            28Item
      6
            Exhibits
      and Reports on Form 8K
            28Signatures
            29CEO
      Certifications
            AttachedCFO
      Certifications
            Attached










PART
1 - FINANCIAL INFORMATION





Item
1.  Financial Statements.





GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS






June
      30,
            
            
            December
      31,2008
            
            
            2007(Unaudited)ASSETSCURRENT
      ASSETS:Cash
            
            $
            38,800
            
            
            $
            954,581Accounts
      receivable, net of allowance for doubtfulaccounts
      of $178,969 and $236,781,respectively
            
            
            6,897,307
            
            
            
            6,495,736Prepaid
      expenses and other current assets
            
            
            505,740
            
            
            
            156,340Total
      Current Assets
            
            
            7,441,847
            
            
            
            7,606,657Property
      and Equipment – net of accumulateddepreciation
      $2,239,582 and $1,854,141 respectively
            
            
            4,863,228
            
            
            
            3,950,253Restricted
      cash
            
            
            1,194,896
            
            
            
            1,184,835Intangibles,
      net
            
            
            946,391
            
            
            
            1,028,044Deferred
      financing fees
            
            
            225,182
            
            
            
            394,082Deposits
            
            
            291,600
            
            
            
            282,070Goodwill
            
            
            946,119
            
            
            
            946,119TOTAL
      ASSETS
            
            $
            15,909,263
            
            
            $
            15,392,060






See
accompanying notes to condensed consolidated financial
statements.


(Continued)




1




GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS (Continued)






June
      30,
            
            
            December
      31,2008
            
            
            2007(Unaudited)LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIENCY)CURRENT
      LIABILITIES:Accounts
      payable
            
            $
            3,293,422
            
            
            $
            4,314,515Accrued
      expenses
            
            
            3,609,414
            
            
            
            2,301,288Accrued
      disposal costs
            
            
            620,291
            
            
            
            478,833Payable
      to related party
            
            
            123,927
            
            
            
            31,871Current
      portion of financing agreement
            
            
            876,589
            
            
            
            662,719Current
      portion of long term obligations
            
            
            1,287,660
            
            
            
            1,274,464Current
      portion of capital lease obligations
            
            
            387,097
            
            
            
            187,015Notes
      payable to Investors
            
            
            509,222
            
            
            
            -Total
      Current Liabilities
            
            
            10,707,622
            
            
            
            9,250,705LONG-TERM
      LIABILITIES :Financing
      agreements, net of current portion
            
            
            4,251,870
            
            
            
            3,708,694Long
      term obligations, net of current portion
            
            
            57,704
            
            
            
            79,842Capital
      Lease obligations, net of current portion
            
            
            1,786,958
            
            
            
            1,046,920Notes
      payable to Investors
            
            
            -
            
            
            
            520,208Total
      Long-Term  Liabilities
            
            
            6,096,532
            
            
            
            5,355,664STOCKHOLDERS’
      EQUITY (DEFICIENCY)Common
      stock, $.001 par value, 1,000,000,000 sharesauthorized,
      12,673,885 and 12,473,885 shares issuedand
      outstanding
            
            
            12,674
            
            
            
            12,474Additional
      paid in capital
            
            
            51,021,050
            
            
            
            50,151,615Accumulated
      deficit
            
            
            (51,928,615
            )
            
            
            (49,378,398
            )Total
      Stockholders' Equity (Deficiency)
            
            
            (894,891
            )
            
            
            785,691TOTAL
      LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIENCY)
            
            $
            15,909,263
            
            
            $
            15,392,060






See
accompanying notes to condensed consolidated financial statements.
  2




GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)








Three
      months ended
            
            
            Six months
      endedJune
      30, 2008
            
            
            June
      30, 2007
            
            
            June
      30, 2008
            
            
            June
      30, 2007REVENUES
            
            $
            9,406,585
            
            
            $
            6,541,832
            
            
            $
            16,358,238
            
            
            $
            12,859,212COST
      OF REVENUES
            
            
            7,822,370
            
            
            
            5,068,675
            
            
            
            13,467,714
            
            
            
            10,145,012GROSS
      PROFIT
            
            
            1,584,215
            
            
            
            1,473,157
            
            
            
            2,890,524
            
            
            
            2,714,200OPERATING
      EXPENSES
            
            
            1,956,313
            
            
            
            2,681,502
            
            
            
            3,805,927
            
            
            
            7,748,042OPERATING
      LOSS
            
            
            (372,098
            )
            
            
            (1,208,345
            )
            
            
            (915,403
            )
            
            
            (5,033,842
            )OTHER
      INCOME (EXPENSE):Interest
      income
            
            
            2,795
            
            
            
            10,948
            
            
            
            9,812
            
            
            
            19,415Interest
      and financing costs
            
            
            (844,711
            )
            
            
            (560,120
            )
            
            
            (1,661,319
            )
            
            
            (1,240,133
            )Costs
      to induce conversion of debt
            
            
            -
            
            
            
            (3,428,847
            )
            
            
            -
            
            
            
            (3,547,687
            )Other
      non-operating income
            
            
            9,030
            
            
            
            34,259
            
            
            
            16,693
            
            
            
            68,239Net
      Loss
            
            $
            (1,204,984
            )
            
            $
            (5,152,105
            )
            
            $
            (2,550,217
            )
            
            $
            (9,734,008
            )Net
      loss per common share, basic and diluted
            
            $
            (.10
            )
            
            $
            (.53
            )
            
            $
            (.20
            )
            
            $
            (1.13
            )Weighted
      average shares of common stockOutstanding,
      basic and diluted
            
            
            12,473,885
            
            
            
            9,767,147
            
            
            
            12,473,885
            
            
            
            8,611,020






See
accompanying notes to the condensed consolidated financial
statements




3




GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
(UNAUDITED)


FOR
THE SIX MONTHS ENDED JUNE 30, 2008






AdditionalCommon
      Stock
            
            
            Paid-in
            
            
            AccumulatedShares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            TotalBalance,
      December  31, 2007
            
            
            12,473,885
            
            
            $
            12,474
            
            
            $
            50,151,615
            
            
            $
            (49,378,398
            )
            
            $
            785,691Stock
      compensation cost forvalue
      of vested options
            
            
            
            
            
            
            
            
            
            
            427,135
            
            
            
            
            
            
            
            427,135Issuance
      of stock to relatedparty
      for extension of debt
            
            
            200,000
            
            
            
            200
            
            
            
            219,800
            
            
            
            
            
            
            
            220,000Fair
      value of warrants issued torelated
      party for extension of debt
            
            
            
            
            
            
            
            
            
            
            222,500
            
            
            
            
            
            
            
            222,500Net
      loss for  the six  monthsended
      June  30, 2008
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,550,217
            )
            
            
            (2,550,217
            )Balance,
      June  30, 2008
            
            
            12,673,885
            
            
            $
            12,674
            
            
            $
            51,021,050
            
            
            $
            (51,928,615
            )
            
            $
            (894,891
            )






See
accompanying notes to consolidated financial statements




4




GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)






Six Months
      EndedJune 30,2008
            
            
            2007OPERATING
      ACTIVITIESNet
      Loss
            
            $
            (2,550,217
            )
            
            $
            (9,734,008
            )Adjustments
      to reconcile net loss to cash used in operating activitiesDepreciation
      and amortization
            
            
            467,096
            
            
            
            363,326Amortization
      of discount on notes
            
            
            904,354
            
            
            
            10,416Fair
      value of vested options
            
            
            427,135
            
            
            
            634,745Issuance
      of warrants and common shares for services
            
            
            -
            
            
            
            2,294,104Conversion
      of accrued interest to common stock
            
            
            -
            
            
            
            48,022Amortization
      of discount on convertible debt
            
            
            -
            
            
            
            408,270Amortization
      of deferred financing fees
            
            
            168,900
            
            
            
            124,843Costs
      to induce conversion of debt
            
            
            -
            
            
            
            3,547,687Valuation
      of warrants to induce conversion of interest payable
            
            
            -
            
            
            
            36,866Gain
      on issuance of common shares for accounts payable
            
            
            -
            
            
            
            62,163Changes
      in assets and liabilities:Accounts
      Receivable
            
            
            (401,571
            )
            
            
            419,060Inventory
            
            
            19,293
            
            
            
            -Prepaid
      and other current assets
            
            
            (368,694
            )
            
            
            (299,911
            )Deposits
      and restricted cash
            
            
            (19,592
            )
            
            
            -Accounts
      Payable
            
            
            (1,021,093
            )
            
            
            26,638Accrued
      interest on related party notes
            
            
            16,001
            
            
            
            -Accrued
      interest on convertible notes
            
            
            19,014
            
            
            
            -Accrued
      expenses and other liabilities
            
            
            1,449,585
            
            
            
            397,217NET
      CASH USED IN OPERATING ACTIVITIES
            
            
            (889,789
            )
            
            
            (1,660,562
            )INVESTING
      ACTIVITIESIncrease
      in deposits and restricted cash
            
            
            -
            
            
            
            (353,569
            )Additions
      to property and equipment
            
            
            (201,959
            )
            
            
            (187,576
            )NET
      CASH USED IN INVESTING ACTIVITIES
            
            
            (201,959
            )
            
            
            (541,145
            )FINANCING
      ACTIVITIESNet
      advances from notes payable – financing agreement
            
            
            (118,177
            )
            
            
            (552,084
            )Advances
      from related parties
            
            
            -
            
            
            
            2,347,400Issuance
      of notes payable to related party
            
            
            516,500
            
            
            
            -Payment
      of notes payable
            
            
            (19,360
            )
            
            
            (115,978
            )Repayment
      of convertible notes
            
            
            (30,000
            )
            
            
            -Payment
      on capital leases
            
            
            (172,996
            )
            
            
            -Proceeds
      from issuance of common stock
            
            
            -
            
            
            
            1,888NET
      CASH PROVIDED BY FINANCING ACTIVITIES
            
            
            175,967
            
            
            
            1,681,226INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            (915,781
            )
            
            
            (520,481
            )Cash
      at beginning of period
            
            
            954,581
            
            
            
            618,654CASH
      AT END OF PERIOD
            
            $
            38,800
            
            
            $
            98,173SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for:Interest
      Expense
            
            $
            558,112
            
            
            $
            463,558






See
accompanying notes to the condensed consolidated financial
statements
  5




GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


(UNAUDITED)








Six Months
      EndedJune 30,2008
            
            
            2007SUPPLEMENTAL
      DISCLOSURE OF NON – CASH INVESTINGAND
      FINANCING ACTIVITIES:Conversion
      of related party debt to common stock
            
            $
            -
            
            
            $
            2,478,212Conversion
      of investor interest to common stock
            
            
            -
            
            
            
            148,750Issuance  of
      common stock to related party for extension of debt
            
            
            220,000
            
            
            
            -Fair
      value of warrants issued  to related party for extension of
      debt
            
            
            222,500
            
            
            
            -Acquisition
      of leased equipment and capital lease obligations
            
            
            1,096,458
            
            
            
            949,185Conversion
      of accrued expenses to equity
            
            
            -
            
            
            
            451,602






See
accompanying notes to the condensed consolidated financial
statements
  6




GENERAL
ENVIRONMENTAL MANAGEMENT, INC AND SUBSIDIARIES


NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (UNAUDITED)






1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES





ORGANIZATION
AND DESCRIPTION OF BUSINESS





Ultronics
Corporation  ( “the Company”)  was incorporated in the state
of Nevada on March 14, 1990 to serve as a vehicle to effect a merger, exchange
of capital stock, asset acquisition or other business combination with a
domestic or foreign private business.  The Company’s fiscal year end
is December 31.





On
February 14, 2005 the Company acquired all of the outstanding shares of General
Environmental Management, Inc (“GEM”), a Delaware Corporation in exchange for
18,914,408 shares of its class A common stock and as a result GEM became a
wholly owned subsidiary of Ultronics Corporation.





The
acquisition was accounted for as a reverse merger (recapitalization) with GEM
deemed to be the accounting acquirer, and Ultronics Corporation the legal
acquirer.  Accordingly, the historical financial information presented
in the financial statements is that of GEM as adjusted to give effect to any
difference in the par value of the issuer’s and the accounting acquirer stock
with an offset to capital in excess of par value.  The basis of the
assets, liabilities and retained earnings of GEM, the accounting acquirer, have
been carried over in the recapitalization.  Subsequent to the
acquisition, the Company changed its name to General Environmental Management,
Inc.





On
January 29, 2007 a special meeting of the shareholders of the Company was
held.  The shareholders approved the amendment and restatement of the
Company’s Articles of Incorporation.  The restated articles included
the increase of the authorized number of shares of common stock to one billion,
the increase of the authorized number of shares of preferred stock to
100,000,000; and of a one for thirty reverse stock split. Share and
per share amounts have been restated to show the effects of the reverse stock
split as if it occurred at the beginning of the earliest period
presented.




BASIS OF
PRESENTATION





The
condensed consolidated interim financial statements included herein have been
prepared by the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission with regard  to Regulation S-B and, in the
opinion of management, include all adjustments which, except, as described
elsewhere herein, are of a normal recurring nature, necessary for a fair
presentation of the financial position, results of operations, and cash flows
for the period presented. The financial statements presented herein should be
read in conjunction with the financial statements included in the Company’s
Annual Report on Form 10-KSB for the year ended December 31, 2007 filed with the
Securities and Exchange Commission.





The
results for the interim periods are not necessarily indicative of results for
the entire year.




7




GOING
CONCERN





The  accompanying
condensed consolidated financial statements have been prepared assuming the
Company will continue as a going concern. The Company incurred a net loss of
$2,550,217 and utilized cash in operating activities of $889,789 during the
six  months  ended June 30, 2008, and as of June 30, 2008
the Company had current liabilities exceeding current assets by $3,265,775.
These matters raise substantial doubt about the Company’s ability to continue as
a going concern.





Management
is continuing to raise capital through the issuance of debt and equity. In
addition, management believes that the Company will begin to operate profitably
due to increased size, improved operational results and cost cutting practices.
However, there can be no assurances that the Company will be successful in this
regard or will be able to eliminate its working capital deficit or operating
losses. The accompanying condensed consolidated financial statements do not
contain any adjustments which may be required as a result of this
uncertainty.


2.
              SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES


(a)  Use
of estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Company’s
management to make certain estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities and disclosure
of the contingent assets and liabilities at the date of the financial
statements.  These estimates and assumptions will also
affect  the reported amounts of certain revenues and expenses during
the reporting period.  Actual results could differ materially based on
any changes in the estimates and assumptions that the Company uses in the
preparation of its financial statements that are reviewed no less than
annually.  Actual results could also differ materially from these
estimates and assumptions due to changes in environmental-related regulations or
future operational plans, and the inherent imprecision associated with
estimating such future matters.





(b)
Revenue Recognition.





The
Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred  or services have been rendered, the price is
fixed or determinable, and collection is reasonably assured.





The
Company is a fully integrated environmental service firm structured to provide
field services, technical services, transportation, off-site treatment, on-site
treatment services, and environmental health and safety (“EHS”) compliance
services.  We assist clients in meeting regulatory requirements from
the designing   stage to the waste disposition stage. The
technicians who provide these services are billed at negotiated rates, or the
service is bundled into a service package.  These services are billed
and revenue recognized when the service is performed and completed. When the
service is billed, client costs are accumulated and accrued.




8


Our field
services consist primarily of handling, packaging, and transporting a wide
variety of liquid and solid wastes of varying amounts. We provide the fully
trained labor and materials to properly package hazardous and non-hazardous
waste according to requirements of the Environmental Protection Agency and the
Department of Transportation. Small quantities of laboratory chemicals are
segregated according to hazard class and packaged into appropriate containers or
drums. Packaged waste is profiled for acceptance at a client’s selected
treatment, storage and disposal facility (TSDF) and tracked electronically
through our systems. Once approved by the TSDF, we provide for the
transportation of the waste utilizing tractor-trailers or bobtail trucks. The
time between picking up the waste and transfer to an approved TSDF is usually
less than 10 days.  The Company recognizes revenue for waste picked up
and received waste at the time pick up or receipt occurs and recognizes the
estimated cost of disposal in the same period. For the Company’s TSDF located in
Rancho Cordova, CA, costs to dispose of waste materials located at the Company’s
facilities are included in accrued disposal costs.  Due to the limited
size of the facility, waste is held for only a short time before transfer to a
final treatment, disposal or recycling facility.


(c)
Concentrations





The
Company’s financial instruments that are exposed to concentrations of credit
risk consist principally of cash and trade receivables.  The Company
places its cash in what it believes to be credit-worthy financial
institutions.  However, cash balances have exceeded FDIC insured
levels at various times.  The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant risk in
cash.





The
Company’s trade receivables result primarily from removal or transportation of
waste, and the concentration of credit risk is limited to a broad customer base
located throughout the Western United States.





During
the six months ended June 30, 2008 and 2007, one customer accounted for 15% and
13% of revenues, respectively. During the three months ended June 30, 2008 and
2007, one customer accounted for 16% and 17% of revenue. As of June 30, 2008 and
December 31, 2007 there was one customer that accounted for 33% and 25% of
accounts receivable, respectively.





(d)
Income Taxes





The
Company accounts for income taxes using the liability method whereby deferred
income tax assets and liabilities are recognized for the tax consequences of
temporary differences by applying statutory  tax  rates
applicable to future years to the difference between the financial statement
carrying  amounts and  the tax  bases of certain
assets and liabilities.  Changes in deferred tax assets and
liabilities include the impact of any tax rate changes enacted during the
year.




(e) Net
Loss per Share





Statement
of Financial Accounting Standards No. 128, "Earnings per Share", requires
presentation of basic earnings per share ("Basic EPS") and diluted earnings per
share ("Diluted EPS").  Basic income (loss) per share is computed by
dividing income (loss) available to common stockholders by the weighted average
number of common shares outstanding during the period.  Diluted
earnings per share gives effect to all dilutive potential common shares
outstanding during the period.





These
potentially dilutive securities were not included in the calculation of loss per
share for the three and six months ended June 30, 2008 and 2007 because the
Company incurred a loss during such periods and thus  their effect
would have been anti-dilutive.  Accordingly, basic and diluted loss
per share is the same for the three and six months ended June 30, 2008 and
2007.


At June
30, 2008 and 2007, potentially dilutive securities consisted of convertible
securities, outstanding common stock purchase warrants and stock options to
acquire an aggregate of 11,853,566 shares and 9,007,015 shares,
respectively.
 
 (f) Stock
Compensation Costs




9




The
Company periodically issues stock options and warrants to employees and
non-employees in capital raising transactions, for services and for financing
costs.  The Company adopted SFAS No. 123R effective January 1, 2006,
and is using the modified prospective method in which compensation cost is
recognized beginning with the effective date (a) based on the requirements of
SFAS No. 123R for all share-based payments granted after the effective date and
(b) based on the requirements of SFAS No. 123R for all awards granted to
employees prior to the effective date of SFAS No. 123R that remain unvested on
the effective date.  The Company accounts  for stock option
and warrant grants issued and vesting to non-employees in accordance with EITF
No. 96-18: "Accounting for Equity Instruments that are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services” and
EITF No. 00-18 “Accounting Recognition for Certain Transactions involving Equity
Instruments Granted to Other Than Employees” whereas the value of the stock
compensation is based upon the measurement date as determined at either a) the
date at which a performance commitment is reached, or b) at the date at which
the necessary performance to earn the equity instruments is
complete.





(g)  Reclassifications





Certain
reclassifications from accrued disposal costs to accrued expenses have been made
to 2007 financial statement amounts to conform to the 2008
presentation.





(h) Fair
Value Measurements





Effective
January 1, 2008, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 157, Fair Value Measurements. This Statement defines fair value for
certain financial and nonfinancial assets and liabilities that are recorded at
fair value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. This guidance applies to other
accounting pronouncements that require or permit fair value measurements. On
February 12, 2008, the FASB finalized FASB Staff Position (FSP) No.157-2,
Effective Date of FASB Statement No. 157. This Staff Position delays the
effective date of SFAS No. 157 for nonfinancial assets and liabilities to fiscal
years beginning after November 15, 2008 and interim periods within those fiscal
years, except for those items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). The adoption
of SFAS No. 157 had no effect on the Company’s consolidated financial position
or results of operations.





(i)
Recent Accounting Pronouncements




In
December 2007, the FASB issued FASB Statement No. 141 (R), “Business
Combinations” (FAS 141(R)), which establishes accounting principles and
disclosure requirements for all transactions in which a company obtains control
over another business.  Statement 141 (R) applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008.  Earlier adoption is prohibited.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”.  SFAS
No. 160 establishes accounting and reporting standards that require that the
ownership interests in subsidiaries held by parties other than the parent be
clearly identified, labeled, and presented in the consolidated statement of
financial position within equity, but separate from the parent’s equity; the
amount of consolidated net income attributable to the parent and to the
noncontrolling interest be clearly identified and presented on the face of the
consolidated statement of income; and changes in a parent’s ownership interest
while the parent retains its controlling financial interest in its subsidiary be
accounted for consistently.  SFAS No. 160 also requires that any
retained noncontrolling equity investment in the former subsidiary be initially
measured at fair value when a subsidiary is deconsolidated.  SFAS No.
160 also sets forth the disclosure requirements to identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners.  SFAS No. 160 applies to all entities that prepare
consolidated financial statements, except not-for-profit organizations, but will
affect only those entities that have an outstanding noncontrolling interest in
one or more subsidiaries or that deconsolidate a subsidiary.  SFAS No.
160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008.  Earlier adoption is
prohibited.  SFAS No. 160 must be applied prospectively as of the
beginning of the fiscal year in which it is initially applied, except for the
presentation and disclosure requirements.  The presentation and
disclosure requirements are applied retrospectively for all periods
presented.




10





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities an amendment of FASB Statement No. 133” (SFAS 161). This
Statement requires enhanced disclosures about an entity’s derivative and hedging
activities, including (a) how and why an entity uses derivative instruments, (b)
how derivative instruments and related hedged items are accounted for under SFAS
No. 133,  “Accounting for Derivative Instruments and Hedging
Activities” (SFAS 133), and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008.





The
Company does not believe that the adoption of the above recent pronouncements
will have a material effect on the Company’s consolidated results of operations,
financial position, or cash flows.




3.
            GOODWILL
      AND INTANGIBLE ASSETS





The
Company accounts for goodwill and intangible assets pursuant to SFAS No. 142,
Goodwill and Other Intangible Assets.  Under SFAS 142, intangibles
with definite lives continue to be amortized on a straight-line basis over the
lesser of their estimated useful lives or contractual terms.  Goodwill
and intangibles with indefinite lives are evaluated at least annually for
impairment by comparing the asset’s estimated fair values with its carrying
value, based on cash flow methodology.




Intangible
assets consist of the following at:





June 30,
              2008
            
            
            December
      31,
              2007(Unaudited)Rancho
      Cordova acquisition – permit
            
            $
            475,614
            
            
            $
            475,659Prime
      acquisition – customers
            
            
            400,422
            
            
            
            400,422GMTS  acquisition
      – customers
            
            
            438,904
            
            
            
            438,904GMTS  acquisition
      – permits
            
            
            27,090
            
            
            
            27,090Accumulated
      amortization
            
            
            (395,639
            )
            
            
            (314,031
            )$
            946,391
            
            
            $
            1,028,044





Permit
costs have been capitalized and are being amortized over the life of the permit,
including expected renewal periods.  Customer Lists acquired are being
amortized over their useful life.




11




4.
RELATED PARTY TRANSACTIONS





The
Company has entered into several transactions with General Pacific Partners
(“GPP”), a company operated by a prior member of the Board of Directors of the
Company’s wholly owned subsidiary, General Environmental Management, Inc. of
Delaware.  GPP owns 7% of the Company’s common stock at June 30,
2008.  The following summarizes the transactions with GPP during the
six months ended June 30, 2008 and 2007.





Advisory
Fees





During
the three months ended March 31, 2007, the Company entered into a twelve month
advisory agreement with GPP.  Advisory fees paid or accrued to GPP
during the three and six months ended June 30, 2007 amounted to $55,500. There
were no amounts paid or accrued under this agreement during 2008.





Advances from Related
Party





June
      30,
              2008
            
            
            December
              31,
      2007(Unaudited)Advances
      due GPP
            
            $
            516,500
            
            
            $
            -Accrued
      Interest
            
            
            49,927
            
            
            
            33,926Valuation
      Discount
            
            
            (442,500
            )
            
            
            -$
            123,927
            
            
            $
            33,926




From time
to time, GPP has made advances to the Company for working capital purposes.
During the six months ended June 30, 2008, General Pacific Partners or its
affiliated entities made unsecured advances to the Company totaling $516,500.
The proceeds were used for general working capital purposes. The rate of
interest on the advance is 10% per annum. The funds were originally due six
months from the date of clearance of the funds or August 14, 2008 and September
19, 2008. On June 30, 2008 GPP and the Company agreed to extend the maturity
date of these advances to February 14, 2009 and March 19, 2009
respectively.  In consideration of the extension the Company agreed to
issue to GPP 200,000 shares of its common stock valued at $220,000 and a warrant
to purchase up to 225,000 shares of the Company’s common stock at $0.60 for a
period of seven years valued at $222,500 using the Black-Scholes pricing model.
The aggregate value of the shares and warrants of $442,500  was
reflected as a valuation discount that will be amortized over the remaining life
of the note. For the Black - Scholes calculation, the Company assumed no
dividendyield, a risk free interest rate of 4.78 %, expected volatility
of 75.88% and an expected term for the warrants of 7 years.





Related Party Lease
Agreement





During
the third quarter ended September 30, 2007, the Company entered into a lease for
$180,846 of equipment with current investors of the Company.  The
lease transaction was organized by General Pacific Partners, a related party,
with these investors.  The five year lease with payments of $4,000 per
month began August 1, 2007.




12




5.
            SECURED
      FINANCING AGREEMENTS





During
2006 and 2007, the Company entered into a series of financings with Laurus
Master Fund (“Laurus).


The
amounts due under these financings at June 30, 2008 and December 31, 2007 are as
follows:





June
      30,
            
            
            December
      31,2008
            
            
            2007(Unaudited)(a)
      Secured convertible Term Note
            
            $
            509,222
            
            
            $
            973,623(b)
      Secured non-convertible Revolving Note
            
            
            4,319,018
            
            
            
            4,194,771(c)
      Secured Short Term Note
            
            
            1,467,187
            
            
            
            1,245,210(d)
      Valuation Discount
            
            
            (1,166,968
            )
            
            
            (2,042,191
            )5,128,459
            
            
            
            4,371,413Less
      current portion
            
            
            (876,589
            )
            
            
            (662,719
            )Financing
      agreement, net of current portion
            
            $
            4,251,870
            
            
            $
            3,708,694





(a) On
March 3, 2006, General Environmental Management, Inc. entered into an agreement
with Laurus Master Fund, Ltd. dated as of February 28, 2006, whereby the Company
issued to Laurus a secured convertible term note ("Note") in the principal
amount of $2.0 million.  Under terms of the initial agreement, the
principal amount of the Note carried an interest rate of prime plus three and
one half percent, subject to adjustment, and such interest was payable monthly.
The Company also was required to make monthly principal payments in the amount
of $60,606, commencing June 1, 2006, until its maturity on February 28, 2009, as
well as monthly interest payments in the amount of prime plus 3.5%, but in no
event less than 8% per annum.





The Note
is secured by all of the Company’s assets and the assets of its direct
subsidiary, General Environmental Management, Inc. (Delaware) and its direct
subsidiary, General Environmental Management of Rancho Cordova LLC, a California
Limited Liability Company (including the real property owed by General
Environmental Management of Rancho Cordova LLC), as well as by a pledge of the
equity interests of General Environmental Management, Inc. (Delaware), GEM
Mobile Treatment Services, Inc. (California) and General Environmental
Management of Rancho Cordova LLC.





The
principal amount of the Note and accrued interest thereon was initially
convertible into shares of its common stock at a price of $0.85 per share,
subject to anti-dilution adjustments. Under the terms of the Note, the monthly
principal payment amount of approximately $60,606, plus the monthly interest
payment (together, the "Monthly Payment"), were payable in either cash or, if
certain criteria are met, including the effectiveness of a current registration
statement covering the shares of its common stock into which the Note is
convertible, through the issuance of its common stock. Laurus had the option to
convert the entire principal amount of the Note, together with interest thereon,
into shares of its common stock, provided that such conversion does not result
in Laurus beneficially owning at any one time more that 4.99% of its outstanding
shares of common stock. The Company agreed to register all of the shares that
are issuable upon conversion of the Note and exercise of the
Warrant.





On
October 31, 2007, the Company entered into an Amendment of, and Joinder to,
Existing Financing Documents with Laurus Master Fund Ltd., wherein the Company’s
principal payment for the convertible term loan under the February 28, 2006
Secured Convertible Term Loan agreement was changed.  The
following  are the terms under the new payment schedule:




13




- Monthly
principal payment was reduced from $60,606 to $30,303 (from February 2008 to
February 2009)


-
4-months grace period for principal payment (monthly payment will start
in March 2008)


-
Interest is to be paid monthly (no change on interest rate, which is based on
prime +3.5%)


- Balloon
payment in February 2009 for the remaining balance of the loan





As of
June 30, 2008 and December 31, 2007, the Company had outstanding borrowings of
$509,222 and $973,623 against the Note.





The
initial Convertible Term Note was issued with warrants in 2006. There were no
changes in the warrant terms nor in the conversion feature of the
note.  Laurus also re-issued new notes to the Company in the name of
Valens Offshore, which is the new operating name for the lender.





The
Company reviewed EITF 96-19, Debtor’s Accounting for a Modification or Exchange
of Debt Instruments to determine if there was a substantial modification of the
debt instrument, and whether a debt extinguishment gain or loss should be
recognized. The Company performed an analysis of the present value of the cash
flows under the old and revised terms of the note and has determined that there
is no substantial change in the cash flows.  There were also no
changes in the note’s conversion feature and the warrants issued with the note
that could affect the cash flows of the note.





(b)
On March 3, 2006, the Company entered into an agreement with Laurus Master Fund,
Ltd. ("Laurus"), dated as of February 28, 2006, whereby the Company issued to
Laurus a Secured Non-Convertible Revolving Note of up to $5.0 million. The
revolving note allows the Company to borrow a maximum amount of $5,000,000,
based on a borrowing base of 90% of all eligible receivables, which are
primarily accounts receivables under 90 days. The interest rate on this line of
credit is in the amount of prime plus 3.5%, but in no event less than 8% per
annum.  The Revolving Note is secured by all assets of the Company and
is subject to the same security agreement as discussed in (a)
above.  The note is due February 28, 2009.  As of June 30,
2008 and December 31, 2007, the Company had outstanding borrowings of $4,319,018
and $4,194,771 against the Revolving Note.





(c)  On
October 31, 2007, General Environmental Management, Inc entered into an
agreement with Laurus Master Fund, Ltd. ("Laurus"), LV Administrative Services,
Inc. (“LV Admin”), Valens U.S. SPV I, LLC (“Valens US”) and Valens Offshore SPV
II, Corp. (“Valens”), dated as of October 31, 2007, whereby the Company issued
to Valens US and Valens (i) secured convertible term notes ("Notes") in the
principal amount of $1.25 million;  (ii) an assignment of the Laurus
Secured Non-Convertible Revolving Note; (iii) a warrant ("Warrant 1") to
purchase up to 661,818 shares of its common stock at a price of $1.38 per share
and, (iv) a warrant ("Warrant 2") to purchase up to 330,909 shares of its common
stock at a price of $2.75 per share.  The balance outstanding under
this note at June 30, 2008 and December 31, 2007 was $1,467,187 and $1,245,210,
respectively.





The
principal amount of the Note carries an interest rate of prime plus three and
one half percent, subject to adjustment, and such interest is payable
monthly.  The Company must also make monthly principal payments in the
amount of $30,303, commencing March 1, 2008. The Note is secured by all of its
assets and the assets of its direct subsidiary, General Environmental
Management, Inc. (Delaware) and its direct subsidiaries, General Environmental
Management of Rancho Cordova LLC, a California Limited Liability Company
(including the real property owed by General Environmental Management of Rancho
Cordova LLC), GEM Mobile Treatment Services Inc., as well as by a pledge of the
equity interests of General Environmental Management, Inc. (Delaware), General
Environmental Management of Rancho Cordova LLC and GEM Mobile Treatment Services
Inc.




14




The
principal amount of the Note and accrued interest thereon is convertible into
shares of its common stock at a price of $2.78 per share, subject to
anti-dilution adjustments. Under the terms of the Note, the monthly principal
payment amount of approximately $30,303, plus the monthly interest payment
(together, the "Monthly Payment"), is payable in either cash or, if certain
criteria are met, including the effectiveness of a current registration
statement covering the shares of its common stock into which the Note is
convertible, through the issuance of its common stock. Valens and Valens US have
the option to convert the entire principal amount of the Note, together with
interest thereon, into shares of its common stock, provided that such conversion
does not result in Valens and Valens US beneficially owning at any one time more
than 9.99% of its outstanding shares of common stock. The Company has agreed to
register all of the shares that are issuable upon conversion of the Note and
exercise of the Warrant.





(d) In
connection with the above financings, the Company paid to Laurus closing fees of
$326,193, and issued to Laurus 1,099,994 warrants initially valued in the
aggregate at $2,000,243, and determined the aggregate benefical conversion
feature to be $1,368,397. The value of the warrants and the calculated
beneficial conversion feature has been reflected by the Company as a valuation
discount and offset to the face amount of the Notes, and is being amortized to
interest expense over the life of the loan based upon the effective interest
method.  During the six months ended June 30, 2008 and 2007 the
Company amortized $875,223 and $408,270
of this amount which is included in interest expense in the accompanying
statement of operations. Unamortized valuation discount was $1,116,968 and
$2,042,191 as of June 30, 2008 and December 31, 2007, respectively.





In
conjunction with the above financings, the Company also incurred fees to various
investment advisors that facilitated the transaction, including the issuance of
shares of our common stock and issuance of warrants. The fees paid to the
finders and the value of the warrants issued to the finders have been reflected
as deferred financing costs in the accompanying balance sheet and are being
amortized over the life of the loan.  During the six months ended June
30, 2008 and 2007 the Company amortized $168,900 and $124,944, respectively, of
this amount which is included in interest expense in the accompanying statement
of operations.  Unamortized deferred financing fees were $225,182 and
$394,082 as of June 30, 2008 and December 31, 2007, respectively.




6.
LONG TERM OBLIGATIONS




Long term
debt consists of the following at June 30, 2008 and December 2007:





June
      30,
              2008
            
            
            December
      31,
              2007(Unaudited)(a)
      Vehicle notes
            
            $
            100,572
            
            
            $
            22,303(b)
      Notes Payable, Alliance
            
            
            1,250,000
            
            
            
            1,250,000(c)
      Equipment notes
            
            
            -
            
            
            
            97,6281,350,572
            
            
            
            1,369,931Loan
      Discount
            
            
            (5,208
            )
            
            
            (15,625
            )1,345,364
            
            
            
            1,354,306Less
      current portion
            
            
            1,287,660
            
            
            
            1,274,464Notes
      payable, net of current portion
            
            $
            57,704
            
            
            $
            79,842




15




(a) Note
payable in monthly installments of $815 including interest at 1.9% per annum,
through April 2010. The note is secured by a vehicle.




(b)  On
September 12, 2005, our wholly owned subsidiary, General Environmental
Management of Rancho Cordova, LLC, (“GEM LLC”) entered into a $1.25 million
secured, long-term financing rrangement with The Alliance Portfolio (the
“2005 Loan”). The loan is secured by real estate.




The terms
of the loan provide that GEM LLC will pay monthly payments of interest only from
November 1, 2005 through October 1, 2008, with the principal balance due on
October 1, 2008.  The 2005 Loan may be prepaid without premium or
penalty after the twelfth month. If the 2005 Loan is prepaid prior to the
twelfth month, then the prepayment penalty is 6 months interest on any principal
prepaid in excess of 20% of the principal. Subject to the terms and conditions
of the loan documentation, interest is due on the unpaid principal balance of
the 2005 Loan at a rate of 12.99% per annum until June 1, 2007, at which time
the interest rate may rise based upon a formula set forth in the loan
documentation. The interest rate reset to 14.07% on June 1, 2007. In no event
will the interest rate be less than 12.99% per annum. In connection with
obtaining the loan, the Company paid a $62,500 loan origination fee which is
being amortized over the term of the loan.





(c) The
equipment note is for equipment utilized by GEM Mobile Treatment Services. It
requires monthly payments of $3,417 with an interest rate of 12.35% and matures
in October 2010. The note is secured by the equipment.




16


7.
OBLIGATIONS UNDER CAPITAL LEASES




The Company has entered
into various capital leases for equipment with monthly payments ranging from
$598 to $4,000 per month, including interest, at interest rates ranging from
9.8% to 19.7% per annum. At June 30, 2008, monthly payments under these leases
aggregated $54,993. The leases expire at various dates through 2014. The amounts
outstanding under the capital lease obligations were $2,174,055 and $1,233,935
as of June 30, 2008 and December 31, 2007, respectively.




Minimum
future payments under capital lease obligations are as follows:




Years Ending
      December 31,2008
            
            $
            312,1432009
            
            
            634,0552010
            
            
            641,1892011
            
            
            618,2612012
            
            
            521,9652013
            
            
            173,906Thereafter
            
            
            56,275Total
      payments
            
            
            2,957,794Less: amount
      representing interest
            
            
            (783,739
            )Present value
      of minimum lease payments
            
            
            2,174,055Less: current
      portion
            
            
            (387,097
            )Non-current
      portion
            
            $
            1,786,958





8.
STOCK OPTIONS AND WARRANTS





Options





On March
28, 2007 the Board of Directors approved and implemented the 2007 Stock Option
Plan (the “Plan”).  The plan authorized option grants to employees and
other persons closely associated with the Company for the purchase of up to
5,500,000 shares.  The Board of Directors granted a total of 4,397,500
options to 102 employees and one consultant.  The exercise price of
the options was $1.19.





On
January 2, 2008 the Stock Option Committee approved the issuance of 43,000
options to six employees. The exercise price for the options was $1.70 per share
and was based on the closing market price on the date of issuance.





On April
1, 2008 the Stock Option Committee approved the issuance of 22,000 options to
eleven employees. The exercise price for the options was $1.99 per share and was
based on the closing market price on the date of issuance.




17





A summary
of the option activity during the period is as follows:





Number
      of Options
            
            
            Weighted
      Avg.
              Exercise
              Price
            
            
            Weighted
      Avg.
              Life
      in
              YearsOptions
      outstanding, January 1, 2008
            
            
            5,000,193
            
            
            
            1.64
            
            
            
            9.32Options
      granted
            
            
            65,000
            
            
            
            1.80
            
            
            
            9.67Options
      exercised
            
            
            -
            
            
            
            -
            
            
            
            -Options
      cancelled
            
            
            (98,422
            )
            
            
            1.51
            
            
            
            -Options
      outstanding, June 30, 2008
            
            
            4,966,771
            
            
            
            1.65
            
            
            
            8.83Options
      exercisable, June 30, 2008
            
            
            2,657,211
            
            
            
            1.81
            
            
            
            8.77




The
options had no intrinsic value at June 30, 2008.





For the
six months ended June 30, 2008 and 2007, the fair value of options vesting
during the period was $427,135 and $634,745 respectively, and has been reflected
as compensation cost. As of June 30, 2008, the Company has unvested options
valued at $1,601,883 which will be reflected as compensation cost over the
estimated remaining vesting period of 8.83 years.




Warrants




A summary
of the warrant activity during the period is as follows:





Number
      of Warrants
            
            
            Range
      of
              exercise
              prices
            
            
            Weighted
              Avg. in
              YearsWarrants
      outstanding, January 1, 2008
            
            
            5,981,635
            
            
            $
            0.60-$120.00
            
            
            
            3.93Warrants
      granted
            
            
            225,000
            
            
            $
            0.60
            
            
            
            3.75Warrants
      exercised
            
            
            -
            
            
            
            -
            
            
            
            -Warrants
      expired
            
            
            (30,778
            )
            
            $
            37.50
            
            
            
            -Warrants
      outstanding, June 30, 2008
            
            
            6,175,857
            
            
            $
            0.60-$120.00
            
            
            
            4.52








The
aggregate intrinsic value of the 6,175,857 warrants outstanding as of June 30,
2008 was $1,429,315. The aggregate intrinsic value for the warrants is
calculated as the difference between the price of the underlying shares and
quoted price of the Company's common shares for the warrants that were
in-the-money as of June 30, 2008.




18




9.
INCOME TAXES





The
Company's net deferred tax assets consisted of the following at June 30, 2008
and December 31, 2007:





June
      30,
              2008
            
            
            December
      31,
              2007(Unaudited)Deferred
      tax asset, net operating loss
            
            $
            11,700,071
            
            
            $
            11,677,897Less
      valuation allowance
            
            
            (11,700,071
            )
            
            
            (11,677,897
            )Net
      deferred tax asset
            
            $
            -
            
            
            $
            -





As of
June 30, 2008, the Company had federal net operating loss carry forwards of
approximately $34,411,973 expiring in various years through 2025, which can be
used to offset future taxable income, if any. No deferred asset benefit for
these operating losses has been recognized in the financial statements due to
the uncertainty as to their realizability in future periods.





As a
result of the Company's significant operating loss carryforward and the
corresponding valuation allowance, no income tax expense (benefit) has been
recorded at June 30, 2008 or December 31, 2007.





Reconciliation
of the effective income tax rate to the United States statutory income tax rate
for the six months ended June 30, 2008 and 2007 is as follows:




Six
      months ended June 30,2008
            
            
            2007Tax
      expense at U.S. statutory income tax rate
            
            
            (34.0
            )
      %
            
            
            (34.0
            )
      %Increase
      in the valuation allowance
            
            
            34.0
            
            
            
            34.0Effective
      rate
            
            
            -
            
            
            
            -




Effective
January 1, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (“FIN
48”) an interpretation of FASB Statement No. 109, Accounting for Income Taxes.”
The Interpretation addresses the determination of whether tax benefits claimed
or expected to be claimed on a tax return should be recorded in the financial
statements. Under FIN 48, we may recognize the tax benefit from an uncertain tax
position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical
merits of the position. The tax benefits recognized in the financial statements
from such a position should be measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon ultimate
settlement. FIN 48 also provides guidance on derecognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures. At the date of adoption, and as of June 30,
2008, the Company does not have a liability for unrecognized tax
uncertainties.




The
Company files income tax returns in the U.S. federal jurisdiction and various
states. The Company is subject to U.S. federal or state income tax examinations
by tax authorities for years after 2002. During the periods open to examination,
the Company has net operating loss and tax credit carry forwards for U.S.
federal and state tax purposes that have attributes from closed periods. Since
these NOLs and tax credit carry forwards may be utilized
in future periods, they remain subject to examination.





The
Company’s policy is to record interest and penalties on uncertain tax provisions
as income tax expense. As of June 30, 2008 the Company has no accrued interest
or penalties related to uncertain tax positions.




19




ITEM
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations





FORWARD
LOOKING STATEMENTS





In
addition to historical information, this Quarterly Report contains
forward-looking statements, which are generally identifiable by use
of  the words “believes”, “expects”, “intends”, “anticipates”, “plans
to”, “estimates”, “ projects”, or similar expressions.  These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in these
forward-looking statements.  Factors that might cause such a
difference include, but are not limited to, those discussed in the section
entitled “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Factors That May Affect Future
Results”.  Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management’s opinions only as of the
date hereof.  We undertake no obligation to revise or publicly release
the results of any revision to these forward-looking
statements.  Readers should carefully review the risk factors
described in other documents the company files from time to time with the
Securities and Exchange Commission  ( the “SEC”), including the
Quarterly Reports on form 10QSB filed by us in the fiscal year
2008.




Statements
made in this Form 10-Q (the “Quarterly Report”) that are not historical or
current facts are “forward-looking statements” made pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933, as amended (the “Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).  We intend that such forward-looking statements be
subject to the safe harbors for such statements.  We wish to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made.  Any forward-looking statements
represent management’s best judgment as to what may occur in the
future.  The forward-looking statements included herein are based on
current expectations that involve numerous risks and uncertainties.
 Assumptions relating to the foregoing involve judgments with respect to,
among other things, future economic, competitive and market conditions and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond our control.  Although we
believe that the assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be inaccurate and, therefore, there can
be no assurance that the forward-looking statements included in this Quarterly
Report will prove to be accurate.  In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by us
or any other person that our objectives and plans will be
achieved.  We disclaim any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after the date of
such statement or to reflect the occurrence of anticipated or unanticipated
events.




The words
“we,” “us,” “our,” and the “Company,” refer to General Environmental Management,
Inc.  The words or phrases “may,” “will,” “expect,” “believe,”
“anticipate,” “estimate,” “approximate,” or “continue,” “would be,” “will
allow,” “intends to,” “will likely result,” “are expected to,” “will continue,”
“is anticipated,” “estimate,” “project,” or similar expressions, or the negative
thereof, are intended to identify “forward-looking
statements.”  Actual results could differ materially from those
projected in the forward looking statements as a result of a number of risks and
uncertainties, including but not limited to:  (a) our failure to
implement our business plan within the time period we originally planned to
accomplish; and (b) other risks that are discussed in this Quarterly Report or
included in our previous filings with the Securities and Exchange Commission
(“SEC”).




20




OVERVIEW





Ultronics
Corporation (Ultronics) was a non-operating company formed for the purpose of
evaluating opportunities to acquire an operating company.  On February
14, 2005 Ultronics acquired General Environmental Management, Inc. through a
reverse merger between Ultronics Acquisition Corp., a wholly owned subsidiary of
Ultronics and General Environmental Management, Inc., whereby General
Environmental Management, Inc. (GEM) was the surviving entity.





The
acquisition was accounted for as a reverse merger (recapitalization) with GEM
deemed to be the accounting acquirer, and Ultronics Corporation the legal
acquirer.  Accordingly, the historical financial information presented
in the financial statements is that of GEM as adjusted to give effect to any
difference in the par value of the issuer’s and the accounting acquirer stock
with an offset to capital in excess of par value.  The basis of the
assets, liabilities and retained earnings of GEM, the accounting acquirer, have
been carried over in the recapitalization.  Subsequent to the
acquisition, the Company changed its name to General Environmental Management,
Inc.




GEM is a
fully integrated environmental service firm structured to provide EHS compliance
services, field services, transportation, off-site treatment, and on-site
treatment services.  Through its services GEM assists clients in
meeting regulatory requirements for the disposal of hazardous and non-hazardous
waste.  GEM provides its clients with access to GEMWare, an internet
based software program that allows clients to maintain oversight of their waste
from the time it leaves their physical control until final disposition by
recycling, destruction, or landfill.  The GEM business model is to
grow both organically and through acquisitions.





During
2003 and 2004 GEM acquired the assets of Envectra, Inc., Prime Environmental
Services, Inc. (Prime) and 100% of the membership interest in Pollution Control
Industries of California, LLC, now named General Environmental Management of
Rancho Cordova, LLC.  The assets of Envectra, Inc. included an
internet based integrated environmental management software now marketed by the
Company as GEMWare.  The acquisition of the assets of Prime resulted
in a significant increase in the revenue stream of the company and a presence in
the Washington State and Alaska markets through Prime’s Seattle
office.  All Prime services are now offered under the GEM
name.  The primary asset of Pollution Control Industries of
California, LLC was a fully permitted Part B Treatment Storage Disposal Facility
(TSDF) in Rancho Cordova, California.  The facility provides waste
management services to field service companies and allows the Company to bulk
and consolidate waste into larger more cost effective containers for outbound
disposal.





During
2006, the Company entered into a stock purchase agreement with K2M Mobile
Treatment Services, Inc. of Long Beach, California ("K2M"), a privately held
company, pursuant to which the Company  acquired all of the issued and
outstanding common stock of K2M. K2M is a California-based provider of mobile
wastewater treatment and vapor recovery services. Subsequent to the acquisition
in March 2006, the Company opened a vapor recovery service division in Houston,
Texas and will be looking to expand its operations in the Gulf coast
area.




21




COMPARISON OF
THREE  MONTHS ENDED JUNE  30, 2008 AND
2007





Revenues





Total
revenues were $9,406,585 for the three months ended June 30, 2008, representing
an increase of $2,864,753 or 43.8% compared to the three months ended June 30,
2007.  The increase in revenue can be attributed to increased revenue
in the Western Region business and for GEM’s mobile treatment business offset by
a decrease in revenues in the Enviroconstruction market sector.





Cost of
Revenues





Cost of
revenues for the three months ended June 30, 2008 were $7,822,370 or 83.1% of
revenue, as compared to $5,068,675 or 77.5% of revenue for the three months
ended June 30, 2007.  The cost of revenues includes disposal costs,
transportation, fuel, outside labor and operating supplies. The change in the
cost of revenue in comparison to the prior year is primarily due to higher
volume and an increase in costs attributable to fuel related
expenses.





Operating
Expenses





Operating
expenses for the three months ended June 30, 2008 were $1,956,313 or 20.8% of
revenue as compared to $2,681,502 or 40.9% of revenue for the same period in
2007. Operating expenses include sales and administrative salaries and benefits,
insurance, rent, legal, accounting and other professional fees. The decrease in
operating expenses is primarily attributable to a reduction in general expenses
over the last nine months.





Depreciation
and Amortization





Depreciation
and amortization expenses for the three months ended June 30, 2008 were
$240,301, or 2.5% of revenue, as compared to $191,253 or 2.9% of revenue for the
same period in 2007. The increase in expense is due to additions to property,
plant and equipment and increase of assets acquired under capitalized
leases.





Interest
and financing costs





Interest
and financing costs for the three months ended June 30, 2008 were $844,711 or
8.9% of revenue, as compared  to $560,120 or 8.6% of revenue for
the same period in 2007. Interest expense consists of interest on the line of
credit, short and long term borrowings, and advances to related
parties.  It also includes amortization of deferred finance fees and
amortization of valuation discounts generated from beneficial conversion
features related to the fair value of warrants and conversion features of long
term debt.  The increase in interest expense is due to higher costs of
amortization of valuation discounts generated from conversion features of
warrants   and long term debt.




22





Other
Non-Operating Income





The
Company had other non-operating income for the three months ended June 30, 2008
of $9,030 or  0.01
% of  revenue, and $34,259 for the same period in
2007.  Non-Operating income for the  three months ended June
30, 2008 consisted of continuing rental income from the lease of warehouse space
in Kent, Washington. The lease in Rancho Cordova which accounted for the
majority of the 2007 non- operating income was terminated in July
2007.




Net
Loss





The net
loss for the three months ended June 30, 2008 was $1,204,984 or 12.8%
of  revenue  as compared  to  a loss of
$5,152,105, or 78.7% of  revenue for the same period in
2007.  The reduced loss is attributable to reductions in operating
expenses over the last nine months and less non-cash charges related to
convertible debt instruments issued in 2007.




COMPARISON OF SIX MONTHS
ENDED JUNE 30, 2008 AND 2007




Revenues





For the
six months ended June 30, 2008, the Company reported consolidated revenue of
$16,358,238   representing an increase of $3,499,026 or 27.2 %
compared to the six months ended June 30, 2007.  The increase in
revenue can be attributed to organic growth of the base business and an increase
in revenues attributable to GEM’s mobile treatment services.





Cost of
Revenues





Cost of
revenues for the six months ended June 30, 2008 were $13,467,714 or 82.3 % of
revenue, as compared to $10,145,012 or 78.9 % of revenue for the six months
ended June 30, 2007. The cost of revenue includes disposal costs,
transportation, fuel, outside labor and operating supplies. The change in the
cost of revenue in comparison to the prior year is primarily due to higher
volumes and an increase in costs attributable to fuel related
expenses.





Operating
Expenses





Operating
expenses for the six months ended June 30, 2008 were $3,805,927 or 23.3%
of  revenue as compared to $ 7,748,042 or 60.2% of revenue for the
same period in 2007.  Operating expenses include  sales and
administrative salaries and benefits, insurance, rent, legal and accounting and
other professional fees. The decrease in operation expenses is primarily
attributable to general expense reductions made in late 2007 and a decrease in
non-cash charges for consulting and advisory fees of $2,294,104.





Depreciation
and Amortization





Depreciation
and amortization expenses for the six months ended June 30, 2008 were $467,096
or 2.8% of revenue, as compared to $363,326 or 2.8% of revenue for the same
period in 2007. The increase in expense is due to additions to property, plant
and equipment and increase of assets acquired under capitalized
leases.




23





Interest
and financing costs





Interest
and financing costs for the six months ended June 30, 2008 were $1,661,319 or
10.1% of revenue, as compared to $ 1,240,133 or 9.6% of revenue for the
same period in 2007.  Interest expense consists of interest on the
line of credit, short and long term borrowings, and advances to related
parties.  It also includes amortization of deferred finance fees and
amortization of valuation discounts generated from beneficial conversion
features related to the fair value of warrants and conversion features of long
term debt. The increase in interest expense is due to additional costs of
amortization of valuation discounts related to the October 2007 Laurus
financing.




Other
Non-Operating Income





The
Company had other non-operating income for the six   months ended
June 30, 2008 of $16,693, or .10% of revenue, and $68,239  or .53% for
the same period in 2007. Non-Operating income for the six months ended June 30,
2008 consisted of continuing rental income from the lease of warehouse space in
Kent, Washington. The lease in Rancho Cordova which  accounted for the
majority of the 2007 non- operating income was terminated in July
2007.





Net
Loss





The net
loss for the six months ended June 30, 2008 was $2,550,217, or 15.6% of revenue
as compared  to a loss of $9,734,008, or 75.7% of revenue for the same
period in 2007. The reduced loss is attributable to reductions in operating
expenses over the last nine months and less non-cash charges related to advisory
fees and convertible debt instruments issued in 2007.




LIQUIDITY
AND CAPITAL RESOURCES





Cash





Our
primary sources of liquidity are cash provided by operating, investing, and
financing activities.  Net cash used in operations for the three
months ended June 30, 2008 was $382,971 as compared to $681,995 for the same
period in 2007.  Net cash used in operations for the six months ended
June 30, 2008 was $889,789 as compared to $1,660,562 for the same period in
2007.





Liquidity





The
accompanying consolidated financial statements have been prepared assuming that
the company will continue as a going concern.  The Company incurred a
net loss of $2,550,217 and utilized cash in operating activities of $889,789
during the six months ended June 30, 2008. As of June 30, 2008 the Company had
current liabilities exceeding current assets by $3,265,775. These matters raise
substantial doubt about the Company’s ability to continue as a going
concern.





Management
is continuing to raise capital through the issuance of debt and equity and
believes it will be able to raise sufficient capital over the next twelve months
to finance operations. In addition, management believes that the company will
begin to operate profitably due to improved operational results and cost
reductions   made in late 2007.  However, there can be
no assurances that the Company will be successful in this regard or will be able
to maintain its working capital surplus or eliminate operating
losses.  The accompanying financial statements do not contain any
adjustments which may be required as a result of this uncertainty.





The
Company’s capital requirements consist of general working capital needs,
scheduled principal and interest payments on debt, obligations, and capital
expenditures.  The Company’s capital resources consist primarily of
cash generated from operations and proceeds from issuances of debt and common
stock.  The Company’s capital resources are impacted by changes in
accounts receivable as a result of revenue fluctuations, economic trends and
collection activities.




24




Cash
Flows for the Six Months Ended June 30, 2008





Operating
activities for the six months ended June 30, 2008 used $889,789 in
cash.  Accounts receivable, net of allowances for bad debts, increased
$401,571 as of June 30, 2008 and accounts payable were reduced
by $1,021,093.  Depreciation and amortization for the six months
ended June 30, 2008 totaled $467,096. The net loss of $2,550,217 included a
number of non-cash expenses incurred by the Company including $904,354
representing discount amortization on convertible debt and, $168,900
representing amortization of deferred financing fees. Prepaid expenses increased
by 368,694 primarily due to insurance premiums that will be amortized in 2008.
Accrued expenses increased by $1,449,585.





The
Company used cash for investment in plant, property and equipment and deposits
totaling approximately $201,959 for the six months ended June 30, 2008. Capital
expenditures increased based on the issuance of capital lease obligations for
the expansion of our transportation assets. The Company used $175,967 from
financing activity for the six months ended June 30, 2008. This consisted of
repayments of debt and capital leases offset by advances from related parties
and execution of capital leases.





These
activities resulted in a $915,781 reduction in cash balances from year end
December 31, 2007 to the end of the quarter June 30, 2008.




CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





The
preparation of our consolidated financial statements requires us to make
estimates that affect the reported amounts of assets, liabilities, revenues and
expenses.  The following are the areas that we believe require the
greatest amount of estimates in the preparation of our financial statements:
allowances for doubtful accounts, impairment testing and accruals for disposal
costs for waste received at our TSDF.





(a)
Allowance for doubtful accounts





We
establish an allowance for doubtful accounts to provide for accounts receivable
that may not be collectible. In establishing the allowance for doubtful
accounts, we analyze specific past due accounts and analyze historical trends in
bad debts.  In addition, we take into account current economic
conditions.  Actual accounts receivable written off in subsequent
periods can differ materially from the allowance for doubtful accounts
provided.





(b)
Impairment of Long-Lived Assets





Statement
of Financial Accounting Standards No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”, established guidelines regarding when impairment
losses on long-lived assets, which include property and equipment, should be
recognized and how impairment losses should be measured.  This
statement also provides a single accounting model for long-lived assets to be
disposed of and significantly changes the criteria that would have to be met to
classify an asset as held-for-sale.  The Company periodically reviews,
at least annually, such assets for possible impairment and expected losses. If
any losses are determined to exist they are recorded in the period when such
impairment is determined




25





(c)
Revenue Recognition





The
Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the price is fixed or
determinable, and collection is reasonably assured.





The
Company is a fully integrated environmental service firm structured to provide
field services, technical services, transportation, off-site treatment, on-site
treatment services, and environmental health and safety (“EHS”) compliance
services.  Through our services, we assist clients in meeting
regulatory requirements from the designing stage to the waste disposition stage.
The technicians who provide these services are billed at negotiated rates, or
the service is bundled into a service package.  These services are
billed and revenue recognized when the service is performed and completed. When
the service is billed, expected costs are accumulated and accrued.





Our field
services consist primarily of handling, packaging, and transporting a wide
variety of liquid and solid wastes of varying amounts. We provide the fully
trained labor and materials to properly package hazardous  and
non-hazardous waste according to requirements of the Environmental Protection
Agency and the Department of Transportation. Small quantities of laboratory
chemicals are segregated according to hazard class and packaged into appropriate
containers or drums. Packaged waste is profiled for acceptance at a client’s
selected treatment, storage and disposal facility (TSDF) and tracked
electronically through our systems. Once approved by the TSDF, we provide for
the transportation of the waste utilizing tractor-trailers or bobtail trucks.
The time between picking up the waste and transfer to an approved TSDF is
usually less than 10 days.  The Company recognizes revenue for waste
picked up and received waste at the time pick up or receipt occurs and
recognizes the estimated cost of disposal in the same period. For the Company’s
TSDF located in Rancho Cordova, CA, costs to dispose of waste materials located
at the Company’s facilities are included in accrued disposal
costs.  Due to the limited size of the facility, waste is held for
only a short time before transfer to a final treatment, disposal or recycling
facility. Revenue is recognized on contracts with retainage when services have
been rendered and collectability is reasonably assured.





Effective
January 1, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (“FIN
48”). —an interpretation of FASB Statement No. 109, Accounting for Income
Taxes.” The Interpretation addresses the determination of whether tax benefits
claimed or expected to be claimed on a tax return should be recorded in the
financial statements. Under FIN 48, we may recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the financial
statements from such a position should be measured based on the largest benefit
that has a greater than fifty percent likelihood of being realized upon ultimate
settlement. FIN 48 also provides guidance on derecognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures. At the date of adoption, and as of June 30,
2008, the Company does not have a liability for unrecognized tax
benefits.





The
Company files income tax returns in the U.S. federal jurisdiction and various
states. The Company is subject to U.S. federal or state income tax examinations
by tax authorities for years after 2002. During the periods open to examination,
the Company has net operating loss and tax credit carry forwards for U.S.
federal and state tax purposes that have attributes from closed periods. Since
these NOLs and tax credit carry forwards may be utilized
in future periods, they remain subject to examination. The Company’s policy
is to record interest and penalties on uncertain tax provisions as income tax
expense. As of June 30, 2008, the Company has no accrued interest or penalties
related to uncertain tax positions.




26





Recent
Accounting Pronouncements





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities an amendment of FASB Statement No. 133” (SFAS 161). This
Statement requires enhanced disclosures about an entity’s derivative and hedging
activities, including (a) how and why an entity uses derivative instruments, (b)
how derivative instruments and related hedged items are accounted for under SFAS
No. 133,  “Accounting for Derivative Instruments and Hedging
Activities” (SFAS 133), and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008.





In
December 2007, the FASB issued FASB Statement No. 141 (R), “Business
Combinations” (FAS 141(R)), which establishes accounting principles and
disclosure requirements for all transactions in which a company obtains control
over another business.  Statement 141 (R) applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008.  Earlier adoption is prohibited.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”.  SFAS
No. 160 establishes accounting and reporting standards that require that the
ownership interests in subsidiaries held by parties other than the parent be
clearly identified, labeled, and presented in the consolidated statement of
financial position within equity, but separate from the parent’s equity; the
amount of consolidated net income attributable to the parent and to the
noncontrolling interest be clearly identified and presented on the face of the
consolidated statement of income; and changes in a parent’s ownership interest
while the parent retains its controlling financial interest in its subsidiary be
accounted for consistently.  SFAS No. 160 also requires that any
retained noncontrolling equity investment in the former subsidiary be initially
measured at fair value when a subsidiary is deconsolidated.  SFAS No.
160 also sets forth the disclosure requirements to identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners.  SFAS No. 160 applies to all entities that prepare
consolidated financial statements, except not-for-profit organizations, but will
affect only those entities that have an outstanding noncontrolling interest in
one or more subsidiaries or that deconsolidate a subsidiary.  SFAS No.
160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008.  Earlier adoption is
prohibited.  SFAS No. 160 must be applied prospectively as of the
beginning of the fiscal year in which it is initially applied, except for the
presentation and disclosure requirements.  The presentation and
disclosure requirements are applied retrospectively for all periods
presented.





The
Company does not believe that the adoption of the above recent pronouncements
will have a material effect on the Company’s consolidated results of operations,
financial position, or cash flows.




ITEM
3. Controls and Procedures





As
required by Rule 13a-15 under the Securities Exchange Act of 1934 (the "Exchange
Act"), we carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as of  June 30,
2008. This evaluation was carried out under the supervision and with the
participation of our CEO, Mr. Tim Koziol and our CFO, Mr. Brett Clark. Based
upon that evaluation, our CEO and CFO concluded that our disclosure controls and
procedures are effective in timely alerting management to material information
relating to us that is required to be included in our periodic SEC filings.
There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
we carried out our evaluation.




27




Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is
accumulated and communicated to management, including our CEO and CFO, to allow
timely decisions regarding required disclosure.






PART
II - OTHER INFORMATION


Item 1.
              Legal Proceeding -
      None


Item 2.
            Unregistered Sales of
      Securities and Use of Proceeds –S-1/A  Registration
      Statement;filed with the commission on May 5,
  2008.





Item 3.
            Defaults upon Senior Securities
      -None





Item 4.
            Submission of Matters to a Vote
      of Security Holders -None





Item 5.
            Other Information -
      None




Item 6.
              Exhibits and
      Reports
 (a)         Exhibits
 (b)         Reports
      on Form 8-K
  28





SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant has caused
this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.




GENERAL
      ENVIRONMENTAL MANAGEMENT, INCAugust
      14, 2008
              By:
              /s/ Timothy
      J. KoziolTimothy
      J. Koziol
                CEO and Chairman of the Board of Directors
  August
      14, 2008
              By:
              /s/ Brett
      M. ClarkBrett
      M. Clark
                Executive
      Vice President of Finance, Chief Financial Officer