UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C.
20549







FORM 10-QSB





(Mark
One)


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


For the
quarterly period ended: March 31,
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 and 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 Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Issuer was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. [X]Yes [ ]
No





Indicate
the number of shares outstanding of each of the Issuer’s classes of common
stock, as of the latest practicable date.





Class
            
            Outstanding
      as of March 31, 2008$0.001
      PAR VALUE COMMON STOCK
            
            12,473,885 SHARES









GENERAL ENVIRONMENTAL MANAGEMENT,
INC.
 QUARTERLY REPORT ON FORM
10QSB
 FOR THE THREE MONTHS ENDED MARCH 31,
2008
 
 TABLE OF CONTENTS
  PagePart
      1
              Financial
      InformationItem
      1
              Financial
      Statements (Unaudited)Condensed
      Consolidated Balance Sheets  as of March 31,
      2008 (Unaudited)and
      December 31, 2007
              1Condensed
      Unaudited Consolidated Statements of Operations for the Three Months ended
      March 31, 2008 and 2007
              3Condensed
      Unaudited Consolidated Statement of Stockholders’ Equity (Deficiency) for
      the Three Months Ended March 31, 2008
              4Condensed
      Unaudited Consolidated Statements of Cash Flows for the Three Months
      Ended March 31, 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
              19Item
      3
              Controls
      and Procedures
              26Part
      II
              Other
      InformationItem
      1
              Legal
      Proceedings
              26Item
      2
              Changes
      in Securities
              26Item
      3
              Defaults
      Upon Senior Securities
              26Item
      4
              Submission
      of Matters to a Vote of Security Holders
              26Item
      5
              Other
      Information
              26Item
      6
              Exhibits
      and Reports on Form 8K
              26Signatures
              27C.E.O
      Certification
              AttachedC.F.O
      Certification
              Attached
  
  PART 1 - FINANCIAL
INFORMATION
 
 Item 1.  Financial
Statements.
  GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
  March
      31,
                
                
                December
      31,2008
                
                
                2007(Unaudited)ASSETSCURRENT
      ASSETS:Cash
                
                $
                200,479
                
                
                $
                954,581Accounts
      receivable, net of allowance for doubtful accounts of$236,781
      and $236,781, respectively
                
                
                4,972,207
                
                
                
                6,495,736Prepaid
      expenses and other current assets
                
                
                662,979
                
                
                
                156,340Total
      Current Assets
                
                
                5,835,665
                
                
                
                7,606,657Property
      and Equipment – net of accumulated depreciation$2,040,086
      and $1,854,141, respectively
                
                
                4,708,463
                
                
                
                3,950,253Restricted
      cash
                
                
                1,191,298
                
                
                
                1,184,835Intangibles,
      net
                
                
                987,195
                
                
                
                1,028,044Deferred
      financing fees
                
                
                309,632
                
                
                
                394,082Deposits
                
                
                282,260
                
                
                
                282,070Goodwill
                
                
                946,119
                
                
                
                946,119TOTAL
      ASSETS
                
                $
                14,260,632
                
                
                $
                15,392,060
 (Continued)
 1
  GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS (Continued)
 
 March
      31,
                
                
                December
      31,2008
                
                
                2007(Unaudited)LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIENCY)CURRENT
      LIABILITIES:Accounts
      payable
                
                $
                2,353,386
                
                
                $
                4,314,515Accrued
      expenses
                
                
                3,182,709
                
                
                
                2,301,288Accrued
      disposal costs
                
                
                411,506
                
                
                
                478,833Payable
      to related party
                
                
                506,426
                
                
                
                31,871Current
      portion of financing agreement
                
                
                606,842
                
                
                
                662,719Current
      portion of long term obligations
                
                
                1,281,318
                
                
                
                1,274,464Current
      portion of capital lease obligations
                
                
                338,412
                
                
                
                187,015Current
      portion of convertible notes payable
                
                
                514,850
                
                
                
                -Total
      Current Liabilities
                
                
                9,195,449
                
                
                
                9,250,705LONG-TERM
      LIABILITIES :Financing
      agreements, net of current portion
                
                
                3,665,780
                
                
                
                3,708,694Long
      term obligations, net of current portion
                
                
                68,772
                
                
                
                79,842Capital
      lease obligations, net of current portion
                
                
                1,673,457
                
                
                
                1,046,920Convertible
      Notes payable
                
                
                -
                
                
                
                520,208Total
      Long-Term Liabilities
                
                
                5,408,009
                
                
                
                5,355,664STOCKHOLDERS’
      EQUITY ( DEFICIENCY)Series
      B Convertible Preferred Stock, net of offering costs of $
60,960,liquidation
      preference $1 per share, $.001 par value, 100,000,000
    sharesauthorized,
      none and 2,480,500  shares issued and
outstanding
                
                
                -
                
                
                
                -Common
      stock, $.001 par value, 1,000,000,000 shares authorized,12,473,885
      and 12,473,885 shares issued and outstanding
                
                
                12,474
                
                
                
                12,474Additional
      paid in capital
                
                
                50,368,331
                
                
                
                50,151,615Accumulated
      deficit
                
                
                (50,723,631
                )
                
                
                (49,378,398
                )Total
      Stockholders' Equity (Deficiency)
                
                
                (342,826
                )
                
                
                785,691TOTAL
      LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIENCY)
                
                $
                14,260,632
                
                
                $
                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
      endedMarch
      31, 2008
            
            
            March
      31, 2007REVENUES
            
            $
            6,951,653
            
            
            $
            6,317,380COST
      OF REVENUES
            
            
            5,645,344
            
            
            
            5,076,337GROSS
      PROFIT
            
            
            1,306,309
            
            
            
            1,241,043OPERATING
      EXPENSES
            
            
            1,849,614
            
            
            
            5,066,540OPERATING
      LOSS
            
            
            (543,305
            )
            
            
            (3,825,497
            )OTHER
      INCOME (EXPENSE):Interest
      income
            
            
            7,017
            
            
            
            8,466Interest
      and financing costs
            
            
            (816,608
            )
            
            
            (798,852
            )Other
      non-operating income
            
            
            7,663
            
            
            
            33,980Net
      Loss applicable to common stock holders
            
            $
            (1,345,233
            )
            
            $
            (4,581,903
            )Net
      loss per common  share, basic and diluted
            
            $
            (0.11
            )
            
            $
            (0.62
            )Weighted
      average shares of common stockoutstanding,
      basic and diluted
            
            
            12,473,885
            
            
            
            7,442,046






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 THREE  MONTHS ENDED MARCH  31, 2008





Preferred
      Stock
            
            
            AdditionalCommon
      Stock
            
            
            Series
      B
            
            
            Paid-in
            
            
            AccumulatedShares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            TotalBalance,
      January 1, 2008
            
            
            12,473,885
            
            
            $
            12,474
            
            
            
            -
            
            
            $
            -
            
            
            $
            50,151,615
            
            
            $
            (49,378,398
            )
            
            $
            785,691Stock
      compensation cost for value of vested options
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            216,716
            
            
            
            
            
            
            
            216,716Net
      loss for  the three  months ended March  31,
      2008
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,345,233
            )
            
            
            (1,345,233
            )Balance,
      March  31, 2008
            
            
            12,473,885
            
            
            $
            12,474
            
            
            
            -
            
            
            $
            -
            
            
            $
            50,368,331
            
            
            $
            (50,723,631
            )
            
            $
            (342,826
            )






See
accompanying notes to the condensed consolidated financial
statements




4




GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)





Three Months
      EndedMarch 31,2008
            
            
            2007OPERATING
      ACTIVITIESNet
      Loss
            
            $
            (1,345,233
            )
            
            $
            (4,581,903
            )Adjustments
      to reconcile net loss to cash used in operating activitiesDepreciation
      and amortization
            
            
            226,795
            
            
            
            172,073Amortization
      of discount on notes
            
            
            437,612
            
            
            
            5,208Fair
      value of vested options
            
            
            216,716
            
            
            
            489,269Issuance
      of warrants for services
            
            
            -
            
            
            
            2,294,104Common
      stock issued for services
            
            
            -
            
            
            
            -Amortization
      of discount on convertible debt
            
            
            -
            
            
            
            204,135Amortization
      of deferred financing fees
            
            
            84,450
            
            
            
            62,476Valuation
      of warrants to induce conversion of interest payable
            
            
            -
            
            
            
            99,029Valuation
      of warrants to induce conversion of notes payable
            
            
            -
            
            
            
            118,840Warrants
      issued to modify  debt
            
            
            -
            
            
            
            -Accrued
      interest on notes payable
            
            
            9,642
            
            
            
            48,022Changes
      in assets and liabilities:Accounts
      Receivable
            
            
            1,523,529
            
            
            
            129,451Inventory
            
            
            6,474
            
            
            
            -Prepaid
      and other current assets
            
            
            (513,113
            )
            
            
            (436,905
            )Deposits
      and restricted cash
            
            
            (6,654
            )
            
            
            -Accounts
      Payable
            
            
            (1,961,128
            )
            
            
            (288,872
            )Accrued
      interest on  notes
            
            
            -
            
            
            
            47,589Payable
      to related party
            
            
            -
            
            
            
            -Accrued
      expenses and other liabilities
            
            
            814,094
            
            
            
            658,917NET
      CASH USED IN OPERATING ACTIVITIES
            
            
            (506,816
            )
            
            
            (978,567
            )INVESTING
      ACTIVITIESAcquisition,
      net of liabilities assumed
            
            
            -
            
            
            
            -Increase
      in deposits and restricted cash
            
            
            -
            
            
            
            (353,992
            )Additions
      to property and equipment
            
            
            (95,300
            )
            
            
            (115,512
            )NET
      CASH USED IN INVESTING ACTIVITIES
            
            
            (95,300
            )
            
            
            (469,504
            )FINANCING
      ACTIVITIESNet
      advances (payments) from line of credit
            
            
            -
            
            
            
            -Net
      advances from notes payable – financing agreement
            
            
            (536,403
            )
            
            
            (230,692
            )Advances
      from related parties
            
            
            472,500
            
            
            
            1,241,933Payment
      of notes payable
            
            
            (4,215
            )
            
            
            (52,625
            )Repayments
      of convertible notes
            
            
            (15,000
            )
            
            
            -Payment
      on capital leases
            
            
            (68,868
            )
            
            
            -Proceeds
      from issuance of common stock
            
            
            -
            
            
            
            1,888Deferred
      financing fees
            
            
            -
            
            
            
            -NET
      CASH PROVIDED BY FINANCING ACTIVITIES
            
            
            (151,986
            )
            
            
            960,504INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            (754,102
            )
            
            
            (487,567
            )Cash
      at beginning of period
            
            
            954,581
            
            
            
            618,654CASH
      AT END OF PERIOD
            
            $
            200,479
            
            
            $
            131,087SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for:Interest
      Expense
            
            $
            275,827
            
            
            $
            230,949






See
accompanying notes to the condensed consolidated financial
statements




5




GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


(UNAUDITED)




Three Months
      EndedMarch 31,2008
            
            
            2007SUPPLEMENTAL
      DISCLOSURE OF NON – CASH INVESTING AND FINANCING
    ACTIVITIES:Acquisition
      of leased equipment and  capital lease
    obligations
            
            $
            848,856
            
            
            $
            738,810Conversion
      of related party debt to common stock
            
            
            -
            
            
            
            969,647Conversion
      of investor interest to common stock
            
            
            -
            
            
            
            148,750Conversion
      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


THREE
MONTHS ENDED MARCH 31, 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 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.




7


GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 (UNAUDITED)




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.




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
$1,345,233 and utilized cash in operating activities of $506,816 during the
three months ended  March 31, 2008, and as of March 31, 2008 the
Company had current liabilities exceeding current assets by $3,359,784. 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.




8


GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 (UNAUDITED)


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, 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.





(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 three months ended March 31, 2008 and 2007, one customer accounted for 9%
and 24.5% of revenues, respectively. As of March 31, 2008 and December 31, 2007
there was one customer that accounted for 7% 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.




9


GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 (UNAUDITED)
   These
potentially dilutive securities were not included in the calculation of loss per
share for the three  months ended March 31, 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 months ended March 31, 2008 and
2007.




At March 31, 2008 and
2007, potentially dilutive securities consisted of convertible securities,
outstanding common stock purchase warrants and stock options to acquire an
aggregate of 11,736,700 shares and 8,700,371 shares, respectively.




(f) Stock
Compensation Costs




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 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 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.




10


GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 (UNAUDITED)
   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.




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:




March
      31,
            
            
            December
      31,2008
            
            
            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
            
            
            (354,835
            )
            
            
            (314,031
            )$
            987,195
            
            
            $
            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


GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 (UNAUDITED)


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 8 % of the Company’s common stock at March 31,
2008.  The following summarizes the transactions with GPP during the
three months ended March 31, 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 to GPP during the
three months ended March 31, 2008 and 2007 amounted to none and $55,500,
respectively.  As of March 31, 2008 and December 31, 2007, all amounts
owed to General Pacific Partners for fees related to advisory services had been
paid.





Advances from Related
Party




From
time to time, GPP has made advances to the Company for working capital purposes. During the quarter ended
March 31, 2008, General Pacific Partners made unsecured advances to the Company
totaling $472,500. The proceeds were used for general working capital purposes.
The rate of interest on the advance is 10% per annum. The funds are due
six months from the date of clearance of the funds or September 19, 2008. As of March 31, 2008
and December 31, 2007, advances and accrued interest due GPP under these
arrangements were $506,426 and $31,871, respectively.




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.  Rent expense for the three months ended
March 31, 2008 includes $12,000 paid on this lease agreement.




5.
            SECURED
      FINANCING AGREEMENT AND LONG TERM
DEBT





Secured
financing consists of the following notes payable to Laurus Master Fund at March
31, 2008 and December
31, 2007:





March
      31,
            
            
            December
      31,2008
            
            
            2007(Unaudited)(a)
      Secured convertible Term Note
            
            $
            943,321
            
            
            $
            973,623(a)
      Secured non-convertible Revolving Note
            
            
            3,718,975
            
            
            
            4,194,771(b)
      Secured Short Term Note
            
            
            1,214,906
            
            
            
            1,245,210Valuation
      Discount
            
            
            (1,604,580
            )
            
            
            (2,042,191
            )4,272,622
            
            
            
            4,371,413Less
      current portion
            
            
            (606,842
            )
            
            
            (662,719
            )Financing
      agreement, net of current portion
            
            $
            3,665,780
            
            
            $
            3,708,694




12




GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 (UNAUDITED)
   On March
3, 2006, the Company entered into a series of agreements with Laurus Master
Fund, Ltd. ("Laurus"), each dated as of February 28, 2006, whereby the Company
issued to Laurus (i) a secured convertible term note ("Note") in the principal
amount of $2.0 million;  (ii) a Secured Non-Convertible Revolving Note
of up to $5.0 million; and, (iii) a warrant ("Warrant") to purchase up to
107,267 shares of our common stock at a price of $26.10 per share. The Company
also agreed to pay out of the Loan proceeds $245,000 to Laurus Capital
Management, LLC, the investment advisor to Laurus, and $40,000 to Laurus Capital
Management, LLC as reimbursement for its due diligence and legal fees and
expenses incurred in connection with the transaction. The Company also incurred
an additional $41,193 of closing costs for total closing costs of
$326,193.   The Company subsequently amended the terms of the
Note on October 31, 2007 as described below.




The
Company calculated that the fair value of the 107,267 warrants issued to Laurus
as $1,224,657 based upon the relative value of the Black Scholes valuation of
the warrants and the underlying debt amount.  For the Black Scholes
calculation, the Company assumed no dividend yield, a risk free interest rate of
3.68%, expected volatility of 109.33% and an expected term for the warrants of 7
years. The Company determined that the beneficial conversion feature of the
convertible note approximated $932,168.  The closing costs paid to
Laurus of $326,193, the value of the warrants issued to the Laurus of $1,224,657
and the $898,774 of calculated beneficial conversion feature have 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 three months ended March 31, 2008
and 2007 the Company amortized $204,135 and $204,135 of this amount which
is included in interest expense in the accompanying statement of
operations.





In
conjunction with the financing, the Company also incurred fees to various
investment advisors that facilitated the transaction.  These fees
totaled $552,000, of which $210,000 was paid through the issuance of 8,236
shares of our common stock. In addition, the Company issued these finders
warrants to purchase 17,804 shares of common stock at a price of $26.10 per
share. The Company calculated that the fair value of the warrants issued to the
finders was $197,653 based upon the relative value of the Black Scholes
valuation of the warrants and the underlying debt amount For the Black Scholes
calculation, the Company assumed no dividend yield, a risk free interest rate of
3.68%, expected volatility of 109.33% and an expected term for the warrants of 7
years. The fees paid to the finders and the value of the warrants issued to the
finders in the aggregate amount of $749,653 have been reflected as deferred
financing costs in the accompanying balance sheet and are being amortized over
the life of the loan.  During the three months ended March 31, 2008
and 2007 the Company amortized $62,472 and $62,472, respectively, of this amount
which is included in interest


expense
in the accompanying statement of operations.





Terms of
the notes are described below:





(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 is 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.




13




GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 (UNAUDITED)
   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:





- 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





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) 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 above.  As of
March 31, 2008 and December 31, 2007, the Company had outstanding borrowings of
$3,718,975 and $4,194,771 against the Revolving Note.




14


GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 (UNAUDITED)


(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 March 31, 2008 and December 31,2007 was $1,214,906 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.





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.





The
Company calculated that the fair value of the warrants issued to Valens as
$775,586 based upon the relative value of the Black Scholes valuation of the
warrants and the underlying debt amount.  For the Black Scholes
calculation, the Company assumed no dividend yield, a risk free interest rate of
4.78%, expected volatility of 70.18% and an expected term for the warrants of 7
years. The Company determined that the beneficial conversion feature of the
convertible note was $469,623.  The value of the warrants and the
calculated beneficial conversion feature of $1,245,210 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 quarter ended March 31, 2008 the Company
amortized $233,477 of this amount which is included in interest expense in
the accompanying statement of operations




6.
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.




15


GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 (UNAUDITED)


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.




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





Weighted
      Avg.
            
            
            Weighted
      Avg.
            
            
            Weighted
      Avg.Options
            
            
            Exercise
      Price
            
            
            Life
      in YearsOptions
      outstanding, January 1, 2008
            
            
            5,000,193
            
            
            
            1.64
            
            
            
            9.32Options
      granted
            
            
            43,000
            
            
            
            1.70
            
            
            
            10.00Options
      exercised
            
            
            -
            
            
            
            -
            
            
            
            -Options
      cancelled
            
            
            (39,482
            )
            
            
            1.40
            
            
            
            -Options
      outstanding, March 31, 2008
            
            
            5,003,711
            
            
            
            1.65
            
            
            
            9.08Options
      exercisable, March 31, 2008
            
            
            2,365,601
            
            
            
            1.85
            
            
            
            9.00




The
aggregate intrinsic value of the 5,003,711 options outstanding and 2,365,601
options exercisable as of March 31, 2008 was $3,408,940 and $1,684,731,
respectively. The aggregate intrinsic value for the options is calculated as the
difference between the price of the underlying awards and quoted price of the
Company's common shares for the options that were in-the-money as of March 31,
2008.





For the
three months ended March 31, 2008 and 2007, the fair value of options vesting
during the period was $216,716 and $489,269 respectively, and has been reflected
as compensation cost. As of March 31, 2008, the Company has unvested options
valued at $1,837,983 which will be reflected as compensation cost over the
estimated remaining vesting period of nine years.




Warrants




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





Warrants
      outstanding, January 1, 2008
            
            
            5,981,635Warrants
      granted
            
            
            -Warrants
      exercised
            
            
            -Warrants
      expired
            
            
            (24,987
            )Warrants
      outstanding, March 31, 2008
            
            
            5,956,648





The
aggregate intrinsic value of the 5,956,648 warrants outstanding as of March 31,
2008 was $5,596,634. 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 March 31, 2008.




16


GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 (UNAUDITED)


7.
INCOME TAXES





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





March
      31,
              2008
            
            
            December 31, 2007(Unaudited)Deferred
      tax asset, net operating loss
            
            $
            11,294,277
            
            
            $
            11,677,897Less
      valuation allowance
            
            
            (11,294,277
            )
            
            
            (11,677,897
            )Net
      deferred tax asset
            
            $
            -
            
            
            $
            -





As of
March 31, 2008, the Company had federal net operating loss carry forwards of
approximately $33,218,462 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 March 31, 2008 or December 31, 2007.





Reconciliation
of the effective income tax rate to the United States statutory income tax rate
for the three months ended March 31, 2008 and 2007 is as
follows:





Three
      months endedMarch
      31,2008
            
            
            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  March 31, 2008, the Company does not have a liability for
unrecognized tax uncertainties.




17


GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 (UNAUDITED)


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  March 31, 2008 the Company has no
accrued interest or penalties related to uncertain tax positions.












18




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
2007.




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”).




19




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.




20




COMPARISON OF
THREE  MONTHS ENDED MARCH 31, 2008 AND 2007





Revenues





Total
revenues were $6,951,653 for the three months
ended  March  31, 2008, representing an increase of $634,273
or 10% compared to the three months ended March 31, 2007.  The
increase in revenue can be attributed to increased revenue from K2M which was
partially offset by a decrease in revenues in the Enviroconstruction market
sector.





Cost of
Revenues





Cost of
revenues for the three months ended March 31, 2008 were $5,645,344 or 81% of
revenue, as compared to $5,076,337 or 80% of revenue for the three months ended
March 31, 2007.  The cost of revenues includes disposal costs,
transportation, outside labor and operating supplies. The change in the cost of
revenue in comparison to the prior year is primarily due to lower margins on
first quarter Enviroconstruction projects.





Operating
Expenses





Operating
expenses for the three months ended March 31, 2008 were $1,849,614 or 26.6% of
revenue as compared to $5,066,540 or 80% 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 decrease in non-cash charges
for consulting and advisory fees of $2,294,104 in 2007. In addition, a non-cash
charge of $479,616 was made to operating expenses in 2007 related to options
vested under the 2007 stock option plan.





Depreciation
and Amortization





Depreciation
and amortization expenses for the three months ended March 31, 2008 were
$226,795, or 3.2% of revenue, as compared to $172,073 or 2.7% 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 March 31, 2008 were $816,608 or
11.7% of revenue, as compared to $798,852 or 12.6% 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.




21





Other
Non-Operating Income





The
Company had other non-operating income for the three months ended March 31, 2008
of $7,663 or  0.01
% of  revenue, and $33,980 for the same period in
2007.  Non-Operating income for the  three  months
ended March 31, 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 March 31, 2008 was $1,345,233 or 19.3% of
revenue as compared  to a loss of $4,581,903 or 72.5%
of  revenue for the same period in 2007.  The loss is
attributable to a general  and administrative infrastructure created
in anticipation of a larger revenue base to be developed through acquisition and
organic growth. The reduction in the net loss was due to reductions in the
non-cash charges related to convertible debt instruments and the 2007 stock
option plan.





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 March 31, 2008 was $506,816 as compared to $978,567 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 $1,345,233 and utilized cash in operating activities of $506,816
during the three months ended March 31, 2008.  As of March 31, 2008
the Company had current liabilities exceeding current assets by $3,359,784
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, cost cutting
practices, and the completion of the integration of
acquisitions.  However, there can be no assurances that the Company
will be successful in this regard or will be able to 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.




22





On
October 31, 2007, General Environmental Management, Inc. (the “Company”) entered
into a series of agreements 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”), each dated as of October 31, 2007,
whereby we issued to Valens US and Valens (i) secured convertible term notes
("Notes") in the principal amount of $1.245 million;  (ii) an
amendment to modify the amortization of the remaining balance of the Laurus
February 28, 2006 Secured Convertible Term Note; (iii) warrants  to
Valens US to purchase up to 344,145 shares of our common stock at a price of
$1.38 per share.and up to 172,013 shares of our common stock at a price of $2.75
per share, (iv) warrants  to Valens to purchase up to 317,673 shares
of our common stock at a price of $1.38 per share.and up to 158,836 shares of
our common stock at a price of $2.75 per share. Of the Note proceeds, $64,751
was paid to Firestone Associates, Inc. and $64,751 was paid  to
Firestone Environmental Services, Inc. in repayment in full of the outstanding
indebtedness then owing by the Company.  The Company also agreed to
pay, out of the Loan proceeds, the sum of $45,000 to Valens US, Valens and
Valens Capital Management, LLC, and the sum of $72,209 to various legal firms as
reimbursement for its due diligence and legal fees and expenses incurred in
connection with the transaction.





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
$60,606.,commencing March 1, 2008.




Cash
Flows for the Three Months Ended March 31, 2008





Operating
activities for the three months ended March 31, 2008 used $506,816 in
cash.  Accounts receivable, net of allowances for bad debts, decreased
by $1,523,529 as of  March 31, 2008 and accounts payable were reduced
by $1,961,128.  Depreciation and amortization for the three months
ended March 31, 2008 totaled $226,795. The net loss of $1,345,233 included a
number of non-cash expenses incurred by the Company including $437,612
representing discount amortization on convertible debt and, $84,450 representing
amortization of deferred financing fees. Prepaid expense
increased by $506,639 primarily due to insurance premiums thatwill
be amortized in 2008. Accrued expenses increased by $814,094.





The
Company used cash for investment in plant, property and equipment and deposits
totaling $95,300 for   the three months ended March 31,
2008. Capital expenditures increased based on the issuance of capital lease
obligations for the expansion of our transportation assets. The Company used
$151,986 from financing activity during the quarter.  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 $754,102 reduction in cash balances from year end
December 31, 2007 to the end of the quarter March 31, 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.




23





(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





(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 March 31,
2008, the Company does not have a liability for unrecognized tax
benefits.




24





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 March 31, 2008, the Company has no accrued interest or
penalties related to uncertain tax positions.





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.




25




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 March 31, 2008. This
evaluationwas 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.




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)
                Exhibits31.1
                CEO
      Certification - Page Attached32.1
                CFO
      Certification - Page Attached32.1
                CEO
      Certification - Page Attached32.2
                CFO
      Certification - Page Attached(b)
                Reports on Form
      8-K
  26
 
  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, INC.Dated:
      March 14, 2008
            By:
            /s/ Timothy
      J. KoziolTimothy
      J. Koziol
              CEO and Chairman of the Board of
    Directors


Dated:
      March 14, 2008
            By:
            /s/ Brett
      M. ClarkBrett
      M. Clark
              Executive Vice President of Finance, Chief Financial
      Officer








27